LHV Group’s subsidiary LHV Pank has agreed to acquire the business unit operating the Estonian corporate and public sector credits from Danske Bank.
LHV Pank and Danske Bank have agreed to finalise the deal this October and then the final scope and price of the transaction is expected to be determined.
The business unit to be acquired by LHV includes the credit portfolio of Estonian corporate clients and the public sector, with a volume of about €312m.
About 42% of the portfolio includes corporate loans and 54% includes loans to local governments.
Through the deal, LHV Pank will take over the servicing of about 670 business clients and 85 public sector customers from Danske Bank.
As per LHV, it is a strong portfolio with relatively low capital requirements for the loans involved with local governments. The deal also includes employees and the exact number will be determined, once the deal is finalised.
The volume of the portfolio is anticipated to amount to €280m at the moment of finalising the transaction.
The deal also needs approval from the Competition Authority of the Republic of Estonia, before it can be finalised.
LHV aims to finance the deal through long-term local deposits
The loan portfolio of LHV amounted to €1.75bn by this April-ending and by acquiring the business unit, the portfolio is expected to grow by €280m. In addition to existing deposits, the Estonian bank aims to raise a total of €250m to finance the deal.
The bank also expects that due to the growing number of deposits from Estonian customers, the transaction could be financed in the long-term through local deposits.
The deal follows LHV’s acquisition of private loans business in the country from Danske Bank last June.
LHV Group CEO Madis Toomsalu said “This is an important event for us. As a result of realisation of this transaction the loan portfolio of LHV will grow by about 15% and the importance of the public sector as part of LHV’s business will increase by leaps and bounds. We continue to follow our strategy and grow our business even when the times are tougher.”
“After acquiring this portfolio, LHV has financed about 85 local governments or their business entities, including several of the bigger cities in Estonia. We consider that a bank based on Estonian capital could be a good and flexible financial partner for the local governments.
“To all our customers we offer our recognized best customer service and comprehensive banking services – in addition to loan products and payment services also point-of-sale terminals, our nation-wide ATM network and handy internet bank and mobile app.”
