Sweden’s Banks Face New Threat as Lendify Plans to Add Mortgages

(Bloomberg) -- Lendify plans to enter Sweden’s $350 billion mortgage market within a few years, promising to intensify competition in a market where major banks are already losing volumes to niche players.

The company, which relies on peer-to-peer lending and institutional capital for funding, plans to add home loans to its existing offering of consumer loans in the next 3-4 years, Chief Executive Officer Nicholas Sunden-Cullberg said in an interview in Stockholm. Its automated processes mean it can handle loans at a fraction of what it costs the big banks, resulting in lower interest rates.

That would add a fresh threat to Swedbank AB and Svenska Handelsbanken AB, the largest mortgage lenders and whose market shares are under increasing pressure from all corners of the market. Competition comes both from established niche lenders such as SBAB and Lansforsakringar, new entrants such as mortgage fund Stabelo, as well as SEB AB and Nordea Bank Abp, traditional lenders that are now pushing to regain lost mortgage volumes.

For Lendify, it would be an entry into a huge new world. Sweden’s home-loan market has doubled to 3.37 trillion kronor ($350 billion) in the past 10 years, as a housing shortage and low interest rates fueled lending and price growth. It’s almost 15 times bigger than the consumer loan market Lendify currently operates in.

Lendify would target the customers that make up “the large bulk” of the mortgage market rather than following in the footsteps of many other niche lenders, which typically either go for riskier customers who can’t get a loan at the major banks or for clients with very low loan-to-value ratios and little risk.

“The unsecured consumer loan market is big and we’re not in a hurry, but we’re building a tool that can be used for other products as well and plan to add new ones in coming years,” Sunden-Cullberg said in the interview.

According to Sunden-Cullberg, many of the challengers underestimate "how difficult it is to build lending businesses" while the traditional banks "underestimate how profoundly challenged and pressured they will be by those who make it through the build-up phases."

Swedbank, Handelsbanken, Nordea and SEB have already seen their overall market shares decline over the past few years, though they still control about 68% of the total credit market. Smaller banks (outside the top seven) realized 23% of total credit growth from 2010-2018, despite having a market share of just 13% in 2010, according to a report from Copenhagen Economics.

Since its 2015 launch, Lendify has grown its loan book to more than 1.5 billion kronor and aims to increase it tenfold to 15 billion kronor by 2023, Sunden-Cullberg said. To get there, it needs to increase its monthly growth to 300 million kronor, from the current 150 million to 200 million kronor, he said.

That target may seem high, but Sunden-Cullberg says it’s “very realistic.” Lendify has grown rapidly because of its ability to compete on price and it gets 85% of its customers from loan brokers, which households turn to in search of better loan terms and then get offers from Lendify and other lenders, he said.

To aid its growth, Lendify this month raised funds from existing and new shareholders at a pre-money valuation of 1 billion kronor, following a June financing round from investors including Insight Investment. It has raised a total of 2.8 billion kronor this year.

--With assistance from Love Liman.

To contact the reporter on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net, Christian Wienberg

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