LHV Group updated the long-term financial forecast
The Supervisory Board of AS LHV Group approved the updated financial forecast for 2019–2023 pursuant to which, the forecast for the growth of LHV’s business volumes has been significantly increased.
In addition to the results of 6 months of 2019, the updated forecast has also considered the purchase transaction of Danske’s loan portfolio, increased loan volumes and deposits, and the effects of the lower Euribor. The estimated profit for 2019–2023 will increase by a total of EUR 7.3 million; the change in profit in different years will remain in the 10% range compared to the existing forecast.
According to the updated forecast, LHV Group will earn a net profit of EUR 25.6 million in the current year, which is EUR 1.8 million less than what has previously been estimated. The increased costs compared to the previous forecast are related to one-off expenses regarding the purchase of Danske’s private loan portfolio and the effects of more expensive temporary financing involved via deposit platforms for conducting the transaction. The increased expenses are partially covered by loan volumes that increased by EUR 122 million, to which Danske’s private loan portfolio in the amount of EUR 447 million will be added at the end of November.
In 2020, the profit will reach EUR 39.2 million, which is EUR 2.8 million higher than what was previously forecast. The effect of the lower Euribor will be covered by higher interest income from the loan portfolio that has increased by EUR 653 million (at that, the volume of loans issued in 2020 has been increased by EUR 84 million in the forecast) and the decrease in costs due to issuing covered bonds which will replace the deposits involved from deposit platforms.
In 2021, the profit will reach EUR 50.0 million, which is EUR 3.6 million higher than what was previously forecast. The effect of the lower Euribor will be covered by higher interest income from the loan portfolio that has increased by EUR 731 million (at that, the volume of loans issued in 2021 has been increased by EUR 78 million in the forecast) and the lower financing cost of the private loan portfolio.
| Key indicators | FF2019 | FF2020 | FF2021 | FF2022 | FF2023 |
| Profit before taxes | 29.6 | 45.2 | 58.5 | 71.0 | 84.6 |
| Net profit | 25.6 | 39.2 | 50.0 | 61.1 | 72.5 |
| Loans | 1751 | 2101 | 2517 | 2898 | 3282 |
| Deposits | 2605 | 2968 | 3390 | 3902 | 4443 |
| Fund volume | 1407 | 1663 | 1946 | 1893 | 1962 |
| Cost/income ratio | 51.5% | 44.2% | 40.7% | 38.3% | 36.4% |
| ROE (before taxes; owners’ share) | 15.6% | 19.9% | 22.0% | 22.6% | 22.6% |
| Capital adequacy | 17.6% | 17.9% | 18.4% | 19.3% | 19.5% |
* Business volumes have been presented in millions of euros
According to Madis Toomsalu, CEO of LHV Group, the need to update the financial forecast arose from the plan to involve share capital in the coming months. “When assessing our doings of the last year, the growth of LHV has been outstanding and has even accelerated in terms of volume. That is why we now dare to claim that our expectations for the future have also grown. We wish to provide investors with an as clear and transparent picture of LHV’s future as possible. This year, we have actively grown our business, and different effects have emerged which must be considered in a long-term forecast. We have strongly increased our expectations for loan volumes, which we increased, compared to the previous forecast, by 570 million euros for the end of 2019 and by 873 million euros for the end of 2023. We increased deposits by 742 million euros for the end of 2019 and by 1.13 billion euros for the end of 2023. Since we intend to increase the share capital of LHV Group in September, we are publishing a new financial forecast, which will best convey our vision regarding the growth of the company,” said Toomsalu.
Key changes compared to the earlier financial forecast:
- Adding the purchase transaction of Danske’s loan portfolio of private persons into the business plan.
- Increasing loan volumes:
- by EUR 569 million in 2019, including by EUR 447 million originating from the Danske transaction;
- by EUR 84 million in 2020;
- by about EUR 70–80 million per year in the following years.
- Increasing deposit volumes:
- by EUR 745 million in 2019, including by EUR 350 million via deposit platforms;
- replacing deposits with covered bonds in 2020;
- the volumes of demand deposits are increased in the following years.
- Taking into consideration the Euribor that is lower than what was previously estimated.
- Considering the results of 6 months of 2019.
According to the updated forecasts, LHV is a highly capitalised financial group with strong liquidity, whose return on equity before taxes remains at around 20%.
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 nearly 420 people. LHV’s banking services are used by over 179,000 clients, and pension funds managed by LHV have more than 177,000 active clients.
Priit Rum
LHV Communication Manager
Phone:
Email:
Attachment
