LHV UK, a subsidiary of Estonian financial services firm LHV Group, is looking to acquire the small and medium-sized enterprises (SME) lending business of Bank North. 

The deal will see LHV UK, which is looking to secure a UK banking licence, enter the UK SME lending market.

The Estonian group currently holds a 9.3% stake in Bank North as a financial investment.

The assets up for sale include a loan portfolio of approximately £17.9m, 20 employees, IT systems and agreements with commercial brokers.

LHV stated that the transaction price will be 110% of the loan book value at the time the transaction completes, which is slated to happen in October. 

For LHV’s UK arm, the business is anticipated to start generating interest income right after its acquisition.

LHV’s offer to acquire Bank North’s assets comes after the latter decided to wind down its operations due to a shortage of capital. 

Bank North, which secured a restricted banking licence from the regulator in August 2021, failed to raise critical capital within the necessary timeline.

As part of the liquidation process, Bank North conducted a tender to sell its business activity or loan portfolio, which attracted a bid from LHV. 

Bank North’s liquidation is expected to result in an additional write-off of €2.2m in September for LHV. 

LHV Group CEO Madis Toomsalu said: “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.”