RIGA – Consolidation processes that currently characterize the Estonian financial market have been having an effect on the country's southern neighbor as well. After Estonian-based Hansapank swallowed Hoiupank, its Latvian subsidiaries followed suit with a merger of their own..
Two leasing companies, Hanza Lizings and Latvijas Zemes Bankas Lizings (LZB Lizings), signed a consolidation agreement July 22. Hanza Lizings acquired LZB Lizings' shares at their face value for 20,000 lats ($33,000).
Hanza Lizings is part of the Hansapank group, and LZB Lizings was owned by Latvijas Zemes Banka, in which Hoiupank held 72.4 percent of shares.
"The merger will essentially affect the whole Latvian leasing market," said LZB Lizings Director Guntars Kniksts.
After the merger, Hanza Lizings will have a market share of 34 to 35 percent, said Hanza Lizings Director Atis Birkmanis. Currently the company holds a 30 percent market share, while LZB Lizings has only 3 to 4 percent of the Latvian leasing market.
According to Birkmanis, the two companies' consolidation serves the interests of the Hansapank group which wants to strengthen its position on the Baltic market.
Before the two companies' leasing portfolios will be merged in November, Hanza Lizings will operate as LZB Lizings' parent company, and leasing conditions will stay the same, Birkmanis said.
Although leasing interest rates in Estonia have jumped up, Hanza Lizings will not raise its interests rates because Latvian market conditions are different, Birkmanis said. "We are a fully Latvian company although the capital is Estonian," Birkmanis said.
According to Birkmanis, 80 percent of Hanza Lizings' leasing portfolio constituted car leasing; the rest was computer leasing. After the merger, the company's portfolio won't change dramatically because LZB Lizings was mostly engaged in car leasing.
LZB Lizings' profit in the first six months was 44,000 lats before taxes, while Hanza Lizings' profit was 500,000 lats.
At the same time, Latvijas Zemes Banka is waiting for its turn to merge with Hansabank Latvija, Hansapank's Latvian subsidiary. Both banks have started the half year audit. Audit results will announced in August, and they will determine the exchange ratio of banks' shares. Shareholders will make their final decision on both banks' merger in late September.
