SEB builds from firm foundations

Flying into Stockholm’s Arlanda Airport, visitors are confronted with an eye-catching wall display documenting the photographic history of Sweden’s talents in sporting, artistic and cultural pursuits. The gallery includes wartime diplomat and humanitarian Raoul Wallenberg, tennis heartthrob Bjorn Borg and popular music quartet Abba.

Sweden’s marketing gurus hope the feel-good factor generated by these scions will put Stockholm firmly at the heart of Scandinavia. Similarly, the Stockholm-headquartered Skandinaviska Enskilda Banken (SEB), has not only stepped up its penetration of the Nordic countries close to Sweden’s borders, but is also becoming increasingly known across Europe, particularly in Germany and the fast-developing and nearby Baltic nations.

Under the stewardship of group CEO Annika Falkengren since November 2005, SEB has been making more progress in private banking, which she identified as a priority. Previously, the bank, owned by Sweden’s powerful Wallenberg family, had been concentrating more on investment and corporate banking activities.

The bank has been particularly keen to develop product ranges, in an innovative fashion, often happy to outsource asset classes to carefully chosen partners, something which few banks in Europe do on an active basis. For instance, SEB has been happy to address performance problems, particularly in US equities four years ago, when it awarded large cap equity briefs to Wellington and SocGen subsidiary TCW. At the same time, it revamped its range of third party funds, adding US funds managed by groups including T Rowe Price. Numbers of products in the hedge funds space were vastly expanded by the acquisition of London-based Key Asset Management in 2008.

Under previous regimes, the time to market of product launches was identified as a problem and management under Ms Falkengren started to accelerate this process by examining and eradicating obstructions in the bank’s decision-making machinery. “Our ambition is to offer high performing products for all market cycles and always have an up-to-date offer that is relevant to our clients,” says Martin Gärtner, global head of SEB Private Banking, which has been recognised as Best Private Bank in the Nordics by the judges in the 2011 PWM/Banker Private Banking Awards.

“It is also just as important to have adaptive investment strategies,” he adds. “Having said that, the majority of our private banking customers have a very long investment horizon and what really matters is our long-term ability to manage their wealth, which can sometimes be across generations.”

TRUSTED PARTNER

Although private banking services are fast becoming prioritized as a revenue source and also as another avenue to manage the wealth and family businesses of SEB’s core client base of small and medium sized companies, they are by no means new, says Mr Gärtner, who points to the banks “long-standing heritage” in wealth management.

“Our private banking business has always been a priority for SEB,” he says, with assets in this division now exceeding SEK170bn (E18.6bn), following SEK17bn of net new money inflows during 2010. “We started to offer financial services to wealthy private clients at the beginning of the twentieth century. Today we hold a leading position in Sweden, and have a strong presence in the Nordics and Europe. We are continuing to attract a steady inflow of new clients with our dedicated team and product offering.”

While it can be difficult to look beyond some of this slick Scandinavian marketing spiel, the ultimate ownership of the bank by the Wallenberg family gives SEB more of a Swiss private banking ethos and feel in some ways, rather than the reality of a big-brand high-street network, competing with other Nordic franchises such as Danske and Jyske banks.

“The Wallenberg family’s contacts within the investor community add an extra dimension to our brand,” says Mr Gärtner, about the Swedish dynasty which founded SEB in 1856 and imbues some “long-term values” throughout the network. “These characteristics not only benefit the culture of private banking at SEB, but are ingrained into our services and enable access to specific business opportunities.”

In specific terms, SEB’s vision is “to be the trusted partner for customers with aspirations,” states Mr Gärtner. Examples of this policy being implemented in practice include the bank’s recent launch of the SEB Entrepreneurs Concept, developed to help successful businessmen and women manage both their corporate and private financial needs in tandem.

The bank is keen to spread its Swedish expertise through a pan-Nordic offer. “We target and serve all Scandinavians,” says Mr Gärtner. “However, our ability to serve our clients cross-border is even more important, as many of our Scandinavian clients have an international career, often with family members living in different countries.”

While advisory services to private individuals have been an important part of SEB’s offering from the outset, a continuous development has taken place within the private bank’s product range. “Today, financial planning is the base of our offering to private banking clients,” says Mr Gärtner. “Since SEB offers solutions to private individuals, companies and their employees, we focus on building an offering that frees up time and provides security to all these groups. Their needs occasionally mean that several divisions within SEB are involved, and the challenge for us is to tighten our internal processes to secure a flexible and efficient delivery to the client.”

This idea of a ‘one-bank’ model, where different divisions cross-sell products and exploit each other’s contacts is however played down by Mr Gärtner, in the wake of regulatory and shareholder threats to the UBS concept, coming under stress in Switzerland. If anything, Mr Gärtner would rather underline the ability of the private bank to work separately, even though it is clearly embedded in the group structure.

“The success of our private banking business lies in the strength of our customer relations and our ability to provide broad, deep and independent advice,” says Mr Gärtner, trying to put the emphasis on customer service issues rather than the profit dimension often vocalised at some global and Swiss giants. “Which divisions of the bank provide advice is of secondary importance and each has its advantages and disadvantages. I’m convinced our private banking operation can survive independently.”

However, the asset management and private banking functions are clearly intertwined within SEB and products such as hedge funds are taking on an increasingly important role in clients’ portfolios. “Generally we have used hedge funds as an alternative source of return, seeking hedge funds that have low correlation to traditional investments,” says Mr Gärtner.

“In this process we emphasise the importance of thorough manager research as a key success factor. As long as we can ensure that hedge funds have a strong investment processes, transparency and favourable terms when it comes to liquidity, we will use them. In the latest market turmoil sound hedge funds have contributed to our performance and we expect to maintain that level of performance going forward.”

In the current crisis-driven times, while capital preservation and minimising risk remain the key aim for relationship managers and their clients at SEB, there is also a need to move quickly when investment opportunities present themselves.

“It comes down to how we steer portfolios depending on mandate structures,” says Mr Gärtner. “In portfolios that are more inclined to capital preservation, such as our Modern Investment Programs, we tend to work slightly differently to a traditional tactical mandate, which allocates between equities and bonds. Ultimately it comes down to the type of portfolio. The learning curve from recent quarters is that capital preservation and managing portfolios according to a value-at-risk mandate can require some very quick decision-making.”