LHV Group’s 2018 First Quarter Unaudited Financial Results

The first three months of 2018 brought AS LHV Group a net profit of EUR 4.3 million, with the bank posting a profit of EUR 3.6 million, asset management EUR 0.7 million and Lithuanian business unit Mokilizingas EUR 0.2 million. In Q1, LHV Group paid income tax amounting to EUR 2.0 million. LHV Group’s return on equity was 12.4% in Q1.

The profit of the consolidation group was EUR 2.5 million lower than in Q4 of 2017 and EUR 0.8 million less than a year ago, Q1 of 2017.

In the first three months of this year the group’s consolidated loan portfolio grew by EUR 34 million (+12%; +EUR 269 million in Q4) and reached EUR 766 million. The consolidated deposits grew by EUR 188 million (+3%; +EUR 36 million in Q4) reaching EUR 1,725 million. Among this the deposits of financial intermediaries grew by EUR 126 million.

During the quarter the volume of funds managed by LHV rose by EUR 24 million (+2%; EUR 35 million in Q4) and reached EUR 1,127 million.

Comments by Madis Toomsalu, CEO of LHV Group:
"In the first quarter, the trends seen last year have continued. LHV’s solid fundamentals are supported by the Estonian economic environment. Economic growth has accelerated and domestic risks are offset by a balanced budget, low government debt, and a positive balance of trade. The main risk is the high development volume in the real estate sector. The credit market remains strong.

We consider it a strong result that the number of customers is growing: the bank’s customer number increased by 6,000 during the quarter and the number of active pension clients by 1,200. A study conducted by Dive affirmed that the quality of LHV’s service is very high and Euromoney magazine named LHV’s private banking service the best in Estonia.

As to new products, we introduced two new loans: a Health and Beauty Loan and a Home Furnishing Loan. We helped with the market launch of mTasku, a payment solution developed by Telia.
Q1 included the opening of LHV Bank’s United Kingdom branch. The objective of the branch is developing financial intermediaries business line.
In March, we announced the establishment of a new Pillar 2 pension fund that invests into Estonia. Provided suitable investments exist, the fund will actively invest up to 100% of its assets into Estonian stocks, bonds, real estate and other funds.

The group’s consolidated Q1 profit of EUR 4.3 million was influenced by income tax amounting to EUR 2.0 million and greater impairments occasioned by the adoption of the IFRS standard’s impairment model. The payment of dividends by LHV Varahaldus to LHV Group incurred income tax expense of EUR 1.1 million and the income tax expense on the LHV Bank dividend amounted to EUR 0.8 million.

In February, for the first time, we released a long-term, five-year financial forecast in addition to this year’s financial plan. LHV continues to be a rapidly growing company, and to support the growth, we increased LHV Bank’s share capital by EUR 10 million within the group.

The bank’s consolidated profit was EUR 3.6 million in Q1. The first quarter was characterized by the fact that customers remained highly active and growth in loans and deposits. The total number of the bank’s customers approached 140,000.
The bank’s loan portfolio grew by EUR 34 million in Q1. The increase in Q1 loan impairment costs to EUR 0.9 million is largely related to the changeover to IFRS 9 in early 2018.
The profit of LHV Varahaldus was EUR 0.7 million in Q1, being influenced by the income tax expense on payment of dividends.
The Lithuanian business unit Mokilizingas posted a profit of EUR 0.2 million in Q1, which is EUR 1.1 million less than in the last quarter of 2017. The net loan portfolio increased by EUR 10 million during the quarter, standing at EUR 60 million by the end of the quarter. The portfolio’s credit quality remains stable.

Late in the first quarter, we disclosed an offer made by AS Inbank to acquire the shares in "UAB Mokilizingas". By now we have accepted this offer. The value of the shares held by LHV amount to EUR 7.5 million. The sale of our share will earn AS LHV Group an extraordinary profit of EUR 3 million, thus we plan to review our Financial plan for 2018. We will disclose the renewed Financial plan on 17 May."

Income statement, EUR t	Q1-2018	Q4-2017	Q1-2017
Net interest income	10 195	9 868	8 164
Net fee and commission income	6 232	5 987	5 285
Net gains from financial assets	-87	-421	396
Other income	-4	5	-23
Total revenue	16 337	15 439	13 822
Staff costs	-4 142	-3 945	-3 590
Office rent and expenses	-494	-499	-437
IT expenses	-552	-570	-416
Marketing expenses	-890	-1 356	-1 107
Other operating expenses	-2 802	-2 117	-2 145
Total operating expenses	-8 880	-8 486	-7 695
EBIT	7 457	6 953	6 127
Earnings before impairment losses	7 457	6 953	6 127
Impairment losses on loans and advances	-1 186	40	-94
Income tax	-2 014	-201	-983
Net profit for the reporting period from continued operations	4 256	6 791	5 050
Profit/-loss from discontinued operations	0	0	0
Net profit	4 256	6 791	5 050
Profit attributable to non-controlling interest	306	1 107	581
Profit attributable to share holders of the parent	3 951	5 684	4 469

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Balance sheet, EURt	March 2018	December 2017	March 2017
Cash and cash equivalents	1 071 822	961 212	348 474
Financial assets	57 091	56 634	68 609
Loans granted	774 760	740 169	551 233
Loan impairments	-9 111	-8 125	-5 571
Receivables from customers	12 250	9 802	2 587
Other assets	24 028	13 165	11 952
Total assets	1 930 839	1 772 856	977 284
Demand deposits	1 598 606	1 409 662	668 350
Term deposits	126 749	127 267	129 863
Loans received	6 018	6 000	90
Loans received and deposits from customers	1 731 373	1 542 929	798 303
Other liabilities	26 796	71 073	35 081
Subordinated loans	30 900	30 900	30 900
Total liabilities	1 789 069	1 644 902	864 284
Equity	141 770	127 955	113 000
Minority interest	7 027	7 894	5 900
Total liabilities and equity	1 930 839	1 772 856	977 284

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

To present the results in Q1 interim report LHV will hold an investor meeting, that will take place on 24 April 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/503.

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 380 people and 140,000 customers use LHV’s banking services. Pension funds managed by LHV have over 178,000 active customers.

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

Attachments

• LHV Group Interim Report 2018-Q1
• LHV Group 2018-Q1 Investor Presentation ENG
• Factbook ENG 2018-Q1