Market announcement

For LHV Group, the second quarter of 2026 was characterised by income growth and a recovery in profitability. Net income increased both quarter-on-quarter and year-on-year. Net profit grew quarter-on-quarter but remained below the level of the same period last year, primarily reflecting higher loan impairment charges and a higher cost base.

AS LHV Group generated consolidated net profit of EUR 24.7 million in Q2 2026, which is 25% more than in the previous quarter but 20% less than in the same period last year. Of the subsidiaries, AS LHV Pank earned a net profit of EUR 24.3 million and LHV Bank Ltd EUR 1.4 million. AS LHV Varahaldus earned a net profit of EUR 0.4 million and AS LHV Kindlustus EUR 0.8 million. The return on equity attributable to the shareholders of the Group was 13.1% in Q2.

On a consolidated basis, LHV Group generated total net income of EUR 79.0 million in Q2 2026, which is 7% more than in the previous quarter and 7% more than in the same period last year. Net interest income accounted for EUR 62.5 million and net fee and commission income for EUR 14.6 million of Q2 net income. Net interest income grew by 5% quarter-on-quarter, as interest income continued to increase and the pressure on funding costs began to ease. Net fee and commission income remained at a similar level to the previous quarter. Total operating expenses amounted to EUR 43.6 million, decreasing by 4% quarter-on-quarter but increasing by 8% year-on-year. The cost/income ratio improved to 55.2%. Loan impairment charges totalled EUR 5.8 million in Q2, largely attributable to LHV Pank.

As at the end of June, LHV Group's consolidated total assets stood at EUR 9.65 billion, down 3% from the end of the previous quarter and up 3% year-on-year. The consolidated loan portfolio grew by EUR 183 million, i.e. 3%, to EUR 5.77 billion in Q2 (+15% year-on-year). LHV Group's consolidated deposits decreased by EUR 245 million (-3%) during the quarter to EUR 7.56 billion (+3% year-on-year). The decrease reflects a shift in deposit dynamics, with term deposits declining by EUR 447 million quarter-on-quarter, while demand deposits increased by EUR 202 million. The aggregate volume of funds managed by LHV grew by EUR 72 million during the quarter to EUR 1.79 billion (+15% year-on-year). Financial intermediary customers processed 25.8 million payments in Q2, an increase of 1% compared to the previous quarter and 34% year-on-year.

For the first six months of the year, LHV Group generated total net income of EUR 152.7 million, broadly in line with the same period last year. Net interest income for the first half of the year amounted to EUR 121.8 million (+2% year-on-year) and net fee and commission income to EUR 29.3 million (-1% year-on-year). Expenses grew by 14% over the six months to EUR 89.2 million and loan impairment charges totalled EUR 7.1 million, compared to EUR 1.5 million a year earlier. Net profit for the first half of the year amounted to EUR 44.4 million, which is 26% less than a year ago. The return on equity for the first half of the year was 11.7% and the cost/income ratio 58.4%.

LHV Group is well capitalised and all capital targets have been met with comfortable buffers. The Group's Common Equity Tier 1 (CET1) ratio stood at 15.8% at the end of Q2, the Tier 1 capital ratio at 17.5% and the total capital adequacy ratio (CAD) at 20.8%. The liquidity coverage ratio (LCR) was 171% and the net stable funding ratio (NSFR) 147%, both well above regulatory minimums.

As at the end of the first half of the year, LHV Group's net income was EUR 0.1 million below the financial plan and net profit EUR 1.6 million below. The loan portfolio exceeds the financial plan by EUR 25 million and fund volumes by EUR 15 million, while deposits are EUR 269 million below plan.

LHV Pank

LHV Pank reported a net profit of EUR 24.3 million in Q2 and total net income of EUR 62.3 million, which is 15% more than in the previous quarter and 10% more than a year ago. The bank's cost/income ratio was 45.3% and return on equity 16.6%.

The number of LHV Pank customers increased by nearly 8,000 during the quarter, reaching 508,000. The number of actively settling customers grew by 4,200 to 237,000. The bank's deposits decreased by EUR 312 million during the quarter to EUR 6.23 billion. The change was mainly driven by a decrease in the deposits of financial intermediaries' customers and a deliberate reduction of platform deposits. The funding focus continues to shift towards demand deposits.

LHV Pank's loan portfolio increased by EUR 114 million during the quarter to EUR 4.82 billion (+9% year-on-year). Retail loans grew by EUR 89 million and corporate loans by EUR 25 million during the quarter. Loan impairment charges of EUR 5.6 million were recognised in the quarter, reflecting a limited number of individual cases and higher forward-looking model provisions. Overall credit quality remained strong.

LHV Pank took several important steps in developing its business model and technological foundation in Q2. In May, the bank completed the migration of all core banking systems to the cloud in line with the previously communicated schedule, significantly improving development speed, flexibility and scalability. Also in May, the bank announced a transition from a customer segment based structure to a product-led organisation built around four product areas: banking platform, investment products, loan products and customer experience. The first changes took effect on 1 June and the transition will be implemented gradually during 2026. The Estonian Financial Supervision and Resolution Authority also issued LHV Pank a crypto-asset service provider licence under the MiCA regulation, the first granted to a bank in Estonia, enabling the bank to offer crypto-asset services across the European Union. In June, LHV introduced the Smart-ID+ authentication solution in its internet bank and mobile app, adding a further layer of protection against phishing and identity fraud. In addition, LHV Pank was recognised as the top employer in the Estonian financial sector in the CV.ee Top Employer survey.

Furthermore, AS LHV Pank intends to change its business name to LHV Bank AS and to register the bank's cross-border activities in the countries of the European Economic Area. An English-language business name is clearly understandable in European markets, supports LHV's international growth strategy and creates a unified identity between LHV Pank operating in Estonia and LHV Bank operating in the United Kingdom. Changing the name helps avoid subsequent changes to regulatory registrations and contracts and makes the expansion process more efficient. The cross-border registration of the credit institution's licence enables the bank to provide services across the European Economic Area. The change of the business name will take effect after approval by the Financial Supervision and Resolution Authority and registration in the Commercial Register.

For the first six months of the year, LHV Pank generated total net income of EUR 116.3 million, remaining at a similar level to last year, and a net profit of EUR 44.5 million, which is 19% less than a year ago. As at the end of the first half of the year, LHV Pank's net income is EUR 1.4 million below the financial plan, but excluding the revaluation effect of interest rate swaps eliminated at the Group level, net income exceeds the plan by EUR 0.2 million. Net profit is EUR 2.3 million below plan or EUR 0.7 million below excluding the revaluation effect. Loan portfolio exceeds the financial plan by EUR 60 million, while deposits are EUR 319 million below plan.

LHV Bank

LHV Bank, operating in the United Kingdom, reported a net profit of EUR 1.4 million in Q2, up 12% from the previous quarter. Total net income amounted to EUR 14.8 million, which is 19% more than a year ago.

The loan portfolio of LHV Bank grew by EUR 69 million, i.e. 8%, during the quarter to EUR 945 million (+66% year-on-year). The pipeline of approved but not yet disbursed loans increased from EUR 143 million to EUR 206 million during the quarter. Loan impairment charges of EUR 0.2 million were recognised in the quarter and portfolio quality is consistent with the growth of the portfolio.

LHV Bank's deposits amounted to EUR 1.39 billion at the end of the quarter (+36% year-on-year). The share of direct customer deposits grew to 24% during the quarter and reliance on intermediary platforms decreased. The number of retail customers grew from 7,000 to 10,000 during the quarter, with an average deposit balance of approximately GBP 28,000.

For the first six months of the year, LHV Bank's net income grew by 10% to EUR 29.8 million, including 65% growth in net interest income to EUR 18.7 million and net profit increased by 18% to EUR 2.7 million. Costs are approximately 1% below plan year-to-date, while investments in brand, product development and artificial intelligence continued.

As at the end of the first half of the year, LHV Bank's net interest income exceeds the financial plan by EUR 1.4 million, while net profit is EUR 0.3 million below plan due to higher loan impairment charges. The loan portfolio is EUR 37 million below plan and deposits exceed the plan by EUR 60 million.

LHV Varahaldus

LHV Varahaldus earned a net profit of EUR 0.4 million in Q2, compared to a net loss of EUR 0.6 million in Q1, which was affected by income tax associated with a dividend payment. Net income grew by 10% year-on-year to EUR 2.4 million. The aggregate volume of funds grew to EUR 1.79 billion by the end of the quarter, supported by both regular contributions and the positive returns of the funds.

Financial markets grew strongly in Q2, driven primarily by AI-related sectors. While the first quarter of the year belonged to actively managed funds, Q2 was a very strong quarter for index funds. LHV fund Indeks, which has higher exposure to emerging markets compared to its competitors, gained 19.4% in three months and is the best-performing fund in the market year-to-date. The actively managed pension funds Julge and Ettevõtlik returned 1.9% and 0.1% respectively in the quarter, the conservative fund Rahulik gained 0.4% and the value of the fund Tasakaalukas declined by 0.1%. Of the Pillar III funds, Aktiivne III delivered a quarterly return of 1.6% and Indeks III gained 19.4%.

For the first six months of the year, LHV Varahaldus's net income grew by 9% to EUR 4.8 million. The net result remained at a loss of EUR 0.2 million due to the EUR 1.1 million income tax expense associated with the dividend payment made in March.

LHV Varahaldus's net profit exceeds the financial plan by EUR 0.1 million as at the end of the first half of the year and fund volumes exceed the plan by EUR 15 million.

LHV Kindlustus

For LHV Kindlustus, Q2 was considerably stronger after a challenging start to the year. Net profit amounted to EUR 0.8 million, compared to a net loss of EUR 0.7 million in Q1. Net earned premiums grew to EUR 11.1 million (+9% year-on-year).

Gross incurred losses decreased by 14% quarter-on-quarter to EUR 7.1 million. Almost no large claims were recorded during the quarter and claims frequency declined. The net loss ratio improved to 67.9% (Q1: 82.2%) and the net expense ratio was 25.2%. On average, 13,500 new claims were registered per month. At the end of June, the number of active insurance contracts stood at approximately 325,000 and the number of customers at 242,000.

For the first six months of the year, LHV Kindlustus's net earned premiums grew by 9% to EUR 21.7 million, while gross incurred losses increased by 21% to EUR 15.4 million. As a result, net profit for the first half of the year remained at EUR 0.1 million, compared to EUR 1.7 million a year earlier. The net loss ratio for the first half of the year was 74.9%.

LHV Kindlustus's net profit is EUR 1.4 million below the financial plan as at the end of the first half of the year. The volume of contract premiums written exceeds the financial plan by EUR 0.5 million.

Comment by Mihkel Torim, CEO of LHV Group:

“The second quarter results show an improvement in LHV's profitability. After a cooler start to the year, net income for the second quarter grew by 7% compared to the first quarter, to EUR 79.0 million and net profit increased by a quarter to EUR 24.7 million.

The main driver of the quarter was active lending: the Group's loan portfolio grew by 15% year-on-year to EUR 5.77 billion. LHV Pank increased loans by EUR 114 million during the quarter, and LHV Bank in the United Kingdom delivered 66% annual growth, already approaching the one billion euro mark in loans. Deposits saw the expected structural shift from term deposits towards demand deposits, which, together with easing pressure on funding costs, supported the 5% growth in net interest income. The other subsidiaries also saw a positive turnaround: LHV Varahaldus returned to profit after the dividend-related income tax expense in the first quarter and LHV Kindlustus earned a net profit of EUR 0.8 million on the back of an improved loss ratio.

We took several important steps for future growth. We completed the migration of LHV Pank's core systems to the cloud, began the transition to a product-led organisation, and became the first bank in Estonia to receive a MiCA-based crypto-asset licence.”

AS LHV Group reports are available at: https://investor.lhv.ee/en/reports/.

To present the quarterly results, LHV Group will host a virtual investor meeting via Teams. The meeting will take place on 21 July at 11:00 AM EET. The presentation will be held in English. Please register in advance here. 

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 approximately 1,200 people. The services of LHV Pank are being used by over 500,000 customers, the II pillar pension funds managed by LHV have 104,000 active customers and LHV Kindlustus protects a total of 242,000 customers. LHV Bank Limited, a subsidiary of the Group, holds a banking licence in the United Kingdom and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.

Investor Relations
Sten Hans Jakobsoo
Head of Investor Relations and Corporate Development
Email: [email protected]

Communications
Paul Pihlak
Head of Communications
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