Market announcement

Title

LHV Group renewed the Financial Plan for 2023

Message

In relation to the better than forecast quality of the credit portfolio and
higher base interest rates, AS LHV Group's financial results for the current
year have exceeded the financial plan published in February, which is why the
company is publishing its updated financial plan for 2023.

The updated financial plan has accounted for the actual economic results and the
continued slow increase of loan and deposit interest rates. While currently, the
quality of the credit portfolio remains good, the macroeconomic situation is
complicated and the financial plan has proactively taken the creation of
provisions into account. A success fee for Varahaldus has not been presumed in
this year's plan.

                                                                         Change
 Key indicators              Updated FP               Previous FP   compared to
                     2022          2023 Change YoY           2023 previous plan
-------------------------------------------------------------------------------
 Financial
 results, EURt
-------------------------------------------------------------------------------
 Total revenue    173,543       299,714    126,171        270,443        29,271
-------------------------------------------------------------------------------
 Total expenses    89,638       170,848     86,943        151,753        19,095
-------------------------------------------------------------------------------
 Impairment
 losses on loans    8,052         8,221        169         24,589       -16,368
-------------------------------------------------------------------------------
 Earnings before
 taxes             75,853       162,627     86,774        127,164        35,462
-------------------------------------------------------------------------------
 Net profit        61,432       140,039     78,606        108,233        31,805
-------------------------------------------------------------------------------
 Business
 volumes, EURm
-------------------------------------------------------------------------------
 Loans              4,901         5,608        707          5,653           -45
-------------------------------------------------------------------------------
 Deposits           3,209         3,506        297          3,428            78
-------------------------------------------------------------------------------
 Assets under
 management         1,332         1,544        212          1,570           -27
-------------------------------------------------------------------------------
 Fin. Inter-
 mediaries'
 payments
 (million pcs)         26            41         14             34             7
-------------------------------------------------------------------------------
 Key ratios

-------------------------------------------------------------------------------
 Cost / Income
 ratio              51.7%         43.0%   -8.7 pp           43.9%       0.9 pp
-------------------------------------------------------------------------------
 ROE                16.5%         29.1%   12.6 pp           23.3%       5.8 pp
-------------------------------------------------------------------------------
 Capital adequacy   21.7%         21.2%    0.5 pp           21.5%      -0.3 pp



Compared to the plan published in February, the updated financial plan for 2023
has forecast a 14% higher interest income, but a 4% lower fee and commission
income. The higher revenue growth is due to larger business volumes, a higher
interest rate, and pre-financing at a lower interest rate. At the same time, fee
and commission income is affected by the lower income rate from investment
services.

The expense forecast has been raised by 9%, but the impairment of loans has been
reduced by 67% compared to the previous forecast. This indicates directly the
levels forecast until the end of 2023 and does not indicate long-term levels of
loan losses. The quality of the credit portfolio has been very strong and the
level of loan impairment abnormally low. This has partly been facilitated by the
high increase in prices, which has sharply decreased in the past few months.
Operating expenses are affected by the significantly increased payment rate of
the deposit guarantee fund, as well as the cost of services purchased. Going
forward, we also expect an increase in interest expenses, originating both from
the continuing increase of deposit expenses as well as the refinancing of
previously issued long-term bonds.

The updated financial plan forecasts a 29% higher net profit and a 5.8
percentage point higher return on equity based on net profit. The business
volumes of the Group's companies remain largely at the same level compared to
the previous plan. The only significant difference is in terms of the larger UK
loan portfolio and the increased volume of payments by financial intermediaries.

Comment by Madis Toomsalu, Chairman of the Management Board at LHV Group:
"After ten years of the zero interest rate policy of central banks, financial
markets have moved back to their historic average, and figuratively speaking -
money once again has a price. Although pulling away from the long-term anomaly
is no easy task, it forms a basis for a more optimal and sustainable economic
structure.
LHV has managed to grow its business in this controversial economic environment,
and as the return of assets has increased faster than the cost of obligations in
this cycle of rising interest rates, the results are surpassing the current
financial plan. In the case of decreasing interest rates, the result would be
the opposite.
Investments made in the Estonian economy are mostly financed by banks. The
underdeveloped capital markets have not offered enough competition. This is why
the existence of strong and well-capitalised banks is of critical importance.
LHV intends to direct the profit earned back to the growth of loan volumes,
raising additional funds from the market via capital instruments, at that.
Together with the company's self-financing, LHV's capital is amplified in the
economy to up to a tenfold final investment, or an even larger home loan
portfolio.
LHV's results are affected the most by the performance of the two banks in the
Group. Recently, we separated our UK business from LHV Pank and transferred the
servicing of our financial intermediary clients to LHV Bank. In addition, the
updated plan has increased the volume of loans in the United Kingdom, as the
current annual objective is already coming to fruition in September. In the
current year, all important subsidiaries of the LHV Group are expected to
achieve profitability, as even the revenue base of LHV Kindlustus is increasing,
supported by increased business volumes, and its activities are profitable."

LHV Group is the largest domestic financial group and capital provider in
Estonia. LHV Group's key subsidiaries are LHV Pank, LHV Varahaldus, LHV
Kindlustus, and LHV Bank Limited. The Group employs over 970 people. As of July,
LHV's banking services are being used by 404,000 clients, the pension funds
managed by LHV have 127,000 active clients, and LHV Kindlustus protects a total
of 161,000 clients. LHV Bank, a subsidiary of the Group, holds a banking licence
in the UK and provides banking services to international financial technology
companies, as well as loans to small and medium-sized enterprises.




Priit Rum
Communication Manager
Phone: +372 502 0786
Email: [email protected] (mailto:[email protected])