With 207 branches across the UK and a lot of recommendations, Handelsbanken have a powerful relationship banking model. Joe McGrath, branch manager at Handelsbanken in Manchester Spinningfields, discusses the importance of being local and accessible to customers and delivering a unique and highly personalised service to SMEs
Handelsbanken, the local relationship bank, may not be widely heard of, but it hasn’t become a successful global bank for nothing. The bank is growing fast (207 branches in the UK and counting), and defying warnings of Brexit doom by posting a 9% increase in its operating profits in the UK in the three months to 30 September 2016.
Total lending by Handelsbanken in the UK rose a reported 12% to £16.8bn with deposits up 19% to £10.3bn – and that’s without advertising. Its continuing success is the fruits of a highly personal, bespoke service, sustained top level customer satisfaction, and personal recommendations. So what does Handelsbanken do for SMEs and what is unique about its services?
Financing Growth spoke to Joe McGrath, branch manager at Handelsbanken in Manchester Spinningfields, who is palpably passionate about Handelsbanken’s relationship banking model and what it means for the customer.
What is the bank doing for SMEs?
SMEs want a banker to be someone with whom they can have a long-term relationship, and talk to them on a regular basis. I’ve been in the relationship side of banking for 30 years and it’s amazing how powerful being accessible is to SMEs. It’s the ability to talk: that might not sound very complicated but you’d be surprised at its value.
At Handelsbanken, we have all the digital tools that our customers need (online banking, mobile apps and so on); but you can also come in and talk to us about your specific business requirements. Given the experience of our branch teams, we are able to have those in-depth conversations. In our decentralised model we make 90–95% of decisions for SMEs in the local branch itself. And we do this not through credit scoring, but through empowered, experienced branch teams who are trusted to make credit decisions locally, for their customers. SMEs face many challenges in the day-to-day running of their business; the ability to meet somebody in their local branch who can make the day-to-day decisions relating to their banking is very valued.
Is this a unique way of working?
Handelsbanken’s locally empowered branch teams – who are entrusted to make credit decisions – really do help to deliver a unique and highly personalised service to SMEs. This is because the products we can offer are tailored around the specific financial requirements of each of our customers. We do not have a one-size-fits-all approach, and we don’t advertise ‘standard’ rates: what we put together is built around your own financial situation and aspirations as a business.
And this is delivered to customers free from central targets, or the bonuses that often go with them, as we believe these can distort behaviour. Our customers can therefore be confident that the decisions we take are done so with their best interests in full focus.
Our model is simple: we listen, we do our best to understand – and then we make a decision that is in the long-term interest of both our customer and our branch.
Delivering first-class service is vital to us here in Manchester Spinningfields as it is elsewhere around the country, because we believe it is the route to being commercially successful. It is even more important because we rely on word of mouth recommendation and referral – we don’t do any central advertising or marketing.
What value does all this bring to your business customers?
Being local means we can spend time with our customers; get to know them, their business and understand their business needs. We spend time ensuring we understand the individuals behind each business too, and what the management structure is like. We make our own value judgements, and overwhelmingly these judgements are made by the person in front of you.
Time and time again, we find that businesses really value the accessibility of the bank manager, often more so than what the latest interest rate might be.
A lot of your clients have come by word of mouth. How does this work in practice?
I’m a Mancunian and we have 10 branches in Greater Manchester. We also have a regional head office in Manchester, which provides specialist support to our branches in the area, so we employ about 250 people. People are gobsmacked at this! We are a major part of the local Manchester economy.
We push our resources out to the customer, so my branch in the Spinningfields area of Manchester looks after the businesses (and individuals) in that particular area. As a team, we get to know the people and businesses in the locality, and the trends and influences in the market place. It’s a great investment in the local economy and it is the same for the other towns where we are present too. What happens then is that people get to know our models and values. We have a principle called the ‘Church Spire’ where we serve customers on our patch: you could go to the top of the tallest building in your area (typically this was a church), and what you see around you is your area of operation.
It works very well because you become a key part of that local economy. You get to know local businesses and the people as you walk around, as you go shopping. You don’t waste time driving to other locations. So here in my branch, we look after the centre of Manchester. In Altrincham, we look after Altrincham customers. It’s the same wherever you think of. Wherever you live in Britain, there will be a Handelsbanken branch that will cover your area.
With 207 branches across the UK and a lot of recommendations, we have a powerful way of doing business. This is based on our ability to deal with our customers locally. Being local means you can speak to somebody, but we know our customers value digital access too, so we ensure we provide that in all the ways you would typically expect of any full service bank.
Are you sector specific?
No, we are generalists. We look after customers in our area – whoever they are. My branch, Manchester Spinningfields, looks after the largest local PLC, as well as a business customer that has no borrowing needs at all: they just want the high levels of personal service that we pride ourselves upon. SMEs may want to deal with their banking themselves and, if there is an issue, they want to ring somebody. We have no call centres, but they have our direct lines, so they do get to know us really well in the branch. We deal with the entire customer relationship here. SMEs want to run their business because they are great at what they do. And they have, in effect, a partner in Handelsbanken.
The problem with having a sector focus is that banks dive into that sector; then next year they might not want to be in that sector anymore so they pull out. We just don’t have that sort of scheme or marketing directive. Because we are long-term and prudent, we are always there: our consistent credit policy allows us to support customers throughout the economic cycle.
How does this long-term relationship benefit the customer?
If their financial needs change, we know the business already and they may have already kept us informed. We are likely to meet on a regular basis (say, once a quarter). They might tell us they are changing a piece of machinery and need finance for it. We walk around and make sure we see everything, and get the touch and feel of the business. The customer sees us as part of the business – it is a good long-term relationship.
We get to know them very well and can talk about all aspects of the business. You become quite informed on what the customer is doing and what its plans are – I actually spend most of my time out visiting businesses. This is a model that has stood the test of time. This two-way communication process helps the business because if there’s an issue, you’ll know about it straight away.
If you’re in an industry that is quite dynamic and issues are evolving, always keep your bank informed as your needs change. Don’t give us any surprises, and we’ll be there in the long-term for you. This makes my job very enjoyable as well, because we get to see a lot of different businesses develop.
What challenges are businesses facing with the impending Brexit?
This has to be considered on an individual business basis. An SME needs to understand the impact Brexit might have on its own business – both in terms of the opportunities, and potential threats. Threats may include the rise in import costs if you are importing raw materials. Opportunities may arise because you are an exporter: with the pound devaluing, this might enhance your ability to export.
When you undertake that analysis, you should speak to your bank on a regular basis so that they understand what the opportunities and threats are, and what you are going to do about them. How might the bank then help you in that process?
From Handelsbanken’s perspective, we take a long-term view and we’ll continue to grow in the UK in order to meet the demand we see for relationship banking in Manchester, and across Britain. It’s ‘business as usual’, and we’ll adjust to the post-Brexit environment when it happens.
Brexit is a unique challenge for us all. It’s an unprecedented constitutional event and it’s important the Government gets it right. But it’s also important that we, as bankers, help our customers as best we can through regular communication and good dialogue.
CASE STUDY: Hill’s Panel Products, Oldham
Hill’s Panel Products (HPP) supplies components to the furniture industry. Around 14 years ago, the company moved its banking to Handelsbanken, and Richard Mottram, HPP’s Finance Director, explains: “We were dissatisfied with our previous bank’s willingness to support the growth and development of our business.”
Since its inception in 1991, HPP has greatly expanded to cover the manufacture of a wide range of furniture products and fittings, using the latest technology. The company now has a turnover of £26 million, employing 170 people across its Oldham and Sheffield sites.
Today, Handelsbanken has HPP’s full banking, and has regularly provided asset finance facilities and corporate loans to support the company’s growth strategy.
Handelsbanken’s flexible approach – tailored around the specific financial requirements of their customers – has allowed HPP to invest in technology to enhance its production capacity, automate stock selection and improve overall efficiency.
Mottram says: “Our relationship with Handelsbanken is person-to-person; we know who we are dealing with and have excellent contact with our local branch team – they know our business’s requirements. Their customer service is excellent and, in turn, Handelsbanken’s support has helped us to improve our own customers’ experience too.”
Notably, at the same time as moving HPP’s banking across, three of their directors also moved their full personal banking and mortgages to Handelsbanken.
CASE STUDY: LDEX Group
LDEX Group is a data centre operator with sites in both Manchester and London. It was established in 2012, and now has a turnover of £2.5 million and employs 17 members of staff across its two sites. For the past two years, LDEX Group has been ranked in the Deloitte Fast 50, as one of the UK’s fastest growing companies.
In May 2016, the company’s owners, Rob Garbutt and Paddy Doyle, moved LDEX Group’s full business banking across to Handelsbanken. “We didn’t want to be just a number at our previous bank, which is what we became when our long-standing relationship manager left,” says Garbutt. Both had done their personal banking with Handelsbanken for five years, and described their decision to move their business banking over as “the obvious choice”.
LDEX Group was attracted by the high levels of customer service and local decision-making that both Garbutt and Doyle had both personally experienced from Handelsbanken. Garbutt explains: “The service – coupled with a lower borrowing rate on an existing loan, and a new £750K asset finance facility – made commercial sense. And the support to the business has been fantastic.”
They are now looking to expand LDEX Group’s two existing data sites in Manchester and London, and have recently secured a second site in Manchester.