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Handelsbanken to shutter Asia and Germany operations, cut 800 jobs

Svenska Handelsbanken AB (publ) will close operations in Asia and Germany and cut 800 jobs as part of a cost reduction program, the bank's CFO said Oct. 23.

Speaking during a presentation of Handelsbanken's third quarter earnings, Rolf Marquardt said the Swedish bank will also discontinue products and services that do not support core business and customers.

The measures are expected to reduce annual spending by about 1.5 billion kronor by 2022, 1 billion kronor of which will take effect in 2020, he said.

Net profit for the quarter fell to 3.57 billion kronor, a 13% decline from 4.11 billion kronor profits in the same period last year. Expenses rose to 6.28 billion kronor, from 5.16 billion kronor a year earlier.

This hike in costs was partly driven by 900 million kronor in restructuring charges, which Handelsbanken said will cover expenses for the discontinuation of branches outside its home markets and of certain product areas, as well as for managing redundancies, primarily in central units. The 800 expected job cuts compare to nearly 12,000 employees in total across 20 countries.

More focused, less complex

Marquardt said the move will help Handelsbanken become "more focused and less complex."

The winding down of operations in Asia and Germany follows similar moves for activities in Estonia, Latvia, Lithuania and Poland.

"Clearly what we have been addressing now is the fact that we find ourselves in a time where it has become more and more expensive to run banking operations in each country, and then you need to have a meaningful business on top of that," he said.

"That potential hasn't been there in many of the countries outside of our home markets. The units that we intend to close down have had negative cost-income ratios or quite poor ones."

The full effects of the cost cutting will be achieved by the end of 2022. As a result of the restructuring plans, the bank's income is expected to decrease concurrently by 500 million kronor. Most of this will stem from Handelsbanken withdrawing from international markets, but "the ambition is that this will be counteracted by increased growth opportunities in our core areas," Marquardt said.

Outside of its six home markets — Sweden, the U.K., Denmark, Finland, Norway and the Netherlands — Handelsbanken will now concentrate its presence in Luxembourg and New York.

Combating financial crime

Handelsbanken has also faced high costs due to an intensifying effort to prevent financial crime, particularly in the U.K. The bank expects the 2019 cost for financial crime prevention to double from last year, to 1.2 billion kronor, and to remain that level for 2020 as well.

Marquardt said these costs do not relate to any investigations. Instead the bank has been building infrastructure that supports management of financial crime-related risks, including know your customer and monitoring systems. Some of the expenses also relate to collecting and digitally storing KYC information.

"Regulatory expectations not only in Scandinavia but also other countries have increased a lot ... and that's why we have increased spending so much," Marquardt said.

As of Oct. 22, US$1 was equivalent to 9.63 Swedish kronor.