Handelsbanken sets profit target after opening branch

"No big banks are coming onto the market and Handelsbanken seems to be entering a little late."
By : Leo Broomfield

   Sweden’s second-largest bank, Handelsbanken, said last week that after setting up its local unit this month, it will strive to turn a profit within two years.

   “By not having to buy a Polish bank we will be able to maintain a low-cost basis and focus on organic growth,” said Raimo Valo, general manager of Bank Svenska Handelsbanken (Polska). “Our plans are to reach operational profitability as soon as possible, hopefully within two years.”

   The unit will launch with zł. 200 million ($48 million) in share capital and an office in Warsaw.

   Analysts said Handelsbanken (Polska) stands a good chance of becoming profitable after two years. “But this is not big money, and is more likely to be a test of the water than anything else,” said Dariusz Górski, an equities analyst at ING Bank in Warsaw.

   Górski said the bank most likely decided to set up its own operation, as no big Polish banks are available for purchase in the near future. “No big banks are coming onto the market and Handelsbanken seems to be entering a little late,” Górski said. “Strange, after it pulled out of Bank Handlowy last year.”

   Handelsbanken sold its 5% stake in Bank Handlowy to the U.S.’ Citibank in 2000.

   According to Valo, Handelsbanken (Polska) is planning to focus on Nordic clients in Poland and Polish firms that trade with Scandinavian companies. Valo said the bank will offer standard corporate banking services such as deposits, short and long-term credit facilities, domestic and cross-border payments, cash management and currency trading. Later it expects to move into the retail sector.

   Valo said Handelsbanken (Polska) would have an immediate advantage in that it has no non-performing loans to stifle its performance. “But we also have a large customer base here in Poland, as there are a few hundred existing Handelsbanken corporate customers in Poland,” he said. “The first priority is to also serve them here.”

   At the same time, Handelsbanken (Polska) plans to emphasize the “Polishness” of its bank. “We are a Polish bank and naturally have lots of agreements with Polish companies, including IT-companies (like Computerland), banks (BRE Bank), insurance companies,” Valo said. “We have one shareholder, Svenska Handelsbanken, but business solutions are localized.

   “It is very important to comply with Polish regulations, therefore many solutions have to made locally.”

   Valo noted, however, that the evolving state of the market would pose a challenge to start-ups like Handelsbanken (Polska). “We will see a lot of turbulence in this sector during the next few years,” he said. “I am sure that we have not seen all the mergers and acquisitions in this market.

   “Competition is tough and we have to be able to serve clients faster and be more flexible to be able to attract customers. Our potential customers are used to high-quality banking services in the Nordic countries, and this is our main challenge.”

   As far as mergers go, Valo would not rule out buying into a Polish bank, particularly state-owned retail giant Powszechna Kasa Oszczędnoœci Bank Polski (PKO BP). “Our strategy in Handelsbanken has always been not to buy banks in new markets that we’ve entered, but this does not mean that we don’t buy foreign banks later on when it suits us,” Valo said. “We want to see our own operations on a stable and profitable footing before we take the next step.”

   Handelsbanken’s Press Spokesman Lars Lindmark said that if the company’s operations do well in Warsaw, it would consider opening branches in other Polish cities.