LHV Group’s unaudited financial results for Q2 and 6 months of 2023

AS LHV Group generated a net profit of EUR 35.6 million in Q2 of this year, which is EUR 2.6 million more than in Q1 (+8%) and EUR 21.6 million more than in the same period a year ago (+155%). The return on equity attributable to LHV Group’s shareholders was 30.7% in Q2.

All business lines were profitable in the quarter. AS LHV Pank earned a net profit of EUR 34.4 million, and AS LHV Varahaldus a net profit of EUR 0.4 million in Q2. The quarterly net profit of AS LHV Kindlustus was EUR 33 thousand. Licensed bank LHV Bank Limited reported a net profit of EUR 1.6 million in Q2.

In Q2 of 2023, the Group generated consolidated revenue of EUR 74.9 million, or 10% more than in the previous quarter. Of the revenue, net interest income accounted for EUR 62.9 million, and net fee and commission income for EUR 12.4 million. The Group’s operating expenses amounted to EUR 33 million in Q2, or 8% more than in Q1.

At the end of June, LHV Group’s consolidated assets stood at EUR 6.31 billion. Over the quarter, assets increased by EUR 217 million euros, or 4%. The Group’s consolidated deposits increased by EUR 195 million over the quarter to EUR 5.06 billion (+4%; EUR -34 million in Q1). The consolidated loan portfolio grew by EUR 104 million over the quarter to EUR 3.25 billion (+3%; EUR -59 million in Q1). The total volume of funds managed by LHV increased by EUR 14 million to EUR 1.46 billion in Q2 (+1%; EUR +119 million in Q1). The number of processed payments to financial intermediaries’ clients amounted to 11.2 million in Q2 (+23% compared to 9.1 million in Q1).

Consolidated net income of AS LHV Group for 6 months of 2023 amounted to EUR 143.3 million (+97% compared to 2022), supported by strong interest income, and total expenses amounted to EUR 63.7 million (+59% compared to 2022). The Group’s 6-month consolidated net profit was EUR 68.7 million, an increase of EUR 42.3 million, or 161%, compared to the previous year. AS LHV Pank generated a net profit of EUR 71.8 million in 6 months. AS LHV Varahaldus made a net profit of EUR 0.5 million in the first 6 months and AS LHV Kindlustus made a net loss of EUR 0.4 million. LHV Bank Limited reported a loss of EUR 0.9 million for the half-year. LHV Group’s ROE for the first half of the year was 30.7%.

By the end of Q2, LHV Group exceeds the current financial plan in terms of net profit by EUR 22.9 million. LHV plans to update its financial plan in September, at the latest.

Income statement, EUR thousand	Q2-2023	Q2-2022	6 months 2023	6 months 2022
Net interest income	62 900	27 185	118 008	52 972
Net fee and commission income	12 352	11 005	24 229	21 351
Net gains from financial assets	-548	-345	837	-1 658
Other income	197	57	210	22
Total revenue	74 902	37 903	143 285	72 687
Staff costs	-15 851	-11 746	-31 518	-21 995
Office rent and expenses	-1 225	-923	-1 992	-1 446
IT expenses	-3 657	-1 561	-6 883	-3 210
Marketing expenses	-1 087	-655	-1 896	-1 612
Other operating expenses	-11 220	-6 195	-21 373	-11 682
Total operating expenses	-33 040	-21 080	-63 662	-39 946
EBIT	41 862	16 822	79 623	32 741
Earnings before impairment losses	41 862	16 822	79 623	32 741
Impairment losses on loans and advances	-809	341	774	-394
Income tax	-5 422	-3 177	-11 703	-5 978
Net profit	35 631	13 986	68 694	26 369
Profit attributable to non-controlling interest	278	444	687	946
Profit attributable to shareholders of the parent	35 353	13 543	68 007	25 423

 

Balance sheet, EUR thousand	Jun 2023	Mar 2023	Jun 2022
Cash and cash equivalents	2 604 108	2 574 177	3 054 953
Financial assets	369 289	297 012	492 539
Loans granted	3 272 084	3 167 568	2 943 373
Loan impairments	-18 588	-18 384	-18 838
Receivables from customers	28 199	19 813	9 183
Other assets	52 223	50 353	49 646
Total assets	6 307 315	6 090 540	6 530 857
Demand deposits	4 005 191	4 339 971	5 218 411
Term deposits	1 057 177	526 928	148 154
Loans received	510 934	539 807	497 048
Loans received and deposits from customers	5 573 302	5 406 706	5 863 613
Other liabilities	120 896	98 876	172 082
Subordinated loans	131 301	131 070	110 368
Total liabilities	5 825 499	5 636 652	6 146 064
Equity	481 816	453 888	384 793
Minority interest	7 287	7 009	7 231
Total liabilities and equity	6 307 315	6 090 540	6 530 857

 

Q2 was characterised by active business for LHV, as well as increasing client activity. The highlight of the quarter was LHV Bank Limited obtaining its banking licence in the UK.

In a challenging economic environment, the loan portfolio grew as expected. Increased interest income, combined with the high quality of the loan portfolio, helped the Group to significantly exceed its profitability target. Only the consumer loan portfolio of private individuals shows some change in quality. Expenditure was affected by an increase in the contribution to the Deposit Guarantee Fund. The cost/income ratio for the first half of the year was a good 44.4%.

Throughout the first half of the year, in an environment of rising interest rates, the focus for LHV has been on deposits, which has resulted in an accelerated shift of clients from demand deposits to fixed-term deposits. Demand deposits decreased by EUR 333 million in Q2, while fixed-term deposits increased by EUR 528 million. Deposits by financial intermediaries decreased by EUR 174 million in Q2. A total of EUR 277 million in fixed-term deposits was raised through deposit platforms. Deposits from regular clients increased by EUR 92 million over the quarter.

During the quarter, the number of LHV’s banking clients increased by nearly 10,000, exceeding the 400,000 mark for the first time. Over the year, the number of bank clients has increased by 50,000 (+14%).

During the quarter, LHV Pank significantly increased the interest rates offered to fixed-term depositors. LHV pays the depositor 4% interest on the one-year deposit. The bank’s non-Group loan portfolio grew by EUR 96 million in Q2: the increase was split equally between retail and corporate banking. Demand for credit is picking up speed again. In terms of revenues, this was the first full quarter when revenues from financial intermediaries, or the banking service clients, were shared with LHV Bank.

During the active quarter, the bank renewed its Youth Bank offer, started the update of the Financial Portal, and added a currency exchange option to its mobile app. In the survey carried out by Kantar Emor, LHV internet bank was named the best online service channel in Estonia.

Following the granting of a banking licence to LHV Bank, preparations for the transfer of financial intermediaries’ business from the Estonian LHV Pank to the UK bank have gained momentum. The IT separation of the two banks and the transfer of business is planned for August. From August, LHV Bank also plans to attract the necessary deposits to grow its loan portfolio through Raisin’s deposit platform. Thereafter, the plan is to focus on creating and launching own deposit products. The UK lending market is currently less active, but there are strong lending projects.

In Q2, LHV Bank earned more interest income than planned from the deposits of its financial intermediary clients, although the deposit base has decreased. The loan portfolio grew by EUR 8 million and fees increased due to an increase in the number of payments. The bank’s costs were higher than planned due to the increased workload.

Funds managed by LHV Varahaldus continued to grow. At the same time, equity markets were driven by the largest technology stocks, with minimal exposure to the larger LHV funds. LHV pension funds M and XL returned 0.3% during the quarter, while pension fund L fell 0.1%. Pensionifond Indeks rose 4.2% in three months. To sum up, Pensionifond Roheline fell 1.2% during a volatile three months.

The number of active pension fund clients decreased by 2,000 over the quarter, mainly due to clients leaving the II pillar at the beginning of May. Operating income and operating expenses were broadly in line with the plan, but fund volumes and financial income from asset management were slightly below the plan, mainly due to lower rates of return in Q2.

Q2 was the first profitable quarter for LHV Kindlustus. Insurance volumes continued to grow, outperforming the financial plan across all major products. At the end of the quarter, clients held 223 thousand insurance agreements. During the quarter, a total of 12,500 claims were handled. Net revenue and the result were negatively affected by unforeseen one-off costs. The net loss ratio is on a downward trend.

Comment by Madis Toomsalu, Chairman of the Management Board at LHV Group:
"Our investments in developing our business have been effective. We received a banking license in the UK and for the first time all LHV Group subsidiaries ended the quarter earning a profit. We are pleased with the increase in loan and deposit volumes, while expecting an acceleration in the growth of LHV Bank's loan volumes in the UK. The loan portfolio has maintained a good quality, there has been some increase in arrears in the consumer financing portfolio. The transfer of financial intermediaries’ business from Estonian LHV Pank to the LHV Bank in UK is planned for the end of August, after that we will also focus on the transfer of customers' euro payments from LHV Pank. Additionally for the long-term growth of business volumes we are improving and investing in our risk control systems. Due to the better-than-expected results, we are updating the financial plan in September at the latest."

 

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

In order to present the results of the quarter, LHV Group will organise an investor meeting via the Zoom webinar platform. The virtual investor meeting will take place before the market opens on 18 July at 9.00. The presentation will be in Estonian. Please register at the following address: https://lhvbank.zoom.us/webinar/register/WN_MVhs8NkhRja5PRfxRmRSOQ#/re ....

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s main subsidiaries are LHV Pank, LHV Varahaldus, and LHV Kindlustus. The Group employs over 960 people. As at the end of June, more than 400,000 clients were using LHV’s banking services, LHV’s pension funds had 128,000 active clients, and 159,000 clients were covered by LHV Kindlustus. LHV Bank, a subsidiary of the Group, holds a banking licence in the UK and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.

 

Priit Rum
Communication Manager
Phone: [phone]
Email: [e-mail] 

Attachments

• LHV Group Interim Report 2023-Q2-EN
• LHV Group Factbook 2023-Q2-EN
• LHV Group Presentation 2023-Q2-EN