LHV Group unaudited results for Q3 and 9 months of 2020

AS LHV Group
·8 min read

In Q3 of 2020, AS LHV Group earned EUR 10.8 million in consolidated net profit. AS LHV Pank earned EUR 10.7 million in net profit, at that, EUR 1.2 million in net profit from servicing clients related to the United Kingdom branch. AS LHV Varahaldus earned EUR 0.8 million in net profit.

Compared to Q2 of this year, the net profit of the consolidation group grew by EUR 7.2 million, i.e., it tripled. Compared to Q3 of 2019, net profit grew by EUR 2.8 million, i.e. 35%. The Group’s return on equity was 18.9%. Previously formed discounts on loans were partially reduced.

In Q3, LHV Group’s volume of assets increased to EUR 4.1 billion, i.e. by 10%. Within the quarter, the Group’s consolidated loan portfolio grew by EUR 52 million to EUR 1.86 billion (+3%; + EUR 65 million in Q2) and consolidated deposits increased by EUR 129 million to EUR 3.22 billion (+4%; + EUR 134 million in Q2). At the same time, deposits related to payment institutions increased by EUR 57 million, while deposits related to deposit platforms decreased by EUR 137 million. The total volume of funds managed by LHV increased by EUR 56 million in Q3, to EUR 1.5 billion (+4%; + EUR 96 million in Q2).

Within the quarter, LHV added more than 11,000 bank clients, with the bank’s total number of clients surpassing 235,000. The number of active clients of the II pension pillar increased by more than 4000 in the quarter.

In Q3, all pension funds managed by LHV Varahaldus had a positive rate of return; at that, funds with a higher equity risk showed the best rate of return. In Q3, the best rate of return was provided by LHV Pension Fund Roheline, its rate of return for the three months being 20.4%.

AS LHV Group’s consolidated net profit in the first 9 months of 2020 was EUR 21.8 million, which is EUR 1.1 million higher than the result of the first 9 months of 2019. AS LHV Pank earned EUR 21.6 million and AS LHV Varahaldus EUR 1.3 million as net profit in 9 months. Since, in terms of consolidated profit, LHV is ahead of the current financial plan by EUR 8.3 million, the company will publish an updated financial plan in October 2020.

Comment by Madis Toomsalu, Managing Director of the LHV Group:
"For LHV, the third quarter was active and effective. We have continued with an open credit policy and with activities directed at the future. Our credit portfolio remains high quality. Our clients have used the grace periods granted largely as a precaution for ensuring liquidity. September was a great example of this: in relation to grace periods, of the loans in the amount of EUR 54 million that were supposed to end, payments in the extent of only EUR 6 million were postponed. The EUR 52 million growth of our loan portfolio was characterised by an decline in demand, rather than supply.

However, looking at the volume of billions of euros that are proposed as a political response to the estimated economic downturn, Estonian companies should prepare for the next economic upturn. The real world is indeed more complicated, since an economic downturn will lead to a decrease in investments with a leveraged effect; also, in order to benefit, different subsidies and loans received must be placed in a yielding manner. Still, considering the political measures and the measures of central banks, a considerable amount of funds will reach the real economy through money markets. Whether this is all good or reasonable should be left for discussions of economic theory, but in case of today’s investment decisions, mathematics should not be ignored. In the short term, the main virtue is still liquidity, and such a recommendation for making investments is directed at companies with a sufficient cash balance or good access to financing. Likewise, it is important to carefully contemplate the sustainability of such investments as well as their suitability for the future.

Among the more important events, the international business magazine Euromoney picked LHV as the best bank in Estonia for the third year in a row. In August, we were the first bank to introduce a virtual ISIC card intended for students, we added the contactless payment opportunity for users of Fitbit and Garmin devices, and we introduced a home credit card together with Alexela. From September, we started providing full service payment acquiring, which is a simple and beneficial opportunity for merchants to offer their clients the payment methods they require.

In September, we finished the public offering of LHV’s subordinated bonds. Since the initial issue volume of EUR 25 million was oversubscribed by 3.4 times, we increased the issue volume within the maximum permitted volume, to EUR 35 million.

After the quarter, at the beginning of October, we finalised the transaction in the course of which we acquired Danske’s credit portfolio related to Estonian companies, apartment associations and the public sector. The final volume of the transaction worked out to EUR 273 million. As a result of the transaction, LHV Pank’s loan portfolio grew by EUR 254 million, and surpassed the EUR 2 billion line for the first time.

We are still applying for an activity licence for the non-life insurance undertaking LHV Kindlustus. We hope to receive the activity licence from the Financial Supervision Authority around the turn of the year. At the same time, we are engaged in preparing information systems, recruiting people, and preparing the introduction of products to the market.

In terms of profit, we are ahead of the current financial plan published in April by EUR 8.3 million. The estimated crisis has been easier than forecast before, and the granted grace periods gave our clients the opportunity to build the necessary reserves. This is why the formed provisions have been EUR 6.4 million lower than planned. For this reason, we will be updating LHV Group’s financial plan for the current year in October."

Income statement, EUR thousand

Q3-2020

Q2-2020

9 months 2020

9 months 2019

Net interest income

16 731

15 545

48 599

34 119

Net fee and commission income

6 472

6 188

19 168

19 250

Net gains from financial assets

335

322

268

500

Other income

44

-16

64

26

Total revenue

23 582

22 039

68 098

53 895

Staff costs

-5 630

-6 146

-17 546

-14 029

Office rent and expenses

-45

-236

-559

-682

IT expenses

-868

-782

-2 379

-1 909

Marketing expenses

-557

-315

-1 347

-1 646

Other operating expenses

-3 613

-3 183

-10 717

-9 641

Total operating expenses

-10 713

-10 661

-32 548

-27 908

EBIT

12 869

11 378

35 550

25 987

Earnings before impairment losses

12 869

11 378

35 550

25 987

Impairment losses on loans and advances

27

-7 672

-8 655

-1 663

Income tax

-2 122

-156

-5 086

-3 664

Net profit

10 774

3 550

21 808

20 660

Profit attributable to non-controlling interest

677

615

1 697

1 583

Profit attributable to share holders of the parent

10 096

2 935

20 111

19 078


Balance sheet, EUR thousand

Sept 2020

Jun 2020

Sept 2019

Cash and cash equivalents

1 753 730

1 438 793

1 468 510

Financial assets

430 661

423 117

124 035

Loans granted

1 870 335

1 818 644

1 233 626

Loan impairments

-14 512

-14 608

-11 561

Receivables from customers

2 443

3 039

33 491

Other assets

29 216

28 527

28 700

Total assets

4 071 872

3 697 512

2 374 714

Demand deposits

2 756 352

2 512 196

2 005 227

Term deposits

459 132

574 739

529 442

Loans received

471 554

271 553

28 640

Loans received and deposits from customers

3 687 038

3 358 488

2 563 309

Other liabilities

35 252

35 702

39 524

Subordinated loans

125 000

90 000

75 000

Total liabilities

3 847 290

3 484 190

2 677 833

Equity

224 582

213 322

198 967

Minority interest

5 921

5 243

4 505

Total liabilities and equity

4 071 872

3 697 512

2 374 714

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

In order to introduce the quarterly results, LHV Group will be organising an investor meeting which will be conducted in the webinar form through the Zoom environment. The virtual investor meeting will take place on 20 October at 18:00. The presentation will be in Estonian. You can register at https://lhvbank.zoom.us/meeting/register/tJAvcOqrrTMqG9HWPYShAMC3PcuZAXYksDS2.

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

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