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Sweden’s banking sector: Facts & Figures

Updated September 2019 – For earlier editions of Facts & Figures click here

The Swedish economy peaked in the first half of 2018 and has since entered a slowdown phase, according to the National Institute of Economic Research (NIER). Both the consumer and business confidence indicators in the NIER’s Economic Tendency Survey had fallen by the end of 2018, partly due to increased uncertainty about the outlook both at home and abroad. The economy has been driven by strong demand for new housing in 2018. Housing investment has since decreased. Employment grew strongly at the end of 2018, but growth is expected to slow down in the beginning of 2019.

The four main categories of banks on the Swedish market are Swedish commercial banks, foreign banks, savings banks and co-operative banks. In December 2018, Sweden had a total of 124 banks, comprising 39 commercial banks, 36 foreign banks, 47 savings banks and two co-operative banks.

The number of commercial banks and foreign bank branches in Sweden has increased from 63 in 2008 to 75 in 2018. The increase has occurred above all among Swedish commercial banks, when several credit market institutions have been transformed into commercial banks. In 2018, the number of foreign banks increased from 30 to 36. After Nordea moved its headquarters to Finland in October 2018, the bank became by far the largest foreign bank in Sweden.

Cross-border activities have increased over the last several years and the major Swedish banks all have a large share of their business abroad. The banking market in the other Nordic countries is important for the major Swedish banks as well as the Baltic States and other countries in northern Europe.

The Swedish state owns one bank, which mainly offers mortgage loans, and has no other ownership in the banking sector.

The Swedish banks have 1,312 branch offices compared to 1,987 branch offices in 2008. The number of branch offices has diminished slowly in the last ten years due mainly to changing customer behaviour. The Swedish banks have more than 40,000 employees compared to 90,000 in the whole financial sector.

Normal bank services are to a large extent performed through mobile phones, tablets and computers. Moreover, new ways to perform bank services are increasing rapidly, e.g. mobile payment services, Bank e-ID, e-invoices, etc. According to the ECB, Swedes uses non-cash payments to a larger extent than any other Europeans. For that reason, the use of cash is declining rapidly.

The most common means of payment in Sweden are the various charge cards and electronic giro systems. Most payments are linked to bank transaction accounts, which facilitate salary deposits, ATM withdrawals, credit and charge card purchases and automatic transfers. In Sweden there are 2,655 ATMs and 219,000 card payment terminals.

Paper-based payments such as giro forms, cheques and cash payments have been replaced by electronic payments of various types. As an example, the use of different kinds of cards has increased from 1,400 million transactions in 2007 to around 3,350 million transactions in 2017.

According to a survey by the Riksbank, the Swedish central bank, 93% of Swedish citizens have used a debit card in the past month and 62% have used the Swish mobile payment service. Swish, which was introduced six years ago and offers real-time account-to-account transfer, has 6.9 million users, which corresponds to more than 65 percent of the Swedish population.

A high demand in housing in Sweden for several years has increased house lending. However, falling house prices during 2018 has cooled the market somewhat. Lending to the Swedish public increased by 5.7% in 2018 and deposits from the public increased by 6.7% in 2018.

In a survey among managers of local bank branch offices, business volumes indicate that lending to SMEs has increased since 2013. In the same survey, the managers believe that lending will continue to increase in 2019, although slightly slower than in 2018. According to an OECD report, 40% of outstanding business loans in Sweden are loans to SMEs. A survey by an organisation for SMEs suggest that bank loans are among the most common form of financing for SMEs. According to the survey, 13% of Swedish SMEs used bank loans to finance investments and 9% used corporate revolving credits.

Sustainable finance is a high priority in Sweden. Initiatives in the area have started or are planned by both banks and government.

Despite the low interest rate environment, where the Riksbank has kept negative repo rates from 2015, the Swedish banks have managed to maintain satisfactory earnings. In addition, the Swedish banks’ non-performing loan ratio is the lowest in Europe. According to the financial stability report from Finansinspektionen, the resilience among the major banks in Sweden is satisfactory because of high capital and liquidity requirements, but also because of the major banks’ strong profitability.

The Swedish banks are important to the Swedish economy and employs 2% of the workforce, constitutes 4.1% of GDP and pay 11% of the corporate taxes.

Contributor: Christian Nilsson