Handelsbanken in deal for Heartwood

Swedish bank Handelsbanken has announced its first acquisition in the UK, buying wealth management firm Heartwood as part of its continuing expansion into Europe.

Handelsbanken has operated in the UK for more than 20 years but the deal to acquire Heartwood for an undisclosed sum marks a rare step for the Stockholm-headquartered group. Its last acquisition was of Danish bank Lokalbanken in 2008, and it has traditionally preferred to grow organically.

Anders Bouvin, Handelsbanken’s UK chief executive, said the purchase of Heartwood reflected customers’ growing demand for investment and wealth management services.

“It’s a good fit because wealth management services have been our only proper product gap,” Mr Bouvin said, pointing out that the service was offered elsewhere in the group. “It’s the missing piece for us in the UK.”

It is the first foray into wealth management for Handelsbanken’s UK arm, which currently operates from 133 branches, with a further 14 currently planned.

The bank, which provides personal and business banking services, has differentiated itself in the UK by allowing individual branches autonomy over business decisions. Local staff are given full authority to approve loans.

In recent years, Handelsbanken has opened a new branch every eighth working day in the UK, a rate that Mr Bouvin says could potentially increase – although the bank does not set branch opening targets.

Under Wednesday’s deal, which is still subject to approval by regulators and Heartwood shareholders, the wealth management company would become a subsidiary of Handelsbanken.

The news came as the Swedish bank announced its full-year results and designated the Netherlands as one of its ‘home markets’ – territories regarded as particularly important and where it will offer the widest range of products – alongside the UK, Sweden, Norway, Finland and Denmark.

Handelsbanken operates in a further 18 countries. It has been in the Netherlands for a decade and currently operates 12 branches, with another three planned.

“Its an important confirmation of the view that we see the market as an important one for Handelsbanken,” Mr Bouvin said.

In the year to the end of December, group net profit rose 18 per cent to SKr14.5bn. The Swedish bank, which has become known for its conservative approach to banking, proposed a 10 per cent rise in its dividend to SKr10.75.

Handelsbanken also reported fourth-quarter results in which net profits increased by 40 per cent to SKr4.54bn compared with a year earlier.

Some analysts were concerned by a 10 per cent rise in costs to Skr4.43bn but were reassured by the bank’s strong capital position: it has a core tier one capital ratio (of core equity capital to total risk-weighted assets) of 16.4 per cent under Basel III regulations.

Operating profit in the UK rose 57 per cent year on year in 2012.