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LHV will found a new fintech focussed bank in the UK


At the end of last month we announced that LHV shall start pursuing a banking licence in UK, this marks our wider ambition and commitment to our fintech clients. LHV’s presence here in London will be more prominent and the focus on the Banking Services even sharper. Although the branch is already fully operational and provides services in the UK, we believe that a dedicated bank in the UK will better serve our long term ambition and the needs of our international clients.

LHV has always focussed on supporting the growing financial technology space, contrary to most banks in our region, we welcomed the fintech community with open arms and provided them with influential and important financial services, essential for their operations. LHV takes pride in being one of the first banks that publicly supported emerging virtual assets companies; standing by the money remittance companies, that always experienced trouble trying to convince banks about their compliance and AML framework suitability, and placed trust on early stage start-ups.

Today, we provide banking infrastructure to more than 130 global rapidly growing financial technology, payments, and virtual assets companies. Our annualised gross-processed payment volume now exceeds 90 billion Euros and we are constantly working to add new innovative services and widening access to our payments infrastructure. Our LHV Connect API is one of a kind and it allows instant Euro payments via SEPA Instant and Sterling transactions through via Faster Payments in the UK. Thanks to our clients, today LHV processes 8% of total the SEPA real time transaction volume.

Admittedly, one could ask what’s the fuss about a separate licence when LHV is already operational? We believe there are a number of very strong motivators that would justify a separate licence.

Focus – a dedicated bank draws a clear line between the existing LHV’s strong retail offering in Estonia and its specialised Banking Services division, that has a global reach. The products, services and processes will be uniquely tailored to Banking Services and the product roadmap will have lesser dependencies outside of the core focus.

Better visibility – Retail and wholesale banking are different animals, LHV Banking Services is in its essence wholesale banking, selling services to not to individuals but large clients, such as other financial institutions, corporations and start-ups. Clear separation between the business allows for better overview over both. People familiar with the UK banking ringfencing may understandably find similarities here , but there is a need to emphasise that this decision was taken voluntarily as the board believes that in the long term it’ll help us serve our clients better. Our Banking Services clients have trusted us with more that EUR500 million (£455 million) worth of deposits, with regulated client funds safeguarding making up majority of the deposits. Safeguarding is an important topic, as it forms the basis of the trust of the non-bank financial institution and the FCA has tightened oversight over safeguarding in general. Again, LHV would rather be at the forefront and in a position to provide to the FCA, PRA and Estonian FSA better visibility over bank’s and its clients activities.

Value unlocking – LHV Group has three core businesses: Retail and Corporate Bank in Estonia, Asset Management and the newly established Asset Insurance. By separating the Banking Services, thereby adding an additional core business, the UK Branch will provide to LHV Group investors a better understanding of the core businesses and improves the valuation.

We are aware that the separation process won’t happen overnight and it may take some years until the successful conclusion of the process. During this period we continue with the existing framework and there will be no impact to LHV’s current and future clients. The core elements and regional coverage of our banking infrastructure shall remain firmly in place and we are committed to enhancing our current offering as well as delivering new products and services, knowing that these will become a solid foundation for the offering of our new bank.

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