LHV UK Limited, a subsidiary of the AS LHV Group, has made an offer to UK-based credit institution Bank North Limited to acquire its Small and Medium Enterprise (SME) lending business. The move will see his LHV UK Limited, which is currently applying for a UK banking license, enter his SME lending market in the UK.
LHV Group currently holds a 9.3% stake in Bank North as a financial investment. Bank North has been approved with restrictions and will enter the mobilization period in Q3 2021. The mobilization period typically lasts up to 12 months and allows the new bank to finish building the bank and fully capitalize the bank. Banks saw considerable loan demand, but Bank North was unable to raise the capital it needed due to lower capital market activity. Therefore, on September 30, 2022, the company has decided to begin the solvent winddown process. For LHV Group, Bank North’s liquidation means that in September he will write off an additional €2.2 million of financial investments.
Bank North, with the help of its liquidation advisors, submitted a bid to sell its business activities or loan portfolio, with LHV UK making the best offer.
The acquisition of this business includes a loan portfolio of approximately £17.9m, 20 employees, information technology systems to manage customer relationships, a loan portfolio and contracts with commercial brokers. Employees include business development and customer relationship teams, underwriting, valuations, and IT teams. The transaction price is 110% of the book value of the loan at closing. The transaction is expected to close in October. LHV UK will fund the transaction from its own funds and no additional capital is required to execute the transaction. For LHV UK, the acquired loan portfolio will start generating interest income immediately after the transition. The long-term financial effects of the transaction will be disclosed along with LHV Group’s financial plans in February 2023.
Comment from LHV Group CEO Madis Toomsal: “Business lending has been the main activity of the LHV Group since the founding of LHV Punk. New entrants to the market to grow their lending business.Bank North’s strengths compared to its competitors are its fast lending process, regional focus, commercial broker The lending business is in line with LHV UK’s strategy and business plans for its next expansion, significantly accelerating current plans by bringing existing activities into the SME lending market. LHV UK will continue to sell through existing commercial brokers and will also continue to operate a physical branch in Manchester. It’s not about demand, it’s about having enough capital to meet demand.”
LHV UK’s growth strategy in the UK is underpinned by three business units: banking services for financial intermediaries, small business lending and banking services for e-merchants. LHV UK is currently focused on obtaining a banking license. In order to offer new SME loans, LHV UK must be registered as an Annex 1 financial institution.
LHV Group is Estonia’s largest domestic financial group and capital provider. LHV Group’s main subsidiaries are LHV Punk, LHV Barahardas and LHV Kindrustas. The group has over 820 of his employees. As of August, LHV’s banking services served 359,000 customers, LHV managed pension funds had 132,000 active customers, and LHV Kindlustus protected a total of 149,000 customers. LHV’s UK branch provides banking infrastructure to 200 international financial services companies, and LHV’s payment services are provided to customers around the world.
Prit Lamb
communication manager
Phone: +372 502 0786
Email: priit.rum@lhv.ee
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