LHV’s pension funds are investing 5 million euros in Coop Pank for the bank’s use in strengthening its equity and expanding its operations.
Under the agreement concluded between LHV Varahaldus and Coop Pank, LHV’s pension funds will buy a total of 5 million euros’ worth of Coop Pank’s subordinated bonds with a maturity of 10 years, whose annual yield is 6.75%.
Coop Pank is using the investment to strengthen the own funds of the bank and to finance its growth. Additional funds enable the bank with a new strategy, which entered the market in Estonia in early October, to provide a bigger range of financing services, for example, loans and leasing products, than has been provided to date.
“Coop Pank has set itself the objective of significantly growing its volume of business in financing both private and business clients and of competing on the loan market more actively than to date. We have already started work to achieve this objective: since the beginning of this year, our loan portfolio has grown by 40%, reaching 215 million euros by the end of September,” stated Margus Rink, Chairman of the Management Board of Coop Pank.
According to Andres Viisemann, who heads LHV’s pension funds, Coop Pank with its local majority shareholder is an attractive investment opportunity that provides pension assets stable rates of return over the long term. “Pension funds play an important role in the stimulation of local capital markets, and at the current stage I can see that allocating resources to the local market provides better opportunities than investment on international stock exchanges. LHV’s pension funds have now invested more than 110 million euros in Estonia, and it may be seen that the word has begun to spread on the local market: pension funds are seen as capital providers whose investments have a longer horizon and a flexible range of interest,” Andres Viisemann noted.
To intensify its business operations, Coop Pank is planning to also accept deposits more actively. “The growth strategy of Coop Pank rests on the recruitment of new clients and the resulting growth in deposits. Therefore, at the moment the bank is also paying higher deposit interest rates than its competitors. In 9 months this year, the deposit portfolio of Coop Pank grew by 22 per cent, reaching 309 million euros,” Margus Rink noted.
By securing funds from LHV, Coop Pank will also repay the subordinated loan of the Bank of Moscow, the former majority shareholder in Krediidipank, which is the last link to the former shareholder. Transactions are approved also by the Financial Supervision Authority.
Estonia’s only co-operative retail group, Coop Eesti, whose sales network includes more than 350 shops across Estonia, acquired a majority holding in AS Eesti Krediidipank, previously owned by the Bank of Moscow, in January this year. Following the transaction, the bank gained a new Supervisory Board, Management Board and business strategy and entered the market under the name Coop Pank last October.
Coop Pank, based on Estonian capital, takes advantage of the synergy generated between retail and banking and brings daily banking services closer to people’s homes. Coop Eesti, consisting of 19 co-operatives, has about 80 000 private shareholders and approximately 600 000 regular clients across Estonia.
The pension funds of AS LHV Varahaldus have over 180 thousand clients. LHV provides both actively and passively managed pension funds of the 2nd and 3rd columns. LHV’s pension funds have a total volume of 1 billion euros.