LHV Group's second quarter and 6 months of 2018 unaudited financial results
In Q2 of 2018, AS LHV Group earned a consolidated net profit of EUR 10.0 million: the bank’s profit amounted to EUR 5.2 million and asset management’s profit to EUR 2.1 million. Additionally, LHV earned an extraordinary EUR 2.9 million profit from the sale of UAB Mokilizingas. Loan impairments were made in the amount of EUR 1.6 million and as a new factor the profit was influenced by the advance income tax, with a total impact of EUR 0.6 million in the second quarter.
The return on equity belonging to LHV’s shareholders was 27.7% in Q2 of 2018. Compared to Q1 of 2018 the group’s profit increased by EUR 5.8 million, and by EUR 5.2 million when compared to Q2 of the previous year.
The group’s consolidated loan portfolio grew by EUR 11 million (+1%; +EUR 34 million in Q1) and reached EUR 777 million. The consolidated deposits decreased by EUR 183 million (-11%; +EUR 188 million in Q1) reaching EUR 1,542 million. At the same time, the deposits related to payment intermediaries decreased by EUR 262 million. During the quarter the volume of funds managed by LHV rose by EUR 40 million (+4%; +EUR 24 million in Q1) and reached EUR 1,167 million.
AS LHV Group posted a consolidated profit of EUR 14.3 million for the first six months of 2018. The bank earned a profit of EUR 8.8 million and asset management EUR 2.8 million. The half-year profit was EUR 4.4 million higher than for the same period last year.
Comments by Madis Toomsalu, CEO of LHV Group:
"The most important keywords of the second quarter were the record-breaking growth of the bank’s client base, the sale of Mokilizingas, the significant revenue from institutional banking and updating the financial plan.
LHV’s strong base trends are also 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. The financial health of households is on the strong side; deposits are growing. The share of overdue loans on the market has fallen below 1%. The main risks that can be pointed out are significant dependence on the external environment, tenseness in the labormarket and the high development volume of the domestic real estate sector.
We are delighted that the work of LHV has been recognised and in the beginning of July, the esteemed business magazine Euromoney named LHV Bank the best bank in Estonia. During the second quarter, the number of the bank’s clients increased by record-breaking 6,800. During Q2 the total number of banking clients reached 147 thousand. More than 3,700 investment agreements were concluded and another significant milestone was reached in the number of card transactions.
Due to the growth of our client base, we added two new ATMs: to Mustamäe Keskus and Laagri Selver. As for our new products, in May we were ready to start with factoring, which serves as a supplement to the corporate banking services offered by LHV.
The growth of the loan portfolio was in line with our expectations, given the EUR 28 million decrease in the Lithuanian loan portfolio due to the sale of Mokilizingas. The credit portfolio remains strong, with just a few clients under special supervision. If the expected decline in the deposits of financial intermediaries is disregarded, deposits also grew at a good rate.
We can say that efforts in growing the export of financial services are yielding their first good results. In the direction of financial intermediaries in the United Kingdom, we are engaged in finding the right people to join our team. Clients are very actively interested. Revenues related to the field are divided between fees related to payments, currency exchange, intermediation of card payments, credit services and management.
The total volume of funds managed by LHV asset management grew by EUR 40 million over the quarter. The decrease in active pension clients number by 400 was due to the fact that fewer new clients were added, as there were no active sales periods in Q2. In April the share capital of LHV Varahaldus was decreased due to the more efficient management of capital at the level of the consolidation group.
During the quarter, the sales transaction of the Lithuanian consumer credit company Mokilizingas was finalised. The value of LHV’s shares in the transaction was EUR 7.5 million and the profit earned from the transaction EUR 2.9 million.
According to the financial plan updated following the transaction, the consolidated net profit of LHV Group this year is EUR 1.8 million higher than initially planned and the net profit belonging to the shareholders is EUR 2.7 million higher. Consequently, by the end of Q2 we surpassed the financial plan published in May by EUR 0.7 million.
In April, the 14-percent advance income tax was first applied to the bank’s revenue, which will be directly accounted under expenses on a monthly basis. Also, LHV’s shareholders’ meeting was held in April, and the decision to pay dividends to shareholders in the sum of 16 cent per share has by now been executed.
We have also started preparations for the bonds programme at the group level in order to use bonds issued within its framework to finance growth and, if needed, the redemption of previously issued bonds. The bonds will be listed on the NASDAQ Tallinn Stock Exchange."
| Income statement, EUR t | Q2-2018 | Q1-2018 | 6 months 2018 | 6 months 2017 |
| Net interest income | 9 408 | 8 999 | 18 407 | 14 443 |
| Net fee and commission income | 7 215 | 5 590 | 12 805 | 10 131 |
| Net gains from financial assets | 335 | -87 | 248 | 1 326 |
| Other income | 3 | -5 | -2 | -111 |
| Total revenue | 16 961 | 14 497 | 31 458 | 25 789 |
| Staff costs | -3 938 | -3 746 | -7 684 | -6 421 |
| Office rent and expenses | -193 | -200 | -393 | -377 |
| IT expenses | -507 | -500 | -1 007 | -788 |
| Marketing expenses | -385 | -517 | -902 | -1 603 |
| Other operating expenses | -2 751 | -2 703 | -5 454 | -4 251 |
| Total operating expenses | -7 774 | -7 666 | -15 440 | -13 440 |
| EBIT | 9 187 | 6 831 | 16 018 | 12 349 |
| Earnings before impairment losses | 9 187 | 6 831 | 16 018 | 12 349 |
| Impairment losses on loans and advances | -1 596 | -882 | -2 478 | -1 952 |
| Income tax | -631 | -1 938 | -2 569 | -951 |
| Net profit for the reporting period from continued operations | 6 960 | 4 011 | 10 971 | 9 446 |
| Profit/-loss from discontinued operations | 3080 | 244 | 3324 | 483 |
| Net profit | 10 040 | 4 255 | 14 295 | 9 929 |
| Profit attributable to non-controlling interest | 515 | 306 | 821 | 1 039 |
| Profit attributable to share holders of the parent | 9 525 | 3 949 | 13 474 | 8 890 |
| Balance sheet, EURt | June 2018 | March 2018 | June 2017 |
| Cash and cash equivalents | 879 204 | 1 071 822 | 488 630 |
| Financial assets | 54 084 | 57 091 | 60 676 |
| Loans granted | 785 663 | 774 760 | 613 366 |
| Loan impairments | -9 116 | -9 111 | -7 314 |
| Receivables from customers | 6 495 | 12 250 | 4 352 |
| Other assets | 23 450 | 24 028 | 11 551 |
| Total assets | 1 739 780 | 1 930 839 | 1 171 261 |
| Demand deposits | 1 427 569 | 1 598 606 | 868 348 |
| Term deposits | 115 212 | 126 749 | 139 706 |
| Loans received | 6 000 | 6 018 | 190 |
| Loans received and deposits from customers | 1 548 781 | 1 731 373 | 1 008 244 |
| Other liabilities | 16 660 | 26 796 | 17 749 |
| Subordinated loans | 30 900 | 30 900 | 30 900 |
| Total liabilities | 1 596 341 | 1 789 069 | 1 056 893 |
| Equity | 143 439 | 141 770 | 114 368 |
| Minority interest | 2 992 | 7 027 | 6 358 |
| Total liabilities and equity | 1 739 780 | 1 930 839 | 1 171 261 |
* In the charts the proceeds and expenses of the discontinued operations have been separated. The data with discontinued operations are presented in the LHV Factbook.
Reports of AS LHV Group are available at .
To present the interim results LHV will hold an investor meeting, that will take place on 24 July 2018 6.00 p.m. in LHV Tallinn client office (Tartu mnt 2, CityPlaza building, 1st floor). The presentation will be made in Estonian. All participants please register at .
LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group's key subsidiaries are AS LHV Pank and AS LHV Varahaldus. LHV employs about 380 people and about 147,000 customers use LHV’s banking services. Pension funds managed by LHV have about 178,000 customers.
Priit Rum
Communication Manager
Phone:
Email:
Attachments
