Market announcement

Title

LHV Pank and Danske Bank finalised the purchase-sale transaction of Estonian corporate and public sector credit portfolio

Message

On 3 October 2020, AS LHV Pank and Danske Bank A/S finalised the transaction,
under which LHV Pank acquired Danske Bank's credit portfolio involved with
Estonian corporate and public sector credits, the included leasing and
collateral agreements and other related agreements in the form of the transfer
of an unit.

The final volume of the transaction amounted to 273 million euros. As a result
of the transaction and taking into account the EUR 19 million discount price,
LHV Pank's loan portfolio grew by EUR 254 million and the servicing of 346
business clients, 252 apartment associations and 80 public sector customers was
transferred. About 56% of the portfolio consists of loans to local governments.
As of today, all valid credit agreements concluded by transferred clients, all
other documents and client data, including personal data related to the loan
portfolio, have been turned over to LHV Pank by Danske Bank. Together with the
unit, LHV Pank took also over the employment contract of one employee.

Danske Bank and LHV Pank notified all clients associated with the deal about the
transfer of their agreements, and also informed the related persons, cooperation
partners and related insurance firms about the change. The transfer has been
made as convenient and automatic as possible for the clients, there is no need
for the clients to go through a refinancing process. Mortgages associated with
the loans will be formalised in the name of LHV and no further costs will be
incurred by clients in connection with that. In the case of lease agreements,
the lessor and owner of the object of the lease will be LHV Pank.

"The transferral of the credit portfolio and clients to LHV went smoothly. We
are glad that we can begin servicing 678 new clients and we will work towards
making them very comfortable in our bank. We invite new clients to familiarize
themselves with other LHV services and we will provide them with all-round
support," commented Kadri Kiisel, Member of the Management Board of LHV Pank.

Transaction's financial impact on the financial situation of LHV

The transaction marks an important milestone for LHV. As at the end of August
2020, the loan portfolio of LHV Pank amounted to EUR 1,839 million. By acquiring
the business unit, the portfolio grew by about 14% and for the first time
reached above EUR 2 billion.

In order to finance the transaction LHV participated in the ECB's TLTRO III
programme and involved financing in the amount of 200 million euros. The rest of
the financing has come from already involved local deposits. The financing
sources of the central bank have been planned to be used temporarily and in
longer-term the goal is to replace most of the financing with local deposits.
Using central bank's resources means borrowing money from the programmes offered
by the ECB, which will be secured by part of the public sector loan portfolio.
At the same time, the interest rates required by the central bank are much lower
than even that of deposits.

Starting from the finalising of the deal, the additional profit from the
portfolio, will be 4.0 million euros per year. On average, the transaction will
improve the return on equity (ROE) of LHV by approximately 0.4 percentage points
per year. The discount included with the transaction will be reflected in the
accounts through the interest income over the lifespan of the portfolio. Should
a significant change or termination of the loan contracts occur then LHV will
include the discounts related to the contracts in the income statements for the
same period.

Provisioning the portfolio and re-registering the guarantees and other one-off
costs will be taken into account at the beginning of the transaction.

Acquiring the business unit of Danske Bank involved with the loan portfolio of
Estonian corporate customers and the public sector requires in total 18 million
euros of own funds from LHV. At least 12 million euros of this is Tier 1 own
funds and 6 million euros of which is Tier 2 own funds. In May, LHV Group
included 15 million euros of additional Tier1 capital
(https://cns.omxgroup.com/cdsPublic/viewDisclosure.action?disclosureId=941707&me
ssageId=1186300) that will also finance this transaction. Additionally, in
September Tier 2 own funds were included in the amount of 35 million euros
(https://cns.omxgroup.com/cdsPublic/viewDisclosure.action?disclosureId=956369&me
ssageId=1205016), that also were used to cover this transaction's need for Tier
2 own funds. AS LHV Pank and Danske Bank A/S announced the plan of this sale-
purchase transaction on 8 June 2020
(https://cns.omxgroup.com/cdsPublic/viewDisclosure.action?disclosureId=944024&me
ssageId=1189305).

LHV Group is the largest domestic financoskad mulial group and capital provider
in Estonia. LHV Group's key subsidiaries are LHV Pank and LHV Varahaldus. LHV
employs more than 480 people. LHV's banking services are used by more than
231,000 clients, and pension funds managed by LHV have over 182,000 active
clients. LHV's UK branch offers banking infrastructure to 120 international
financial services companies, via which LHV's payment services reach clients
around the world.



Priit Rum
LHV Head of Communications
Phone: +372 502 0786
Email: [email protected] (https://www.globenewswire.com/Tracker?data=VrzphAt0_-
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