Published: 2020-04-21 07:00:00 CEST
LHV Group
Quarterly report

LHV Group unaudited results for Q1 2020

In the first quarter of 2020, AS LHV Group earned a total of EUR 7.5 million in consolidated profit. In Q1, the bank earned a net profit of EUR 8.1 million, and asset management recorded a loss of EUR 0.6 million.

LHV Group paid EUR 2.8 million in income tax in Q1. The Group’s return on equity was 14%.

The Q1 net profit of the consolidation group was EUR 2.5 million higher year-on-year, and EUR 1.1 million higher than in Q4 2019.

During the quarter, the Group’s consolidated net loan portfolio increased by EUR 52 million (+3%; + EUR 465 million in Q4 2019), to EUR 1.74 billion. Consolidated deposits increased by EUR 252 million (+9%; + EUR 166 million in Q4), to EUR 2.95 billion. At the same time, the deposits related to payment intermediaries increased by EUR 129 million, deposit platforms added EUR 45 million, and the deposits of regular clients increased by EUR 78 million. The total volume of funds managed by LHV decreased by EUR 30 million over the quarter (-2%; + EUR 46 million in Q4), to EUR 1.34 billion.

Comment by Madis Toomsalu, Managing Director of the LHV Group:
"For LHV, the first three months of the year were active and yielded good results; however, the effects of the coronavirus are only included to a small extent. Due to the sharp decline of the economic environment at the end of the quarter, the outlook for the future has become much more important. Together with the economic results, we will also be publishing an updated financial plan, in which the effects of the emergency situation on the economy and on our activities will be taken into consideration.

From the point of view of the bank, the keywords for Q1 were bringing Apple Pay to the market, abolition of transaction fees for Baltic shares, and record activity in securities brokerage as a result of the volatility of markets. An important event was the financing of state aid measures via government bonds in the amount of EUR 200 million, on which LHV earns no interest. The number of bank clients increased by 14,400. As of today, 90% of the clients that were added by taking over Danske’s loan portfolio have also entered into a client agreement.

Among loans, business loans and home loans grew the most in Q1. Deposits increased broadly. The cost of discounts on loans amounted to EUR 1 million in Q1. At the same time, changes in the economic environment will significantly increase the discounts in Q2. LHV already announced a grace period for its corporate clients in the first half of March; we also began offering grace periods in a simplified manner for private loan products. We will not amend loan agreement terms and conditions during grace periods, and the grace period will be offered to private clients without an agreement fee.

The Q1 loss of Varahaldus was affected by the income tax paid on dividends, with fee and commission income having decreased significantly. The decline of financial markets over the past few months has affected LHV’s actively managed pension funds the least. In terms of managing pension funds, we have thus far been guided by the reasoning that, in the long term, it is most important to maintain capital that provides a good starting position for investing more vigorously at the current price levels of assets. The number of active pension clients increased by more than 1100 during the quarter.

In Q1 we also announced the plan to enter the non-life insurance market, and to create the insurance company AS LHV Kindlustus together with a partner. With this undertaking, we plan to focus on the Estonian market. Clients of the insurance undertaking will consist primarily of the clients of LHV Pank and Euronics, and others to a lesser extent. We have been granted permission to concentrate by the Estonian Competition Authority, and we will proceed with the next steps in order to be active within the insurance sector in a year’s time.

LHV’s capitalisation and liquidity are at a strong level. Compared to the previous financial crisis, the capital levels of European banks have grown twice. LHV is not an exception here, our Tier 1 own funds are at 14%, and total capital adequacy is at 18%. In terms of liquidity, deposits surpass loans by more than twofold. At that, LHV’s liquidity structure is diverse, consisting of the deposits of Estonian clients, financial intermediaries, and deposits raised via several deposit platforms. We are on schedule with the covered bonds project, which will further diversify financing opportunities and decrease costs, and the hope is to issue these at the beginning of summer.

Considering the deteriorated economic environment, in terms of external factors we are most affected by the recovery speed of the economy, national measures for ensuring the financial capacity of companies and private persons, and the decisions of central banks. Our updated financial plan will provide a more detailed overview of our vision for the future."

Income statement, EUR thousandQ1-2020Q4-20193 months 20203 months 2019
   Net interest income16 32413 27016 32310 945
   Net fee and commission income6 5086 4276 5076 225
   Net gains from financial assets-389170-389178
   Other income365836-23
Total revenue22 47819 92522 47717 324
   Staff costs-5 769-5 236-5 770-4 553
   Office rent and expenses-278-277-278-229
   IT expenses-729-861-729-629
   Marketing expenses-475-443-475-708
   Other operating expenses-3 924-4 543-3 922-2 987
Total operating expenses-11 176-11 361-11 174-9 105
EBIT11 3038 56411 3038 219
Earnings before impairment losses11 3038 56411 3038 219
   Impairment losses on loans and advances-1 011-1 546-1 011-951
   Income tax-2 809-586-2 809-2 265
Net profit for the reporting period from continued operations7 4836 4327 4845 002
Profit/-loss from discontinued operations0000
Net profit7 4836 4327 4845 002
   Profit attributable to non-controlling interest404713404312
  Profit attributable to share holders of the parent7 0785 7197 0794 690


Balance sheet, EUR thousand Mar 2020Dec 2019Mar 2019
   Cash and cash equivalents1 284 1821 271 153764 778
   Financial assets231 32140 96226 205
   Loans granted1 746 2051 693 1381 001 963
   Loan impairments-7 296-6 104-11 216
   Receivables from customers2 7803 5517 275
   Other assets30 14829 21229 308
Total assets3 287 3413 031 9121 818 313
      Demand deposits2 357 4632 189 4781 422 738
      Term deposits595 948511 437144 266
      Loans received25 68725 64721 638
   Loans received and deposits from customers2 979 0982 726 5621 588 642
   Other liabilities26 09324 32122 325
   Subordinated loans75 00075 00050 900
Total liabilities3 080 1912 825 8831 661 866
Equity207 150206 028156 447
   Minority interest4 1905 2183 234
Total liabilities and equity3 287 3413 031 9121 818 313


To introduce quarterly results and the financial plan LHV is organizing an investor meeting, which this time will be conducted in the form of a webinar via video communication platform Zoom. The virtual investor meeting will take place on 21 April at 9:00 a.m. Presentation will be made in Estonian. Registration is open via the link https://lhvbank.zoom.us/webinar/register/WN_JzDz7iVZQ0eE0grJLBlX_g.

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 over 450 people. LHV’s banking services are used by nearly 217,000 clients, and pension funds managed by LHV have nearly 178,000 active clients.


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

Attachments


LHV Group Presentation 2020-Q1-EN.pdf
LHV Group Interim Report 2020-Q1-EN.pdf
LHV Group Factbook 2020-Q1-EN.pdf