Competition between banks in housing loans beginning to ease
Sampo reaches limit
Competition among Finnish banks for housing loan customers is calming down. Sampo, which has greatly expanded its market share in recent years, informed that it will now concentrate more on its current customers, than on acquiring new ones.
"The margins for housing loans have reached the point where aggressive competition is no longer feasible. We have reached the pain barrier", announced CEO of Sampo, Mika Ihamuotila.
Sampo expressed its views in its interim report last Thursday. The finance group is still doing well, with profits of EUR 339 million before tax, compared to last year's EUR 230 million.
"We have received plenty of new customers through housing loans, which we are very happy with. Now we wish to grow for example in savings products", says Ihamuotila.
Sampo's announcement will have practical consequences, as it has clearly been the most growth-oriented bank recently.
In 2005 Sampo grew at a rate of 25 per cent in housing loans, while the increase in the overall housing loan market was about 15 per cent.
Competitors have long assumed that Sampo has cut its rates in order to attract more customers now and then. However, Ihamuotila insists Sampo has operated using "market prices".
"Sampo's new housing loans have an average margin of 0,55% per cent. I believe that our competitors are at the same level."
Housing loans have become the main source of new customers for banks in recent years. Banks have cut their housing loan interest margins, and have tried to make up for this by selling more of other products.
Nordea's Deputy CEO Markku Pohjola said that Sampo's announcement "is sure to calm down the situation."
"We also have the understanding that the profitability of housing loans has been in danger. However, this business is not dependant on just one party, but requires the other banks to interpret the situation the same way", said Pohjola.
The largest bank in the housing loan market is the Osuuspankki group, which controls 34 per cent of the market.
Reijo Karhinen, CEO of the OP Bank Group, says that he has noticed signs of reduced activity on the loan market. He describes Sampo's announcement as interesting.
"Our strategy remains the same. We intend to keep our customers in the future as well", said Karhinen.
Karhinen's statement means that established customers will continue to be offered loans at competitive prices.
Paavo Ahonen, an analyst for the FIM Group investment services company, estimates that the importance of housing loans for banks will now decrease. "Customers have been attracted with low margins from competitors and have been tied for years with loans."
Helsingin Sanomat
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| 12.5.2006 - TODAY |
 Competition between banks in housing loans beginning to ease |
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