Markets Wired

In the third quarter of 2019, AS LHV Group earned EUR 8.0 million altogether in consolidated net profit. AS LHV Pank earned EUR 6.4 million and AS LHV Varahaldus EUR 1.9 million as net profit. The return on equity of LHV Group was 16.4% in the third quarter. 

Compared to the second quarter, the profit of the consolidation group grew by EUR 0.3 million. Compared to the third quarter of 2018, the net profit grew by EUR 1.8 million. The profit of the group was affected in the third quarter by income tax expenses in the amount of EUR 0.7 million, the impairment was close to zero.

The volume of assets of LHV Group grew by half a billion, to EUR 2.9 billion over the quarter. Compared to the previous quarter, the Group’s consolidated loan portfolio increased by EUR 104 million to EUR 1,222 million (+9%; +127 million euros in Q2). Consolidated deposits increased by EUR 451 million to EUR 2,535 million (+22%; +516 million euros in Q2). At the same time, the deposits related to payment intermediaries increased by EUR 184 million. The total volume of funds managed by LHV grew by EUR 34 million in the third quarter and reached EUR 1,328 million (+3%; +36 million euros in Q2).

The consolidated net profit of AS LHV Group in the first 9 months of 2019 was EUR 20.7 million. The profit for the first 9 months is EUR 0.2 larger compared to the same period in previous year, when the profit also contained a one-off sales revenue of the Lithuanian business unit. AS LHV Pank earned EUR 16.4 million and AS LHV Varahaldus EUR 5.2 million as net profit in 9 months.

Comment by Madis Toomsalu, CEO of LHV Group on the results:
“As a result of active summer months, the third quarter was strong and eventful for LHV. Over the last four months, we have raised capital worth 65 million euros from the investors and notably increased our business volumes. We are working on a daily basis towards ensuring that we offer the best, fastest, most efficient and professional service to our customers. This is also evidenced by the title of the best bank in Estonia from Euromoney.

In co-operation with Luminor, we increased LHV’s Estonia-wide ATM network by a factor of five, to 125 ATMs. We are constantly updating our Mobile Bank. During the summer period, we implemented a possibility to request money through the app and account opening for a new private customer, as well as ordering a bankcard and investing in securities. After the end of the quarter we introduced a possibility to apply for a loan.

The number of new customers added during the quarter was a record of 9,600. Loan growth was broad-based; deposit growth was to a large extent related to the deposits being involved via deposit platforms, which we are using to purchase Danske Bank’s private loan portfolio.

Even though the Danske transaction will be concluded at the end of November, we wanted to attain certainty in terms of financing earlier. Due to the rapid and extensive involvement of deposits, the interest expenses have been bigger over the last months. The interest income accruing starting from the last week of November will in substantial part be translated into additional profit. The deposit cost related to the transaction shall remain high until the middle of next year, when we will be looking to replace these deposits with covered bonds.

In September, a regulation entered into force, according to which lower fixed management fees apply to pension funds; yet, in the event of a strong rate of return, the funds are able to earn a success fee. We have not taken the success fee into account in our financial plan until the end of this year, which means that the monthly gains of Varahaldus shall decrease by about 400 thousand euros.

This year, we have actively grown our business, and different effects have emerged, which is why we published an updated financial plan. We have strongly upgraded our expectations for loan volumes, which we increased, compared to the previous forecast, by 570 million euros for the end of 2019 and by 873 million euros for the end of 2023. We increased deposits by 742 million euros for the end of 2019 and by 1.13 billion euros for the end of 2023. According to the updated forecast, LHV Group will earn 25.6 million euros in net profit this year. We outperform the profit forecast at the end of Q3 by 1.6 million euros; this better-than-expected outcome has mainly been achieved due to lower impairment costs and the greater late interest income of loans.

To reach the higher forecasts published in July and to purchase the Danske Bank’s private loans portfolio, we finalised the share issue in September, in which we publicly issued 2.2 million new shares in the form of pre-emptive subscription rights. A total of 3,789 investors participated in the subscription, subscribing to shares in the total amount of 32.4 million euros. LHV now has more than 6,700 shareholders altogether.

LHV’s growth trends are supported by the Estonian business environment. Economic growth has been solid, depending largely on the economies of our neighbouring countries. Internal policy risks are managed by a balanced budget, low public sector debt and a positive foreign balance, with the main source of tension being the availability of labour. Also, the credit market has remained strong. All of the main credit products, incl. corporate loans and home loans, are growing. The financial health of households is on the strong side, the loan-to-deposit ratio is improving.”

Income statement, EUR t	Q3-2019	Q2-2019	9 months 2019	9 months 2018
Net interest income	11 546	11 628	34 119	27 861
Net fee and commission income	6 412	6 613	19 250	18 952
Net gains from financial assets	119	203	500	338
Other income	33	16	26	768
Total revenue	18 111	18 460	53 895	47 919
Staff costs	-4 593	-4 883	-14 029	-11 463
Office rent and expenses	-229	-225	-682	-1294
IT expenses	-641	-639	-1 909	-1572
Marketing expenses	-471	-467	-1 646	-1 424
Other operating expenses	-3 465	-3 189	-9 641	-7 618
Total operating expenses	-9 399	-9 403	-27 908	-23 371
EBIT	8 711	9 057	25 987	24 548
Earnings before impairment losses	8 711	9 057	25 987	24 548
Impairment losses on loans and advances	-15	-697	-1 663	-4 337
Income tax	-701	-697	-3 664	-3070
Net profit for the reporting period from continued operations	7 995	7 662	20 660	17 141
Profit/-loss from discontinued operations	0	0	0	3324
Net profit	7 995	7 662	20 660	20 465
Profit attributable to non-controlling interest	706	565	1 583	1 277
Profit attributable to share holders of the parent	7 289	7 098	19 078	19 188

 

Balance sheet, EURt	September 2019	June 2019	September 2018
Cash and cash equivalents	1 468 510	1 099 009	965 494
Financial assets	124 035	119 462	48 829
Loans granted	1 233 626	1 129 661	822 696
Loan impairments	-11 561	-11 757	-10 745
Receivables from customers	33 491	9 503	7 372
Other assets	28 700	28 835	23 776
Total assets	2 876 800	2 374 714	1 857 421
Demand deposits	2 005 227	1 672 003	1 513 113
Term deposits	529 442	411 384	124 476
Loans received	28 640	28 591	12 289
Loans received and deposits from customers	2 563 309	2 111 977	1 649 877
Other liabilities	39 524	23 197	26 024
Subordinated loans	75 000	75 000	30 900
Total liabilities	2 677 833	2 210 175	1 706 802
Equity	198 967	164 539	150 620
Minority interest	4 505	3 799	3 447
Total liabilities and equity	2 876 800	2 374 714	1 857 421

 

AS LHV Group reports are available at https://investor.lhv.ee/en/reports.

LHV organises an investor meeting for introducing the quarterly results, to be held on 15 October at 18.00 in LHV Tallinn office (Tartu mnt 2, I floor). The presentation will be made in Estonian. To participate, please register at https://fp.lhv.ee/academy/560. A real-time video broadcast is made of the investor meeting on LHV’s Facebook page www.facebook.com/LHVPank.

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank and LHV Varahaldus. LHV employs about 420 people, and more than 189,000 customers use LHV’s banking services. Pension funds managed by LHV have more than 176,000 active clients.

 

Priit Rum
Communication Manager
Phone: +372 502 0786
Email: priit.rum@lhv.ee