Unaudited financial results of LHV Group for Q4 and 12 months of 2021

In Q4 2021, AS LHV Group earned EUR 19.3 million in consolidated net profit. AS LHV Pank earned EUR 18.6 million in net profit, of which EUR 3.7 million was from servicing clients related to the United Kingdom branch. AS LHV Varahaldus earned EUR 3.0 million in net profit. AS LHV Kindlustus earned EUR 0.2 million in net loss. LHV UK Limited earned EUR 1.4 million in net loss. The Group’s return on equity in Q4 was 25.7%.

In terms of results, Q4 was a record quarter for LHV, with revenue also impacted by a one-off pension fund performance fee. Compared to the previous quarter, the Group’s profit increased by EUR 2.8 million (+17%) and compared to Q4 of the previous year, by EUR 1.3 million (+7%). The Group’s consolidated revenue in Q4 was EUR 42.7 million, ie EUR 6.6 million more than in Q3 (+18%) and EUR 7.2 million more than a year earlier (+20%). At the time, total expenses amounted to EUR 18.2 million, which was EUR 3.0 million more than in Q3 (+20%) and EUR 6.8 million more than in Q4 of 2021 (+60%).

The volume of consolidated assets of LHV Group increased by 5% quarter-on-quarter to EUR 6.84 billion at the end of the year. The Group’s consolidated deposits increased by EUR 351 million to EUR 5.81 billion over the quarter (+6%; +EUR 535 million in Q3). Compared to the previous quarter, the consolidated loan portfolio increased by EUR 128 million to EUR 2.68 billion (+5%; +EUR 148 million in Q3). The total volume of funds managed by LHV increased by EUR 65 million to EUR 1.35 billion (+5%; -EUR 336 million in Q3). The number of processed payments from financial intermediaries amounted to EUR 7.3 million in Q4 (+10% compared to 6.7 million payments in Q3).

The consolidated net profit of AS LHV Group in 2021 was EUR 60.3 million, ie EUR 20.4 million more than in 2020 (+51%). In 2021, the pre-tax rate of return on the equity owned by LHV Group’s shareholders was 24.9%, while the return on equity based on net profit was 21.1%. Within the year, AS LHV Pank earned EUR 64.1 million (EUR 12.2 million from servicing clients related to the United Kingdom branch) and AS LHV Varahaldus earned EUR 0.7 million. The net loss of AS LHV Kindlustus in 2021 was EUR 0.8 million and net loss of LHV UK Limited was EUR 3.0 million.

Income statement, EUR thousand

Q4-2021

Q4-2020

12 months 2021

12 months 2020

Net interest income

28,163

19,893

97,319

68,492

Net fee and commission income

15,252

14,183

43,479

33,351

Net gains from financial assets

-914

1,316

-948

1,584

Other income

177

57

530

120

Total revenue

42,677

35,449

140,379

103,547

Staff costs

-8,638

-6,368

-31,322

-23,914

Office rent and expenses

-453

-239

-1,836

-798

IT expenses

-1,271

-964

-4,407

-3,343

Marketing expense

-791

-475

-2,506

-1,822

Other operating expenses

-7,093

-3,381

-25 111

-14,098

Total operating expenses

-18,247

-11,427

-65,183

-43,975

EBIT

24,431

24,023

75 197

59,572

Earnings before impairment losses

24,431

24,023

75 197

59,572

Impairment losses on loans and advances

-1,694

-2,243

-3,948

-10,898

income tax

-3,395

-3,741

-10,986

-8,827

net profit

19,342

18,039

60,263

39,847

Profit attributable to non-controlling interest

485

200

2002

1,897

Profit attributable to share holders of the parent

18,856

17,840

58,261

37,950

Balance sheet, EUR thousand

Dec 2021

Sept 2021

Dec 2020

Cash and cash equivalents

3,987,312

3,769,432

2,393,537

Financial assets

135,856

138,800

330,055

Loans granted

2,696,210

2,566,887

2,225,681

Loan impairments

-19,049

-18,024

-16,858

Receivable from customers

9,746

6,240

9,388

Other assets

34,856

32,279

29,604

Totalassets

6,844,930

6,495,615

4,971,407

Demand deposits

5,648,013

5,198,733

3,635,166

Term deposits

159,607

257,838

484 604

Loans received

546,280

563 203

468,585

Loans received and deposits from customers

6,353,899

6,019,774

4,588,355

Other liabilities

55,852

86 137

27,776

Subordinated loans

110,378

110,383

110,000

Total liabilities

6,520,130

6,216,294

4,726,131

Equity

324,801

279,321

245 276

Minority interest

8,384

7,899

8,483

Total liabilities and equity

6,844,930

6,495,615

4,971,407

In addition to the performance fee of EUR 2.6 million of LHV Varahaldus, the strong growth in the business volumes of the bank had the biggest impact on the quarterly result. For the year as a whole, LHV Group’s profit exceeded the financial plan by EUR 6.4 million.

In 2021, LHV Group’s consolidated deposits grew by EUR 1.69 billion (+41%) and the volume of loans by EUR 468 million (+21%). The volume of the funds managed by LHV has decreased by EUR 188 million (-12%) under the influence of the pension reform. The number of payments made by financial intermediaries has increased by EUR 11 million (+70%).

Deposits from regular clients grew the most in Q4. Deposits from financial intermediaries grew by EUR 61 million, while the balance of deposits from the deposit platforms has decreased to EUR 7 million. Of the increase in loans in Q4, corporate loans accounted for EUR 63 million and retail loans EUR 65 million. The credit portfolio remains strong, with all lending funded by deposits.

During the quarter, LHV gained over 19,500 new bank clients – within the year, the number of banking clients increased by 24%, ie by almost 63,200. As of the end of the year, LHV Pank had over 321,000 customers. The high level of client activity was influenced by the pension reform and several IPOs. Among the highlights of the quarter, LHV Pank was the first bank in Estonia to introduce crypto trading to its clients, LHV Pank became a direct member of the European Direct Debit Scheme, and The Banker magazine named LHV the best bank in Estonia for the third consecutive year.

The number of active clients in the second pension pillar of LHV Varahaldus increased slightly to 140,000 clients, while the number of clients in the third pillar exceeded 30,000. Both the volume of assets under management and the number of clients of LHV Varahaldus fell less than expected as a result of the pension reform. Over the year, LHV Varahaldus generated net income of EUR 126 million for second pillar clients. The largest actively managed LHV pension funds, M, L, and XL, had a net rate of return of 5.3%, 9.0%, and 10.0%, respectively, in 2021, and as they outperformed the benchmark index, LHV Varahaldus earned a performance fee at the end of the year, which was not included in the updated financial plan.

LHV Kindlestus launched travel insurance products in Q4, which were sold online and through direct sales. The number of intermediaries offering LHV’s insurance was also increased. The number of customers increased by 4000 in Q4 to 143,000. LHV Kindlustus aims to provide the handling of claims with the best quality, and in Q4, client satisfaction remained at a high level amounting to 95%. The insurance result was negatively affected by an increase in losses due to the winter period.

In the United Kingdom, an application for a banking license is due to be submitted to the supervisory authority in February. The application for the license, the preparation of the preceding documents, and the parallel recruitment have taken place as planned.

The Group’s liquidity and capitalization remain stable and exceed regulatory and internal targets. In January, the Supervisory Board increased the internal capitalization rate by 0.5 percentage points. As of the end of 2021, AS LHV Group has a market capitalization of EUR 1.29 billion and 20,400 shareholders.

Comment by Madis Toomsalu, the Managing Director of LHV Group:
“LHV has continued to finance the Estonian economy and expand internationally despite a controversial environment. In 2021, we issued new loans to companies in the amount of EUR 1.1 billion and to private persons in the amount of EUR 325 million. In doing so, we financed almost a third of the loans issued to Estonian companies during the year. In addition to strong loan growth, we saw a rapid increase in the number of clients and the use of investment services. For pension funds, it was the second consecutive year in which we outperformed the benchmark index with the rate of return, and we also launched several new insurance products. The application for a banking license in the United Kingdom has progressed according to the initial plan, and we aim to submit a formal application to the supervisory authority in February. I am very pleased that LHV continues to be rated the best bank in Estonia and now also the best employer in Estonia.”

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

LHV will disclose the new financial plan for 2022, with a five-year forecast, on 15 February.

In order to introduce the quarterly and 12-month results, LHV Group will be organizing an investor meeting via the Zoom webinar environment. The virtual investor meeting will take place on 8 February at 9.00, before the market opens. The presentation will be in Estonian. We kindly ask you to register at the following address: https://lhvbank.zoom.us/webinar/register/WN_0uK3c-RIQHO0vTPolQ1H3A.

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus, and LHV Kindlustus. LHV employs over 650 people. As of the end of the year, LHV’s banking services are being used by 321,000 clients, the pension funds managed by LHV have 140,000 active clients, and LHV Kindlustus protects a total of 143,000 clients. LHV’s UK branch offers banking infrastructure to 180 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

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