In relation to the milder than estimated effects of the coronavirus crisis, LHV
Group's financial results exceed what was forecast previously, which is why AS
LHV Group is publishing an updated financial plan for the current year. Compared
to the plan that has been in force since April, both forecast revenues and
business volumes have increased; at the same time, impairment losses have
decreased - therefore, the profit forecast and efficiency indicators have been
raised.
Pursuant to the updated financial plan, this year, the consolidated revenues of
LHV Group will increase by 29%, expenses by 11%, and the impairment losses on
loans by 3.7 times. In comparison to the previous year, consolidated net profit
will grow by EUR 5.5 million, i.e., 20%. The quality of the loan portfolio is
significantly better, compared to the spring-plan. The financial plan that was
in effect so far foresaw significantly higher discounts and thereby, a decrease
in revenue in the year-on-year comparison.
Updated 2019 Change Previous Change compared to
Key indicators FP 2020 results YoY FP 2020 previous plan
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Financial results, EURt
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Total revenue 95,395 73,818 21,577 87,316 8,079
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Total expenses 43,749 39,266 4,483 44,773 -1,024
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Impairment losses on
loans 11,950 3,209 8,740 19,357 -7,408
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Earnings before taxes 39,697 31,342 8,354 23,185 16,512
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Net profit 32,611 27,092 5,519 19,231 13,380
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Business volumes, EURm
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Loans 2,227 1,687 540 1,806 421
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Deposits 3,301 2,701 600 2,985 316
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Assets under management 1,531 1,374 157 1,454 78
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Key ratios
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Cost / Income ratio 45.9% 53.2% -7.3% 51.3% -5.4%
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ROE (pre tax) 16.6% 16.2% 0.4% 10.2% 6.4%
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Capital adequacy 17.3% 18.0% -0.6% 17.6% -0.2%
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The updated financial plan also considers the effect of the purchase of the
Danske Bank corporate and municipal loan portfolio, and therefore, regarding LHV
business volumes, estimates the loan portfolio to grow by 32% this year, and
deposits to grow by 22%. Pursuant to the updated plan, the volume of managed
funds will increase by 11% this year.
Compared to the financial plan disclosed at the peak of coronavirus crisis, the
Group will earn 70% more in net profit this year, reaching EUR 32.6 million. Of
this, EUR 21.8 million has been earned in the first 9 months. At the same time,
the financial plan has not estimated the potential of a success fee by asset
management.
In the updated plan, the company's cost/income ratio and the return on equity
have improved as the growth of business volumes increase revenues; at the same
time, expenses have slightly gone down compared to the previous plan. LHV's
capitalisation and liquidity are still at a strong level.
Comment by Madis Toomsalu, CEO of LHV Group:
"LHV can only be as successful as our clients. In terms of economic sectors, the
situation is different, but the economy as a whole has fared better than what
was initially forecast. We have continued with decisions that support our
clients and with our local and open credit policy. Through this, our loan
portfolio has continued to grow during the crisis as well, and loan discounts
have remained significantly lower than what was forecast. The updated forecast
takes into account the interest revenues added by the purchase of the Danske
portfolio from the beginning of October. The forecast has estimated the
capitalisation of LHV Pank and LHV Kindlustus during the current year. In the
case of LHV Varahaldus, operating revenues have been taken into account; a
potential success fee would be added outside of the forecast, since estimating
the inputs that are the basis for the success fee has a high error rate. Besides
business in Estonia, we are increasingly focusing on growing the business
related to clients in the United Kingdom; from the estimated profit of the Group
in 2020 in the amount of EUR 32.6 million, this constitutes EUR 4.8 million in
total."
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 over 490 people. LHV's banking services are used by more than 235,000
clients, and pension funds managed by LHV have more than 183,000 active clients.
LHV's UK branch offers banking infrastructure to 130 international financial
services companies, via which LHV's payment services reach clients around the
world.
Priit Rum
LHV Communication Manager
Phone: +372 502 0786
Email: priit.rum@lhv.ee (mailto:priit.rum@lhv.ee)
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