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Experts: Buyer of Blackstone's Luminor stake may come from Europe

Luminor Bank in Tallinn.
Luminor Bank in Tallinn. Source: Priit Mürk/ERR

The U.S. investment company Blackstone plans to sell its majority stake in Luminor Bank, which operates in the Baltics, Bloomberg reported. Financial experts believe a buyer could be found in Europe.

The resale of Luminor, which operates in Estonia, Latvia and Lithuania, was forecast as soon as Blackstone bought a majority stake in 2019. Currently, Luminor holds 16 percent of the loan market in the Baltic countries.

"Investment funds always have an investment horizon, which is typically five to seven years. And we have reached the stage where they should be thinking about selling. /.../ I think Luminor also needs this kind of strategic push," said Redgate Capital partner Valeria Kiisk.

Peter Priisalm, head of Avaron Investments, said: "I don't know if now is the best time to sell Luminor Bank. In particular, it is complicated by geopolitical risks. But it is certainly a good time in terms of the level of interest income. As interest rates are high today, banks are earning significantly higher interest income as a result. /.../ Luminor Bank is certainly in the best shape it has been in recent years."

Bloomberg said the sale could take place as early as this year. Blackstone expects the sale price to be around €1.9 billion.

When asked for an interview, Luminor said the company does not comment on rumors. Blackstone told "Aktuaalne kaamera" it would also not comment.

Experts think a buyer may come from western or central Europe.

Priisalm said: "I would probably look towards Poland first. There are big financial institutions in Poland, it is a big market, and the big Polish public financial institutions are also looking outside the Polish market. PZU, for example, already has insurance companies in the Baltics, and as PZU is the largest Polish insurance company, which also has stakes in the banking sector, owning a banking group in the Baltics, for example, could fit into their portfolio quite well. But surely this circle of interested parties is wider."

Kiisk said: "I would look at western Europe and central Europe in particular, who are the bigger banks there that might think. Or some of the banks further afield who have already looked over here and done something in our region."

Neither of them believes that Luminor will find a buyer on the home market. Larger market participants could not get permission to buy from the Competition Authority, and smaller ones do not have an independent framework for this.

However, interest from a large international owner can also have a good effect on the credit market in Estonia.

"Certainly one thing a buyer can bring is cheaper capital. Today, Luminor has still had to borrow from international markets as an independent bank, but by being part of a larger institution, this cost may come down," Priisalm told AK.

Luminor Bank was created in 2017 after the merger of the Baltic units of Nordea and DNB. The 20 percent minority share is still owned by the Norwegian bank DNB.

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Editor: Merili Nael, Helen Wright

Source: Aktuaalne kaamera

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