LHV Bank, a leading provider of Banking Services and SME Lending solutions, announces it has been authorised as a credit institution by the Prudential Regulation Authority (PRA), becoming the first institution to receive a banking licence without restrictions in 2023.
This milestone achievement allows LHV Bank to accept customer deposits and transition from operating under the temporary permissions regime as a branch of Estonian retail bank AS LHV Pank (LHV Pank) to being a fully authorised and regulated bank by both the PRA and the Financial Conduct Authority (FCA).
The decision to pursue a UK banking licence was made in 2021, and LHV submitted its application in March 2022. Following a close collaboration with the PRA and the FCA, the bank has secured the licence in just over a year, demonstrating its commitment to regulatory compliance and high standards.
Madis Toomsalu, Chairman of LHV Bank, stated, “Receiving the licence without restrictions in just over a year since submitting our application validates the exceptional work of our team and the professional operation we’ve built. We expect LHV Bank to achieve profitability by the end of our first year of operations. Our ability to generate additional capital internally positions us strongly for further growth in the dynamic UK banking market.”
Erki Kilu, the CEO of LHV Bank, added, “In addition to our existing Banking Services and SME Lending activities, we plan to start accepting retail deposits later this year and expand our banking solutions offering to e-commerce businesses, maintaining the same level of convenience, reliability, and security that our existing clients have come to expect.”
Connecting Traditional Banking and New-Generation Financial Services
LHV Bank connects the traditional banking sector with cutting-edge financial services, delivering best-in-class, cloud-native payments and banking infrastructure. Operating in the UK since 2018, LHV is a member of all major UK and EU payment schemes and, as such, its extensive offering includes real-time multi-currency payments, current and savings accounts, acquiring, indirect scheme access, open banking, and FX solutions, which are used by over 200 leading fintechs like Airwallex, Currencycloud, Truelayer, and Wise.
With a team of 130 employees and offices in London, Leeds, Manchester and Tallinn, LHV Bank enables its portfolio companies to serve over 10 million end-customers. Through its offering, its client base has access to a pool of 500 million potential clients across the UK and Europe, making LHV Bank one of the largest providers of Banking Services. Last year, the bank processed over 25 million payments valued at over £90 billion.
LHV Bank has made significant investments in technology, implementing the best-in-class core-banking solution, developing leading cloud-native services and building in-house payments modules and API solutions tailored to fintech clients.
Commitment to Reliability, Security, and Financial Performance
With an emphasis on reliability and security, LHV Bank employs prudent risk and liquidity management practices. LHV’s diverse service offerings and broad customer base have helped to de-risk its revenue streams, contributing to the consistent profitability of the Banking Services business line - last year, it generated £11.5m profit for LHV Pank.
As a result of the banking licence, the company is currently undergoing the Business Transfer process to move all operations to the new bank. After the transfer, the UK branch of LHV Pank will be deregistered, and LHV Bank will continue to operate as a separate entity. The underlying strong financial performance of the business line means that LHV Bank’s financial plan projects profitability by the end of its first year of operations.
AS LHV Group (LHV Group), the parent company of LHV Bank and LHV Pank, decided to pursue a UK banking licence to better highlight the financial performance and value proposition of its Banking Services business line to investors. LHV Group is a fast-growing Estonian financial group with over £10 billion in financial assets, operating in the banking, asset management, and insurance sectors, serving nearly 400,000 direct customers and employing over 900 professionals.
SME Lending Offerings
Last year, LHV Bank acquired Bank North’s SME Lending business line and received regulatory clearance from the FCA to start issuing SME loans. SME Lending has been a key strength of LHV Group, which has delivered 15 years of consecutive growth in this space. LHV Bank offers commercial real estate investment loans and trading loans starting from £0.5m to SMEs in the UK, with loan brokers serving as the primary sales channel for SME loans. LHV Bank’s strengths lie in its faster lending process, loan managers’ long-term experience, and understanding of local entrepreneurs’ needs. Leveraging its expertise, strong balance sheet and the proven demand for SME loans, LHV Bank plans to establish a robust lending business quickly, with operations in Manchester and London.
With its banking licence, LHV Bank plans to expand its offering to a broader audience. This includes accepting retail deposits, which will be available later this year, as well as introducing Banking Services to e-commerce businesses. LHV Bank is fully capitalised, and customer deposits are protected under the FSCS up to a limit of £85,000.