LHV UK plans to acquire Bank North’s business activities
11 October 2022 - 4:00PM
LHV UK plans to acquire Bank North’s business activities
LHV UK Limited, a subsidiary of AS LHV Group, has made an offer
to Bank North Limited, a UK based credit institution, to acquire
its small and medium-sized enterprises ('SME') lending business.
With this move, LHV UK Limited, which is currently applying for a
UK banking license, enters the UK SME lending market.
LHV Group currently holds a 9.3% stake in Bank North as a
financial investment. Bank North was Authorised with Restrictions
and it entered the mobilisation period in Q3 2021. The mobilisation
period usually lasts up to 12 months and enables new banks to
complete the build-out of their bank and fully capitalise the bank.
Although the bank saw substantial loan demand, Bank North was
unable to raise the required capital due to falling activity in the
capital markets. Therefore, on 30 September 2022, the company
decided to initiate the Solvent Wind Down process. For LHV Group,
liquidating Bank North means an additional write-off of its
financial investment in the amount of EUR 2.2 million in
September.
Bank North with the help of liquidation advisers conducted a
tender to sell its business activity or loan portfolio, where LHV
UK made the best offer.
The acquisition of the business would include the loan portfolio
of approximately 17.9 million pounds, 20 employees, information
technology systems for managing the customer relationships and loan
portfolio, alongside agreements with commercial brokers.
Employees include the business development and client
relationship team, underwriting, valuation and IT teams. The
transaction price is 110% of the loan book value at the time the
transaction completes. The transaction is scheduled to be completed
in October. LHV UK will finance the transaction from its own funds
and does not need additional capital to carry out the transaction.
For LHV UK the acquired loan portfolio would start generating
interest income right after its transition. Longer term financial
effect of the transaction will be disclosed with the LHV Group
financial plan in February 2023.
Comment by Madis Toomsalu, CEO of LHV Group:
"Lending to enterprises has been the main activity of LHV Group
since the establishment of LHV Pank. Bank North's activities have
proven that the demand for SME loans in the UK remains strong and
that an efficient and fast decision-making process makes it
possible for a new entrant to the market to grow a lending
business. Bank North's strengths have been faster lending process
compared to competitors, regional focus and great relationship with
commercial brokers. The lending business aligns with LHV UK's
strategy and business plan, which envisages the next expansion of
existing activities into the SME lending market, enabling a
significant acceleration of current plans. LHV UK plans to continue
sales through existing commercial brokers and also continue
operating the physical branch in Manchester. For a bank the size of
LHV, the question in UK is not about demand for loans, but about
having enough capital to meet the demand."
LHV UK’s growth strategy in the UK is underpinned by three
business lines: banking services for financial intermediaries, SME
lending and banking services for e-merchants. LHV UK is currently
focused on obtaining a banking licence. For providing new SME
loans, LHV UK must register as an Annex 1 financial
institution.
LHV Group is the largest domestic financial group and capital
provider in Estonia. LHV Group's key subsidiaries are LHV Pank, LHV
Varahaldus, and LHV Kindlustus. The Group employs more than 820
people. As of August, LHV's banking services are used by 359,000
clients, the pension funds managed by LHV have 132,000 active
clients, and LHV Kindlustus protects a total of
149,000 clients. LHV's UK branch offers banking infrastructure
to 200 international financial services companies, via which LHV's
payment services reach clients worldwide.
Priit RumCommunication ManagerPhone: +372 502 0786Email:
priit.rum@lhv.ee
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