Market announcement

Title

LHV Group’s first quarter unaudited financial results

Message

In three months LHV earned a net profit of EUR 5.1 million
The first three months of 2017 brought AS LHV Group a net profit of EUR 5.1
million, with the bank posting a profit of EUR 4.3 million, asset management
EUR 0.7 million and Lithuanian business unit Mokilizingas 0.3 million. LHV
Group’s return on equity was 17.1% in Q1. 

The group’s profit was EUR 0.6 million lower than in Q4 of 2016 and EUR 1.6
million higher than a year ago, Q1 of 2016. 

In the first three months of this year the group’s consolidated loan portfolio
grew by EUR 8 million (+1%; +EUR 60 million in Q4) and reached EUR 546 million.
The consolidated deposits grew by EUR 22 million (+3%; +EUR 36 million in Q4)
reaching EUR 798 million. During the quarter the volume of funds managed by LHV
rose by EUR 46 million (+5%; EUR 37 million in Q4) and reached EUR 1,020
million. 

According to Madis Toomsalu, CEO of LHV Group, the company had an active
beginning to 2017. "The quarter was characterised by strong economic results, a
good growth of the client base, several new products and recognitions, a
productive general meeting of shareholders, and the decision for the first
payment of dividends being adopted," Toomsalu commented. 

"The decline of the first quarter’s profit when compared with the 4th quarter
was caused mainly by the increase of income tax expenditure by EUR 0.9 million.
The profit was supported by the clients’ high activity and strong credit
quality. Over the quarter, the number of new clients for LHV bank grew by 5,000
and the total number of clients surpassed 117,000. The loan write-down
expenditure in the first quarter was EUR 0.1 million, which is EUR 0.6 million
less than in the previous quarter. The modest rise in the volume of the bank’s
loan portfolio was due to higher than average repayment of loans from real
estate development; on the other hand, the sum of unbridled loans from
concluded contracts grew to record high. This stands for work done in advance. 

During the quarter, we updated LHV’s private banking offer and we hope to show
strong competitiveness with this service. LHV Finance launched the car- and
home repair loan that offer consumers more favorable conditions than the
consumer loan product to finance expenditures with specific purpose. It is
gratifying to see, that according to surveys by Dive and Kantar Emor, LHV is
the bank with best service in Estonia, and we also hold in high regard the
third position achieved in the reputation survey of IT employers. 

The result of asset management was affected by the income tax expenditure on
the dividends paid to the Group, and by the decrease of pension fund
administration fees for the average of 19% in February. 

The number of 2nd pillar clients decreased by 1,900 during the quarter. On the
background of high-priced securities markets, the Fund Manager keeps the
investment risks of the actively managed pension funds low by looking for
alternative investment opportunities, first and foremost among Estonian
enterprises outside the stock market. LHV pension funds helped BaltCap fund the
acquisition of the web portals auto24 and Kuldne Börs. It is expected that
investments made in Estonia are able to provide pension savers a higher yield,
while also enlivening Estonian economy. 

LHV’s outlook for the current year is good. We wish to grow in all business
directions but we will not do it at the expense of client satisfaction, credit
quality and excessive risks in pension funds. The medium-term plans of LHV show
that we have room for growth multiple times over. In addition to retail,
private and business banking, LHV Pank will start serving the providers of
payment services. LHV is an organisation of bold ideas and it is also reflected
in our ambitions," Madis Toomsalu commented. 



Income statement, EUR t                                Q1-2017  Q4-2016  Q1-2016
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Net interest income                                      8 164    8 262    6 788
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Net fee and commission income                            5 285    5 847    3 654
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Net gains from financial assets                            396     -485      199
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Other income                                               -23       -9      -15
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Total revenue                                           13 822   13 615   10 626
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Staff costs                                             -3 590   -3 198   -3 225
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Office rent and expenses                                  -437     -398     -383
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IT expenses                                               -416     -497     -443
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Marketing expenses                                      -1 107   -1 456   -1 088
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Other operating expenses                                -2 145   -2 279   -1 689
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Total operating expenses                                -7 695   -7 827   -6 828
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EBIT                                                     6 127    5 788    3 798
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Earnings before impairment losses                        6 127    5 788    3 798
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Impairment losses on loans and advances                    -94       17     -255
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Income tax                                                -983      -70      -77
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Net profit for the reporting period from continued       5 050    5 735    3 466
 operations                                                                     
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Profit/-loss from discontinued operations                    0        0        0
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Net profit                                               5 050    5 735    3 466
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Profit attributable to non-controlling interest            581      838      447
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Profit attributable to share holders of the parent       4 469    4 897    3 019
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Balance sheet, EURt                         March 2017  Dec 2016  March 2016
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Cash and cash equivalents                      348 474   306 500     249 012
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Financial assets                                68 609    76 140      98 698
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Loans granted                                  551 233   543 382     436 673
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Loan impairments                                -5 571    -5 741      -4 842
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Receivables from customers                       2 587     3 478       1 628
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Other assets                                    11 952    11 687       3 969
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Total assets                                   977 284   935 447     785 138
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Demand deposits                                668 350   624 219     442 243
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Term deposits                                  129 863   152 583     202 664
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Loans received                                      90       779      15 228
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Loans received and deposits from customers     798 303   777 581     660 135
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Other liabilities                               35 081    19 241      16 608
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Subordinated loans                              30 900    30 900      30 900
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Total liabilities                              864 284   827 722     707 643
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Equity                                         113 000   107 724      77 496
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Minority interest                                5 900     5 319       3 688
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Total liabilities and equity                   977 284   935 446     785 139
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Reports of AS LHV Group are available at https://investor.lhv.ee/en/reports/.

To present the results in interim report LHV will hold an investor meeting,
that will take place on 18 April 6.00 p.m. in LHV Tallinn client office, Tartu
mnt 2 (CityPlaza building, 1st floor). All participants please register at
https://fp.lhv.ee/academy/455. 

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 300 people and over 117,000 customers use LHV’s banking
services. Pension funds managed by LHV have about 180,000 customers. 


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