Published: 2020-02-11 07:00:00 CET
LHV Group
Company Announcement

LHV Group financial plan 2020 and five-year financial forecast

According to the financial plan of AS LHV Group for this year, the revenues of the consolidation group will increase by 29% and expenses by 18% in 2020, resulting in a 33%-growth of consolidated net profit for this year. In terms of business volumes, LHV estimates a 28% increase of the loan portfolio, 25% increase in deposit volumes and 15% increase in assets under management for this year.

Key indicatorsFF20202019
Profit before taxes42.031.3+34%
Loans (millions of euros)21651687+28%
Deposits (millions of euros)31272701+16%
Volume of funds (millions of euros)15761374+15%
Cost/income ratio48.5%53.2%-4.7 pp
ROE (before taxes, owners’ share)18.1%16.2%+1.9 pp
Capital adequacy17.5%18.0%-0.5 pp

* Business volumes have been presented in millions of euros

According to the financial plan, the consolidated loan volumes of LHV Group in 2020 will increase by 478 million euros, including corporate loans by 209, retail loans by 199 and loans to financial intermediaries by 70 million euros. The growth in the deposit volumes of 426 million euros is planned mainly on the account of regular deposits in the amount of 575 million euros, with the deposits of financial intermediaries growing by 224 million euros, and those included via deposit platforms decreasing by 373 million euros (according to the plan, these will be replaced by covered bonds in the amount of 250 million euros). The growth in the volume of funds is related to continued payments by clients, but also to the rate of return of the funds, which for larger funds XL and L is estimated at 5.6%.

The cost/income ratio is improving thanks to the added Danske portfolio of private individuals at the end of 2019, which increases monthly revenues by as much as 0.9 million euros. Insofar as LHV Group has expressed its wish to replace the foreign deposits involved for this transaction at a higher price with covered bonds in 2020, it will also lower the costs and have a positive impact on the cost/income ratio. According to the financial plan, we will not achieve the 20% pre-tax return on equity set as the target in 2020, since it will not be possible to replace the sharp decline in the management fee of pension funds that occurred in September 2019 in just one year.

Comment by Madis Toomsalu, the CEO of LHV Group:
"For today, LHV has become the largest and the fastest growing provider of capital and financial group based on local capital in Estonia. We are now the third largest bank in Estonia in everyday banking and continue to be the second largest management company of pension funds. The financial forecast clearly demonstrates our long-term growth ambitions.

In Estonia, we aim to achieve an Estonia-wide increasing customer base. Despite the strong growth in the number of clients, it is our goal to provide top-quality service. We offer home loans to private persons in all Estonian cities, as well as a broad network of ATMs, strong electronic channels and as the only bank in Estonia, free instant payments. We want to become an overwhelming market leader in providing investment services; our most complete service offer so far is supplemented by free trading and safekeeping options of Baltic shares. In the direction of companies, in essence we are able to finance all large Estonian companies.

Through our UK branch, we offer the payment services infrastructure to financial intermediaries together with real-time euro and pound payments; as well as liquidity loans on suitable conditions. The goal of our business side in the coming years is to expand the product portfolio and client segments.

LHV Varahaldus aims to achieve a high rate of return of pension funds. We can focus on OTC private capital and real estate investments, the estimated rate of return of which is higher than listed securities. In the case of a higher rate of return achieved for our clients, it is also possible to replace the lower management fee by earning a success fee, however since the short periods of the rate of return are difficult to forecast, we have not considered this in our financial forecast. As both the rates of return as well as the benchmark index are public, the investors may nevertheless notionally consider it. In the case of generating the success fee, we will record it in revenues once a year.

A good foundation for our future growth is built on the record number of new clients starting from autumn 2019, the revenues earned on the private portfolio of Danske and the improving cost/income ratio. Our loan limits are increasing, and we are able to finance an ever-growing number of clients. We have considered the impairment of loans on a rather conservative level."

Financial forecast 2020–2024

AS LHV Group also discloses the financial plan for the next five years. According to the forecast, the group’s revenues will increase by 19% over the next five years on average, while the expenses will increase on average by 11% in a year. Based on the forecast, the consolidated net profit of LHV will be nearly 91 million euros by 2024, considering the average annual growth of 26%.

Key indicatorsFF2019FF2021FF2022FF2023FP2024
Profit before taxes42.051.169.387.2104.4
Funds volume15761395157117611967
Cost/income ratio48.5%47.6%41.4%38.4%36.4%
ROE (before taxes; owners’ share)18.1%20.5%22.2%23.4%23.4%
Capital adequacy17.5%18.1%18.3%18.9%19.5%

* Business volumes have been presented in millions of euros

Compared to the end of 2019, the volume of loans, deposits and funds should increase in five years by 2617 million, 3303 million and 593 million euros, respectively. For loans and deposits, this means the duplication of volumes. The improvement of the cost/income ratio is related to higher efficiency, but also to the lower cost base of the financial intermediaries’ line of business. According to the forecast, the results of 2021 will be adversely affected by the pension reform, as a result of which LHV Varahaldus will have to write down the intangible assets related to the sales costs of clients. This impairment has no cash flow and will not influence net own funds. Starting from 2021, we expect the recovery of pre-tax equity to be over 20% and starting from 2023 aim to reach the level of 20% for the net profit based return on equity.

LHV Group publishes five-year financial forecasts to share the company’s long-term targets and trends with the investors in a transparent way. The company as well as the economic environment may change significantly in five years.

LHV Group will change the financial plan 2020 if a difference of more than 10% between the planned net profit and the financial plan becomes probable. The company will update the five-year plan again at the beginning of 2021 or, if necessary, together with the changes made to the financial plan of 2020.

To introduce the financial plans to investors and the press, LHV organises a press briefing at 11:00 on 11 February, at the Tallinn office of LHV (Cityplaza building, Tartu mnt 2) on 21st floor. Please notify us of your participation via email using the address

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 440 people. LHV’s banking services are used by more than 207,000 clients, and pension funds managed by LHV have more than 176,000 active clients.


Priit Rum
Communication Manager
Phone: +372 502 0786


LHV Group Financial Plan 2020 EN.pdf