Challenger bank Handelsbanken posts £50m Carillion loss overshadowing UK growth

Lucy White
Handelsbanken has 208 branches across the UK (Source: Handelsbanken)

Swedish challenger bank Handelsbanken revealed a massive loss flowing from the fall of construction company Carillion this morning, drawing attention away from growth in its UK lending and wealth management business.

Handelsbanken said it had booked SEK 556m (£50.1m) of loan losses in its British business in the fourth quarter of last year, all of which flowed from a single exposure.

The bank was one of several lenders to arrange a £790m credit facility for Carillion.

Read more: Santander UK arm sees impairments triple after Carillion collapse but group profits rise over 2017

More surprise loan losses from a single exposure in Denmark meant Handelsbanken failed to hit earnings expectations.

However, the bank did have some good news in the UK as it revealed individual and corporate lending and deposits were all up.

It added that preparations for a hard Brexit, rather than making it withdraw the UK, were causing Handelsbanken to firm up its 208-branch presence in the country by creating a subsidiary.

Read more: Bank of England says Brexit trade deal including the City is possible but warns of tensions with EU over investment banks

"Our preparations to create a subsidiary are progressing very well, and the investments we are making will ultimately strengthen the foundations for Handelsbanken's further UK growth," said the UK chief executive Mikael Sorensen.

Handelsbanken, which calls itself a "local relationship branch" and was founded in 1871, said net lending to UK individual and corporate customers increased 12 per cent to £19.2bn year-on-year in the fourth quarter of 2017, while customer deposits rose 27 per cent to £13.4bn.

Its in-branch wealth management specialists, combined with its UK investment services subsidiary Heartwood Investment Management, also contributed to a 14 per cent increase in net fee and commission income.

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