AS LHV Group generated a consolidated net profit of EUR 14.0 million in Q2 of 2022. Within the quarter, the Bank earned EUR 16.9 million in net profit, of which EUR 2.1 million was from servicing clients related to the United Kingdom branch. Within the quarter, Vahahaldus incurred a net loss of EUR 234,000 and Kindlustus incurred a net loss of EUR 235,000. LHV UK Limited incurred a loss of EUR 2.1 million. The Group’s return on equity in Q2 was 15.3%.
Net profit for Q2 was EUR 1.1 million higher than in the same period in 2021 (+8%) and EUR 1.6 million higher than in Q1 of this year (+13%). The Group’s consolidated revenues in Q2 were EUR 37.9 million, or EUR 5 million more than a year earlier (+15%) and EUR 3.1 million ahead of the Q1 result (+9%). The Group’s expenses amounted to EUR 21.1 million in Q2, which was EUR 3.2 million more than in the previous year (+18%) and EUR 2.2 million more than in Q1 (+12%).
At the end of Q2, LHV Group had EUR 6.53 billion in assets. The Group’s consolidated deposits decreased by EUR 44 million over the quarter to EUR 5.37 billion (-1%; EUR -397 million in Q1). Compared to the previous quarter, the consolidated loan portfolio increased by EUR 172 million to EUR 2.92 billion (+6%; EUR +75 million in Q1). The total volume of funds managed by LHV decreased by EUR 103 million to EUR 1.26 billion in Q2 (-8%; EUR +13 million in Q1). The number of processed payments related to financial intermediaries amounted to 6.4 million in Q2 (-2% compared to 6.6 million payments in Q1).
Consolidated net profit of AS LHV Group for the first 6 months of 2022 amounted to EUR 26.4 million, an increase of EUR 2.0 million, or 8%, year-on-year. In the first 6 months of the year, AS LHV Pank generated a net profit of EUR 31.8 million, including EUR 4.8 million from servicing clients related to the United Kingdom branch. AS LHV Varahaldus incurred a net loss of EUR 900,000 in the first 6 months and AS LHV Kindlustus incurred a net loss of EUR 700,000. LHV UK Limited incurred a loss of EUR 3.7 million for the half-year.
By the end of Q2, LHV Group will be EUR 3.5 million behind the current financial plan in terms of net profit. The financial plan stands.
Income statement, EUR thousand
Q2-2022
Q2-2021
6 months 2022
6 months 2021
Net interest income
27 184
22 928
52 971
43 299
Net fee and commission income
11 004
9 518
21 351
18 248
Net gains from financial assets
-343
292
-1 657
-83
Other income
57
43
22
82
Total revenue
37 903
32 780
72 687
61 545
Staff costs
-11 746
-8 007
-21 995
-15 259
Office rent and expenses
-923
-384
-1 446
-847
IT expenses
-1 561
-993
-3 210
-1 998
Marketing expenses
-655
-549
-1 612
-1 081
Other operating expenses
-6 195
-7 940
-11 682
-12 447
Total operating expenses
-21 079
-17 872
-39 945
-31 632
EBIT
16 823
14 909
32 741
29 914
Earnings before impairment losses
16 823
14 909
32 741
29 914
Impairment losses on loans, bonds and advances
341
791
-394
-810
Income tax
-3 177
-2 785
-5 978
-4 773
Net profit
13 987
12 915
26 370
24 331
Profit attributable to non-controlling interest
444
507
946
880
Profit attributable to shareholders of the parent
13 543
12 408
25 423
23 451
Balance sheet, EUR thousand
Jun 2022
Mar 2022
Jun 2021
Cash and cash equivalents
3 054 953
3 247 918
3 341 694
Financial assets
492 539
475 843
86 614
Loans granted
2 943 373
2 771 767
2 418 634
Loan impairments
-18 838
-19 244
-17 298
Receivables from customers
9 183
6 531
5 319
Other assets
49 646
33 604
26 704
Total assets
6 530 857
6 516 418
5 861 667
Demand deposits
5 218 411
5 247 061
4 658 731
Term deposits
148 154
163 314
262 762
Loans received
497 048
546 215
505 867
Loans received and deposits from customers
5 863 613
5 956 590
5 427 361
Other liabilities
172 082
113 510
61 207
Subordinated loans
110 368
110 374
111 057
Total liabilities
6 146 064
6 180 474
5 599 625
Equity
384 793
335 944
262 043
Minority interest
7 231
6 787
7 263
Total liabilities and equity
6 530 857
6 516 418
5 861 667
LHV Group’s quarterly results were impacted by growth in business volumes and a volatile economic environment. In addition to business as usual, the quarter was an active one for the Group: it raised EUR 35 million in new capital from investors, acquired a new subsidiary, EveryPay AS, which will enable the further development of the product portfolio, and developed operations in the United Kingdom, where the application for a banking licence and the development of the organisation are proceeding as planned, with the management for LHV UK now fully in place.
For the Bank, loan portfolio and business volumes continued to grow. The number of banking clients increased by more than 13,000 (+4%). Regular client activity has returned to pre-war levels, while payment institutions have stabilised. Deposits from payment institutions decreased, but deposits from regular clients increased. Among loans, corporate loans increased by EUR 93 million and retail loans by EUR 79 million. The quality of the loan portfolio as a whole has remained strong and the share of overdue loans remains very low.
The Bank’s interest income is in line with the financial plan, but fee and commission income has been lower than planned, while revenues are increasing. The Bank’s costs have been boosted by increased resources to implement sanctions.
The performance of Varahaldus was characterised by challenging market conditions. The largest actively managed LHV pension funds outperformed all their competitors, but over the quarter, the M, L, and XL funds were down 1.8%, 4.0%, and 5.3%, respectively. If the withdrawal of clients from the II pillar is also taken into account, the volume of funds decreased by 8% over the quarter. At the same time, LHV Varahaldus has managed to increase its market share in the Estonian pension market during the quarter. LHV has 131,000 active II pillar pension clients.
The business volumes of LHV Kindlustus will continue to grow rapidly and financial results will improve, supported by better-than-planned results in insurance intermediaries and online sales channels. The number of clients of Kindlustus has grown to 149,000, while client satisfaction with claim settlement services remains high at 97%. The costs of Kindlustus are lower than planned due to later recruitments, but the result is negatively affected by a growing number of claims in travel insurance.
Comment by Madis Toomsalu, the CEO of LHV Group:
"The inconsistent economic environment has reduced consumer confidence, as well as business investment plans. This has had different effects on different areas of LHV’s business. We are seeing growth in high-quality loan portfolios driven by increased market share, an increase in payment volumes outside of virtual currency services, and rather active private client behaviour, while activity is lower in investment services, and our regulatory costs have also increased.
In a contradictory environment, LHV remains open to its clients. In Estonia, we have continued to focus on a high-quality corporate and retail loan portfolio, a strong investment proposition with pension funds and insurance. Internationally, we see an opportunity to expand into e-commerce with our existing product portfolio for financial intermediaries, and we are preparing for this in the United Kingdom. This, together with the increased start of lending activities, will take place in the first half of the new year and we will need a bank licence in advance.
The inflationary environment, combined with rising interest rates, has mostly meant higher revenues for banks. Investor confidence in LHV has also remained high, as demonstrated by the successful share issue in early June. LHV’s greatest strengths are speed and adaptability. I believe that these principles will enable us to get through a difficult environment without sacrificing any of our ambitious goals."
In order to introduce the quarterly results, LHV Group will organise an investor meeting via the Zoom webinar environment. The virtual investor meeting will take place before the market opens on 19 July at 9.00. The presentation will be in Estonian. We kindly ask you to register at the following address: https://lhvbank.zoom.us/webinar/register/WN_Q-ezAL2yRii0hFZxt0NOpA.
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. The Group employs more than 800 people. As of June, LHV’s banking services are being used by 350,000 clients, the pension funds managed by LHV have 131,000 active clients, and LHV Kindlustus protects a total of 149,000 clients. LHV’s UK branch offers banking infrastructure to 200 international financial services companies, via which LHV’s payment services reach clients around the world.
