Half Year financial report
LHV Group unaudited results for Q2 and 6 months of 2019
In the second quarter of 2019, AS LHV Group altogether earned EUR 7.7 million in consolidated net profit. AS LHV Pank earned EUR 5.9 million and AS LHV Varahaldus EUR 2.1 million as net profit. The return on equity of LHV Group was 18.1% in the second quarter.
Compared to the first quarter, the profit of the consolidation group grew by EUR 2.7 million. Compared to the second quarter of 2018, net profit remained lower by EUR 2.4 million, since the financial results of the previous year included one-off profits from the sale of the Lithuanian business unit. The profit of the group was affected in the second quarter by income tax expenses in the amount of EUR 0.7 million, and discounts made, also in the amount of EUR 0.7 million.
In the second quarter, the volume of assets of LHV Group exceeded EUR 2 billion for the first time, and reached EUR 2.4 billion. Compared to the previous quarter, the Group’s consolidated loan portfolio increased by EUR 127 million to EUR 1,118 million (+13%; +72 million euros in Q1). Consolidated deposits increased by EUR 516 million to EUR 2,083 million (+33%; +145 million euros in Q1). At the same time, the deposits related to payment intermediaries increased by EUR 8 million. The total volume of funds managed by LHV grew by EUR 36 million in the second quarter and reached EUR 1,293 million (+3%; +43 million euros in Q1).
The consolidated net profit of AS LHV Group in the first 6 months of 2019 was EUR 12.7 million. The profit of the half-year was EUR 1.7 million smaller compared to the same period of the previous year. In 6 months, AS LHV Pank earned EUR 10.1 million and AS LHV Varahaldus EUR 3.3 million as net profit.
Comment by Madis Toomsalu, CEO of LHV Group:
"For LHV, the second quarter was our most active quarter ever, with all-time best results. We announced the acquisition of Danske private persons’ portfolio which should increase LHV’s loan portfolio by more than 40% in the autumn, ensuring the expected return on equity at the same time. To conduct the transaction and ensure the growth of the portfolio, we raised capital through subordinated loans and bonds qualifying as Tier 1 own funds, totalling EUR 40 million. We also increased the volume of deposits involved from Germany through the deposit marketplace.
During the quarter, we technologically joined the real-time pound payment system of the United Kingdom which will help us to offer a complete service to fintech companies. In the Estonian customers’ business line, we announced the fivefold increase in the number of our ATMs, as we will take over Danske’s role in the common ATM network with Luminor. In addition to investments in Baltic equities, we now offer our investors a possibility to also invest in other foreign shares using our mobile bank and get an overview of alternative investments via the internet bank. The new Chairman of the Management Board of LHV Varahaldus, Vahur Vallistu, also commenced work in the quarter. We also finished the app My Pension, which enables one to notably better analyse the future of pension investments.
In terms of continued business activity, this was the best quarterly result ever. Our Estonian-wide strategy has proven its worth. The quarterly growth of our business volumes was fast and broad-based. The number of the bank’s customers increased by nearly 8,600. Several activity indicators, including salary receipts, the number of customers with assets and payments, use of cards, acceptance of card payments and number of new investment contracts reached record levels.
The fast growth is excellently illustrated by the record growth of the loan portfolio by EUR 127 million, with the portfolio reaching EUR 1.1 billion by now. Deposits grew by a record amount of EUR 516 million; at that, by EUR 231 million via the deposit platforms that will be used to conduct the Danske transaction.
LHV’s growth trends are supported by the excellently growing Estonian business environment. The credit market has also 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.
Against the background of a stable economic environment and strong credit market, the sector is increasingly influenced by various regulatory issues, of which the intention to demolish II pillar is one of the most relevant. When the goal of the pension system had previously been saving for the future instead of current consumption, according to the current unanalysed proposals, society would be directed towards consuming more today on account of the future. It can be presumed that this will be paid for by the next generation together with tax increases.
In the second quarter, Vahur Vallistu started work as the Chairman of the Management Board of LHV Varahaldus; his duty is to strengthen the capability of OTC investments. The total volume of investment funds managed by LHV Varahaldus reached EUR 1.29 billion by the end of Q2. LHV’s actively managed pension funds still have the lowest price risk related to stock exchanges, as the focus is primarily on making OTC investments.
In connection with the Danske transaction, we will raise new capital within the share issue in the autumn. Raising the capital is also important for securing the growth of our previous business, as with this quarterly report we confirm that we are ahead of our volume forecast stated in the Financial plan. Although the terms and conditions of involving the capital have to be approved by LHV’s general meeting of shareholders, we will most likely prefer the current shareholders in the share issue."
|Income statement, EUR t ||Q2-2019||Q1-2019||6 months 2019||6 months 2018|
| Net interest income||11 627||10 945||22 572||18 407|
| Net fee and commission income||6 612||6 225||12 837||12 805|
| Net gains from financial assets||201||179||381||248|
| Other income||17||-24||-7||-2|
|Total revenue||18 457||17 325||35 783||31 458|
| Staff costs||-4 882||-4 553||-9 435||-7 684|
| Office rent and expenses||-158||-143||-301||-393|
| IT expenses||-653||-644||-1 297||-1007|
| Marketing expenses||-468||-708||-1 176||-902|
| Other operating expenses||-3 240||-3 058||-6 298||-5 454|
|Total operating expenses||-9 401||-9 106||-18 507||-15 440|
|EBIT||9 057||8 219||17 276||16 018|
|Earnings before impairment losses||9 057||8 219||17 276||16 018|
| Impairment losses on loans and advances||-698||-951||-1 649||-2 478|
| Income tax||-697||-2 265||-2 962||-2569|
|Net profit for the reporting period from continued operations||7 662||5 003||12 665||10 971|
|Profit/-loss from discontinued operations||0||0||0||3324|
|Net profit||7 662||5 003||12 665||14 295|
| Profit attributable to non-controlling interest||565||312||877||821|
| Profit attributable to share holders of the parent||7 097||4 691||11 788||13 474|
|Balance sheet, EURt||June 2019||March 2019||June 2018|
| Cash and cash equivalents||1 099 009||764 778||879 204|
| Financial assets||119 462||26 205||54 084|
| Loans granted||1 129 661||1 001 963||785 663|
| Loan impairments||-11 757||-11 216||-9 116|
| Receivables from customers||9 503||7 275||6 495|
| Other assets||28 835||29 308||23 450|
|Total assets||2 374 714||1 818 313||1 739 780|
| Demand deposits||1 672 003||1 422 922||1 427 569|
| Term deposits||411 384||144 082||115 212|
| Loans received||28 591||21 638||6000|
| Loans received and deposits from customers||2 111 977||1 588 642||1 548 781|
| Other liabilities||23 197||22 325||16 660|
| Subordinated loans||75 000||50 900||30 900|
|Total liabilities||2 210 175||1 661 866||1 596 341|
|Equity||164 539||156 447||143 439|
| Minority interest||3 799||3 234||2 992|
|Total liabilities and equity||2 374 714||1 818 313||1 739 780|
Driven by the planned share issue and as a result of the transaction with Danske, higher loan volumes and lower Euribor, LHV is in the near future renewing its long-term Financial forecast.
AS LHV Group reports are available at https://investor.lhv.ee/en/reports/.
LHV Group will organise an investor meeting for introducing the results of the second quarter and 6 months, which will be held on 16 July at 18.00 at the LHV Tallinn office (Tartu mnt 2, first floor). To participate, please register at https://fp.lhv.ee/academy/559. The presentation will be made in Estonian. 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 nearly 420 people. LHV’s banking services are used by over 179,000 clients, and pension funds managed by LHV have more than 177,000 active clients.
LHV Communication Manager
Phone: +372 502 0786