Danske Bank A/S will off-load its portfolio of Estonian private loans to a subsidiary of AS LHV Group for about €410 million.
The troubled Danish bank began closing parts of its Estonia business in 2018 as a consequence of a global money laundering scandal in which €200 billion of suspicious payments allegedly passed through Danske's Estonia branch between 2007 and 2015.
Estonian lender LHV Group said subsidiary AS LHV Pank will finalize the transaction for the Danske unit holding the loans in autumn, once it receives regulatory approval and raises additional capital.
LHV Group said it must raise €280 million to finance the deal, including €27 million of its own funds that will be raised through a rights issue, a subordinated bond issuance and a private placement of additional Tier 1 bonds.
The transaction is expected to have a significant financial impact on LHV Pank, as its €1.02 billion loan book will grow by around €450 million.
"This is an important event for us. LHV's loan portfolio will increase by 40% as a result of the transaction taking place, and the importance of retail banking in LHV's business will increase dramatically," said Madis Toomsalu, the group CEO.