In Q3 of this year, AS LHV Group earned EUR 39.5 million in net profit. AS LHV Pank earned EUR 36.0 million in net profit, LHV Bank Limited EUR 3.2 million, AS LHV Varahaldus EUR 0.6 million, and AS LHV Kindlustus EUR 0.3 million. The return on equity attributable to the Group’s shareholders was 31.6% in Q3.
In Q3 of 2023, the Group generated consolidated revenue of EUR 81.5 million, i.e., 9% more than in the previous quarter. Of the revenue, net interest income accounted for EUR 68.1 million, and net fee and commission income for EUR 13.6 million. The operating expenses of the consolidation group amounted to EUR 32.8 million in Q3, i.e., 1% less than in Q2. Net profit for the quarter was EUR 3.8 million more than in the previous quarter (+11%) and 3.7 times higher than in the same period last year.
As at the end of September, LHV Group’s consolidated assets stood at EUR 6.59 billion. Over the quarter, assets increased by EUR 284 million, i.e., 5%. The Group’s consolidated deposits increased by EUR 254 million over the quarter to EUR 5.32 billion (+5%; EUR +195 million in Q2). The consolidated loan portfolio grew by EUR 122 million over the quarter to EUR 3.38 billion (+4%; EUR +104 million in Q2). The total volume of funds managed by LHV decreased by EUR 13 million to EUR 1.45 billion in Q3 (-1%; EUR +14 million in Q2). The number of processed payments related to clients who are financial intermediaries amounted to 13.2 million in Q3 (+18% compared to 11.2 million payments in Q2).
Consolidated net revenue of AS LHV Group for the nine months of 2023 amounted to EUR 224.8 million (+92% compared to 2022) and total expenditure was EUR 96.5 million (+54%). The consolidated net profit of the Group for the nine months was consequently EUR 108.2 million, i.e., EUR 71.1 million more than a year ago (+191%). Over the nine months, AS LHV Pank earned EUR 107.8 million in net profit, UK Bank Limited EUR 2.2 million in net profit, AS LHV Varahaldus EUR 1.1 million in net profit, and AS LHV Kindlustus EUR 0.1 million in net loss. The return on equity of LHV Group was 30.8% over the nine months. LHV outperformed the financial plan disclosed at the beginning of September by EUR 4.0 million with regard to net profit for the nine months.
| Income statement, EUR thousand | Q3-2023 | Q3-2022 | 9 months 2023 | 9 months 2022 |
| Net interest income | 68 140 | 62 900 | 186 149 | 85 013 |
| Net fee and commission income | 13 617 | 12 352 | 37 846 | 33 351 |
| Net gains from financial assets | -589 | -548 | 249 | -1 430 |
| Other income | 311 | 197 | 521 | 51 |
| Total revenue | 81 479 | 74 902 | 224 765 | 116 985 |
| Staff costs | -16 308 | -15 851 | -47 827 | -33 626 |
| Office rent and expenses | -1 085 | -1 225 | -3 077 | -2 360 |
| IT expenses | -3 379 | -3 657 | -10 263 | -5 411 |
| Marketing expenses | -845 | -1 087 | -2 741 | -2 177 |
| Other operating expenses | -11 189 | -11 220 | -32 561 | -19 184 |
| Total operating expenses | -32 806 | -33 040 | -96 469 | -62 759 |
| EBIT | 48 673 | 41 862 | 128 296 | 54 227 |
| Earnings before impairment losses | 48 673 | 41 862 | 128 296 | 54 227 |
| Impairment losses on loans and advances | -2 883 | -809 | -2 109 | -7 801 |
| Income tax | -6 314 | -5 422 | -18 017 | -9 309 |
| Net profit | 39 476 | 35 631 | 108 170 | 37 116 |
| Profit attributable to non-controlling interest | 419 | 278 | 1 105 | 1 387 |
| Profit attributable to share holders of the parent | 39 058 | 35 353 | 107 064 | 35 729 |
| Balance sheet, EUR thousand | Sept 2023 | Jun 2023 | Dec 2022 | Sept 2022 |
| Cash and cash equivalents | 2 857 964 | 2 604 108 | 2 482 288 | 2 735 080 |
| Financial assets | 269 828 | 369 289 | 373 584 | 373 749 |
| Loans granted | 3 396 048 | 3 272 084 | 3 229 214 | 3 115 239 |
| Loan impairments | -20 466 | -18 588 | -20 642 | -20 537 |
| Receivables from customers | 36 873 | 28 199 | 21 019 | 12 785 |
| Other assets | 50 924 | 52 223 | 49 539 | 46 099 |
| Total assets | 6 591 170 | 6 307 315 | 6 135 002 | 6 262 414 |
| Demand deposits | 3 813 924 | 4 005 191 | 4 644 843 | 5 053 834 |
| Term deposits | 1 502 280 | 1 057 177 | 255 672 | 114 319 |
| Loans received | 461 635 | 510 934 | 586 254 | 496 239 |
| Loans received and deposits from customers | 5 777 839 | 5 573 302 | 5 486 768 | 5 664 393 |
| Other liabilities | 124 237 | 120 896 | 96 541 | 91 626 |
| Subordinated loans | 166 848 | 131 301 | 130 843 | 110 652 |
| Total liabilities | 6 068 924 | 5 825 499 | 5 714 152 | 5 866 671 |
| Equity | 522 246 | 481 816 | 420 850 | 395 743 |
| Minority interest | 7 706 | 7 287 | 7 908 | 7 671 |
| Total liabilities and equity | 6 591 170 | 6 307 315 | 6 135 002 | 6 262 414 |
A strong quarter for LHV, as previously expected, was characterised by the profitable performance of the Estonian enterprises, capital raising, and the development of business in the United Kingdom. Over the quarter, LHV updated its financial plan, increasing its profit target for the current year by 29%. In September, LHV Group organised a public offering of subordinated bonds, raising EUR 35 million in Tier II capital. A record 16,255 investors participated in the offering, which was oversubscribed 16 times.
In a still uncertain economic environment, we managed to increase the number of clients and client activity is improving. The focus has been on deposits: the shift of clients from demand deposits to fixed-term deposits continued. During Q3, demand deposits decreased by EUR 191 million, while fixed-term deposits increased by EUR 445 million, of which EUR 142 million was raised through deposit platforms. Deposits from regular clients increased by EUR 79 million over the quarter.
The quality of the loan portfolio has remained at a good level, despite a small change in the retail small loan portfolio, where an increase in delays has been observed. Growth in the Group’s loan portfolio has been as expected.
During the quarter, the number of LHV Pank’s clients increased by 6,600 to 407 thousand. Client activity in terms of settlement services and card usage remained at a good level. The loan portfolio of LHV Pank increased by EUR 176 million, of which EUR 83 million was issued to LHV Bank and EUR 95 million to clients, which in turn was split equally between retail and corporate banking. Demand for credit is showing some signs of growth after a more stable period. The new student loan period started, with more activity than last year. In September, the employer branding agency Instar named LHV Pank the most attractive employer for both Estonian students and experienced employees.
In August, the business of the UK branch of LHV Pank was successfully transferred to LHV Bank. As a result, servicing of clients’ payments in pounds, interfacing with payment systems, and the contracts related to servicing these payments were transferred to the new bank. The current UK branch is in the closing process. LHV Bank introduced a new IT system and replaced its loan system.
In addition to increasing its loan portfolio to EUR 61 million, LHV Bank started to attract deposits from the UK market through the Raisin deposit platform. Connections to other platforms are ongoing. Business volumes in the Banking Services segment were a record high in Q3, driven by growth in companies operating in new sectors. Strong results are reflected in better-than-planned profitability. In Q3, LHV Group increased the share capital of LHV Bank by EUR 12 million.
In the pension fund market, LHV’s actively managed funds had the best rate of return in Q3. Growth in LHV funds was led by bonds, private equity, and equity positions contributing to the energy sector, while the major equity markets were in the red.
The reason for the decline in the volume of funds managed by LHV Varahaldus was due to the payouts made at the beginning of September and the lower-than-expected rate of return. Pillar III assets grew quarter on quarter. The number of active pension clients decreased by 4,000 over the quarter, due to clients leaving pension Pillar II in September. The increase in profit from asset management has been supported by a lower-than-planned cost base.
The net revenue of LHV Kindlustus continued its upward trend, while expenses remained in line with the financial plan. In Q3, gross premiums fell. During the quarter, 15,300 new claims were registered and 17,600 were closed. As at the end of the quarter, clients had 228,000 valid insurance contracts. The number of clients covered by insurance increased to 160 thousand.
Comment by Madis Toomsalu, Chairman of the Management Board at LHV Group:
"The record braking bond offering that took place at the end of the third quarter proved that investors belief in what we do continuous. LHV’s capitalisation is at a good level, enabling us to go on with active lending in Estonia as well as in the UK. Our revenue base in Estonia is broad, but the results have mainly grown with the help of interest income More and more interest costs are also increasing, which is why group efficiency is one of the main keywords for the upcoming financial planning. The performance of the UK bank is encouraging. Our loan portfolio and payment volumes are growing, and we are preparing for including deposits."
AS LHV Group’s reports 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 on 24 October at 9.00, before the market opens. The presentation will be in Estonian. We kindly ask you to register at the following address: https://lhvbank.zoom.us/webinar/register/WN_fl0PsP3sTI65dEPE_4STEQ.
LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus and LHV Kindlustus in Estonia, and LHV Bank in the United Kingdom. The Group employs over 1,020 people. As at the end of September, more than 407,000 clients were using LHV’s banking services, LHV’s pension funds had 125,000 active clients, and 160,000 clients were covered by LHV Kindlustus. LHV Bank holds a banking licence in the United Kingdom and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.
Priit Rum
Communication Manager
Phone: +372 502 0786
Email: priit.rum@lhv.ee
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