Estonian banking firm strikes deal to acquire Bank North’s SME lending business

Jonathan Thompson, CEO (left) and David Broadbent, CFO

Estonian banking and financial services company LHV UK has agreed commercial terms to acquire Bank North’s SME lending business.

Bank North, the Manchester-based banking start-up, announced last week it was winding down its operations after failing to secure a £30m new funding round to obtain a full banking license from the Bank of England, which would have allowed it to take deposits from retail savers.

Unable to secure the funds, Bank North said it was in talks to sell its £17m loan book and transfer its Manchester-based lending team – about a third of its 60 staff.

This transaction by LHV UK, which invested in Bank North last year, will enable the company, which has offices in Leeds, London and Tallinn and provides banking services to more than 200 fintechs, to accelerate its strategy to expand to servicing SMEs.

As part of the deal, LHV UK will acquire Bank North’s entire £17.9m loan book and technology systems for managing the loans.

The transaction, which is scheduled to complete later this month, will also see 20 employees transfer to LHV UK and cooperation agreements with commercial brokers. The proceeds will be used by Bank North to settle creditors as part of its solvent wind-down process.

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.”

He added: “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.”