LHV Group unaudited results for Q1 2019

16.04.2019

LHV Group unaudited results for Q1 2019

During the first three months of 2019, LHV Group earned EUR 5.0 million in consolidated profit. In Q1, the bank earned EUR 4.2 million and Varahaldus EUR 1.2 million as net profit. LHV Group paid EUR 2.3 million as income tax in Q1. The Group’s equity ratio was 12.2%.

The Q1 net profit of the consolidated group was EUR 1.7 million less than in Q4 of 2018, however it has increased by EUR 0.7 million year-on-year.

During the quarter, the Group’s consolidated net loan portfolio increased by EUR 72 million (+8%; +107 million in Q4 of 2018), to EUR 991 million. Consolidated deposits increased by EUR 145 million (+10%; -215 million in Q4), to EUR 1,567 million. At the same time, the deposits related to payment intermediaries increased by EUR 33 million and those of the regular customers by EUR 112 million.

The volume of funds managed by LHV increased by EUR 43 million over the quarter (+4%; +11 million in Q4), to EUR 1,257 million.

Madis Toomsalu, the CEO of LHV Group, said: "In the first quarter, the growth of our business volumes has been broad-based, while also showing an all-time rapid pace. The number of new customers grew by 9,500, with over 3,600 customers joining us in March. The number of salary receipts, customers with assets, payments, use of bank cards and investment contracts amongst other services is higher than ever. LHV’s loan portfolio passed the EUR 1 billion threshold and customers’ deposits thrived. The total number of LHV’s customers now exceeds 170,000.

The most important highlights of the quarter were the launch of the Entrepreneur Account and outgoing instant payments, as well as the acquisition of Verso’s loan portfolio amounting to EUR 13.2 million. In March, we expanded our ATM network, to speak to a growing number of customers all over Estonia.”

In January, LHV Group was chosen as the company with the best investor relations on the Nasdaq Baltic Stock Exchange. The recognition we are most happy about is the assessment given to our service quality with the survey company Dive which rated LHV Pank as the bank offering the best service in Estonia.”

LHV Group’s profitability was notably influenced by the payment of income tax relating to dividends. All in all, LHV paid EUR 2.3 million as income tax and accordingly, the equity ratio was 12.2% in Q1 of 2019.”

By the end of Q1, the consolidated volume of investment funds managed by LHV Varahaldus exceeded the threshold of EUR 1.25 billion; a great part of the growth originated from the recovery of securities markets after the Q4 decline. LHV’s actively managed pension funds still have the lowest price risk related to stock exchanges, as the focus is primarily on making OTC investments. From February, there was an annual decline of 2nd pillar pension fund management fees related to volume growth, as a result of which the operating income decreased. The new management fee rates of 2nd pillar funds range from 0.39% to 1.20%. By the end of the quarter, the number of LHV’s active 2nd pillar customers exceeded 177,000.”

LHV’s growth trend is supported by the Estonian business environment. The economic growth has been solid and the internal policy risks are managed by the balanced budget, low public sector debt and positive foreign balance.”

We expect the slow economic growth to continue; at the same time, making predictions for the economic trajectory of the surrounding economies has become increasingly complicated. I’m happy to say that the credit market has remained strong. All of the main credit products, including corporate loans and home loans, are increasing. The financial health of households is on the strong side with the loan-to-deposit ratio improving.”

The sector is increasingly influenced by regulatory issues, such as the calls to dismantle the 2nd pillar pension schemes due to the insufficient rate of return. I believe that this hampers productivity and draws attention away from the efforts being made to improve the returns. This in itself negatively affects the development of Estonian capital and capital markets, therefore, we hope that a reasonable dialogue will be achieved between the decision makers and the public.”

It is ironic that in acknowledging the insufficient rate of return, the productivity is not being improved, but instead, the message that we need to save is destroyed and the development of Estonian capital and capital markets reversed. When previously, instead of today’s consumption, the goal was to save for the future, according to the current unanalysed proposals, society is directed towards consuming more today on account of the future. This will be paid for by the next generation, together with tax increases. This cannot be a goal. One should be able to make a difference between the input and goal. We hope that a reasonable dialogue is achieved between the public and those making the decisions.

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group's key subsidiaries are LHV Pank and LHV Varahaldus. LHV employs about 400 people. More than 171,000 customers use LHV’s banking services. Pension funds managed by LHV have over 177,000 active clients.

AS LHV Group interim report Q1 2019

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