Published: 2017-07-18 07:00:00 CEST
LHV Group
Quarterly report

LHV Group's second quarter and 6 months unaudited financial results

LHV's six-month net profit was EUR 9.9 million

AS LHV Group earned a consolidated profit of EUR 4.9 million in Q2 of 2017. The bank earned a profit of EUR 3.4 million, asset management’s profit amounted to 1.6 million and the Lithuanian business unit Mokilizingas earned EUR 0.2 million. LHV Group's return on equity was 16.4% in Q2.

The group’s profit was EUR 0.2 million lower than in Q1 and equaled the profit earned a year ago in Q2 of 2016. The group’s consolidated loan portfolio grew by EUR 60 million (+11%; +EUR 8 million in Q1) and reached EUR 606 million. The consolidated deposits grew by a record EUR 210 million (+26%; +EUR 22 million in Q4) reaching EUR 1,008 million. During the quarter the volume of funds managed by LHV rose by EUR 14 million (+1%; EUR 46 million in Q4) and reached EUR 1,035 million. In Q2, the cost of the discount of loans was EUR 1.8 million (EUR 0.1 million in Q1), having been impacted by the discount of two clients in the sum of EUR 1.4 million.

AS LHV Group posted a consolidated profit of EUR 9.9 million for the first half-year of 2017. The bank earned a profit of EUR 7.6 million, asset management EUR 2.3 million and the Lithuanian business unit EUR 0.5 million. The half-year profit constitutes an EUR 1.6 million increase from last year

According to Madis Toomsalu, CEO of LHV Group, LHV was moving forward in a solid pace in the second quarter:
"We’re pleased to see, that the number of the bank’s clients grew by around 5,000 during the quarter and the loan portfolio by EUR 59 million. Among the loans, loans to businesses grew the most. Client deposits surpassed EUR 1 billion, that includes the deposits of non-residents. This mainly includes financial technology enterprises, as the provision of services to them is a new business direction for LHV. At the same time, new records were achieved in the clients’ payment activity, card transactions and acquiring.

In the second half of the quarter, the bank submitted the documents required to open a branch in the United Kingdom to the Financial Supervision Authority, made an agreement on the site of the office in London and joined UK Finance. Developments regarding UK have been as expected.

The results of Q2 include loan discounts that are larger than usual. We are still in a strong credit cycle which, while decreasing the credit loss risk on the level of the portfolio, does not preclude a deterioration of solvency by specific clients. As for the budget, the discounts were in an expected amount.

As for other events of Q2, the launch of video identification can be highlighted. In addition to video identification, in order to improve user-friendliness, we adopted the Smart-ID authentication solution, expanded the network of ATMs to Rakvere and Viljandi and developed a chat robot on LHV’s Facebook channel. The new salary payment solution, created in cooperation with the Tax and Customs Board, earnt this year’s innovation award of the Estonian Banking Association.

In order to sustain the growth that exceeds the financial plan, LHV Pank plans to increase their capital by EUR 3 million in July, involving the respective sum from LHV Group. This is the group’s internal transaction and does not impact the group’s own resources.

LHV’s pension funds continued investments related to Estonia. In the first half-year as a whole, pension funds have already made investment decisions related to Estonia amounting to EUR 100 million. As the prices of internationally traded securities are high and the trading volumes of the Tallinn stock exchange are modest, we have started to develop the local capital market ourselves, looking for new investment opportunities. The objective of LHV’s pension funds is to help the local enterprises grow, while we hope to earn a profit for the clients of our pension funds from this growth.

The profit of Mokilizingas in Q2 was EUR 0.2 million. The financing portfolio increased by EUR 0.3 million over the quarter and reached EUR 34 million by the end of the quarter. The portfolio’s credit quality remains stable.

LHV’s outlook for the current year is good. We are aiming for growth in all our business directions. LHV’s strong basic trends are also supported by the Estonian economic situation, which, according to the latest figures, is improving.

The credit market has remained strong, with its characteristic figures being an increase of loan volumes on the market and the low level of debt. There are also signs of the higher pricing of credit and an increase of the number of enterprises involved in debt.

Concluding six-month results, we have surpassed the financial plan published in February 2017 by EUR 1 million and are not currently going to change the estimated profit of EUR 21.8 million. In the medium term, we can grow with the overall market growth, but we also see an opportunity for increasing our market share by offering new and modern financial services. The cornerstone of LHV’s strategy is quality growth."

Income statement, EUR t  Q2-2017 Q1-2017 6 months 2017 6 months 2016
   Net interest income 8 607 8 164 16 771 14 018
   Net fee and commission income 5 213 5 285 10 498 7 962
   Net gains from financial assets 930 396 1 326 1 345
   Other income -84 -23 -108 113
Total revenue 14 665 13 822 28 487 23 438
   Staff costs -3 621 -3 590 -7 211 -6 729
   Office rent and expenses -374 -437 -811 -758
   IT expenses -438 -416 -854 -866
   Marketing expenses -1 118 -1 107 -2 224 -1 841
   Other operating expenses -2 376 -2 145 -4 521 -3 734
Total operating expenses -7 926 -7 695 -15 622 -13 929
EBIT 6 739 6 127 12 866 9 509
Earnings before impairment losses 6 739 6 127 12 866 9 509
   Impairment losses on loans and advances -1 839 -94 -1 933 -997
   Income tax -21 -983 -1 004 -146
Net profit for the reporting period from continued operations 4 878 5 050 9 929 8 367
Profit/-loss from discontinued operations 0 0 0 0
Net profit 4 878 5 050 9 929 8 367
   Profit attributable to non-controlling interest 458 581 1 039 793
   Profit attributable to share holders of the parent 4 420 4 469 8 890 7 574

 

Balance sheet, EURt  June 2017 March 2017 June 2016
   Cash and cash equivalents 488 630 348 474 236 395
   Financial assets 60 676 68 609 103 936
   Loans granted 613 366 551 233 474 452
   Loan impairments -7 314 -5 571 -5 152
   Receivables from customers 4 352 2 587 2 022
   Other assets 11 551 11 952 11 529
Total assets 1 171 261 977 284 823 181
      Demand deposits 868 348 668 350 482 075
      Term deposits 139 706 129 863 189 928
      Loans received 190 90 914
   Loans received and deposits from customers 1 008 244 798 303 672 918
   Other liabilities 17 749 35 081 23 521
   Subordinated loans 30 900 30 900 30 900
Total liabilities 1 056 893 864 284 727 339
Equity 114 368 113 000 95 842
   Minority interest 6 358 5 900 4 034
Total liabilities and equity 1 171 261 977 284 823 181

 

Reports of AS LHV Group are available at https://investor.lhv.ee/en/reports/.

To present the results in interim report LHV will hold an investor meeting, that will take place on 18 July 2017 6.00 p.m. in LHV Tallinn client office (Tartu mnt 2, CityPlaza building, 1st floor). The presentation will be made in Estonian. All participants please register at https://fp.lhv.ee/academy/463.

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group's key subsidiaries are AS LHV Pank and AS LHV Varahaldus. LHV employs about 350 people and over 123,000 customers use LHV’s banking services. Pension funds managed by LHV have about 175,000 customers.

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


LHV Group 2017-Q2 Investor presentation.pdf
LHV Group Interim Report 2017-Q2.pdf
Factbook ENG 2017-Q2.pdf