The largest financial group based on Estonian capital will be driven this year by an increase in business volumes and client activity, and by more efficient operations. However, in an environment of falling interest rates, the net profit of LHV Group in 2025 will decrease compared to the previous year.
Key indicators
2024
FP 2025
∆
Profit before taxes
175.1
153.3
-12%
Net profit
150.3
125.1
-17%
Deposits
6,910
7,558
9%
Loans
4,552
5,345
17%
Volume of funds
1,558
1,735
11%
Number of payments related to financial intermediaries (million pcs)
75
75
0%
Cost/income ratio
43.4%
47.7%
+4.3 pp
ROE* (before taxes; owners’ share)
28.7%
22.1%
-6.6 pp
ROE* (from net profit; owners’ share)
24.7%
18.1%
-6.6 pp
Capital adequacy
20.7%
21.0%
+0.3 pp
* Calculated on the basis of the average end-of-month equity volumes Business volumes in millions of euros
According to the latest financial plan, LHV Group’s business volumes will continue to grow significantly this year. The consolidated loan portfolio is set to grow by 17%, i.e. EUR 793 million, over the year to EUR 5.35 billion. Of this, EUR 223 million will come from corporate banking in Estonia and EUR 278 million from retail loans, while in the United Kingdom the plan is to increase lending by EUR 292 million. As a result of the improving economic environment, write-down costs are planned to decrease to EUR 10.2 million in 2025.
The focus remains on growing deposits. Consolidated deposits are expected to grow by EUR 648 million, i.e. 9%, to EUR 7.56 billion this year. Of the additional deposits, EUR 302 million are to be raised by LHV Pank in Estonia and EUR 388 by LHV Bank in the United Kingdom.
LHV Pank’s interest income will decrease, but net fee and commission income is planned to increase mainly from higher business volumes resulting from the growth and activation of the client base. It is planned to reduce the bank’s expenses by 2% compared to the previous year, which will be helped by the automation of processes. The goal is to continue to provide the best service to clients in all channels by developing digital channels and supplementing services.
The number of payments by financial intermediaries reached 75 million in 2024, and it will remain similar this year according to the financial plan.
In the United Kingdom, in addition to corporate loans, the focus is on introducing retail offering to the market and, consequently, increasing the number of retail clients. In the first half of the year, deposits and direct debits will be added to the new bank app, and the issuance of bank cards will begin. The plans for the second half of the year include the inclusion of other currencies and the opening of accounts for corporate clients. In order to expand the offering, LHV Bank plans to apply for a consumer credit activity licence, join the real-time euro payments scheme, and develop additional payment collection solutions.
According to the financial plan, the volume of funds managed by LHV will increase by 11% this year to EUR 1.74 billion, i.e. by EUR 177 million. The volumes are supported by increased contributions to the II pension pillar and the opening of the new LHV Euro Bond Fund. Varahaldus continues with an investment strategy that stands out clearly from its competitors, focusing on different high-yield asset classes. The forecast for 2025 does not include earning a success fee from pension funds.
The gross premiums of LHV Kindlustus will increase by 11% this year to EUR 42 million. It is planned to increase sales volumes and improve efficiency. This should be supported by extending the provision of property insurance to businesses as well. The goal of LHV Kindlustus is to position itself as the most preferred insurance partner on the market.
In summary, the financial plan for 2025 foresees a 7% decrease in the income of the LHV Group consolidation group to EUR 313 million. Expenditure is expected to increase by 2% to EUR 149.4 million. The company’s net profit for this year is estimated at EUR 125.1 million, which means a decrease of 17% compared to the previous record year. LHV Group’s return on equity (ROE) ratio will remain at 18.1% in 2025 and the company forecasts a cost/income ratio of 47.7%.
This year, in addition to the decrease in base interest rates, the profitability of LHV Group is affected by the interest expense and increased tax rates associated with the revaluation of liabilities and the growth of volume, while positively increasing efficiency, increasing net fee and commission income and lower write-downs due to the improvement of the economic environment, as well as increasing efficiency.
Comment by Madis Toomsalu, the Chairman of the Management Board at LHV Group: “In recent years, LHV has developed into a financial institution with a significant impact on the Estonian economy. Over the course of five years, the volume of LHV’s loans and deposits has increased by as much as 2.6 times, with new loans issued in Estonia in the amount of EUR 7.6 billion, while the loan portfolio has grown by EUR 2.5 billion during this period. The bank belonging to LHV Group in the United Kingdom has also entered the growth phase from the creation phase, with its share increasing.
We will continue to be ambitious for the next five years. Of the business volumes, we expect our loan portfolio to double, including a fivefold increase in the loan portfolio in the United Kingdom. We also expect double growth from insurance activities, the volume of funds will increase more than one and a half times. Our goal is to provide the best access to financial services and capital through high-quality relations.
We want to fulfil our long-term growth ambitions more effectively than before. In Estonia, we continue to innovate technology, the main keywords here are moving systems to the cloud and thoroughly updating the data strategy. In the United Kingdom, we are opening the direction of retail banking, and throughout the year we are developing new products there.
In 2024, we will continue to grow business volumes to offset falling interest rates. However, the net profit will fall as planned, partly due to the increase in the advance income tax of the banks to 18%, which effectively is the taxation of current profits. The return on equity is influenced by capitalization that, supported by strong results, has grown above the optimal level and which, according to the financial plan, does not find fully efficient use within the group.”
Financial forecast for 2025–2029
AS LHV Group discloses its financial forecast for the next five years. The forecast has been prepared on the basis of the assumptions that the Estonian economy will grow from 2025, tax rates in Estonia will rise, and base interest rates will fall rapidly until mid-2025. It is expected that the long-term dividend policy will be maintained, that capital layers will be optimised, and that LHV Varahaldus will earn a success fee from 2026.
Key indicators
FP2025
FP2026
FP2027
FP2028
FP2029
Profit before taxes
153.4
192.5
233.1
287.6
328.5
Net profit
125.1
154.0
184.7
229.2
268.5
Deposits
7,558
8,473
9,485
10,339
11,375
Loans
5,345
6,227
7,099
7,956
8,865
Volume of funds
1,735
1,978
2,233
2,497
2,774
Number of payments related to financial intermediaries (million pcs)
75
75
75
76
76
Cost/income ratio
47.7%
42.3%
38.3%
34.8%
32.9%
ROE (before taxes; owners’ share)
22.1%
25.1%
26.8%
29.1%
29.6%
ROE* (from net profit; owners’ share)
18.1%
20.1%
21.2%
23.2%
24.1%
Capital adequacy
21.0%
20.4%
20.8%
20.6%
20.3%
* Calculated on the basis of the average end-of-month equity volumes Business volumes in millions of euros
According to the long-term forecast, all important business volumes of LHV will grow organically over the next five years. The volume of loans will increase 1.9 times to EUR 8.87 billion in five years, with corporate loans increasing by EUR 1.2 billion, home loans by EUR 1.4 billion, and the United Kingdom loan portfolio by EUR 1.4 billion. The volume of deposits will increase by 65% to EUR 11.38 billion. The volume of funds will increase by 78% to EUR 2.77 billion in five years.
According to the financial forecast, within five years, revenue will grow faster than expenditure, with revenue from the United Kingdom taking on an increasing share. Costs are increasing mainly due to increased labour costs and IT costs. Due to changes in the economic environment and the growth of the credit portfolio, costs from write-downs will decrease in 2025, but they are expected to increase in the future.
According to the five-year forecast, LHV’s consolidated net profit will reach nearly EUR 268.5 million by 2029, with an average annual growth of 12%. Although this year the return on equity will be below the long-term target of 20%, it is planned to exceed it in the coming years. The Group’s cost/income ratio continues to decline.
LHV Group will amend the financial plan for 2025 if it becomes likely that the planned net profit will differ by more than 10% from the financial plan. The company will update its five-year forecast in early 2026.
To introduce the financial plan, LHV will organise an investor meeting (in Estonian) on 13 February at 9.00 via Zoom, the online seminar environment. Investors and interested parties are invited to register at: https://lhvbank.zoom.us/webinar/register/WN_h9xQnBP2Qj-Gaa3m6DIRnA.
LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus, LHV Kindlustus, and LHV Bank Limited. The Group employs over 1,200 people. As at the end of December, LHV’s banking services are being used by nearly 460,000 clients, the pension funds managed by LHV have 114,000 active clients, and LHV Kindlustus is protecting a total of 170,000 clients. LHV Bank Limited, a subsidiary of the Group, 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 Communications Manager Phone: +372 502 0786 Email: priit.rum@lhv.ee
