Danske Won't Let Laundering Case Hurt Swedish Market Ambitions

(Bloomberg) -- Danske Bank A/S has no intention to let its role at the center of Europe’s biggest money laundering scandal affect its growth in the Swedish mortgage market.

The Swedish unit of Denmark’s biggest bank has spent the past two years grabbing about 8 percent of new mortgages in Scandinavia’s biggest economy. That’s roughly double its overall market share on Swedish home loans. Berit Behring, the head of Danske in Sweden, says it can continue to grow at that pace.

Danske Won't Let Laundering Case Hurt Swedish Market Ambitions

"We’ve been tracking credit quality closely, especially as we have been bearish on housing prices in Sweden, and we’re comfortable with the risk that we’re taking," Behring said in an interview in Stockholm on Jan. 8.

"The main thing we focus on is what kind of credit quality we get into our books, and right now we can continue to grow at that rate," she said. "That could of course change if housing prices fall."

Competition in Sweden’s 3.3 trillion-krona ($372 billion) mortgage market has intensified in recent years, with smaller players such as SBAB, Danske Bank and Lansforsakringar taking market share from larger rivals such as Nordea Bank Abp and SEB AB. New players such as mortgage fund Stabelo and online startup Enkla have also entered the market.

With some lenders offering lower prices and quick loan applications to win over more customers, Sweden’s bigger banks have been forced to respond. Both Nordea and SEB have made clear they want to win back lost ground in Sweden’s mortgage market, with Nordea cutting prices last year and SEB focusing on its service offering.

For Danske, efforts to win more customers in Sweden come amid accusations that the Danish bank was at the center of a multi-billion dollar dirty-money scandal, with a branch in Estonia allegedly serving as Europe’s main causeway through which criminals from the former Soviet Union laundered their money and channeled it into the West.

Behring says Danske can continue to grow in Sweden.

Danske Won't Let Laundering Case Hurt Swedish Market Ambitions

"I still believe that we can continue to challenge, especially the major Swedish banks," she said. "And as long as we can do that in a balanced way, we should continue to grow."

Growth can continue even if the Swedish economy slows, Behring said. In such a scenario, the bank can expand by broadening its business with existing clients even if the pace of new customer inflows slows, she said. One way to do that is to roll out products in Sweden that already exists in Danske’s Danish home market or in its other Nordic markets, she said.

In the 11 months through November, Danske took an average of 8.4 percent of new home loans, while its average overall market share was 3.7 percent. That helped lift its total share of the Swedish lending market to 5.8 percent in the third quarter of 2018, from 4.7 percent in late 2015.

Danske Won't Let Laundering Case Hurt Swedish Market Ambitions

A lot of Danske’s Swedish mortgage growth has come through partnerships with the white-collar Saco and TCO unions, which together have about 2 million members. They’re offered low rates on mortgages and other loans by Danske, as well as discounts on other services. Behring sees more potential in those partnerships.

"They have so many members, and so far we have taken quite a small portion of the total," she said. "Our advantage is that we are small, which enables us to give special offers to a targeted group of customers to a larger extent than our main competitors."

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