Biggest Swedish lender pulling out of Baltic business over high costs

Bloomberg

Sweden’s biggest lender, Svenska Handelsbanken AB, is pulling out of the Baltic region arguing that the cost of staying is simply too big.
Handelsbanken’s Baltic operations are far smaller than those of its Swedish peers, Swedbank AB and SEB AB. But the decision comes at a sensitive time. Estonia is at the center of a $230 billion money laundering scandal that has
engulfed Denmark’s biggest lender, Danske Bank A/S. Swedbank, which dominates financial markets in the Baltics, is fielding allegations it may have handled over $100 billion in potentially suspicious flows.
Handelsbanken’s decision to close its three branches in Tal-linn, Riga and Vilnius marks the first major step by its new chief executive officer, Carina Akerstrom, as she tries to halt an increase in costs and improve profitability. Right after taking the helm in late March, Akerstrom said she would immediately address expenses, which means that Handelsbanken may have to exit some areas.
Even after pushing through “efficiency-enhancing measures” in Estonia, Latvia and Lithuania, Handelsbanken said that “the operations in the region have not performed satisfactorily,” in a statement. “Profitability is too low, while costs are too high.”
“This, combined with changes in many customers’ behavior and an increase in the investments needed, has resulted in the bank deciding to gradually wind down the operations during 2020,” it said.
Kilvar Kessler, the head of Estonia’s financial supervisor, said that “Handelsbanken’s departure from the Estonian market has no impact on the local banking market as their market share in Estonia has been very small,” in an emailed comment. “It is important that their client relationships in Estonia would be properly ended or transferred.”
Handelsbanken is the second major Nordic lender to quit the Baltics, after Danske. Denmark’s biggest bank said in February it was leaving the entire region after being kicked out by the Estonian regulator in the wake of the dirty-money scandal at its Tallinn branch. Nordea Bank Abp and DNB ASA are also retreating, after deciding to sell most of their Baltic joint venture, Luminor, to a group of buyers led by Blackstone.