The independent savings banks may become the principal owner of Swedbank. A shop that could both be a good placement and a strategic hit, predicts Real-time columnist Per Lindvall.
Swedbank’s fastfoot flies while they are slow-moving. The latter consist of the independent savings banks that continue to buy shares in the shaken bank. The Greek Aisopo’s fable about the race between the fast hare and the slow turtle suddenly feels right in time.
The recent month’s turbulence around Swedbank after the disclosure of the bank’s money laundering transactions in the Baltic countries has scared many owners. The share price has fallen by almost 19 percent. A heavy blow for many owners, and not least the three main owners Folksam, through the life insurance business, the non-life insurance business and the KPA, the savings banks foundations and the savings bank group. These three have an agreement where they together must own at least 20 percent of shares in Swedbank.
As DI’s small-gay chronicler Ulf Pettersson writes this week, the fall in prices has put great pressure on the Folksam group, which has a very heavy exposure to Swedbank. You can actually ask whether it is reasonable for the insurance company to have such a large ostrich egg in its basket. The savings bank foundations are also not a really stable owner. In practice, they only own the shares in Swedbank and do not have much room to increase their exposure. To borrow the shares can go bad, where the financial crisis in the early 90s is a trauma that the foundations may live with forever.
But the independent savings banks then? Can these 19th century anachronisms in today’s finance world be a main owner to trust. The answer should probably be a real yes. First, they have a very great strategic interest in owning and increasing their ownership in Swedbank. The independent savings banks ‘mortgage lending business is largely linked to Swedbank Mortgage and much of their customers’ fund savings are channeled to Robur and also the connection to Swedbank does not lag behind in digital development. Dependency is also largely mutual. Almost 20 per cent of Swedbank Mortgage’s lending is savings bank customers, and it is true that this relationship also applies to Robur.
But do these savings banks have any money? Yep, a lot. In 2018, the independent savings banks generated a combined operating profit of SEK 3.5 billion. Much of the savings banks’ income comes from Swedbank, of course. The dividend on the shares was just over SEK 1 billion and commissions from Swedbank Mortgage and Robur were probably guessing for revenues of the same amount.
But since the Savings Banks do not have any own “dividend-hungry shareholders”, to quote Björn Wahlroos, many of them collect the capital on high. Last year they jointly distributed SEK 350 million for public utility purposes. But it still gives just under SEK 2.5 billion, partly to expand its own business, and partly a lot to buy shares for, as in Swedbank.
Of course, how much money the Savings Banks can buy online is difficult to assess. Financial health certainly varies greatly. But take the example of Leksand’s Savings Bank. This savings bank in Sweden’s actual hockey heart had a balance sheet total of SEK 4.6 billion and an equity of SEK 861 million, ie an equity ratio of nearly 19 percent at the end of 2017. They are supposed to have built little to 2018. Leksand’s Savings Bank owned 1.55 million shares in Swedbank 2017. At that time they were worth SEK 307 million, compared with SEK 272 million today. But without in any way threatening the financial stability of the business, Leksand’s Sparbank could double its holding. They have the capital to take this risk and it would yield significantly better returns than the around 600 million they placed in bonds.
Lilla Bjursås Sparbank outside Falun could also double its share. And if it is a general health description for the independent savings banks then they should be able to double their ownership, instantaneously.
In addition, as long as Swedbank maintains its earning capacity, they have a continuous inflow of capital. And since Swedbank’s earning capacity is crucial for its own survival capacity, continued buying of shares in Swedbank to strengthen control over the bank is a good deal. The slow turtle beats the fast-paced hair.