Published: 2020-07-14 07:00:00 CEST
LHV Group
Half Year financial report

LHV Group unaudited results for Q2 and 6 months of 2020

In the second quarter of 2020, AS LHV Group earned EUR 3.6 million in consolidated net profit. AS LHV Pank earned EUR 2.8 million and AS LHV Varahaldus EUR 1 million as net profit.

Compared to the first quarter of this year, the net profit of the consolidation group decreased by EUR 3.9 million or by 53%. Compared to the second quarter of 2019, net profit remained lower by EUR 4.1 million or 54%. The return on equity of LHV Group was 5.7% in the second quarter. The results of otherwise successful quarter were influenced primarily by the loan impairments in the amount of EUR 7.7 million made because of the emergency situation and effects of COVID-19.

In Q2, the volume of assets of LHV Group grew to EUR 3.7 billion. During the quarter the Group’s consolidated loan portfolio increased by EUR 65 million to EUR 1.8 billion (+4%; +52 million euros in Q1). Consolidated deposits increased by EUR 134 million to EUR 3.09 billion (+5%; +252 million euros in Q1). Most of deposit growth came from regular customers. The total volume of funds managed by LHV grew by EUR 96 million in the second quarter and reached EUR 1.44 billion (+7%; -30 million euros in Q1).

In the first 6 months of 2020, the consolidated net profit of AS LHV Group was EUR 11.0 million, that was EUR 1.6 million lower than the first half-year of 2019. In 6 months, AS LHV Pank earned EUR 10.9 million and AS LHV Varahaldus EUR 0.4 million as net profit.

Comments by Madis Toomsalu, CEO of LHV Group:

"Second quarter results were affected by the global health and economic crisis. Nonetheless, difficult times proved that as long as we are pursuing a long-term vision, we have the opportunity to shape the end result. LHV is governed by our long-term growth ambitions and that is why we reckon the past quarter to be a strong one.

Even though the growth in business volumes remained moderate and loan losses were higher, the acquisition of the Danske corporate and local government portfolio, the successful issue of covered bonds, engagement of capital, submission of the application for authorisation of LHV Insurance, facilitation of USD payments and introduction of the green LHV action plan constitute activities which are bound to take us beyond the horizon in a profitable and sustainable manner.

The customer base of the bank is growing, 8,000 new bank customers added during the quarter. We have continued pursuing our open and local credit policy, reviewing all loan applications on a customer-by-customer basis. Our loan portfolio grew by EUR 65 million in Q2. At the same time, we granted grace periods to our existing customers in the total amount of EUR 350 million. Predominantly, customers use the grace periods as a precautionary measure for ensuring liquidity. We therefore expect the scheduled repayments to resume after expiry of the grace periods.

To secure a growth in business volumes, we signed an agreement to purchase the Danske corporate loan and public sector loan portfolio. At the moment of the conclusion of the contract, the portfolio amounted to EUR 312 million, but this volume will somewhat decrease by October, when the transaction is scheduled to be completed. The agreed discount of EUR 19 million will be retained. For the completion of the transaction the permission of the Competition Authority is required.

In the beginning of June, LHV's first issue of covered bonds was concluded. The amount of the issue was EUR 250 million, for a period of 5 years and at an annual interest rate of 0.12%. 31 institutional investors from Europe participated in the issue. The covered bonds received a rating of Aa1. Covered bonds provide alternative means for engaging financing, important considering the bank's quick growth and efficiency in interest expenses.

We also engaged a further EUR 15 million from investors via bonds included in own funds. Additional capital engagements of the year will depend on the rate of growth of the loan portfolio and the need for further write-down of loans. The decisions regarding capital engagements must be made within the next few months.

During the quarter, we filed the application for authorisation of LHV Insurance with the Financial Supervision Authority, as well as disclosed LHV's green projects and activities to reduce our impact on climate.

While Q1 was characterised by a sharp drop in stock markets, the markets showed a strong recovery in Q2. All pension funds managed by LHV Asset Management showed a positive yield in Q2, while the funds with the greatest stock market risk also generated the highest yield. The number of active pension fund clients has somewhat risen and is now close to 179 thousand, adding 1,200 customers in Q2."

Income statement, EUR thousand Q2-2020 Q1-2020 6 months 2020 6 months 2019
   Net interest income 15 545 16 323 31 868 22 573
   Net fee and commission income 6 188 6 507 12 696 12 838
   Net gains from financial assets 322 -389 -68 381
   Other income -16 36 20 -7
Total revenue 22 039 22 477 44 516 35 784
   Staff costs -6 146 -5 770 -11 916 -9 436
   Office rent and expenses -236 -278 -514 -453
   IT expenses -782 -729 -1 511 -1 268
   Marketing expenses -315 -475 -790 -1 175
   Other operating expenses -3 183 -3 922 -7 104 -6 176
Total operating expenses -10 661 -11 174 -21 835 -18 508
EBIT 11 378 11 303 22 681 17 276
Earnings before impairment losses 11 378 11 303 22 681 17 276
   Impairment losses on loans and advances -7 672 -1 011 -8 683 -1 649
   Income tax -156 -2 809 -2 964 -2 963
Net profit for the reporting period from continued operations 3 550 7 484 11 034 12 665
Profit/-loss from discontinued operations 0 0 0 0
Net profit 3 550 7 484 11 034 12 665
   Profit attributable to non-controlling interest 615 404 1 019 877
  Profit attributable to share holders of the parent 2 935 7 079 10 014 11 788

 

Balance sheet, EUR thousand Jun 2020 Mar 2020 Jun 2019
   Cash and cash equivalents 1 438 793 1 284 182 1 099 009
   Financial assets 423 117 231 321 119 462
   Loans granted 1 818 644 1 746 205 1 129 661
   Loan impairments -14 608 -7 296 -11 757
   Receivables from customers 3 039 2 780 9 503
   Other assets 28 527 30 148 28 835
Total assets 3 697 512 3 287 341 2 374 714
      Demand deposits 2 512 196 2 357 463 1 672 003
      Term deposits 574 739 595 948 411 384
      Loans received 271 553 25 687 28 591
   Loans received and deposits from customers 3 358 488 2 979 098 2 111 977
   Other liabilities 35 702 26 093 23 197
   Subordinated loans 90 000 75 000 75 000
Total liabilities 3 484 190 3 080 191 2 210 175
Equity 213 322 207 150 164 539
   Minority interest 5 243 4 190 3 799
Total liabilities and equity 3 697 512 3 287 341 2 374 714


LHV is organizing an investor meeting to introduce quarterly results, 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 14 July at 18:00. The presentation will be made in Estonian. Registration is open via the link https://lhvbank.zoom.us/webinar/register/WN_4DU53nSARLSXw2KTJFrZDQ.

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 about 470 people. LHV’s banking services are used by about 224,000 clients, and pension funds managed by LHV have about 179,000 active clients. Additionally, LHV’s UK branch offers banking infrastructure to more than 120 financial service providers, that in turn intermediate LHV’s payment services to their customers around the world.

 

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

Attachments


LHV Group presentation 2020-Q2-EN.pdf
LHV Group Interim Report 2020-Q2-EN.pdf
LHV Group Factbook 2020-Q2-EN.pdf