AS LHV Group earned a consolidated profit of EUR 5.8 million in Q3, with the bank earning EUR 3.7 million, asset management EUR 2.2 million and the Lithuanian business unit EUR 0.2 million.
The group's consolidated Q3 profit was EUR 0.9 million more than in Q2 and EUR 2.4 million more than in Q3 2015. LHV Group's return on equity was 22.6% in Q3.
The group's consolidated loan portfolio grew by EUR 9 million during the quarter (+2%; +EUR 38 million in Q2) reaching EUR 478 million and consolidated deposits by EUR 69 million (+10%; +EUR 27 million in Q2) to EUR 741 million. The volume of funds managed by LHV grew by EUR 46 million (+5%; +EUR 294 million in Q2) and reached EUR 937 million.
In the first nine months of 2016, LHV posted a profit of EUR 14.2 million, i.e. a EUR 2.6 million increase from last year (Q1 2015 included extraordinary revenue from disposal of business operations in Finland). The bank has earned a profit of EUR 10.1 million in nine months, asset management EUR 4.3 million and the Lithuanian business unit EUR 0.8 million. The return on equity held by LHV's shareholders amounts to 20.6% in the first nine months of 2016.
Erkki Raasuke, CEO of AS LHV Group explained that the company has a good momentum and both the bank and asset management are ahead of their financial targets.
„The third quarter was a successful one for LHV. Profit was fueled by customers’ high activity level, strong credit quality and revenue generated through the acquisition of Danske Capital.
The bank’s strong forward momentum has continued for over a year now. The bank gained 8,400 customers during the quarter and the bank currently has over 100,000 customers.
The bank’s loan portfolio grew mainly due to increase in loans to individuals. Corporate loans were issued actively but in connection with the seasonal completion of real estate development projects, loan repayment also took place at a higher volume. Credit quality has remained strong and loan impairment costs decreased compared to the previous quarter.
Customers’ demand deposits grew fast (+EUR 96 million), while term deposits shrank (-EUR 25 million) to the lowest volume they have been in the last five years. The sea change in structure of deposits in the last five years has been in favor of demand deposits. Thanks to the drop in average expense on deposits LHV Bank in terms of cost of internal funds is just as competitive as other banks providing service in Estonia.
The acquisition of Danske Capital and growth in business volumes were responsible for the leap in asset management’s profit growth. The asset management team has done good work to integrate the two businesses. The companies’ merger took effect in late July and the process of merging funds with similar risk profiles still lies ahead. The strong stream of revenue from management fees will continue until the end of 2016. In February the scale effect from the merger will be passed on to customers and the management fees of 2nd pillar pension funds will drop. This will result in a significant reduction of asset management’s revenue. The number of active 2nd pillar pension customers grew to 177,000 in Q3.
Mokilizingas, Lithuanian business unit, posted a profit that was EUR 0.1 million less than in the last quarter, but after a slowdown in the sale of credit products due to changes in regulations, this area is once again gaining momentum. We will fall short of the targets we had set; however the return on capital has not suffered. Mokilizingas started offering customers a new credit card. The financing portfolio reached EUR 38 million at the end of the quarter and the portfolio’s credit quality remains strong.
LHV’s outlook for the months ahead is good. Stable credit quality, new customers, and good fund yields will allow the current momentum to be sustained. We hope to close out our first financial year as a publicly listed company with strong results and affirm that there is always demand and room for good work.”
| Income statement, EURt | Q3-2016 | Q2-2016 | 9 months 2016 | 9 months 2015 |
| Net interest income | 7 696 | 7 230 | 21 714 | 16 863 |
| Net fee and commission income | 5 375 | 4 311 | 13 339 | 10 863 |
| Net gains from financial assets | 449 | 1 146 | 1 794 | 242 |
| Other income | -17 | 127 | 95 | 36 |
| Total revenue | 13 503 | 12 814 | 36 942 | 28 004 |
| Staff costs | -3 048 | -3 504 | -9 777 | -7 963 |
| Office rent and expenses | -120 | -375 | -404 | -315 |
| IT expenses | -429 | -423 | -1 302 | -1 001 |
| Marketing expenses | -1 315 | -754 | -3 174 | -2 773 |
| Other operating expenses | -2 244 | -2 046 | -6 429 | -5 067 |
| Total operating expenses | -7 156 | -7 103 | -21 086 | -17 119 |
| EBIT | 6 347 | 5 711 | 15 856 | 10 885 |
| Earnings before impairment losses | 6 347 | 5 711 | 15 856 | 10 885 |
| Impairment losses on loans and advances | -500 | -742 | -1 497 | -1 332 |
| Income tax | -55 | -68 | -201 | -197 |
| Loss from associates accounted for using the equity method | 0 | 0 | 1 | 2 183 |
| Net profit for the reporting period from continued operations | 5 792 | 4 900 | 14 159 | 11 539 |
| Profit/-loss from discontinued operations | 0 | 0 | 0 | 0 |
| Net profit | 5 792 | 4 900 | 14 159 | 11 539 |
| Profit attributable to non-controlling interest | 447 | 346 | 1 240 | 660 |
| Balance sheet, EURt | Sept 2016 | June 2016 | March 2015 |
| Cash and cash equivalents | 315 315 | 236 395 | 133 802 |
| Financial assets | 77 681 | 103 936 | 165 658 |
| Loans granted | 483 596 | 474 452 | 401 136 |
| Loan impairments | -5 297 | -5 152 | -4 851 |
| Receivables from customers | 2 739 | 1 988 | 2 590 |
| Other assets | 11 852 | 11 563 | 4 640 |
| Total assets | 885 886 | 823 181 | 702 975 |
| Demand deposits | 578 405 | 482 075 | 389 279 |
| Term deposits | 162 551 | 189 928 | 200 769 |
| Loans received | 832 | 914 | 15 679 |
| Loans received and deposits from customers | 741 788 | 672 918 | 605 727 |
| Other liabilities | 11 372 | 23 521 | 10 740 |
| Subordinated loans | 30 900 | 30 900 | 16 650 |
| Total liabilities | 784 060 | 727 339 | 633 117 |
| Equity | 101 826 | 95 842 | 69 858 |
| Minority interest | 4 481 | 4 034 | 2 819 |
| Total liabilities and equity | 885 886 | 823 181 | 702 975 |
Reports of AS LHV Group are available at https://investor.lhv.ee/en/reports/.
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 250 people and over 100,000 customers use LHV’s banking services. Pension funds managed by LHV have over 175,000 customers.
Priit Rum
Communication Manager
Telephone: +372 502 0786
Email: priit.rum@lhv.ee
