LHV Group’s unaudited financial results for Q4 and 12 months of 2023

With record business volumes, AS LHV Group generated a consolidated net profit of EUR 140.9 million in 2023. All of the Group’s subsidiaries were profitable, both in the last quarter and for the year as a whole.

LHV Group’s consolidated net income in 2023 was EUR 310.5 million, which is 79% more than a year earlier. Net interest income increased to EUR 253.8 million (+97%) and net fee and commission income to EUR 54.1 million (+21%). Last year’s consolidated expenditure totalled EUR 134.3 million (+50%). LHV Group’s consolidated net profit of EUR 140.9 million in 2023 was EUR 79.5 million higher than in 2022 (+129%).

Among its subsidiaries, AS LHV Pank earned EUR 141.4 million in net profit in 2023, UK Bank Limited EUR 5.3 million, AS LHV Varahaldus EUR 1.7 million, and AS LHV Kindlustus earned a total of EUR 305 thousand in net profit over 12 months.

As of the end of 2023, the volume of LHV Group’s consolidated assets stood at a record EUR 7.13 billion, growing by 16% or EUR 990 million over the year. In Q4, the volume of assets increased by 8%.

The Group’s consolidated deposits increased by EUR 830 million over the year to EUR 5.73 billion (+17%). In Q4, deposits increased by EUR 415 million, or +8%; the increase was due to term deposits, as the level of demand deposits remained the same. At the same time, EUR 151 million was raised through deposit platforms.

LHV’s consolidated loan portfolio increased by EUR 353 million to EUR 3.56 billion (+11%) in 2023. In Q4, the loan portfolio grew by 6%, or EUR 186 million. Corporate loans increased by EUR 137 million and retail loans by EUR 49 million.

The aggregate volume of funds managed by LHV increased by EUR 187 million to EUR 1.52 billion (+14%). The last quarter of the year contributed EUR 68 million to growth (+5%).

The number of processed payments related to clients that were financial intermediaries amounted to 49.5 million payments in 2023 (+89% compared to 26.1 million payments in 2022). 15.9 million of such payments were made in Q4, which is one fifth more than in Q3.

In Q4 2023, the consolidated net profit of AS LHV Group was EUR 32.8 million. This is EUR 6.7 million less than in Q3 (-17%), however, it exceeded Q4 of last year by 35%. AS LHV Pank earned EUR 33.6 million in net profit in Q4, AS LHV Varahaldus EUR 0.5 million, and AS LHV Kindlustus EUR 0.4 million. LHV Bank Limited earned EUR 3.0 million in net profit in the last quarter of the year. The return on equity owned by the Group’s shareholders was 24.5% in Q4.

The Group’s consolidated revenue increased by 5% in Q4 compared to the previous quarter, namely to EUR 85.7 million. Net interest income was earned in the amount of EUR 67.7 million and net service fee and commission income in the amount of EUR 16.3 million. Consolidated operating expenses were EUR 37.9 million in Q4, which is 15% higher than in Q3.

The results at the end of the year were strong for LHV, supported by client activity, but the declining economy and weakening confidence led to prudence. Interest income still dominates, but increasing interest expenses need to be taken into account, while service fee and commission income is also showing growth. By the end of the year, LHV fulfilled the financial plan by a small margin.

The number of clients of LHV Pank increased by more than 10,000 to 417 thousand clients in Q4. Over the year, the number of the bank’s clients increased by 39,500, or more than 10%. Client activity in everyday banking remained at a good level, and demand for loans is growing somewhat. Clients actively used investment services. At the end of the quarter, the bank expanded its favourable home loan offer to energy-efficient homes. LHV Pank was chosen as the most desirable employer in Estonia in the CVKeskus.ee survey.

The bank’s general focus was on taking deposits – the deposits of regular clients increased by EUR 153 million in the last three months of the year. Clients increasingly prefer term deposits, the share of which has grown to a third of all deposits. Volatility continued on the deposits of financial intermediaries.

During 2023, LHV Bank financed the Estonian economy with a total of EUR 1.49 billion in issued loans. Of this, EUR 321 million was issued to private customers and EUR 1,169 million to companies. Loan originations have continued at a slightly increasing pace, but client decision-making processes have lengthened. The quality of the loan portfolio remains stronger than planned, but due to macroeconomic trends, the bank increased its write-downs in a forward-looking manner, with EUR 9.6 million in Q4. In addition to interest income, the bank earned more service fee and commission income in Q4 than before, which was supported by a couple of larger investment banking transactions.

For LHV Varahaldus, the end of the year was marked by an increase in the volume of pension funds, which was supported by a strong quarter on the stock markets. The rate of return of LHV’s pension funds M, L, and XL in the quarter was 2.8%, 2.2%, and 2.8%, respectively. The rate of return of the more conservative funds XS and S were 3.7% and 3.6%, respectively. Pensionifond Indeks increased by 5.0%, while Pensionifond Roheline fell by 0.9%.

LHV’s market share in terms of the volume of pension funds at the end of the year was approximately 30%, and 24% according to the number of clients. The number of active clients did not change significantly in Q4. The volume, financial income, and profit of LHV Varahaldus fell short of the financial plan due to more modest rates of return than expected. Expenses were increased in the last quarter by developments and preparations for an amendment to the law, which will allow pension savers to direct larger contributions to the II pillar than before. As of 1 January, LHV and other fund managers started introducing the opportunity and accepting applications.

For LHV Kindlustus, the year ended with a quarter of stable growth and profitability. The company’s revenue continued on a growth trend and was in line with the financial plan, while gross premiums remained slightly below what was planned. As of the end of Q4, clients owned 229,000 valid insurance contracts, and 19,300 new loss events were registered during the quarter. Kindlustus fulfilled the plan, ending the year with a profit overall.

LHV Bank Limited continued to grow its business volumes, successfully launching deposit-taking through deposit platforms, increasing the volume of deposits to EUR 239 million, and increasing its loan portfolio to EUR 79 million. At the same time, the volume of payments in the Banking Services segment was at its highest level in history on a quarterly basis. As the bank in the United Kingdom is now independently financed, the Bank has repaid LHV Pank the loan previously received in the amount of EUR 71 million. The growth in both interest and service fee and commission income was faster than planned at the end of the year. Of the development activities, the Bank started preparations for the launch of the mobile bank and strengthened the team with leaders of several important divisions. Compared to the financial plan, the Bank’s expenses were higher due to salary costs and one-time IT and legal costs.

LHV Group’s annual cost/income ratio was a good 43.3%, while the return on equity was 29.0%. The Group’s liquidity and capitalisation remain strong, but given the macroeconomic situation, it is under close monitoring. In Q4, LHV Group issued MREL bonds for EUR 100 million. LHV Group will publish its financial plan and five-year forecast for 2024 on 13 February.

Comment by Madis Toomsalu, Chairman of the Management Board at LHV Group:
“In 2023, LHV did well. Increasing business volumes and rising interest rates have strengthened the results, but the general economic downturn has made planning difficult. Interest rates are cyclical and a very rapid rise can be followed by a rapid decline. Achieving a good result has required a strong commitment and important strategic decisions. Over the past 12 months, in addition to our daily activities, the successful launch of LHV Bank in the United Kingdom, the growth of the insurance business, and the transition to the direct supervision of the European Central Bank have required us to pay special attention.

We intend to continue with ambitious goals and strategic activities so that our business activities will remain efficient and sustainable in the years to come. A large part of increasing efficiency lies in increasing technological capabilities, on which we have placed a significant emphasis both in the last quarter and in the future. We are going to face 2024 with the strength and confidence that is characteristic of us. We achieve good results on the basis of strong prerequisites – satisfied employees, clients and shareholders.“

To access the reports of AS LHV Group, please visit the website at https://investor.lhv.ee/en/reports.

In order to introduce the financial results, LHV Group will organise an investor meeting via the Zoom webinar environment. The virtual investor meeting will take place on 6 February at 9.00, before the market opens. The presentation will be in Estonian. Please register at: https://lhvbank.zoom.us/webinar/register/WN_g-UYp3tqThi2-L7scsxdMw#.

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. LHV employs more than 1,060 people. As of the end of December, LHV’s banking services are being used by 417,000 clients, the pension funds managed by LHV have 123,000 active clients, and LHV Kindlustus protects a total of 161,000 clients. LHV Bank, a subsidiary of LHV 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
Communications Manager
Phone: +372 502 0786
Email: priit.rum@lhv.ee 

Attachments

• LHV Group Presentation 2023-Q4-EN
• LHV Group Factbook 2023-Q4-EN
• LHV Group Interim Report 2023-Q4-EN