Published: 2018-02-13 10:00:00 CET
LHV Group
Company Announcement

LHV Group’s financial plan for 2018 and five year financial forecast

LHV Group is disclosing the financial plan for 2018, that forecasts the group’s income to increase by 20% and consolidated net profit to grow by 10%.

During 2017 LHV Group achieved record levels in all its’ business volumes. During the year, LHV Bank deposits grew by EUR 760 million, loans by EUR 194 million, and the volume of funds managed by LHV Asset management by EUR 129 million, supported by pension funds growth. For this year, LHV forecasts a 25% increase of the loan portfolio and a 13% decrease of consolidated deposits. Funds managed by LHV are forecasted to grow by 15%. LHV Group’s pre-tax profit is planned to amount to EUR 28.2 million in 2018 (21% increase from 2017).

Key figures FP2018 2017
Loans 916 732 +25%
Deposits 1344 1537* -13%
Cost/income ratio (C/I) 52.0% 54.6% -2.6 pp
ROE (attr. to owners) 16.7% 17.6% -0.9 pp
Capital adequacy 16.9% 18.3% -1.4 pp

* Includes deposits of payment intermediaries, expected to decrease by EUR 300 million.

LHV has over 5,300 shareholders and over 900 bond investors. In order to provide investors with the most up-to-date and relevant information, last year, LHV Group started to disclose monthly results and financial plan.

Comments by Madis Toomsalu, CEO of LHV Group:
"One of the cornerstones of the Corporate Governance practices followed by LHV is the equal treatment of investors. That is why we have decided to disclose also a five-year financial forecast. Compiling such a forecast is not new for LHV, however it is the first time we will make it public.

The keywords of the 2018 Financial plan are quality in continuing existing services and development of the new business line. The economic environment remains good, the underlying trends being broad based economic growth, rise in companies’ productivity and investments and also growing wages. The financial sector is healthy and mainly characterized by the increasing loan volumes and low overdue levels.

In 2018, LHV is focusing on growing in every domain of our business, sticking to the principles of simplicity and modernity, when it comes to our products:

  • We will continue perfecting e-channels, renewing our internet bank, improving the mobile bank app with many new functionalities and launching a new pension application to the market. With open banking in mind, we will continue developing our APIs. We will introduce an offering to younger clients and car insurance. We will join the real time euro payment system and prepare for joining the real-time pound payments system. We will form an on-site team in our UK office and begin servicing clients there.
  • Deposits will grow at a pace on par with last year. The majority of deposits will be taken in from retail customers; somewhat less will come from companies. Regarding financial intermediaries, we see a deposit increase from different customers; however, a very high deposit balance of one particular payment provider makes us expect a decrease in the deposits of the business line as a whole. In 2018, we are broadening our list of sources for financing.
  • Loans continue to grow in record speed. The biggest source of growth will be loans to companies, followed by small loans by our Lithuanian business unit Mokilizingas and home loans issued in Estonia. All other loan products will continue to grow. We will also start providing factoring services.
  • Regarding our services to financial technology companies the focus remains on establishing a branch in United Kingdom, preparation to join the Pound payments system and beginning to service clients in London. We will concentrate on the following sectors: neo-banks, currency service providers and payment intermediaries.
  • Regarding pension funds, we will introduce to market a new II pillar pension fund, which invests only in Estonia. In 2017, LHV pension funds made Estonia-oriented investment decisions in the sum of EUR 170 million and Estonia-related investments will continue to grow in the coming years. At the same time, we are not excluding any other investment opportunities, any region or economic sector. The goal remains to provide best possible yields for our customers.

In 2018, the group has sufficient capitalization in order to finance growth, but preparations will be initiated in order to refinance subordinated bond issue in 2019 and raise new capital, needed for growth."

Long-term forecast – a five-year plan

AS LHV Group discloses hereby the financial forecast for the coming five years. According to this forecast, the income of the group should grow on average 15% yearly, at the same time costs will grow 8% yearly. Based on the financial forecast LHV’s consolidated net profit would reach EUR 54.1 million in 2022.

Key figures FP2022 FP2021 FP20220 FP2019 FP2018
Pre-tax profit 63.6 53.9 45.7 35.1 28.2
Loans 1510 1362 1240 1093 916
Deposits 2154 1922 1714 1520 1344
Cost/income ratio 41% 43% 45% 49% 52%
ROE ( owners) 19.7% 19.1% 17.3% 19.1% 16.7%
Capital adequacy 20.7% 19.2% 17.8% 17.1% 16.9%

* Business volumes shown in EUR million

Comments by Madis Toomsalu, CEO of LHV Group:
"One of the prerequisites of the five-year financial forecast is the persistence of the current economic environment. The choice not to forecast the turning of the economic cycle does not mean neglecting possible risks. Our credit decisions and different stress tests continuously take into account abrupt stress scenarios; likewise, we consider them when determining our capital buffers. Out of the other main prerequisites we can highlight significant growth of business volumes, accrual of income from the financial intermediaries business line, higher credit loss resulting from a conservative approach, rise of the Euribor according to market forecasts, the capitalization and depreciation of the sales expenses of Asset management, persistence of II pillar pension fund payments at today’s level and the decrease in pension fund administrative fees due to volume growth as set by regulations, persistence of our dividend policy and the effect of the banking tax.

The items of the financial forecast, that potentially could differ from reality the most, are deposit volumes and income from servicing financial intermediaries. Additionally, the absolute level of interest income is partially dependent on changes of Euribor rates and in addition to economic conditions, the realization of credit losses could also depend on other reasons related to individual customers.

We forecast that the consolidated pre-tax return on capital will reach at least 20% every forecasted year. The UK branch activation expenses as well as the impact of the banking tax will affect the 2018 net profit’s return on capital belonging to shareholders. According to the five-year forecast, the aim is to also move towards 20% ROE in terms of net profit attributable to the shareholders. The five-year forecast anticipates that both in 2019 and 2020 new capital shall be raised by issuing bonds.

In conclusion, the long-term financial forecast is ambitious, but realistic. We can carry out the plan with the help of more than 360 people, working in LHV, this number is likely to rise during this period. I hope that also henceforth our people will be motivated by the passion to raise the importance of LHV, that is to say Estonian capital, in the local financial services market and equally to help along to the LHV’s breakthrough in new markets and business fields."


LHV Group will make changes to the 2018 Financial plan in case it becomes likely that the planned net profit will differ more than 10% compared to the financial plan. The five-year forecast will be updated at the beginning of 2019 or together with the changes to the 2018 Financial plan, if needed.

In order to present the financial plans to media, LHV will hold a press briefing on 13 February starting at 11 a.m at LHV Tallinn office. The presentation will be broadcast live (in Estonian) on LHV’s Facebook page

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 over 360 people and over 135,000 customers use LHV’s banking services. Pension funds managed by LHV have over 176,000 active customers.

         Priit Rum
         Communication Manager
         Phone: +372 502 0786

LHVGroup Financial plan 2018 ENG.pdf