The crisis helped a bank from Haapsalu expand to Sweden


  • The loan business is growing
  • In Estonia, banks can still ask high interest
  • People’s financial literacy has improved

According to Rauno Klettenberg, the head of Holm Bank, people have finally started investing in addition to saving, and their financial literacy has improved. The head of the bank is counting on the younger generation. 

Holm Bank AS, which expanded to Sweden during the crisis, has grown its portfolio significantly.

‘We must learn to take advantage of the crisis. It was definitely a risk,’ said Rauno Klettenberg, head of Holm Bank.

Now, the risk has paid off: the bank’s digital credit card portfolio is already over one million euros.

‘Sweden is a country with a well-established market and habits, where competition is intense and the market is more conservative, but we are also satisfied with a smaller market share. The Holm name is familiar for Swedes, because holm means an island in Swedish,’ said Klettenberg.

Holm Bank plans to expand further next year, but Klettenberg will keep the destinations secret for the time being.

Waiting for a cash injection

The reason for the expansion was prosaic: Estonia is too small.

‘The development of the financial market in Estonia has been fast over the years and customers welcome the innovations. When I worked at Handelsbanken, the Estonian subsidiaries of international banks had better online banking than the parent banks. However, Estonia’s disadvantage is the small size of the market. Small companies hit the ceiling and have to consider moving across the border,’ said Klettenberg.

Given the rapid pace of expansion, Klettenberg makes no secret of the intention to raise money from investors to boost development.

‘We have not set a goal to go public, but we need capital for growth. We plan to raise money from investors operating in this region,’ said Klettenberg.

The saying ‘For whoever has, to him more shall be given’ also applies to banks.

‘For a moment at the beginning of the year, money became scarce on the capital markets, but the situation recovered by the summer and there is potential to find investors,’ Klettenberg confirmed.

More sustainable

The coronavirus crisis has affected people everywhere, including Holm’s customers: ‘People are more economical, more careful, grace periods are also taken to prevent problems.’

It can also be seen that loans / hire purchases are becoming more popular in connection with the growing popularity of home offices: people buy computers or adjust their homes. There is not much concern with hire purchase customers.

‘It is purposeful – people think whether a computer, for example, is necessary,’ Klettenberg said. ‘People can use a small loan for a wider purpose, and in the case of extra money in the account, people may not consider the purchase so thoroughly, so there may be a desire to spend it on other things.’

The hire purchase amount is usually not very large. According to Klettenberg, the amount is between 300 and 400 euros on average in Holm. A small loan for a private person is usually larger, reaching a few thousand euros. A business loan of less than 20,000–25,000 euros is rather rare.

What does Klettenberg think about the quick loan business that is currently being discussed?

‘Everyone has to assess their needs and solvency and do so rather conservatively,’ said Klettenberg. ‘A few years ago, there was a clean-up in the loan market, causing some short-sighted players to disappear.’

Klettenberg does not say whether Holm has the highest interest rates in Estonia.

‘Holm’s interest rates depend on the country’s market environment – the bank sets the interest rates in Estonia on the basis of what the other banks with the same profile are offering,’ said Klettenberg.

According to Klettenberg, if competition increases, loan interest rates may start to fall. The activities of the European Central Bank have brought the key interest rate below zero. According to him, the decline in interest rates in Estonia is held back by the lack of competition: in recent years, some banks have disappeared from the market. Thus, there is still room for new players in Estonia.

Not afraid of the crisis

According to Klettenberg, the current crisis has affected the financial sector less than the previous, global financial crisis. At present, the financial results of banks are relatively good. Holm’s consolidated loan portfolio increased from 44 million to 56 million in Estonia and 2.6 million to 8 million in Latvia compared to the beginning of the year.

According to Klettenberg, this year’s result is rather modest: partly because the bank has to make more loan provisions, but partly because of higher investments in IT development and an increase in the number of employees, which provides a better growth prospect for the future. For next year, however, Klettenberg promises better figures.

The head of Holm is not too worried about the economic situation at the moment: ‘I am cautiously optimistic. Although some sectors are struggling, the economy outperformed the first wave of the coronavirus much better than initially expected.’

Klettenberg expressed hope that the second wave would pass without serious long-term damage as well.

‘You become a banker only after you have gone through three crises,’ Klettenberg used a proverb from the financial sector.

He has gone through them, gaining his most recent, third educational experience while working at Handelsbanken during the previous financial crisis.

‘You may have an innovative and flexible approach, but that does not mean that you can cope with a crisis. The risks need to be acknowledged, but every crisis – they tend to recur in ten-year cycles – is different, and you have to be prepared for that,’ said Klettenberg.

According to Klettenberg, the good thing is that all crises pass and they teach us not to be afraid of failures, but to learn from them.

Holm will remain a small bank

Having worked in international companies, Klettenberg wants to do everything possible to ensure that Holm does not lose flexibility as it grows bigger. ‘In a small team, everyone works harder and the value of a person is greater,’ Klettenberg pointed out.

As a leader, Klettenberg considers himself democratic.

‘A leader is someone who keeps people together and intervenes when it becomes obvious that an obstacle has arisen. If things are going well, people should be allowed to do things on their own, but my door is always open. I want to ensure that everyone’s ideas are heard and we also expect everyone to make suggestions and show initiative,’ said Klettenberg.

He mostly agreed with the statement that now, in the home office age, Estonians tend to work overtime – and this must also be recognised by the leader.

‘When the bank’s annual report was submitted for the first time this spring, I saw that we worked a lot of overtime with the financial team, but we were able to rest more during the summer thanks to it. It might happen that you start working behind the computer with a cup of coffee in the morning and then discover all of a sudden that it is dark outside and you have spent a long day behind the computer and worked more than you would have in the office. We have to pay close attention to this. At first, I tried to go to the gym as often as I could, but then the sports clubs were closed. Now, I go on a walk with my kid every day,’ said Klettenberg.

Although the bank is rapidly growing, it has not started paying salaries in shares as it is customary in start-ups.

‘Issuing shares would make sense if the company were listed and the share had a marketable value,’ said the head of Holm bank.

Holm uses motivation packages and pays an annual bonus.