FöreningsSparbanken AB History

Brunkebergstorg 8
S-105 34

Telephone: 46 8 5859 0000
Fax: 46 8 796 80 92

Public Company
Incorporated: 1997
Employees: 16,366
Total Assets: SEK 1.0 trillion ($146 billion) (2003)
Stock Exchanges: Pink Sheets Berlin
Ticker Symbols: FGSKY; FSPBA
NAIC: 522110 Commercial Banking

Company Perspectives:

Vision: FöreningsSparbanken is a bank for one and all--for customers, shareholders, employees and the community.

Key Dates:

The first Swedish savings bank is founded in Gothenburg.
The first farmer's cooperative credit society is formed in Västerhanige.
A central savings bank, Sparbankernas, is created, providing support services to the larger savings bank industry.
Jordbrukets Bank is created as a central bank for farmers' cooperative banks.
The cooperative bank changes its name to Föreningsbanken.
A banking crisis leads to the creation of a single savings bank entity, Sparbankgruppen.
A full-scale merger of savings banks creates Swedbank; 350 cooperative banks merge to form Föreningsbanken AB.
Föreningsbanken AB goes public on the Stockholm Stock Exchange.
Swedbank goes public on the Stockholm Stock Exchange.
Föreningsbanken AB and Swedbank merge to form FöreningsSparbanken (FS-banken).
Expansion into the Nordic region begins through alliances with Sparebank 1 (Norway), Aktia SparBank (Finland), and acquisitions of majority stakes in Hansapank (Estonia) and FIH (Denmark).
A merger with SEB is attempted, but is abandoned after EU monopolies scrutiny.
The company announces plans to open its first international branch in Copenhagen in 2005.

Company History:

FöreningsSparbanken AB (FS-banken) is one of Sweden's leading banks and one of the largest banking groups in the Nordic (Scandinavia and the Baltic states) region. FS-banken's total assets of more than SEK 1 trillion (nearly $150 billion) also places it among the top 50 banks in Europe. FS-banken offers a full range of banking services, and is especially present on the local level--the group's 785 branches are operated through 93 local banks, but also include 80 independently owned banks that operate under the FS-banken umbrella. Altogether these branches serve more than six million private customers, nearly 350,000 corporate customers, and nearly 350 city councils and municipalities. FS-banken also has taken advantage of the technological savvy of the Scandinavian and Baltic markets, operating a highly successful Internet banking service with nearly three million active customers, and a telephone banking service with more than 1.5 million customers. The company's 1,200-strong ATM network accommodates more than two million "self-service" customers as well. FS-banken's failed 2001 merger with rival Swedish bank SEB--which would have placed it among Europe's top 20 banks--has forced FS-banken to focus on building a Nordic presence, instead of a pan-European presence. As such, FS-banken has expanded throughout the Nordic region, primarily through alliances, including SpareBank 1 in Norway and Aktia Sparbank in Finland, in which FS-banken holds 19.5 percent and 24.4 percent stakes, respectively. The company also controls Estonia's Hansapank, active throughout the Baltic region, Norway's First Securities, and Denmark's FIH, a corporate finance specialist. The company markets its products through its alliance partners, with additional markets including Poland and Austria. The company also operates a number of specialist subsidiaries, including Robur (fund management products), Spintab (mortgages), Swedbank Markets (investments and asset management), and FöreningsSparbanken Finans. In 2005, the company expects to open the first foreign branch under its direct control, in Copenhagen. FS-banken was formed in 1997 through the merger of Föreningsbanken and Swedbank (known as Sparbanken Sverige inside Sweden). FS-banken is listed on the Stockholm Stock Exchange.

Merging Swedish Banking History in the 1990s

The merger of cooperative banking group Föreningsbanken and the savings bank-based Sparbanken Sverige (known as Swedbank internationally) brought together two concurrent streams of Swedish banking history. The earliest savings bank in Sweden was established in Gothenburg in 1820, emulating a trend that had begun in Europe earlier in the century. The new bank format responded to the rising demand for banking facilities suited to the growing middle-class and worker populations that appeared in force during the Industrial Revolution.

The savings bank format proved extremely popular in Sweden, and by the end of World War I, the country boasted nearly 500 separate and independent savings banks. A significant feature of the savings banks was their decidedly local focus--most had been set up to serve a single community and were, in large part, owned and operated by the "notables" of a community, that is, judges, industrialists, elected officials, and the like. These bank owners remained fiercely independent.

Nonetheless, the Depression Era put a stop to the growth in the savings bank sector and forced the merger of a number of banks in a first wave of consolidation. While the remaining banks continued to assert their independence, they were nonetheless forced to recognize the need--and benefits--of cooperating more closely. In 1942, the savings banks established Sparbankernas Bank, which literally meant "The Savings Banks' Bank." The new bank provided a number of centralized services to the savings banks, including foreign exchange operations and securities issuing. Sparbankernas's operations ended there for the most part, however, as its savings banks' owners refused to allow it to develop into a full-fledged bank capable of competing with their own banks.

While Sparbankernas Bank and the savings banks tended to the financial needs of Sweden's towns and cities, another branch of the country's banking system had developed specifically oriented toward the country's agricultural sector. The first banking cooperatives had appeared in Europe in the 19th century--many, such as the United Kingdom's mutual aid societies--had been formed initially as temporary cooperatives with a specific end purpose, such as the building of homes for each member, for example. The cooperative movement took off throughout Europe in the second half of the 19th century and evolved into permanent rivals to the growing savings banks and established commercial banks.

Sweden's first cooperative bank was founded in Västerhaninge in 1915. The cooperative credit society soon inspired the creation of new cooperative banks. From the outset, Sweden's cooperative banking movement was oriented toward the country's agricultural communities. The early decades of the century were a time of rapid technological development in the farming and other agricultural industries. With the advent of industrialized agricultural techniques, farmers required new means of raising the capital to invest in the new methods, equipment, and machinery.

By 1958, the cooperative movement had matured enough to require its own centralized banking facility. In that year, the country's farming cooperatives founded Jordbrukets Bank (Swedish for Agricultural Bank). The new entity enabled its credit society owners to compete on more equal terms, and encouraged continued growth of the movement. The cooperative societies became known collectively as Jordbrukskassan, or Farming Cooperative Credit Society.

Into the 1970s, however, the Jordbrukskassan--like the country's savings banks--operated under legislation that restricted their range of activities. Because of this, the cooperative banks operated at a disadvantage to the country's larger commercial banks. This situation was changed in 1969 when the financial sector was liberalized and the cooperatives and savings banks achieved parity with the commercial banks.

One result of this was continued growth of the cooperative movement, which by the early 1990s boasted more than 350 members. To underscore this change in status, the Jordbrukskassan changed its name, to Föreningsbanken, in 1974. The savings bank sector, meanwhile, also had begun to evolve. While Sparbankernas Bank continued to act as a central savings bank, the sector had consolidated into more than ten regionally active savings banks, 100 local savings banks, as well as another unit, the Swedish Savings Bank Association. These banks not only competed with the commercial, cooperative, and other financial entities, they also came into competition with each other.

Emerging from Crisis in the 1990s

The Swedish banking industry was deregulated in the 1980s, introducing a new era of competition--including the entry of foreign banks into Sweden for the first time. The deregulation, coupled with the country's buoyant economy, sparked a huge expansion of the country's credit market--by the late 1980s private borrowing had increased from 85 percent to more than 135 percent of the country's gross domestic product.

Sparbankernas Bank faced a number of challenges during this time. For one thing, operating as a central bank for the many local banks had become overly expensive in an era when competition turned cutthroat. Worse for Sparbankernas Bank, it also faced a revolt from within its own ranks. In the early 1980s, two of the larger savings banks behind Sparbankernas Bank, those in Stockholm and Gothenburg, had merged to form Sparbanken Forsa. The new bank began developing its own centralized services during the 1980s, coming into direct competition with Sparbankernas Bank. By the late 1980s, the competition had intensified, leading to Sparbanken Forsa's exit from the Sparbankernas Bank union.

At Sparbankernas Bank, meanwhile, Chief Executive Goran Collert had been struggling to transform the bank into a more directly active financial player in order to allow the savings bank sector to compete more effectively with the other banking sectors. By 1990, Collert began advocating the consolidation of the savings bank movement into a single unit, with the Sparbankernas Bank taking over as the head banking operation. Yet Collert met extreme resistance from the sector's many independently minded "notables."

Collert had his way, however, thanks to the crisis that rocked the Swedish financial industry at the beginning of the 1990s. Years of unbridled credit had come to a crashing halt with the collapse of the global economy and especially the property markets. Sweden's banks found themselves forced to foreclose on vast portfolios of defaulted loans as the country's real estate developers went bankrupt. Many of the country's banks teetered on the edge of bankruptcy themselves and were forced to turn to the Swedish government for a massive bailout.

Reeling from the crisis, the savings bank sector agreed to the reform led by Collert. In 1991, 11 of the country's largest regional savings banks, which converted themselves into limited banking companies, joined with the Savings Bank Association and Sparbankernas Bank to create a single cohesive entity, Sparbanksgruppen. Some 100 local banks chose not to join the new union outright, but instead agreed to continue to operate under its umbrella. Upstart Sparbanken Forsa was left out of the initial merger--then was absorbed by Sparbanksgruppen in a government-backed bailout in 1992.

As the financial crisis worsened, Collert finally gained the upper hand, and the country's savings banks were merged outright into a single banking structure, Sparbank Sverige, or Swedbank, as it came to be known internationally. Swedbank's début hardly seemed auspicious--between 1991 and 1993, the bank lost some SEK 20 billion ($3 billion). Yet the creation of Swedbank enabled Collert to lead a massive restructuring of the bloated savings bank industry, closing a number of underperforming branches and cutting nearly 25 percent of its payroll in just two years. By 1994, Swedbank had lowered its operating costs by some 20 percent and the company prepared to launch a public offering.

Regional Force in the New Century

Swedbank was beaten to the market by Föreningsbanken. Emerging from its own difficulties during the banking crisis, Föreningsbanken too had restructured, merging its 350 former cooperative members into a single banking entity to become Föreningsbanken AB in 1992. By 1994, Föreningsbanken had returned to growth, and in that year listed its stock on the Stockholm Stock Exchange. Swedbank's listing came the following year.

By 1996, Sweden's banks had not only staged a comeback from the crisis at the beginning of the decade, they had emerged as some of the most profitable banks in all of Europe. The banking sector now began looking forward to a new era, as the European banking industry began preparing for the full deregulation of the sector and the arrival of the single European currency at the end of the decade. The later 1990s were marked by a wave of consolidations within the various domestic markets, creating a smaller number of national powerhouse banks capable of competing on a European--and global--scale.

In 1997, Föreningsbanken and Swedbank joined the consolidation drive, announcing their agreement to merge to form FöreningsSparbanken (FS-banken). The new bank now became one of Sweden's top four banks--and one of the largest in the Scandinavian and wider Nordic regions.

FS-banken quickly began to assert itself as a major player in the Nordic region--which combined the Scandinavian and Baltic markets. In order to expand internationally, the bank developed a strategy of forming alliances with local partners. Such was the case in Finland, when the company acquired a minority stake in that country's Aktia. In 1998, the bank forged a similar alliance with Norway's Sparebank 1, in which FS-banken agreed to pay NOK 720 million ($90 million) for a 25 percent share of Sparebank 1 Gruppen. That organization, which controlled four regional savings banks as well as 16 local savings banks in Norway, agreed to market FS-banken's financial products to its customers.

Elsewhere, FS-banken moved into Estonia, acquiring majority control of that country's Hansapank. The purchase enabled FS-banken to expand throughout the Baltic states. The bank returned to Norway the following year with the purchase of 60 percent of that country's FIH, a major corporate finance specialist. FS-banken also formed an alliance with Erste Bank in Austria, and began marketing its products in Poland as well.

FS-banken next attempted to enter the European big leagues. In 2001, the bank announced its agreement with rival Swedish bank SEB--the Wallenberg family's banking vehicle--to merge to form one of Europe's top 25 banks. The merger would have given FS-banken the critical mass needed to extend its reach beyond the Nordic region in order to establish a truly pan-European operation.

The merger quickly foundered, however, when the initial review of the European Commission raised monopoly objections--the proposed merger would have created an entity controlling more than 50 percent of the Swedish market. Observers criticized the commission for not recognizing the special conditions of the smaller market countries, such as Sweden, and their need to create larger, more internationally competitive banking structures. Yet FS-banken and SEB surprised observers as well by calling off the merger without challenging the review--or even allowing it to reach a conclusion.

Thwarted in its ambition of becoming a pan-European bank, FS-banken contented itself with solidifying its Nordic region presence in the 2000s. The bank made a highly successful entry into the Internet banking market, attracting nearly three million customers by late 2004, including more than 1.3 million Baltic region customers. FS-banken, which previously operated in the larger Scandinavian market through its alliances, then began plans to establish its own international operations. In December 2004, FS-banken announced its intention to launch its own banking network in Denmark, with the first branch expected to open in Cophenhagen by mid-2005. FS-banken prepared to build on its position as a major Nordic region banking player in the new century.

Principal Subsidiaries: AB Spintab; Aktia Sparbank Abp (24.39%); Allround AB (67%); AS Hansapank (59.71%); Babs Paylink AB (49%); Bergslagens Sparbank AB (48%); Entercard AS; Eskilstuna Rekarne Sparbank AB (50%); Färs & Frosta Sparbank AB (30%); FI-Holding A/S (74.7%); First Securities ASA (33.3%); Förenings-Sparbanken Administration AB; Förenings-Sparbanken Fastighetsbyrå AB; Förenings-Sparbanken Finans AB; Förenings-Sparbanken Jordbrukskredit AB; Förenings-Sparbanken Juristbyrå AB; Förenings-Sparbanken Öland AB (60%); Förenings-Sparbanken Sjuhärad AB (47.5%); Förenings-Sparbanken Söderhamn AB (40%); HSB Bank AB; Kundinkasso AB K.I.A.B.; Robur AB; Robur Fonder AB; Robur Försäkring AB; Robur Kapitalförvaltning AB; SpareBank 1 Gruppen ASb (25%); Sparia Försäkrings AB; Swedbank Luxembourg S.A.; Vimmerby Sparbank AB (40%).

Principal Competitors: Nordea Group; Svenska Handelsbanken; Skandinaviska Enskilda Banken.

Further Reading:

  • "Advantages in Abundance: Swedish Banks Lead the Field on Many Fronts--Customer Satisfaction, NPL Ratios and IT Among," Banker, December 2002, p. 38.
  • Brown, Jonathan, "A Rude Shock to Domestic Bliss," Euromoney, November 2001, p. 74.
  • Burt, Tim, "Swedish Bank Lifts Estonian Stake," Financial Times, September 11, 1998, p. 32.
  • "FöreningsSparbanken to Launch Operations in Denmark," Nordic Business Report, December 15, 2004.
  • George, Nicholas, "Turbulence Hits Fsbanken," Financial Times, August 26, 2002, p. 6.
  • George, Nicholas, and Christopher Brown-Humes, "FSB and SEB Come to Terms with Life on Their Own," Financial Times, September 20, 2001, p. 30.
  • "Saved: Swedish Banking," Economist, December 17, 1994, p. 78.
  • "Swedbank Divests Holding in Erste Bank for SEK 1,564m," Nordic Business Report, June 19, 2003.

Source: International Directory of Company Histories, Vol.69. St. James Press, 2005.