Published: 2016-10-25 07:00:00 CEST
LHV Group
Quarterly report

LHV Group’s third quarter and 9 months unaudited financial results

LHV Group's quarterly profit rose to EUR 5.8 million

AS LHV Group earned a consolidated profit of EUR 5.8 million in Q3, with the bank earning EUR 3.7 million, asset management EUR 2.2 million and the Lithuanian business unit EUR 0.2 million.

The group's consolidated Q3 profit was EUR 0.9 million more than in Q2 and EUR 2.4 million more than in Q3 2015. LHV Group's return on equity was 22.6% in Q3.

The group's consolidated loan portfolio grew by EUR 9 million during the quarter (+2%; +EUR 38 million in Q2) reaching EUR 478 million and consolidated deposits by EUR 69 million (+10%; +EUR 27 million in Q2) to EUR 741 million. The volume of funds managed by LHV grew by EUR 46 million (+5%; +EUR 294 million in Q2) and reached EUR 937 million.

In the first nine months of 2016, LHV posted a profit of EUR 14.2 million, i.e. a EUR 2.6 million increase from last year (Q1 2015 included extraordinary revenue from disposal of business operations in Finland). The bank has earned a profit of EUR 10.1 million in nine months, asset management EUR 4.3 million and the Lithuanian business unit EUR 0.8 million. The return on equity held by LHV's shareholders amounts to 20.6% in the first nine months of 2016.

Erkki Raasuke, CEO of AS LHV Group explained that the company has a good momentum and both the bank and asset management are ahead of their financial targets.

„The third quarter was a successful one for LHV. Profit was fueled by customers’ high activity level, strong credit quality and revenue generated through the acquisition of Danske Capital.

The bank’s strong forward momentum has continued for over a year now. The bank gained 8,400 customers during the quarter and the bank currently has over 100,000 customers.

The bank’s loan portfolio grew mainly due to increase in loans to individuals. Corporate loans were issued actively but in connection with the seasonal completion of real estate development projects, loan repayment also took place at a higher volume. Credit quality has remained strong and loan impairment costs decreased compared to the previous quarter.

Customers’ demand deposits grew fast (+EUR 96 million), while term deposits shrank (-EUR 25 million) to the lowest volume they have been in the last five years. The sea change in structure of deposits in the last five years has been in favor of demand deposits. Thanks to the drop in average expense on deposits LHV Bank in terms of cost of internal funds is just as competitive as other banks providing service in Estonia.

The acquisition of Danske Capital and growth in business volumes were responsible for the leap in asset management’s profit growth. The asset management team has done good work to integrate the two businesses. The companies’ merger took effect in late July and the process of merging funds with similar risk profiles still lies ahead. The strong stream of revenue from management fees will continue until the end of 2016. In February the scale effect from the merger will be passed on to customers and the management fees of 2nd pillar pension funds will drop. This will result in a significant reduction of asset management’s revenue. The number of active 2nd pillar pension customers grew to 177,000 in Q3.

Mokilizingas, Lithuanian business unit, posted a profit that was EUR 0.1 million less than in the last quarter, but after a slowdown in the sale of credit products due to changes in regulations, this area is once again gaining momentum. We will fall short of the targets we had set; however the return on capital has not suffered. Mokilizingas started offering customers a new credit card. The financing portfolio reached EUR 38 million at the end of the quarter and the portfolio’s credit quality remains strong.

LHV’s outlook for the months ahead is good. Stable credit quality, new customers, and good fund yields will allow the current momentum to be sustained. We hope to close out our first financial year as a publicly listed company with strong results and affirm that there is always demand and room for good work.”

Income statement, EURt  Q3-2016 Q2-2016 9 months 2016 9 months 2015
   Net interest income 7 696 7 230 21 714 16 863
   Net fee and commission income 5 375 4 311 13 339 10 863
   Net gains from financial assets 449 1 146 1 794 242
   Other income -17 127 95 36
Total revenue 13 503 12 814 36 942 28 004
   Staff costs -3 048 -3 504 -9 777 -7 963
   Office rent and expenses -120 -375 -404 -315
   IT expenses -429 -423 -1 302 -1 001
   Marketing expenses -1 315 -754 -3 174 -2 773
   Other operating expenses  -2 244 -2 046 -6 429 -5 067
Total operating expenses -7 156 -7 103 -21 086 -17 119
EBIT 6 347 5 711 15 856 10 885
Earnings before impairment losses 6 347 5 711 15 856 10 885
   Impairment losses on loans and advances  -500 -742 -1 497 -1 332
   Income tax -55 -68 -201 -197
   Loss from associates accounted for using the equity method 0 0 1 2 183
Net profit for the reporting period from continued operations 5 792 4 900 14 159 11 539
Profit/-loss from discontinued operations 0 0 0 0
Net profit 5 792 4 900 14 159 11 539
   Profit attributable to non-controlling interest 447 346 1 240 660

 

Balance sheet, EURt  Sept 2016 June 2016 March 2015
   Cash and cash equivalents 315 315 236 395 133 802
   Financial assets 77 681 103 936 165 658
   Loans granted 483 596 474 452 401 136
   Loan impairments -5 297 -5 152 -4 851
   Receivables from customers 2 739 1 988 2 590
   Other assets 11 852 11 563 4 640
Total assets 885 886 823 181 702 975
      Demand deposits 578 405 482 075 389 279
      Term deposits 162 551 189 928 200 769
      Loans received 832 914 15 679
   Loans received and deposits from customers 741 788 672 918 605 727
   Other liabilities 11 372 23 521 10 740
   Subordinated loans 30 900 30 900 16 650
Total liabilities 784 060 727 339 633 117
Equity 101 826 95 842 69 858
   Minority interest 4 481 4 034 2 819
Total liabilities and equity 885 886 823 181 702 975

 

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

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group's key subsidiaries are AS LHV Pank and AS LHV Varahaldus. LHV employs over 250 people and over 100,000 customers use LHV’s banking services. Pension funds managed by LHV have over 175,000 customers.

 

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


LHV Group Interim Report III Q 2016.pdf
LHV Group Q3 2016 Investor presentation.pdf