LHV Group
Quarterly report

LHV Group's 2017 fourth quarter and 12 months unaudited financial results

LHV's Q4 was record-breaking

AS LHV Group earned a consolidated net profit of EUR 6.8 million in the fourth quarter of 2017. The profit of the bank was EUR 3.9 million, asset management’s profit was 1.8 million and the Lithuanian business unit Mokilizingas earned EUR 1.4 million. LHV Group's return on equity belonging to the shareholders was 19.4% in Q4.

The consolidated profit of the group was EUR 1.3 million higher than in Q3 and EUR 1.1 million more than a year ago in Q4 of 2016. The profit for Q4 was positively influenced by the sales of the written-off portfolios of Mokilizingas, a decrease in write-downs and the transition to effective interest rate accounting, and negatively by revaluations arising from changes in exchange rates.

During the quarter, the group’s consolidated loan portfolio grew by EUR 77 million (+12%; +EUR 49 million in Q3) and reached EUR 732 million. The consolidated deposits grew by a record EUR 269 million (+21%; +EUR 260 million in Q3) reaching EUR 1,537 million. Deposits related to payment intermediaries grew by EUR 152 million, mainly due to the account balances of a few large customers.

The volume of funds managed by LHV grew by EUR 35 million in Q4 (+3%; EUR 33 million in Q3) and reached EUR 1,103 million.

AS LHV Group posted yearly consolidated profit of EUR 22.2 million, which is EUR 2.3 million more than in 2016. The bank earned a profit of EUR 15.5 million, asset management EUR 5.8 million and the Lithuanian business unit EUR 1.9 million. The return on equity belonging to the LHV Group’s shareholders was 17.6% in 2017.

Comments by Madis Toomsalu, CEO of LHV Group:
"LHV’s fourth quarter was the strongest throughout time. Broad-based economic growth and the good work done by more than 360 people employed by LHV have driven a strong growth trend, and its impact is also carrying over to the coming quarters. By the end of the year, LHV is managing EUR 3.8 billion worth of customers’ assets.

LHV’s strong underlying trends are also supported by the Estonian economic environment. Estonia has reached out of a long period of below potential performance and entered a period of strong economic growth. It is good to note that the outlook is improving for all trade partners of Estonia. The biggest concerns for Estonian enterprises are the labour availability and the rapid increase of labour expenses, therefore investments need to be increased in order to improve the efficiency. The continued record-low levels of financing costs and a stabile credit market create favourable conditions for that and enterprises are increasingly using the opportunity.

The bank posted a profit at par with the previous quarter. Q4 was characterised by strong customer activity and a growth in loans and deposits. New customer numbers grew by 5,600 during the quarter, with the total number of customers exceeding 133,000.

In addition to loans and deposits, new levels were reached in the assets of private banking, customer activity in payments, card transactions and acceptance of card transactions. Regarding the loan portfolio, loans to companies grew the most. The bank’s loan losses amounted to EUR 0.5 million in Q4. LHV’s focus continues to be on offering high-quality digital solutions, which during the quarter was characterized by rapid increase of the number of mobile bank logins, as well as the growing on numbers of customer agreements concluded by video identification and interfacing with LHV Connect.

The pension funds managed by LHV Asset Management continued to make investments in Estonia – during the year the total volume of Estonia-oriented investment decisions amounted to EUR 170 million. This has ensured a relatively stable performance for LHV’s funds. The number of active 2nd-pillar customers decreased by 0.2 thousand in the quarter and remained at the level of 177,000.

We are also happy with Mokilizingas, where the efforts made during the year to strengthen the team, increase efficiency and find new business volumes have started to bear fruit. The financing portfolio of Mokilizingas grew by EUR 12 million during the quarter (+31%), amounting to EUR 49 million at the end of the quarter. The credit quality of the portfolio remains stable.

With regard to the 2017 financial plan, we surpassed the consolidated profit plan by EUR 364 thousand thanks to Mokilizingas achieving better results than expected, but remained below expectations by EUR 146 thousand with regard to shareholders’ equity, due to lower than expected interest income mainly from small financing products.

LHV’s outlook for 2018 is strong. We pursue growth, while taking into account the risks and using capital efficiently. As a new area, we shall in 2018 focus on providing services to financial technology enterprises, with the launch of the UK branch being the main prerequisite thereof."

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

To present the results in Q4 interim report LHV will hold an investor meeting, that will take place on 6 February 6.00 p.m in LHV Tallinn client office (Tartu mnt 2, CityPlaza building, 1st floor). The presentation will be made in Estonian. All participants please register at https://fp.lhv.ee/academy/488.

On 13 February LHV will disclose the 2018 Financial plan as well as a five year financial forecast. In order to present the plans to media, LHV will hold a press briefing on 13 February starting at 11 a.m at LHV Tallinn office. The presentation will be made in Estonian. To participate please let us know at priit.rum@lhv.ee.

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 about 360 people and over 133,000 customers use LHV’s banking services. Pension funds managed by LHV have over 177,000 active customers.

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