"The SME lending business will remain regional through our offices in London and Manchester, where it’ll continue to benefit from local expertise and established relationships with the brokers"
Bank North was Authorised with Restrictions and entered the mobilisation period in Q3 2021, which usually lasts up to 12 months and enables new banks to complete the build-out of their bank. However, Bank North was unable to raise the required capital during the period due to the falling activity in the capital markets. As a result, on 30th September, the board of Bank North triggered the Solvent Wind Down process.
LHV UK will acquire Bank North’s entire £17.9m loan book and technology systems for managing the loans. The transaction will also see 20 employees transfer to LHV UK and cooperation agreements with commercial brokers.
Lending to SMEs has been one of the core business areas for LHV Group, LHV UK’s parent company and an investor in Bank North.
The Company will not need any third-party financing for the transaction. Once the business and assets transfer is complete, LHV UK will continue to operate the same business model. The transaction is scheduled to complete later this month, and the proceeds will be used by Bank North to settle creditors as part of its solvent wind-down process.
The SME business will remain regional and driven by cooperation with local commercial brokers. Manchester will become LHV UK’s third hub in the UK, in addition to London and Leeds.
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.
Erki Kilu, CEO of LHV UK, said: “The demand for SME lending is well proven, and this acquisition enables LHV UK to accelerate our plans to expand to servicing SME companies. By utilising the experience of LHV UK’s executive management in the SME lending space and our access to funding and capital, which is essential when running a loan business, we can quickly build on the solid foundation laid by Bank North’s team.
"By combining the skills and experience of the two companies, we increase LHV UK’s technical capacity, create value and will be in a position to better deliver to the UK SME market. The SME lending business will remain regional through our offices in London and Manchester, where it’ll continue to benefit from local expertise and established relationships with the brokers, who’ve already delivered a proven substantial loan pipeline to Bank North.”
Ron Emerson CBE, chair of Bank North, said: “On behalf of the board, I would like to express our appreciation for the support that we have received from the LHV Group. As an investor, they have conducted themselves impeccably and have demonstrated real empathy for SMEs and a genuine understanding of the Bank North lending proposition and vision. Following a competitive and independently managed process, we are pleased that we were able to agree on this transaction with LHV UK, which not only preserves 20 jobs and the Bank North legacy but also ensures that SMEs will get much-needed finance from a progressive and well-funded provider.”
