Evli Bank Plc (“Evli”) and Fellow Finance Plc (“Fellow Finance”) have today signed a combination agreement (the “Combination Agreement”).
The Combination Agreement sets out an arrangement (the “Arrangement”) by which Evli will demerge through a partial demerger into a new asset management group that will be listed (“New Evli”) and a company that will carry on Evli’s banking services and into which Fellow Finance will merge (the combined company formed in the merger of Fellow Finance and the company that will carry on Evli’s banking services is hereinafter referred to as “Fellow Bank”). In connection with the Arrangement, New Evli, Taaleri Plc and a company owned by Fellow Finance’s CEO Teemu Nyholm will capitalise Fellow Bank in a directed share issue in order to secure a level of own funds that substantially exceeds authority requirements.
The Arrangement is intended to be completed during the first half of 2022.
Reasons for and goals of the arrangement
Evli announced on 22 January 2021 that its board of directors had decided to commence a strategic review regarding the future of its banking services. The financial significance of banking services for Evli is limited, with its share of Evli Group’s net sales in 2020 less than five percent. Evli’s strategic goal is to strengthen its position as a leading Nordic wealth manager. The focus of the strategy is on developing and growing international sales and alternative asset classes, as well as strengthening domestic market leadership in both private and institutional wealth management and in advisory and incentive services offered to corporate clients. Investments into customer experience, digitalisation and leadership in taking responsibility factors into account in asset management are at the core of Evli’s strategy.
In the evaluation, Evli assessed, among other things, the business and financial effects of a possible exit from banking services. As a result of the evaluation, Evli has in negotiations with Fellow Finance reached a solution in which the assets and resources of current Evli’s investment services are to be separated from Evli's banking services. The separation of investment services would free up both financial and human resources for the development of existing and new products and services in order to strengthen Evli's market position.
In connection with the separation of Evli’s banking services, Fellow Finance will merge into Evli, being the entity carrying on banking services, and the two combined will become Fellow Bank. Fellow Bank’s aim is to be the leading Finnish customer-focused digital bank for individuals and SMEs as well as savers looking to receive interest income from deposits. Fellow Bank’s business will be based on offering its customers banking services in a simple, understandable and responsible manner. The core of Fellow Bank’s operations will be Fellow Finance’s unique expertise in lending and assessment of creditworthiness as well as digital services combined with Evli’s expertise in banking and risk management.
The arrangement will create a new company, Fellow Bank Plc, which will be based on a scalable and digital service concept as well as New Evli, which will be further focused on wealth management and advisory services. The arrangement further improves opportunities to grow both banking services and wealth management as independent businesses.
Evli’s CEO Maunu Lehtimäki: “Evli’s strategic goal is to strengthen its position as a leading Nordic wealth manager. The focus of the strategy is on developing and growing international sales and alternative asset classes, as well as strengthening domestic market leadership in both private and institutional wealth management and among corporate clients. Evli announced in January that its board of directors had decided to commence a strategic review regarding the future of its banking services. The review found that significant improvement of the profitability of credit institution operations would require a more extensive customer base and service offering. The proposed solution in which Evli’s banking services would merge with one of Finland’s leading digital service providers in the field of consumer credit and corporate lending, Fellow Finance, will make this possible and create a solid foundation for a well-capitalised new bank for the digital age that will combine the core expertise of both companies.”
Fellow Finance’s Chairman of the Board Kai Myllyneva: “I am looking forward to launching the new banking business. Combining the strengths of Evli’s banking services with Fellow Finance will open up excellent opportunities for the new Fellow Bank to grow profitably. The new bank will be backed by financially strong owners who are highly committed to developing the bank’s operations. The commitment of and funding by the main owners will give the new Fellow Bank a very high level of own funds.”
Fellow Finance's CEO Teemu Nyholm: “The combination of Fellow Finance and Evli will create a unique new bank in Finland. Our future business model will enable us to offer even more comprehensive services to our private and corporate customers, to expand our client base and offer our customers a variety of financing products at highly competitive interest rates. Cooperating with Evli to serve Evli’s customers with respect to deposits combined with the ability to offer competitive interest rates on deposits provides a solid foundation to increase the bank’s deposited assets. Our digital and customer-oriented service model, operative efficiency and credit risk management expertise as well as our existing extensive customer base will enable profitable future growth for Fellow Bank.”