Published: 2019-07-16 07:00:00 CEST
LHV Group
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 Q2-2019Q1-20196 months 20196 months 2018
   Net interest income11 62710 94522 57218 407
   Net fee and commission income6 6126 22512 83712 805
   Net gains from financial assets201179381248
   Other income17-24-7-2
Total revenue18 45717 32535 78331 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
EBIT9 0578 21917 27616 018
Earnings before impairment losses9 0578 21917 27616 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 operations7 6625 00312 66510 971
Profit/-loss from discontinued operations0003324
Net profit7 6625 00312 66514 295
   Profit attributable to non-controlling interest565312877821
   Profit attributable to share holders of the parent7 0974 69111 78813 474


Balance sheet, EURtJune 2019March 2019June 2018
   Cash and cash equivalents1 099 009764 778879 204
   Financial assets119 46226 20554 084
   Loans granted1 129 6611 001 963785 663
   Loan impairments-11 757-11 216-9 116
   Receivables from customers9 5037 2756 495
   Other assets28 83529 30823 450
Total assets2 374 7141 818 3131 739 780
      Demand deposits1 672 0031 422 9221 427 569
      Term deposits411 384144 082115 212
      Loans received28 59121 6386000
   Loans received and deposits from customers2 111 9771 588 6421 548 781
   Other liabilities23 19722 32516 660
   Subordinated loans75 00050 90030 900
Total liabilities2 210 1751 661 8661 596 341
Equity164 539156 447143 439
   Minority interest3 7993 2342 992
Total liabilities and equity2 374 7141 818 3131 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.


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

Attachments


LHV Group Interim Report 2019-Q2 EN.pdf
LHV Group Presentation 2019-Q2 EN.pdf
LHV Group Factbook 2019-Q2 EN.pdf