Published: 2020-10-22 07:00:00 CEST
LHV Group
Company Announcement

LHV Group updated its financial plan for 2020

In relation to the milder than estimated effects of the coronavirus crisis, LHV Group’s financial results exceed what was forecast previously, which is why AS LHV Group is publishing an updated financial plan for the current year. Compared to the plan that has been in force since April, both forecast revenues and business volumes have increased; at the same time, impairment losses have decreased – therefore, the profit forecast and efficiency indicators have been raised.

Pursuant to the updated financial plan, this year, the consolidated revenues of LHV Group will increase by 29%, expenses by 11%, and the impairment losses on loans by 3.7 times. In comparison to the previous year, consolidated net profit will grow by EUR 5.5 million, i.e., 20%. The quality of the loan portfolio is significantly better, compared to the spring-plan. The financial plan that was in effect so far foresaw significantly higher discounts and thereby, a decrease in revenue in the year-on-year comparison.

Key indicators Updated
FP 2020
2019
results
Change
YoY
  Previous
FP 2020
Change compared to previous plan
Financial results, EURt            
Total revenue 95,395 73,818 21,577   87,316 8,079
Total expenses 43,749 39,266 4,483   44,773 -1,024
Impairment losses on loans 11,950 3,209 8,740   19,357 -7,408
Earnings before taxes 39,697 31,342 8,354   23,185 16,512
Net profit 32,611 27,092 5,519   19,231 13,380
Business volumes, EURm            
Loans 2,227 1,687 540   1,806 421
Deposits 3,301 2,701 600   2,985 316
Assets under management 1,531 1,374 157   1,454 78
Key ratios            
Cost / Income ratio 45.9% 53.2% -7.3%   51.3% -5.4%
ROE (pre tax) 16.6% 16.2% 0.4%   10.2% 6.4%
Capital adequacy 17.3% 18.0% -0.6%   17.6% -0.2%

The updated financial plan also considers the effect of the purchase of the Danske Bank corporate and municipal loan portfolio, and therefore, regarding LHV business volumes, estimates the loan portfolio to grow by 32% this year, and deposits to grow by 22%. Pursuant to the updated plan, the volume of managed funds will increase by 11% this year.

Compared to the financial plan disclosed at the peak of coronavirus crisis, the Group will earn 70% more in net profit this year, reaching EUR 32.6 million. Of this, EUR 21.8 million has been earned in the first 9 months. At the same time, the financial plan has not estimated the potential of a success fee by asset management.

In the updated plan, the company’s cost/income ratio and the return on equity have improved as the growth of business volumes increase revenues; at the same time, expenses have slightly gone down compared to the previous plan. LHV’s capitalisation and liquidity are still at a strong level.

Comment by Madis Toomsalu, CEO of LHV Group:
"LHV can only be as successful as our clients. In terms of economic sectors, the situation is different, but the economy as a whole has fared better than what was initially forecast. We have continued with decisions that support our clients and with our local and open credit policy. Through this, our loan portfolio has continued to grow during the crisis as well, and loan discounts have remained significantly lower than what was forecast. The updated forecast takes into account the interest revenues added by the purchase of the Danske portfolio from the beginning of October. The forecast has estimated the capitalisation of LHV Pank and LHV Kindlustus during the current year. In the case of LHV Varahaldus, operating revenues have been taken into account; a potential success fee would be added outside of the forecast, since estimating the inputs that are the basis for the success fee has a high error rate. Besides business in Estonia, we are increasingly focusing on growing the business related to clients in the United Kingdom; from the estimated profit of the Group in 2020 in the amount of EUR 32.6 million, this constitutes EUR 4.8 million in total."

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 490 people. LHV’s banking services are used by more than 235,000 clients, and pension funds managed by LHV have more than 183,000 active clients. LHV’s UK branch offers banking infrastructure to 130 international financial services companies, via which LHV’s payment services reach clients around the world.


 

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

 

Attachment


LHV Group updated Financial Plan 2020-Q4 EN.pdf