LHV Group — Earnings Release 2022

Oct 18, 2022

LHV Group

Q3 results 18 October 2022

Growing loan portfolio together with volatile deposits

-652 th NR OF UK PAYMENTS Growth in loan volumes Loan portfolio exceeding 3 EURmld Housing loan portfolio exceeding 1 EURmld Growth in insurance services Building the organisation in the UK Financial investment into Bank North written off. Acquiring lending business in October +13,800 BANK CUSTOMERS -198 EURm DEPOSITS +7 EURm FUNDS +170 EURm LOANS

LHV Group Growing revenues, writing off financial investment

Financial results, EURt	9 quarters	$Q3-22$	$Q2 - 22$	$\Delta$ quarter
Net interest income	.	32,041	27,185	$+4,856$
Net fee and commission income	alandari	12,000	11,005	$+995$
Other income	∽™∽∽∽≡∎∽∽	257	$-288$	$+545$
Total revenue	an shirt	44,298	37,903	$+6,396$
Total operating expenses	. .	22,813	21,080	$+1,732$
Earnings before impairment	dullut	21,485	16,822	$+4,663$
Impairment losses	__	7,407	$-341$	$+7,749$
Income tax expense	القطيب ال	3,331	3,177	$+154$
Net income	dallar	10,747	13,986	$-3,239$
Business volumes, EURm	9 quarters	$Q3-22$	$Q2-22$	$\Delta$ quarter
Deposits from customers	.	5,168	5,367	$-198$
Loans (net)	a mul	3,095	2,925	$+170$
Assets under management	ww	1,266	1,259	$+7$
Customers, thous.	u mul	544	532	$+12$
Fin. intermediaries' payments, thous. pcs	n in In	5,793	6,445	$-652$
Key figures	9 quarters	$Q3-22$	$Q2 - 22$	$\Delta$ quarter
Cost / income ratio (C/I)	a da B	51.5%	55.6%	$-4.1$ pp
pre-tax ROE*	dutha.	14.2%	18.8%	$-4.7$ pp

* ROE is based on net profit and equity attributable to the owners of AS LHV Group

• Number of customers and business volumes increased in both loans and regular customers' deposits. Financial intermediaries' deposits decreased, payment volumes are increasing except for providers of virtual services
• Credit portfolio remains good, lending is fully financed with deposits
• Interest income growing rapidly
• Financial investment of 5.2 EURm into Bank North fully written off. Acquisition of loan portfolio in October
• Quarterly net profit 10.7 EURm

LHV Group – comparison with financial plan Net profit behind the financial plan by -7.7 EURm

Financial results, EURt	13 months	Sep 22	YTD22	YTD21	FP YTD	Δ YTD FP
Total revenue, incl.		16,063	116,985	97,702	121,948	$-4,963$
Net interest income		11,475	85,013	69,156	81,333	$+3,680$
Net fee and commission income		4,865	33,351	28,227	39,614	$-6,263$
Total operating expenses		8,229	62,759	46,936	61,189	$+1,570$
Earnings before impairment		7,835	54,227	50,766	60,759	$-6,532$
Impairment losses		4,439	7,801	2,254	6,905	$+896$
Income tax expense		1,181	9,309	7,591	9,013	$+296$
Net income, incl.		2,214	37,116	40,921	44,841	$-7,724$
attr. to shareholders		2,127	35,729	39,405	43,273	$-7,544$
Business volumes, EURm	13 months	Sep 22	YTD22	YTD21	FP YTD	Δ YTD FP
Deposits from customers		5,168	5,168	5,457	5,922	$-754$
Loans (net)		3,095	3,095	2,549	2,977	$+118$
Assets under management		1,266	1,266	1,284	1,348	$-82$
Fin. intermediaries' payments, thous. pcs		1,861	18,830	20,058	26,178	$-7,348$
Key figures	13 months	Sep 22	YTD22	YTD21	FP YTD	Δ YTD FP
Cost / income ratio (C/I)		51.2%	53.6%	48.0%	50.2%	$+3.5$ pp
Net interest margin (NIM)		2.2%	1.8%	1.6%	1.6%	$+0.1$ pp
pre-tax ROE*		10.3%	17.0%	24.5%	19.4%	$-2.4$ pp
ROE*		6.7%	13.5%	20.7%	16.6%	$-3.1$ pp
ROA		0.4%	0.8%	0.9%	0.9%	$-0.1$ pp

* ROE is based on net profit and equity attributable to the owners of AS LHV Group

• Results are behind the financial plan mainly due to write-off of financial investment, but also due to lower fees
• Revenues will be affected by increasing Euribor
• Expenses higher than planned due to recruitment in risk units
• Loan portfolio quality is strong, few customers are under supervision
• At the quarter-end, net profit was behind the financial plan by 7.7 EURm
• By year-end, lag from the financial plan will decrease significantly. Complete fulfilment depends on quality of loan portfolio

LHV Pank Activity of customers has recovered

Q3 Q4 Q1 2021 Q2 Q3 Q4 Q1 2022 Q2 Q3

Corporate loans Retail loans

• Approximately 14,000 new bank customers. Activity of regular customers recovered to pre-war level
• Deposits stayed on the same level, total decrease resulted from deposits of financial intermediaries
• Strong growth in loans of 170 EURm, including 93 EURm in corporate loans and 77 EURm in retail loans. Housing portfolio exceeded 1 EURmld and total loan portfolio 3 EURmld
• State conditions for student loans changed, increasing demand for the product
• LHV Pank is rated as the most attractive employer by economics students and experienced employees

0

800

1 600

2 400

LHV Pank Decent growth in business volumes

Financial results, EURt	9 quarters	$Q3 - 22$	Q2-22	$\Delta$ quarter
Net interest income	.	31,993	27,232	$+4,761$
Net fee and commission income	an a bat	8,716	7,643	$+1,072$
Other income	−™−−−∎∎−−	273	147	$+127$
Total revenue	an a tha t	40,981	35,021	$+5,960$
Total operating expenses	.	16,434	15,635	$+799$
Earnings before impairment	an Bhuil	24,548	19,387	$+5,161$
Impairment losses on loans and bonds	الرجائي الر	2,171	$-341$	$+2,512$
Income tax expense	ana da B	3,209	2,792	$+417$
Net income	a a Bhail	19,168	16,936	$+2,232$
Business volumes, EURm	9 quarters	Q3-22	$Q2 - 22$	$\Delta$ quarter
Deposits from customers	.	5,223	5,425	$-202$
Loans (net)	.	3,095	2,925	$+170$
Customers, thous.	.	382	368	$+14$
Key figures	9 quarters	$Q3-22$	$Q2 - 22$	$\Delta$ quarter
Cost / income ratio (C/I)	t in H	40.1%	44.6%	$-4.5$ pp
pre-tax ROE*	a ta 111 a m	26.5%	25.9%	$+0.7$ pp
ROE*	a ta 111 a m	22.7%	22.2%	$+0.5$ pp
Net interest margin (NIM)	Harristan	2.0%	1.7%	$+0.3$ pp

* ROE is based on net profit and equity attributable to the owners of AS LHV Group

• Activity of corporate customers is remaining high, but the confidence of private customers has significantly decreased since the end of September
• The quality of the loan portfolio as a whole has remained strong and the share of overdue loans continues to stay low. However, we have increased forward looking provisions due to uncertainty
• Net profit amounted to 19.2 EURm and ROE 22.7%

LHV Pank – comparison with financial plan 9 months net profit as planned

Financial results, EURt	13 months	Sep 22	YTD22	YTD21	FP YTD	Δ YTD FP
Total revenue, incl.		15,240	108,236	89,996	112,382	$-4,146$
Net interest income		11,470	85,099	69,340	81,543	$+3,556$
Net fee and commission income		3,770	24,149	20,640	30,274	$-6,125$
Total operating expenses		5,866	46,447	35,069	46,020	$+427$
Earnings before impairment		9,374	61,789	54,927	66,362	$-4,574$
Impairment losses on loans and bonds		2,203	2,565	2,254	6,905	$-4,340$
Income tax expense		1,141	8,269	7,268	8,237	$+32$
Net income		6,031	50,955	45,406	51,220	$-266$
Business volumes, EURm	13 months	Sep 22	YTD22	YTD21	FP YTD	Δ YTD FP
Deposits from customers		5,223	5,223	5,476	5,986	-763
Loans (net)		3,095	3,095	2,549	2,977	$+118$
Key figures	13 months	Sep 22	YTD 22	YTD21	FP YTD	Δ YTD FP
Cost / income ratio (C/I)		38.5%	42.9%	39.0%	40.9%	$+2.0$ pp
Net interest margin (NIM)		2.2%	1.8%	1.6%	1.6%	$+0.1$ pp
T1 capital adequacy		15.8%	15.8%	15.4%	15.5%	$+0.3$ pp
Total capital adequacy		18.4%	18.4%	18.1%	18.3%	$+0.1$ pp

• Loan portfolio ahead of the plan, regular customers' deposits as planned. Deposits of financial intermediaries have decreased by 726 EURm in 9 months
• Growth in net interest income compensates lower net fee and commission income
• Expenses higher due to increased number of employees for implementing sanctions
• Net profit of the bank almost reached the financial plan, difference 0.3 EURm

LHV Varahaldus Actively managed funds have retained value in difficult market conditions

6%

-21% -14% -7% 0% 7% Jan Mar May Jul Sep Pillar II comparable pension funds NAV change (YTD) LHV L Luminor A SEB Progressiivne Swedbank 1970-79 sünd. Index funds and pension fund Roheline NAV change YTD

• The volume of assets under management was about 1.3 EURb by quarter-end. Volumes affected by customers exiting II pillar in September and return of funds
• Largest actively managed LHV pension funds M, L and XL decreased within the quarter by 0.7%, 1.2% and 1.2%, respectively
• Again, difficult quarter on stock markets, the unit value of pension funds LHV Indeks and Roheline decreased by 0.9% and 3.2%, respectively
• Larger actively managed funds and conservative funds decreased less than competitors

LHV Varahaldus Net assets and market share are slightly increasing

Financial results, EURt	9 quarters	Q3-22	Q2-22	$\Delta$ quarter
Total revenue	- Leon Leon	1,977	2,000	$-22$
Total operating expenses	and became	1,767	1,823	$-56$
EBIT		210	177	$+34$
Net financial income	------- - -	26	$-411$	$+437$
Income tax expense	П	0	O	$+0$
Net income	ممتد من الم	237	$-234$	$+471$
Business volumes, EURm	9 quarters	$Q3-22$		$Q2-22 \Delta$ quarter
Pillar II pension funds	II II II II	1,206	1,200	$+6$
Pillar III pension funds	.	54	52	$+2$
Eurofunds	.	6	6	$-0$
Active customers of PII funds, th.	.	130	131	$-1$
Key figures	9 quarters	$Q3-22$	Q2-22	$\Delta$ quarter
Cost / income ratio (C/I)	والمحمأ مجم	88.2%	114.8%	$-26.6$ pp
pre-tax ROE	▃▊▃▁▃▖▃▁▃	4.3%	-4.3%	$+8.5$ pp
ROE	- II ma - Albert	4.3%	$-4.3%$	$+8.5$ pp

• Quarterly net loss amounted to 0.2 EURm. Decrease of own units value has marginal impact
• Operating income and expenses are as planned and comparable with previous quarter
• Number of active customers of II pillar pension funds decreased due to customers, who exited the system in September. This also resulted in marginal decrease in fund volumes
• Market share by volume is 31% and by number of customers is 25%

LHV Varahaldus – comparison with financial plan Profitability is behind the plan mainly due to lower returns than expected

Financial results, EURt	13 months	Sep 22	YTD22	YTD21	FP YTD	Δ YTD FP
Total revenue		638	5,936	6,832	6,011	$-75$
Total operating expenses		604	5,467	8,238	5,123	$+344$
EBIT		34	469	$-1,406$	888	$-420$
Net financial income		$-237$	$-282$	342	403	$-685$
Income tax expense		0	830	1,241	830	$+0$
Net income		$-203$	$-644$	$-2,306$	461	$-1,104$
Business volumes	13 months	Sep 22	YTD22	YTD21	FP YTD	YTD FP Δ
Assets under management, EURm		1,266	1,266	1,284	1,348	$-82$
Active customers of PII funds, thous.		130	130	139	129	$+1$
Key figures	13 months	Sep 22	YTD22	YTD21	FP YTD	Δ YTD FP
Cost / income ratio (C/I)		150.6%	96.7%	114.8%	79.9%	$+16.8$ pp

• Revenues largely in line with the financial plan, expenses somewhat higher due to customers leaving II pillar
• Volume of funds are behind the financial plan due to lower returns than expected
• The number of active II pillar customers is as planned, market share slightly increased
• Already second quarter in row the number of customer joining LHV II pillar pension funds exceeded the number of customers exiting the system
• II pillar payments that were stopped by state for some period will be compensated as a bullet in January 2023. Impact to funds' volumes is 110 EURm

LHV Kindlustus Rapid growth in business volumes

Financial results, EURt	9 quarters	Q3-22	Q2-22	$\Delta$ quarter
Total revenue	المبال	464	484	$-20$
Total expenses	an an Dùbh	870	719	$+151$
Technical result	7	-406	-235	$-171$
Net investments income		$-25$	0	$-25$
Net income	71	$-432$	$-235$	$-197$
Business volumes	9 quarters	Q3-22	Q2-22	$\Delta$ quarter
Gross written premiums, EURt	السم	4,750	4,612	$+138$
No of Customers (thous.)		152	149	$+3$
Key figures	9 quarters	$Q3-22$	Q2-22	$\Delta$ quarter
Net loss ratio	a Hill	71.6%	63.4%	$+8.2$ pp
Net expense ratio		45.7%	50.8%	$-5.1$ pp
pre-tax ROE		-30.0%	-15.6%	$-14.4$ pp
ROE		$-30.0\%$	-15.6%	$-14.4$ pp

• Rapid growth in business volumes continues in all insurance products and sales channels. Insurance payments plan is exceeded by 2.5 EURm
• Number of customers reached 152 thousand, number of effective insurance contracts by quarter-end 219 thousand
• In vehicle and home insurance claims are higher than planned
• Customer satisfaction with claims handling remains high at 97%, increasing volumes are handled well by the team

LHV Kindlustus – comparison with financial plan Growth in earned premiums forms a base for making profit

Financial results, EURt	13 months	Sep 22	YTD22	YTD21	FP YTD	YTD FP Δ
Total revenue, incl.		172	1,091	850	1,904	$-813$
Net earned premiums		840	5,247	1,323	5,073	$+174$
Net incurred losses		598	3,749	433	2,804	$+945$
Total expenses		424	2,231	1,461	2,227	$+4$
Technical result		$-252$	$-1,140$	$-610$	$-323$	$-817$
Net investments income		$-32$	-24		77	$-101$
Net income		$-284$	$-1,166$	$-610$	-246	$-921$
Business volumes	13 months	Sep 22	YTD 22	YTD21	FP YTD	YTD FP Δ
Gross written premiums, EURt		1,726	11,109	5,188	8,637	$+2,473$
No of Customers (thous.)		152	152	139	na	na
Key figures	13 months	Sep 22	YTD22	YTD21	FP YTD	Δ YTD FP
Net loss ratio		71.2%	71.4%	32.7%	55.3%	$+16.2$ pp
Net expense ratio		58.8%	50.3%	113.4%	51.1%	$-0.8$ pp

• Good sale results in September. 14.5 thousand insurance contracts were signed with a total volume of 2.2 EURm
• Net earned premiums increased to 840 EURt in September. Net earned premiums have reached a level, where conditions are set for making profit
• Claim frequency decreased in September, no large claims were filed
• 9 month expenses are as planned

LHV Group 9 months

Annexes

LHV Group Liquidity and capitalization levels to be hold

% Total capital adequacy

• Liquidity and capitalization of the Group remain sufficient, but are carefully observed
• The Group raised 35 EURm in June, which will be used for capitalizing the UK business line

LHV Group Strong quality of the portfolio

EURm LHV Finance loans overdue porfolio

loan impairments over 90 days or contract cancelled up to 90 days

EURm Retail banking loans overdue portfolio

• Proportion of customers with a lower rating is decreasing among both corporate and retail customers
• Despite a very small amount of loans overdue in all portfolios, additional provisions have been made to cover possible credit losses in the future

-2,8

Q3 Q4 Q1

2021

-1,4

0,0

1,4

2,8

LHV Group Share information

• Q3 closing share price was 3.12 EUR
• 30,304 trades were made with LHV shares during Q3 on the market with a turnover of 12.0 EURm, which gave the share an average price of 3.53 EUR
• 12-month shareholders earnings per share (EPS) is 0.17 EUR
• As of 30 September 2022 LHV had 30,462 shareholders and 45.7% of shares belonged to supervisory and management board members and parties associated with them
• Market capitalization based on closing price of 30.09.2022 was 984 EURm

Madis Toomsalu LHV Group Managing Director madis.toomsalu@lhv.ee

Meelis Paakspuu LHV Group CFO meelis.paakspuu@lhv.ee