As the financial results of AS LHV Group are ahead of the financial plan disclosed in February due to faster than forecast loan portfolio growth and higher interest levels, the company will publish an updated financial plan for 2024.
The updated financial plan builds on actual economic performance and takes into account the gradually falling interest rates and the slowly improving macroeconomic situation. The quality of the credit portfolio remains at the projected level, but the formation of provisions that continue to be forward-looking has been taken into consideration, primarily due to specific counterparties and changes in the model. A success fee for LHV Varahaldus has not been presumed in this year's plan.
| Key indicators | 2023 | Updated FP 2024 | Change YoY | Previous FP 2024 | Change compared to previous plan |
| Financial results, EURt | |||||
| Total revenue | 310,458 | 349,397 | 38,939 | 309,089 | 40,308 |
| Total expenses | 134,321 | 150,903 | 16,582 | 143,568 | 7,335 |
| Impairment losses on loans | 11,539 | 23,676 | 12,137 | 23,390 | 286 |
| Earnings before taxes | 164,598 | 174,818 | 10,220 | 142,131 | 32,687 |
| Net profit | 140,938 | 150,304 | 9,366 | 120,081 | 30,223 |
| Business volumes, EURm | |||||
| Deposits | 5,731 | 6,667 | 936 | 6,674 | -7 |
| Loans | 3,562 | 4 343 | 781 | 4,037 | 305 |
| Assets under management | 1,519 | 1 573 | 54 | 1,668 | -95 |
| Fin. Inter-mediaries' payments (million pcs) | 49 | 69 | 19 | 62 | 7 |
| Key ratios | |||||
| Cost / Income ratio | 43.3% | 43.2% | -0.1 pp | 46.4% | -3.3 pp |
| ROE | 29.2% | 24.8% | -4.4 pp | 20.3% | 4.5 pp |
| Capital adequacy | 23.5% | 20.5% | -3.0 pp | 22.5% | -2.0 pp |
Compared to the financial plan released in February, the new financial plan forecasts 13% higher revenue, 5% higher expenses, and 25% higher net profit by the end of 2024. The higher growth in interest income is thanks to an 8% larger loan portfolio and higher interest rates than forecast in the previous financial plan. At the same time, fee and commission income is affected by the slower growth in the income from financial intermediaries.
Higher operating expenses are affected by the increase in the number of employees in recent years, one-off salary costs, IT costs, and the cost of developing the retail business in the United Kingdom. In addition, unlike what was expected in the previous plan, the fee of the Deposit Guarantee Fund did not decline this year.
In terms of business volumes, the increase in the volume of loans is mainly due to home loans and corporate loans in Estonia. The volume of the LHV Bank Ltd loans has remained at the same level as in the previous plan. Consolidated deposits are at the same level as previously forecast. The volume of funds has been reduced by 6% compared to the previous financial plan, whereas the number of payments by financial intermediaries has been increased by 12%.
The business activities of all companies belonging to the LHV consolidation group are profitable on an annual basis. The lower profitability of LHV Bank Ltd than previously planned is due, on the one hand, to the slower growth of the loan portfolio at the beginning of the year and the lower interest income earned from financial intermediaries and, on the other hand, developing an offer aimed at retail clients has been more expensive than previously planned.
LHV Group invests growing capital in the growth of loan portfolios at the expense of the profit earned. Capital adequacy remains at a good level. The updated financial plan forecasts a return on equity based on net profit of 4.5 percentage points higher than planned in February.
Comment by Madis Toomsalu, the Chairman of the Management Board at LHV Group: "The economy of Estonia and the United Kingdom need investment to grow. LHV is more profitable than in previous years, but based on the example of the decrease in our capital rates, the earned profit has gone to the maximum extent for issuing new loans. Therefore, in the financial plan for 2024, we have significantly increased loan volumes by more than 300 million euros. In August, we reached a loan portfolio of 4 billion euros, and by the end of the year we expect the loan portfolio to grow to 4.3 billion euros, which will translate into an annual growth of almost 800 million euros. In terms of profits, the forecast takes into account the 14% profit-based tax rate applied to banks."
To access the reports of AS LHV Group, please visit the website at https://investor.lhv.ee/en/reports/.
LHV Group is the largest domestic financial group and capital provider in Estonia. The LHV Group's key subsidiaries are LHV Pank, LHV Varahaldus, LHV Kindlustus, and LHV Bank Limited. The Group employs over 1,100 people. As at the end of August, LHV's banking services are used by 441,000 clients, the pension funds managed by LHV have 118,000 active clients, and LHV Kindlustus protects a total of 168,000 clients. 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.
Priit Rum
LHV Communications Manager
Phone: +372 502 0786
Email: priit.rum@lhv.ee
