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LHV Group Interim / Quarterly Report 2024
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Interim / Quarterly Report
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Interim Report January – September 2024 Summary of Results
Q3 2024 in comparison with Q2 2024
- Net profit EUR 34.7 m (EUR 38.6 m), of which EUR 34.4 m (EUR 38.3 m) is attributable to owners of the parent
- Earnings per share EUR 0.11 (EUR 0.12)
- Net income EUR 84.9 m (EUR 87.3 m)
- Operating expenses EUR 37.2 m (EUR 37.6 m)
- Loan and bond provisions EUR 7.3 m (EUR 5.0 m)
- Income tax expenses EUR 5.7 m (EUR 6.1 m)
- Return on equity 22.4% (25.8%)
- Capital adequacy 21.0% (21.9%)
Q3 2024 in comparison with Q3 2023
- Net profit EUR 34.7 m (EUR 39.5 m), of which EUR 34.4 m (EUR 39.1 m) is attributable to owners of the parent
- Earnings per share EUR 0.11 (EUR 0.12)
- Net income EUR 84.9 (EUR 81.5 m)
- Operating expenses EUR 37.2 m (EUR 32.8 m)
- Loan and bond provisions EUR 7.3 m (EUR 2.9 m)
- Income tax expenses EUR 5.7 m (EUR 6.3 m)
- Return on equity 22.4% (31.6%)
- Capital adequacy 21.0% (25.2%)
Earnings per share and return on equity ratios are based on the profit attributed to the shareholders and equity of AS LHV Group and do not include non-controlling interest.
| Financial Summary 3 | |
|---|---|
| Operating Environment 7 | |
| The Group's Liquidity, Capitalisation and Asset Quality 11 | |
| Overview of AS LHV Pank Consolidation Group 14 | |
| Overview of LHV Bank Limited 17 | |
| Overview of AS LHV Varahaldus 18 | |
| Overview of AS LHV Kindlustus 20 | |
| CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 21 | |
| Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income21 | |
| Condensed Consolidated Interim Statement of Financial Position22 | |
| Condensed Consolidated Interim Statement of Cash Flows23 | |
| Condensed Consolidated Interim Statement of Changes in Equity24 | |
| Notes to the Condensed Consolidated Interim Financial Statements 25 | |
| NOTE 1 Accounting Policies 25 |
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| NOTE 2 Business Segments26 |
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| NOTE 3 Risk Management 28 |
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| NOTE 4 Breakdown of Financial Assets and Liabilities by Countries29 |
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| NOTE 5 Breakdown of Assets and Liabilities by Maturity Dates (undiscounted contractual cash flows) 30 |
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| NOTE 6 Open Foreign Currency Positions31 |
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| NOTE 7 Fair Value of Financial Assets and Liabilities32 |
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| NOTE 8 Breakdown of Loan Portfolio by Economic Sectors and by Stages 33 |
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| NOTE 9 Net Interest Income34 |
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| NOTE 10 Net Fee and Commission Income35 | |
| NOTE 11 Operating Expenses35 | |
| NOTE 12 Balances with the Central Bank, Credit Institutions and Investment Companies 36 | |
| NOTE 13 Deposits of Customers and Debt Securities in issue36 | |
| NOTE 14 Accounts payable and other liabilities37 | |
| NOTE 15 Contingent Liabilities 37 | |
| NOTE 16 Basic Earnings and Diluted Earnings Per Share37 | |
| NOTE 17 Capital Management 38 | |
| NOTE 18 Transactions with related parties 39 | |
| NOTE 19 Tangible and intangible assets 40 | |
| NOTE 20 Subordinated debts 41 | |
| NOTE 21 Changes in impairments41 | |
| Supervisory Boards and Management Boards of AS LHV Group and its Subsidiaries 43 | |
| Signatures of the Management Board to the Condensed Consolidated Interim Report 44 |
Financial Summary
The Group's consolidated net profit in Q3 2024 was EUR 34.7 million, having decreased by EUR 3.9 million compared to Q2 2024 and by EUR 4.8 million compared to Q3 2023. The profit for the Group's shareholders was EUR 34.4 million in Q3 2024, which was EUR 3.9 million less than in Q2 2024. Net profit for 9 months 2024 compared to 2023 has increased by EUR 5.9 million.
The Group's consolidated net income in Q3 2024 amounted to EUR 84.9 million, having decreased by EUR 2.4 million compared to Q2 2024 and increased by EUR 3.4 million compared to Q3 2023.
The Group's net interest income decreased by 4% in Q3 2024 compared to Q2 2024, amounting to EUR 67.4 million (EUR 70.4 million in Q2 2024). The Group's net interest income grew by 1% compared to Q3 2023.
Net service fee income remained the same, amounting to EUR 16.3 million (EUR 16.3 million in Q2 2024). The Group's net interest income grew by 20% compared to Q3 2023. In total, the Group's net income decreased by 2.7% in Q3 2024 compared to Q2 2024, amounting to EUR 84.9 million (EUR 87.3 million in Q2 2024).
Operating expenses amounted to EUR 37.2 million in Q3, having decreased by EUR 0.3 million compared to Q2 2024 and grown by EUR 4.4 million compared to Q3 2023.
The Group's Q3 operating profit was EUR 47.7 million (EUR 49.7 million in Q2 2024). Write-downs amounted to EUR 7.3 million in Q3 (EUR 5.0 million in Q2 2024).
Income tax expense on future disbursements of dividends by subsidiaries at the consolidated level was EUR 0.4 million in Q3.
The Group's Q3 net profit was EUR 34.7 million (EUR 38.6 million in Q2 2024).
The return on equity owned by LHV's shareholders was 22.4% in Q3 2024, which was 3.4 percentage points lower than in Q2 2024 (25.8%) and 9.2 percentage points lower than in Q3 2023 (31.6%).
The Group's loan volume grew to EUR 4 126 million by the end of Q3 (EUR 3 891 million in Q2 2024), having grown by 6% or EUR 236 million in a quarter (a growth of EUR 246 million in Q2 2024). Compared to Q3 2023, the Group's loan volume has grown by 22%.
The volume of deposits increased by EUR 502 million in a quarter (an increase of EUR 150 million in Q2 2024). The volume of deposits of clients who are financial intermediaries grew by EUR 79.8 million. The volume of deposits of ordinary clients increased by EUR 174.8 million and the volume of platform deposits decreased by EUR 247.8 million. Of the deposits, EUR 3 785 million (EUR 3 660 million in Q2 2024) were call deposits, EUR 1 646 million (EUR 1,517 million in Q2) term deposits and EUR 855 million (EUR 607 million in Q2) platform deposits.
By business units, AS LHV Pank's consolidated net profit amounted to EUR 34.1 million in Q3 and that of AS LHV Varahaldus amounted to EUR 0.6 million. AS LHV Kindlustus earned a net profit of EUR 0.5 million. The net profit of LHV Bank was EUR 0.6 million. The net profit of LHV Paytech was EUR 0.2 million. Viewed separately, LHV Group made a net profit of EUR 0.1 million.
Management emphasized better-than-expected performance in business volumes and profitability, with net profit exceeding financial plans and better than results in last year. Therefore, LHV Grupp updated the financial plan for 2024 in September, increasing the profitability goals by a third. We expect that all business lines will fulfill their 2024. financial targets.
LHV Management has acknowledged the importance of maintaining quality in the loan portfolio amidst rapid growth, especially in negatiive GDP growth environment. This is the largest factor generating volatility in profitability.
The Bank's net profit at the consolidated level was EUR 34.1 million in Q3 2024, which is EUR 0.7 million less than the result in the previous quarter (EUR 34.8 million in Q2 2024) and EUR 1.9 million less than the net profit of Q3 2023. The number of the Bank's clients grew by 11,200 during the quarter (5,400 in Q2 2024) and the total number of the Bank's clients is 445,000.
The Bank's loan portfolio grew by EUR 160 million in Q3 (EUR 194 million in Q2 2024), reaching EUR 3,904 million.
The deposits of the Bank's clients increased by EUR 257 million in Q3, while the balance of the deposits of payment intermediaries increased by EUR 52 million, platform deposits grew by EUR 92 million, and the deposits of the remaining clients grew by EUR 113 million. The total volume of deposits was EUR 5,716 million at the end of Q3.
As at the end of Q3 2024, the net loan portfolio of LHV Bank amounted to EUR 223 million and the volume of deposits was EUR 635 million. The net loss of LHV Bank was EUR 0.6 million in Q3 2024 (a profit of EUR 0.9 million in Q2 2024). The net income of LHV Bank was EUR 9.4 million in Q3 2024 (EUR 12.0 million in Q2 2024).
The net profit of LHV Varahaldus was EUR 0.6 million in Q3 2024 (EUR 0.7 million in Q2 2024). The service fee income of LHV Varahaldus amounted to EUR 2.3 million (EUR 2.2 million in Q2 2024). The operating expenses of LHV Varahaldus were EUR 1.5 million in Q3 2024 (EUR 1.4 million in Q2 2024). Expenses related to non-current assets (including depreciation on client agreements) were EUR 0.3 million in Q3 2024 (EUR 0.3 million in Q2 2024).
The total volume of funds managed by LHV decreased by EUR 8 million in a quarter (a decrease of EUR 11 million in Q2 2024). The number of active 2nd pillar clients decreased by 2,400 in a quarter (a decrease of 1,600 in Q2 2024).
The net profit of LHV Kindlustus was EUR 0.5 million in Q3 2024 (EUR 0.4 million in Q2 2024). The volume of premiums from concluded contracts decreased by EUR 0.5 million in the quarter, reaching EUR 8.5 million. The result of the insurance activities of LHV Kindlustus was EUR 0.3 million, having decreased by EUR 0.1 million in a quarter.
There is only one class of shares issued by LHV, each share gives 1 voting right. The shares of LHV Group is traded on NASDAQ Tallinn main list since May 2016. Graph below presents LHV Group share performance against OMX Tallinn index and OMX Baltics benchmark index over last three years. The performance of the LHV Group share has fallen short of both indices, falling by 18.95% in three years, while the reference indices fell by 10.78% and 6.39 %, respectively. LHV Group share price has been 3.23 euros in the end of year and based on the stock price, LHV's market value was EUR 1 047 million.
| Quarter | Year | |||
|---|---|---|---|---|
| Q3 2024 | Q2 2024 | over quarter | Q3 2023 | over year |
| 4 126.2 | 3 890.5 | 6% | 3 375.6 | 22% |
| 255.2 | 151.6 | 68% | 270.8 | -6% |
| 6 286.4 | 5 783.9 | 9% | 5 316.2 | 18% |
| 2 711.0 | 2 572.0 | 5% | 1 287.7 | 111% |
| 639.8 | 602.3 | 6% | 522.2 | 23% |
| 631.7 | 594.6 | 6% | 514.5 | 23% |
| 1 521.4 | 1 529.3 | -1% | 1 451.3 | 5% |
| 3 553.8 | 3 604.5 | -1% | 3 552.1 | 0% |
| Income statement | Quarter | Q3 | Year | Year | ||||
|---|---|---|---|---|---|---|---|---|
| EUR million | Q3 2024 | Q2 2024 | over quarter | 2023 | over year | 9M 2024 | 9M 2023 | over year |
| Net interest income | 67.43 | 70.42 | -4% | 68.14 | -1% | 206.77 | 186.15 | 11% |
| Net fee and commission income |
67.43 | 16.26 | 0% | 12.52 | 20% | 48.12 | 35.81 | 27% |
| Other financial income | 16.32 | -0.04 | NA | -0.59 | NA | 1.30 | 0.25 | 420% |
| Total net operating income | 84.55 | 86.64 | -2% | 80.07 | 4% | 256.19 | 222.21 | 14% |
| Other income | 0.36 | 0.64 | -44% | 0.31 | 16% | 1.42 | 0.52 | 173% |
| Operating expenses | -37.25 | -37.59 | -1% | -32.81 | 14% | -110.37 | -96.47 | 14% |
| Loan and bond portfolio gains/(-losses) |
-7.28 | -5.04 | 44% | -2.88 | 153% | -15.17 | -2.11 | 619% |
| Income tax expenses | -5.68 | -6.07 | -6% | -6.31 | -10% | -18.09 | -18.02 | 0% |
| Net profit | 34.70 | 34.70 | -10% | 39.48 | -12% | 113.98 | 108.17 | 5% |
| Including attributable to owners of the parent |
34.39 | 34.39 | -10% | 39.06 | -12% | 113.22 | 107.06 | 6% |
| Ratios | Quarter | Year | Year | |||||
|---|---|---|---|---|---|---|---|---|
| EUR million | Q3 2024 | Q2 2024 | over quarter |
Q3 2023 | over year |
9M 2024 | over 9M 2023 year |
|
| Average equity | ||||||||
| (attributable to owners of the parent) | 613.2 | 593.0 | 20.2 | 494.5 | 118.7 | 590.1 | 463.7 | 126.4 |
| Return on equity (ROE), % | 22.4 | 25.8 | -3.4 | 31.6 | -9,2 | 25.6 | 30.8 | -5.2 |
| Return on assets (ROA), % | 1.8 | 2.1 | -0.3 | 2.4 | -0.6 | 2.0 | 2.3 | -0.3 |
| Interest-bearing assets, average | 7 529.6 | 7 291.7 | 237.9 | 6 364.7 | 1 164.9 | 7 405.5 | 6 286.0 | 1 119.5 |
| Net interest margin (NIM) % | 3.58 | 3.86 | -0.28 | 4.28 | -0.70 | 3.72 | 3.95 | -0.23 |
| Price spread (SPREAD) % | 3.30 | 3.52 | -0.22 | 4.13 | -0.83 | 3.46 | 3.85 | -0.39 |
| Cost/income ratio % | 43.9 | 43.1 | 0.8 | 40.3 | 3.6 | 42.8 | 42.9 | -0.1 |
| Profit attributable to owners before income tax |
40.0 | 44.3 | -4.3 | 45.3 | -5.3 | 131.0 | 125.1 | 5.9 |
Explanations to ratios (quarterly ratios have been expressed on an annualised basis)
Average equity (attributable to owners of the parent) = (equity as at the end of the reporting period + equity as at the end of the previous reporting period) / 2 Return on equity (ROE) = net profit for the quarter (share of owners of the parent) / average equity (attributable to owners of the parent) *100 Return on assets (ROA) = net profit for the quarter (share of owners of the parent) / average assets*100 Net interest margin (NIM) = net interest income / interest-bearing assets, average *100 Price spread (SPREAD) = interest yield from interest-bearing assets – cost of external capital Interest yield from interest-bearing assets = interest income / interest-bearing assets, average *100 Cost of external capital = interest expenses / interest-bearing liabilities, average *100 Cost/income ratio = total operating cost / total income *100
Operating Environment
In Q3 of 2024, the world's economy remained stable and inflation continued to slow toward the 2% target level. Monetary easing through interest rate cuts had an impact on more economic regions (such as the US and the UK). The continuing growth of real wages supports household incomes, yet in many countries purchasing power has not returned to pre-pandemic levels. Economic activity, which was stable early in the year, slipped to the lowest level of the last 8 months by the end of Q3, mainly due to a drop in manufacturing output.1 On the other hand, activity continued to grow in the service sector, albeit at a slower pace. The outlook of the industrial sector as to the growth rate of output and new orders fell throughout the quarter, foremost in the Eurozone, Canada and China. At the same time, economic growth remained stable in the US; Japan, UK and Brazil. By the end of September, signs of slowing economic growth apparent in Q3, coupled with geopolitical tensions, pushed business confidence to the lowest level of the last two years.
Risks to global outlook are generally balanced yet are still very much present. Geopolitical tensions, including from the war in Ukraine and Gaza-Israel war, may lead to a new rise in the prices of energy (oil, electricity natural gas) and certain foodstuffs (olive oil, sugar). Secondly, the persistent strength of the labour market allows the price growth in the services to be maintained at a level higher than desired. These factors contribute their share of uncertainty to the scale and speed of subsequent interest rate cuts by central banks. Global economic growth will nevertheless remain modest in years to come, since fiscal policy measures are being tightened, taxes are raised and government sector spending is being reined in. Economic growth is forecast to be 3.2% in 2024-252.
The US economy grew 3% in Q2 of 2024 and economic growth for the year is expected to be 2.6%, but slowing to 1.6% is expected for 20253. With inflation decreasing, the Federal Reserve cut interest rates by 0.5 percentage point in September and further cuts are expected. The Chinese economy grew 0.4 percentage point less than expected – 4.7% – in Q2. Despite the
1 S&P Global. J.P.Morgan Global Composite PMI®, October 2024. [WWW] https://www.pmi.spglobal.com/Public/Home/Press Release/80a2d5d7d8554f7f909ba9ae30fd4016 2 OECD Economic Outlook, Interim Report September 2024. [WWW] https://www.oecd.org/en/publications/oecd-
economic-outlook-interim-report-september-
recently announced aid package, Chinese economic growth will slow to 4.9% in 2024 and to 4.5% in 2025, since consumer demand is still muted and a deep correction continues in the real estate sector. India, however; is expected to see a continuation of strong growth in internal demand and economic growth in 2024- 25 is expected to be 6.7% and 2025-26, 6.8%.1
The performance of the world's largest stock indexes in Q3 was characterized by high volatility. S&P 500 set a new record in mid-July then in early August retreated 8.5% from the high-water mark. By the quarter's end, the index had set another record and overall quarterly growth was 5.5%. Tokyo's Nikkei 225 started the quarter with strong growth but then suffered a steep drop in August (including -12.4% in a single day), followed by a return to growth, but finished the quarter down 4.2%. Europe's STOXX 600 was stable in July, then also declined in August (-2.2% in one day), then started rising again with the result for the quarter a net positive 2.2%. London's FTSE 100 made lateral strides for most of the quarter, then also fell in August (-2% in a single day) but ended the quarter positive by 0.9%. The Shanghai SSE Composite Index fell nearly the entire Q3 but saw rapid growth at the end of the September and closed out the quarter up 12.4%. The steep growth of Chinese stock markets stemmed from planned economic stimulus package from the government but by the start of Q4, it had given up some of the ground.
Economic growth in the EU was 0.8% in Q2 of 2024. Compared to previous quarters, growth sped up slightly. Growth in the Eurozone also stayed low, at 0.6% year over year. The trends between countries remain quite different and some are still in recession (Germany, Austria and Finland). The Eurozone economy is still hampered by low consumer confidence, the aftereffects of high energy prices and weakness of investments and interest-rate-sensitive businesses. At the end of Q3, difficulties spread to manufacturing, above all in Germany. Expected output volumes and number of orders received fell to the lowest point since January and this causes concern about the outlook for the Eurozone. Private sector output in France began diminishing in
2024_1517c196-en/full-report.html#sectiond1e478-455e658ef2
3 Bureau of Economic Analysis. Gross Domestic Product (Third Estimate), Corporate Profits (Revised Estimate), and GDP by Industry, Second Quarter 2024 and Annual Update, September 2024. [WWW] https://www.bea.gov/sites/default/files/2024- 09/gdp2q24-3rd.pdf
September again.4 The labour market in the Eurozone has remained strong overall and unemployment level is at a record low, 6.4%. Inflation fell in Q3 and in September hit 1.8%, below the central bank's target. At the same time, temporary acceleration of inflation is expected in Q4 due to the low comparison base in energy prices before the inflation target is reached by the end of 2025.
The latest forecast from the European Central Bank is that economic growth in the Eurozone will continue but at a lower than expected level. Growth outlook is lower since consumer spending and corporate investment have proven weaker than expected. Real wages are continuing to grow, which increases consumer confidence and, as expected, drives internal demand. Eurozone economic growth is forecasted to be 0.8% in 2024 and 1.3% in 2025.5
The European Central Bank (EKP) has cut interest rates twice so far: 0.25 percentage point in June and September. On the backdrop of the changes, the 6-month Euribor fell more steeply than expected, reaching 3.105% in late September. The ECB will probably continue cutting interest rates, but the timing and extent are based on the outlook for the inflation and monetary policy transmission. Financial markets are expecting two more 0.25 percentage-point cuts this year.
The UK economy grew 0.7% year-over-year in Q2 and annual GDP growth was 0.9% in July and 1% in August. Similarly to the Eurozone, UK growth is driven by the service sector but output continues to decline in manufacturing and construction. Some signs of improvement could be seen in consumer spending in Q3. Inflation rose back to 2.2% in August after falling to 2% in May and June.6 With inflation having approached the target, the Bank
- 4 HCOB Eurozone Composite PMI®, October 2024. [WWW] https://www.pmi.spglobal.com/Public/Home/Press Release/cf694df7d0cd4523886a14a068f0007e
- 5 Eurosystem staff macroeconomic projections for the euro area, September 2024. [WWW] https://www.ecb.europa.eu/press/projections/html /ecb.projections202409_ecbstaff~9c88364c57.en .html
- 6 Office for National Statistics. GDP quarterly national accounts, UK: April to June 2024. September 2024.
[WWW]https://www.ons.gov.uk/economy/grossdo mesticproductgdp/bulletins/quarterlynationalacco unts/apriltojune2024
7HM Treasury. Forecasts for the UK economy:a comparison of independent forecasts, September of England lowered the prime interest rate by 0.25 percentage point in August. Further interest rate decisions will be based on inflation outlook and the strength of monetary policy transmission, but financial markets await the next cut in November 2024. Unemployment dropped to 4.1% in July and the number of job openings also decreased. The workforce participation rate grew slightly but remains lower than a year ago. The outlook for the British economy has improved in recent months and it is expected to grow 1.1% this year and 1.3% in 2025.7
Estonia's main trading partners' economies trended in opposite directions in Q3. Scandinavian countries contended with low foreign demand (including export to Germany) and this also posed challenges for Estonian are as an indirect effect. The Finnish economy shrank by 1.5% in Q2 in 2024, above all due to low consumer spending and investment. The Bank of Finland forecasts 0.5% growth in 2024 and 1.1% in 2025, but recovery will be slow.8 The Swedish economy and labour market are still dogged by weakness, while the economy grew 0.6% year-overyear in Q2, it contracted 0.3% quarter-over-quarter. Economic recovery is progressing a little slower than expected and unemployment stubbornly remains a high 8.3%. GDP growth is expected to be 0.8% in 2024 and 1.9% in 2025. Due to the weak outlook and lower inflationary pressure, the Swedish central bank continued lowering interest rates to 3.25% and the next cuts are expected in November and December9. The situation in the Lithuanian economy has improved, with 1.3% year-over-year growth in Q2 in 2024. The stronger than expected recovery of consumer spending and gradual improvement of export markets leads the Lithuanian central bank to call for higher economic
2024.
[WWW]https://assets.publishing.service.gov.uk/m edia/66e997517f20ecc7ec3aa2ff/Forecasts_for_t he_UK_economy_September_2024.pdf
8 Bank of Finland. Interim forecast – September 2024. [WWW]
https://www.bofbulletin.fi/en/2024/articles/stickyrecovery-in-finland-s-
economy/#:~:text=and%20public%20demand.- ,According to the Bank of Finland's September 2024 interim forecast,growth will rise to 1.8%25.
9 Sveriges Riksbank. Monetary Policy Report.September 2024.
[WWW]https://www.riksbank.se/globalassets/med ia/rapporter/ppr/penningpolitiska-rapporter-ochuppdateringar/engelska/2024/monetary-policyreport-september-2024.pdf
growth: 2.2% in 2024 and 3.1% in 2025.10 At the same time, economic growth in Latvia continues to hover around 0%. In Q1, the economy grew but in Q2 contraction was -0.1%. The Latvian central bank lowered its growth forecast by 1.2 percentage points to 0.6% in 2024 and 2.6% in 2025 due to a weaker than expected first half-year and a significant revision of economic figures11.
The Estonian economy shrank 1.3% in Q2 of 2023, but reached zero growth quarter-over-quarter. Trade has declined since March 2023 and remains weak. The 12-month sliding average annual growth in trade in August was -12.8%, the monthly year-over-year growth was -1.1% and the speed of the decline has slowed to the lowest level in the past year. Weak export also keeps production volumes in decline and the speed of the decline rose in the Q3 to the same level seen in the beginning of the year (-6% in August). The difficulties can be expected to be felt in manufacturing in future after a lag time. Sales volumes in retail continue to decline, but not as fast in recent months (-3.8% in August). Confidence is still at historical lows but has improved somewhat in manufacturing. Still, consumer and retail and construction companies' confidence slipped in Q3 back to the same level seen at the start of the year. Tax hikes played a role in this process, as they exert a negative impact on purchasing power and consumer spending.
Estonia's workforce market is in good health, and the saving grace has been the retention of employees on the payroll at businesses. Unemployment fell to 7.6% in Q2 of 2024 and the Bank of Estonia is predicting that level to be the average for 2024. The number of employees has fallen the most in construction, real estate, manufacturing and water supply fields of activity. Wage growth rate has begun to melt quicker, down to 7.2% in Q2. Due to tax increases, the recovery of purchasing power will be deferred an additional year compared to expectations, pushed back to 2026. Consumer prices increased 3.2% in Q3, which is higher than the previous quarter. The growth in the prices of services continues high and the prices of foodstuffs have started rising but will probably stabilize going forward. The Bank of Estonia forecasts the average inflation to be 3.5% for 2024 and 3.9% in 2025, due mainly to the tax hikes and state-regulated prices.12 Foreign price pressure will also gain strength because after a year of decline, import prices have returned to growth.
10 Bank of Lithuania. Macroeconomic Projections (September 2024). [WWW]https://www.lb.lt/uploads/publications/doc s/47132_f6b4b91434526aafcbcfac9ec3574e95.p df
The housing price index increased 6.7% year-over-year in Q2. Apartment prices rose 2.9% compared to Q1 of 2024; houses, 2.4%. The monetary volume of transactions was lower in H1 of 2024 than in the same period in the past three years. At the same time, the supply of apartments remained high and the sales were slow. Transaction volumes were even lower than in H1 of 2020 at the start of the pandemic.
The financial state and savings capacity of domestic households has gradually started to improve, but recovery will take time. Annual growth in deposits of households was 8.7% in August and that of companies was 1.6%. Nevertheless, the growth rate is clearly under the long-term level and growth is not broad-based. In August, the average interest rate on term deposits fell to 3.54% for households and 3.51% for businesses. In the context of sputtering economic activity, loan activity has remained strong. The annual growth of businesses' loan portfolio as of the end of August was 7.2%; the corresponding indicator for households was 6.6%. The growth in businesses' loan portfolio has had a slight acceleration in recent months. Long-term loans taken by energy and real estate companies and retailers are responsible for the growth. The industrial sector's loan portfolio has also had gradually increasing month-over-month since spring. The average interest rate on home loans has dropped to 5% due to the lower 6-month Euribor, and the figure is 6.1% for long-term business loans. While the fraught economic situation has increased banks' risk assessments, the trend has been counterbalanced by increase in pressure from the competition and the fact that companies and households have thus far managed repayment of loans well. Home loans more than 60 days in arrears make up just 0.17% of the loan portfolio, 0.25% in the case of companies. The share of consumer loans in arrears is up slightly as of Q3, but still at a low 3.2%.
Two years into a recession in Estonia, the conditions for economic recovery are better. Prices of energy and other goods are down, inflation is lower and people's purchasing power in Estonia and the rest of Europe is gradually improving. Estonian businesses are making efforts to become more competitive. The recently established tax hikes and budget cuts will curb the stimulus effect and thus rapid growth of demand is not expected on either internal or external markets. Gradual increase in foreign demand (e.g. Scandinavia) can be expected in the second half of 2025, but
events/news-and-articles/news/17054 macroeconomic-forecasts-october-2024
12 Eesti Pank. Rahapoliitika ja Majandus, 3/2024 [WWW]https://haldus.eestipank.ee/sites/default/fil es/2024-09/rpm2024_3.pdf
11 Bank of Latvia. Macroeconomic forecasts. October 2024. [WWW] https://www.bank.lv/en/news-and-
consumer spending growth will remain weak in 2025 or even on par with 2024, since the recovery of purchasing power is slow. The Bank of Estonia is forecasting -0.4% economic growth in 2024, 1.9% in 2025 and 3.0% in 2026.
The Group's Liquidity, Capitalisation and Asset Quality
As at 30 September 2024, the Group's own funds stood at EUR 634.3 million (31 December 2023: EUR 596.4 million). LHV Group own funds are calculated based on regulative requirements.
Compared to Group's internal capital adequacy ratio target 19.7%, the Group is capitalised good enough as at the end of the reporting period, with the capital adequacy ratio is amounting to 21.0% (31 December 2023: 23.5%). In addition to total capital adequacy targets the Group has also set internal targets for the core Tier 1 capital adequacy ratio to 14.70% and Tier 1 capital adequacy ratio to 16.85%. The internal targets were approved in December 2023 by the Group's Supervisory Board, after the completion of the annual supervisory assessment by the ECB. LHV Group includes only that part of the current year's profit for which the European Central Bank has given permission as part of its own funds. Obtaining the permit is done with the referrer, but it is also applied to the reporting quarter afterwards, which is why the capitalization ratios also change, and the Group reflects them in the next report.
The minimum requirement for own funds and eligible liabilities (MREL) is a building block of the resolution plan and LHV has to maintain sufficient own funds and qualifying liabilities which can be used to cover losses in resolution planning. On 21st of June 2021 Estonian FSA set two separate MREL ratios on the consolidation group level for LHV Group. MREL-TREA is calculated based on total risk weighted assets. MREL-LRE is calculated based on total assets. Each year regulator reviews the targets and recalibrates the requirements, if needed. As at the end of Q3 2024 the regulatory targets are 26.30% (MREL-TREA) and 5.91% (MREL-LRE). Group needs to meet higher MREL-TREA target to distribute dividends. This target is equal to sum of regulatory minimum requirement and combined buffer which is 32.30%. As at 30 September 2024, MREL-TREA ratio was 34.81% (31.12.2023: 35.68%) and MREL-LRE was 13.23% (31.12.2023: 12.62%).
The Group's liquidity coverage ratio (LCR), as defined by the Basel Committee, stood at 211.0% as at the end of September (31 December 2023: 194.2%).
Financial intermediates' deposits in Bank are covered 100% with liquid assets. Excluding the financial intermediates deposits the Groups LCR is 447.2% (31.12.2023: 449.9%). The Group recognises cash and bond portfolios as liquidity buffers. These accounted for 46% of the balance sheet (31 December 2023: 48%). The ratio of loans to deposits stood at 64% as at the end of the third quarter (31 December 2023: 60%). Group's maturity structure is presented in Note 5.
| Capital base | 30.09.2024 31.12.2023 31.12.2022 | ||
|---|---|---|---|
| Paid-in share capital | 32 419 | 31 983 | 31 542 |
| Share premium | 146 958 | 143 372 | 141 186 |
| Statutory reserves transferred from net profit | 4 713 | 4 713 | 4 713 |
| Other reserves | 1 826 | -996 | -1 441 |
| Retained earnings | 320 757 | 229 287 | 170 010 |
| Intangible assets (subtracted) | -20 705 | -21 278 | -23 333 |
| Net profit for the reporting period (COREP) | 55 285 | 129 740 | 46 180 |
| Other adjustments | -7 | -8 | -369 |
| Dividends to be distributed | 0 | -41 578 | 0 |
| Deferred tax assets that rely on future profitability and do not arise from temporary differences net of | |||
| associated tax liabilities | -1 028 | 0 | 0 |
| CET1 capital elements or deductions | -7 035 | -382 | 0 |
| CET1 instruments of financial sector entities where the institution has a significant investment | -4 262 | -3 496 | -3 351 |
| CET1 instruments of financial sector entities where the institution has not a significant investment | 0 | 0 | -181 |
| Tier 1 capital | 528 921 | 471 357 | 364 956 |
| Additional Tier 1 capital | 35 307 | 55 000 | 55 000 |
| Total Tier 1 capital | 564 228 | 526 357 | 419 956 |
| Subordinated debt | 70 026 | 70 000 | 75 000 |
| Total Tier 2 capital | 70 026 | 70 000 | 75 000 |
| Net own funds for capital adequacy | 634 254 | 596 357 | 494 956 |
| Risk weighted assets | |||
| Central governments and central bank under standard method | 0 | 0 | 0 |
| Credit institutions and investment companies under standard method | 9 205 | 12 316 | 11 553 |
| Companies under standard method | 1 413 839 | 1 300 707 | 1 204 523 |
| Retail claims under standard method | 213 624 | 226 592 | 219 031 |
| Public sector under standard method | 0 | 0 | 0 |
| Housing real estate under standard method | 787 225 | 610 181 | 513 483 |
| Overdue claims under standard methods | 19 783 | 19 759 | 8 004 |
| Investment funds' shares under standard method | 188 | 188 | 186 |
| Other assets under standard method | 101 159 | 109 295 | 102 697 |
| Total capital requirements for covering the credit risk and counterparty credit risk | 2 545 023 | 2 279 038 | 2 059 477 |
| Foreign currency risk | 90 513 | 1 793 | 18 324 |
| Interest position risk | 0 | 0 | 0 |
| Equity portfolio risk | 1 194 | 746 | 740 |
| Credit valuation adjustment risk | 1 648 | 1 966 | 2 228 |
| Operational risk under base method | 385 579 | 259 437 | 197 920 |
| Total risk weighted assets | 3 023 957 | 2 542 980 | 2 278 689 |
| Capital adequacy (%) | 20.97 | 23.45 | 21.72 |
| Tier 1 capital ratio (%) | 18.66 | 20.70 | 18.43 |
| Core Tier 1 capital ratio (%) | 17.49 | 18.54 | 16.02 |
The credit quality of the group remained at a good level. A loan discount reserve of 42.5 million euros was formed in the balance sheet at the end of September to cover estimated loan losses. As of the end of the third quarter, the fair value of the collateral of the loan portfolio is 3% higher than the book value of the loan portfolio.
| Loan portfolio distribution | Under-collateralized loans |
|||||
|---|---|---|---|---|---|---|
| Over-collateralized loans | Total | |||||
| Carrying value |
Fair value of collateral |
Carrying value |
Fair value of collateral |
Carrying value |
Fair value of collateral |
|
| Stage 1 | 1 670 913 | 2 517 804 | 1 880 881 | 1 009 662 | 3 551 794 | 3 527 466 |
| Corporate Lending | 707 174 | 980 621 | 1 365 241 | 617 379 | 2 072 415 | 1 598 000 |
| Consumer Financing | 0 | 0 | 62 060 | 0 | 62 060 | 0 |
| Investment Financing | 6 556 | 28 034 | 1 984 | 1 611 | 8 540 | 29 645 |
| Leasing | 18 342 | 26 415 | 124 692 | 90 410 | 143 034 | 116 825 |
| Private Lending | 938 841 | 1 482 734 | 326 904 | 300 262 | 1 265 745 | 1 782 996 |
| Stage 2 | 313 666 | 540 407 | 237 762 | 142 210 | 551 428 | 682 617 |
| Corporate Lending | 162 688 | 205 214 | 157 298 | 110 344 | 319 986 | 315 558 |
| Consumer Financing | 0 | 0 | 37 412 | 0 | 37 412 | 0 |
| Investment Financing | 9 | 13 | 3 | 3 | 12 | 16 |
| Leasing | 6 687 | 10 086 | 23 884 | 17 461 | 30 571 | 27 547 |
| Private Lending | 144 282 | 325 094 | 19 165 | 14 402 | 163 447 | 339 496 |
| Stage 3 | 19 491 | 31 693 | 3 522 | 2 671 | 23 013 | 34 364 |
| Corporate Lending | 15 740 | 21 539 | 1 869 | 1 644 | 17 609 | 23 183 |
| Consumer Financing | 0 | 0 | 526 | 0 | 526 | 0 |
| Investment Financing | 5 | 9 | 0 | 0 | 5 | 9 |
| Leasing | 1 018 | 1 268 | 1 119 | 1 027 | 2 137 | 2 295 |
| Private Lending | 2 728 | 8 877 | 8 | 0 | 2 736 | 8 877 |
Overview of AS LHV Pank Consolidation Group
- Net profit EUR 34.1 million
- The volume of loans grew by EUR 355 million
- Deposits increased by 257 million euros in the quarter
- The number of customers increased by 11 thousand in the quarter
| EUR million | Q3 2024 | Q2 2024 | Change % |
Q3 2023 | Change % |
From the beginning of 2024 |
From the beginning of 2023 |
Change % |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 59.99 | 59,99 | 0% | 59.90 | 0% | 180.30 | 168.89 | 7% |
| Net fee and commission income | 8.74 | 8,74 | 6% | 5.72 | 53% | 24.84 | 18.78 | 32% |
| Other financial income | 0.65 | 0,65 | NA | -0.46 | NA | 0.85 | 0.28 | 203% |
| Total net operating income | 69.38 | 69,38 | 2% | 65.16 | 6% | 206.00 | 187.95 | 10% |
| Other income | 0.39 | 0,39 | -42% | 0.33 | 18% | 1.34 | 0.57 | 133% |
| Operating expenses Loan and bond portfolio |
-22.83 | -22,83 | -2% | -20.50 | 11% | -68.85 | -62.36 | 10% |
| gains/(-losses) | -7.09 | -7,09 | 46% | -2.77 | 156% | -14.76 | -1.78 | 728% |
| Income tax expenses | -5.74 | -5,74 | -2% | -6.19 | -7% | -17.98 | -16.59 | 8% |
| Net profit | 34.10 | 34,10 | -2% | 36.03 | -5% | 105.75 | 107.80 | -2% |
| Loan portfolio | 3 904 | 3 744 | 4% | 3 452 | 13% | |||
| Financial investments | 245 | 143 | 71% | 257 | -5% | |||
| Deposits of customers incl. deposits of financial |
5 716 | 5 459 | 5% | 5 256 | 9% | |||
| entities | 1 193 | 1 184 | 1% | 1 131 | -3% | |||
| Subordinated liabilities | 114 | 114 | 7% | 114 | 14% | |||
| Equity | 562 | 527 | 3% | 495 | 9% |
LHV Pank earned net interest income of EUR 60 million and EUR 8.7 million in net service fee income in Q3. Net financial income amounted to EUR 0.6 million in Q3. In total, the Bank's income was EUR 69.8 million and expenses were EUR 22.8 million. Net income rose by 7% and expenses increased by 11% over the year. The discounts of loans and bonds amounted to EUR 7.1 million in Q3. We made forward-looking specific and general discounts. We are keeping a very close eye on developments in the credit portfolio.
LHV Pank accounts for and recognises in expenses a 14% advance income tax which was EUR 5.5 million in Q3. Income tax expense on future disbursements of dividends by subsidiaries at the consolidated level was EUR 0.3 million in Q3.
The Bank's Q3 profit amounted to EUR 34.1 million, which is 2% less than in Q2 2024 (34.8) and 5% less than in Q3 2023 (36.0).
The strong result in Q3 was mainly impacted by higher interest rate income, due in turn to larger than planned volumes in the loan portfolio. The growth in interest income will slow since the expenses paid on deposits are growing faster. Service charge income fell short of planned levels, mainly due to profit shared with the UK bank, while expenses were as planned. Since we outperformed planned results significantly, we updated the financial plan at the end of Q3.
Income from settlements, currency exchange and investment services contribute the most into service fees.
The total volume of the Bank's loan portfolio reached EUR 3,904 million by the end of Q3 (Q2 2024: EUR 3 744 million). The volume of loans grew by EUR 160 million in Q3 (Q2 2024: a growth of EUR 194 million). The net retail loan portfolio grew by 7% during the quarter, reaching EUR 1 832 million (Q2 2024: EUR 1 719 million). The net corporate loan portfolio grew by 2% during the quarter, reaching EUR 2 072 million (Q2 2024: EUR 2 024 million).
The volume of deposits at the Bank increased by EUR 257 million from the previous quarter and stood at EUR 5 716 million at the end of the quarter (Q2 2024: EUR 5 459 million). The volume of payment intermediaries' deposits grew by EUR 52 million during the quarter. Of the deposits, EUR 3 714 million were call deposits, EUR 1 650 million term deposits and EUR 352 million platform deposits. The volume of individuals' deposits was EUR 1 699 million as at the end of the quarter, having grown by 8% since the previous quarter.
The Bank's expense-income ratio was 32.7%%n Q3, increasing by 1.4 percentage points from Q3 2023 (31.3%).
Loans to businesses grew by EUR 47 million and retail loans increased by EUR 113 million. Lending activity has remained solid despite the slumping economy. The annual growth of the business loan portfolio in Estonia was 7.2% at the end of August while domestic households' loan portfolio grew 7.6%. The growth of businesses' loan portfolio has shown signs of accelerating in recent months. We are outpacing growth on the market; our market share of new loans to businesses is close to 30%. In addition, the strong result is also due to the continuation of the home loan refinancing campaign and the general activation of the home loan market, which also keeps new applications coming in. September marked the start of the student loan issuing period.
The corporate credit portfolio, which includes loans and guarantees, grew EUR 400.9 million over the year (+21%) with a quarter-over-quarter growth of EUR 106.7 million (+5%). Loans granted to companies in the sector of real estate related activities were the largest source of growth, growing by EUR 158.3 million (+22%) in a year. Next came loans to companies in the construction sector, which grew EUR 71.5 million from the year before (+155%) and loans issued to companies in the transport and warehousing sector, which grew EUR 47.8 million (+360%) over the year.
Compared to Q2 2024, the portfolio growth was most influenced by the sector engaged in real estate activities (quarterly growth EUR 34.7 million; +4%), followed by the construction sector (EUR 28.3 million; +32%) and the administrative and support activities sector (EUR 14.7 million; +20%).
The majority of corporate loans were granted to the real estate sector, which makes up 39% of the Bank's corporate loan portfolio. Of real estate loans, the principal part was issued to projects with high-quality rental streams, with real estate developments making up a much smaller share. Most of the financed real estate developments are located in Tallinn, while projects located in other major Estonian cities and in the vicinity of Tallinn made up about 26% of development projects. LHV's market share of new development financing in Tallinn made up about one-third by estimate at the end of Q3 2024. The LHV real estate development portfolio is well-positioned in case market trends should change – the financed developments are in good locations and the risk to planned sales price ratio averages 56%.
After the real estate sector, the largest amount of credit has been issued to companies in the power, gas, steam and conditioned air sector (9%) and to manufacturing industry companies (8%). Of sectors that usually run a higher credit risk, construction makes up 5%, transport and warehousing 3% and HoReCa 2% of the total volume of the portfolio.
During the quarter, the number of the bank's clients grew by more than 11 000. New clients were added at a solid clip and clients' activity level was high.
Ordinary clients' deposits increased by EUR 174 million during the quarter and financial intermediaries' deposits by EUR 52 million. The financial situation and savings capacity of households has started gradually improving, but recovery will take time. The annual growth of households' deposits in Estonia reached to 8.7% and corporate deposits to 1.6%. Still, the growth rate is clearly less than the long-term average and the growth is not broadbased. The goal is to attract deposits from the Estonian market, and this effort was successful in Q3, but due to faster loan portfolio growth, we also increased deposits attracted via platforms by EUR 92 million. Deposits remain in the focus.
Loan impairments grew somewhat during the quarter. The environment is still fragile and Q3 also saw model-based forwardlooking impairments. In addition, impairments were also affected by changes in ratings of individual clients. There were also movements in the positive direction, which levelled the results. As a whole, the bank's loan portfolio quality has remained strong and the share of overdue loans continues to be low. We see increase in arrears in consumer loans, but the levels are reasonable and consistent with expectations.
We entered into a contract of sale with TBB Pank for part of the loan portfolio. At the time of the signing, the portfolio being purchased was EUR 36 million, which may go down to EUR 25 million. The transaction will be completed by late October.
In August, we launched a comprehensive offer aimed at apartment associations, which combines a convenient payment solution, insurance and financing at low rates for investments into energy efficiency. The offer has been very well received.
The internship summer, highly popular among young people, came to a close. This summer, 31 interns worked at LHV. Besides their everyday work, they attended workshops where they learned more about their strengths, the history of LHV, investing and pensions, job-seeking and LinkedIn and Youth Bank. As part of Book Club they also read the LHV book Pangasaladus. Grouped into teams, interns presented projects for making LHV even better.
Instar's job expectations and employer reputation survey found that LHV Pank was seen as the most attractive employer among experienced employees, youth and economics students. LHV placed third among IT students.
Overview of LHV Bank Limited
In Q3, the bank continued to actively grow its business volumes. Deposits grew more than 40% during the quarter and the loan portfolio saw over 50% growth for the second quarter in a row. Deposits grew from EUR 189 million to EUR 635 million. By the end of the quarter, the bank had almost 10,000 depositors. Deposits are attracted from three deposit platforms, with interest rates adjusted on the deposits as needed to optimize the interest expenses incurred. On 1 August the Bank of England cut the reference interest rate by 0.25% to 5.00%, resulting in the bank's interest rates and financing expenses falling as well.
Loans grew by EUR 76 million to EUR 223 million during the quarter. Loans approved by the Credit Committee but yet to be issued stood at EUR 150 million at the end of the quarter. The quality of the loan portfolio was strong, and no borrowers were in arrears as of the end of the quarter. In Q3, the focus was on expanding the network of loan brokers and team-building. The bank now has partnership agreements with over 50 loan brokers. By the quarter's end, the whole team was together – loan managers and support functions in both London and Manchester.
Business volumes of payments of financial intermediary clients stayed at the same level as last quarter. The volumes of deposits, which dropped in Q2, recovered to some degree but remained lower than planned. The reason for the lower deposits was tougher competition in competitors' pricing of deposits and the fact that the bank had a more conservative risk appetite than competitors in servicing some clients.
Net profit for the quarter was EUR 0.6 million. The quarterly profitability result fell short of the target due to the slow growth in
| EUR million | Q3 2024 | Q2 2024 | change % |
|---|---|---|---|
| Net interest income | 7.21 | 9.63 | -25% |
| Net fee and commission income | 2.23 | 2.44 | -9% |
| Other financial income | -0.06 | -0.03 | 100% |
| Total net operating income | 9.38 | 12.04 | -22% |
| Other income | 0.00 | 0.00 | NA |
| Operating expenses | -10.0 | -9.82 | 2% |
| Loan and bond portfolio gains/(-losses) |
-0.18 | -0.19 | -5% |
| Income tax expenses | 0.2 | -1.09 | NA |
| Net profit | 0.6 | 0.94 | -36% |
| Loan portfolio | 222.7 | 146.8 | 52% |
| Deposits of customers | 635.3 | 446.2 | 42% |
| Equity | 84.4 | 83.8 | 1% |
the loan portfolio in the beginning of the year; which led to slower growth of interest income, and the decrease in financial intermediaries' deposits and greater volatility, which led to lower than planned interest income. The "other expenses" outperformed expectations due to the introduction of the mobile bank for retail banking clients. A few major one-time expenses also occurred in Q3. Overall, "other expenses" at the nine-month mark were less than last year in the same period.
Work continued on developing the new retail banking services, mobile bank and website. In early October, the mobile bank was opened for LHV staff for testing, the first accounts were opened and the first payments made. The public opening of the mobile bank will take place a few months from now depending on the results of the in-house testing. Direct debiting and cards are planned to be ready in Q1 2025.
In early July, the bank joined the SEPA system of ordinary payments. Preparations for accession proved more timeconsuming than planned and the accession window planned for December will actually be realized in April 2025.
In Q3, supervisory authorities published several policy statements on the implementation of Basel 3.1 standards and the implementation date was postponed to 1 January 2026. The bank is engaged in conducting impact analysis of the new rules.
Overview of AS LHV Varahaldus
- Net profit for Q2 was EUR 0.6 million
- Number of active second-pillar clients at the end of the quarter –116 thousand
- Volume of assets in second-pillar funds by the end of the Septeber – EUR 1 413 million
- Volume of third-pillar assets exceeded EUR 100 million
| nds | = Other |
|---|---|
| Change | Change | From the beginning of |
From the beginning of |
Change | ||||
|---|---|---|---|---|---|---|---|---|
| EUR million | Q3 2024 | Q2 2024 | % | Q3 2023 | % | 2024 | 2023 | % |
| Net fee and commission income | 2.25 | 2.24 | 0% | 2.26 | 0% | 6.68 | 6.60 | 1% |
| Net financial income | 0.11 | 0.17 | -35% | -0.03 | NA | 0.50 | 0.15 | 233% |
| Operating expenses | -1.46 | -1.37 | 7% | -1.26 | 16% | -4.29 | -4.03 | 6% |
| Depreciation of non-current | ||||||||
| assets | -0.32 | -0.30 | 7% | -0.37 | -14% | -0.99 | -1.12 | -12% |
| Profit | 0.58 | 0.74 | -22% | 0.60 | -3% | 1.90 | 1.60 | 19% |
| Financial investments | 6.0 | 6.0 | 0% | 8.0 | -25% | |||
| Equity | 19.0 | 19.0 | 0% | 22.0 | -14% | |||
| Assets under management | 1 521.0 | 1 529.0 | -1% | 1 451.0 | 5% |
In Q3, the operating income of LHV Varahaldus amounted to EUR 2.3 million and the net profit was EUR 0.6 million. Operating income largely corresponds to what was expected at the beginning of the year, while operating expenses were influenced by one-time personnel expenses at the beginning of the quarter. Profitability has been positively influenced by a good yield of major funds that also continued in the past quarter and the resulting financial income earned from a growth in the value of own shares. The financial plan that was updated in September did not have an extensive impact on the forecasts of LHV Varahaldus.
Compared to the first half of the year, Q3 was considerably more restless in equity markets. The major equity markets ended the quarter at new peaks, but a sudden drop of a few days was seen in the markets at the beginning of both August and September, followed by a quick recovery. The long-awaited reduction of the US base interest by 50 base points also took place in Q3, but the future trend on the backdrop of a strong economy remains unclear. Measured in euros, the values of MSCI World and SP500 grew by 2.1% and 1.4%, respectively. The dollar weakened towards the euro by 3.8% during the quarter.
All LHV's pension funds showed a positive yield in the past quarter. The values of M, L and XL shares grew by 1.8%, 1.2% and 2.2%, respectively. Pension fund Roheline grew by 1.9% and the three-month yield of pension fund Indeks was 1.9%. The conservative funds S and XS rose by 2.8% and 2.5%, respectively. In the largest funds of L and XL, the yield was positively influenced mainly by investments related to precious metals, while the quarter was weaker for other listed assets contained in the portfolio, both shares and bonds.
The number of LHV's active second-pillar clients at the quarter's end was more than 116 thousand, having dropped by nearly two thousand in the three months. The drop was mainly caused by clients who left the second pillar at the beginning of September, but the sales figures have also been more modest. The rate of clients leaving the second pillar remains lower compared to previous periods, with the four-month window of applications for than-before number of exiting clients. The volume of assets managed by LHV Varahaldus was EUR 1,521 million by the end of the quarter. Clients also continue actively increasing the second pillar payments – by the end of September, 7,700 LHV pension fund clients had submitted the respective application.
Long-term Management Board member and fund manager of LHV Varahaldus, Joel Kukemelk left his position on 31 July and the Management Board now has two members since August. Erko Rebane with his long-standing experience became the portfolio manager responsible for index funds, and Jani Mäenpää became the portfolio manager of pension funds Roheline and Roheline III.
The portfolio of all actively managed funds and distribution of asset classes largely correspond to the long-term goal, where M, L and XL portfolios are mainly invested in unlisted asset classes less dependent on stock markets. We keep a close eye on developments on the stock market and are prepared to quickly adjust our positions depending on the conditions. We also devote extra attention to liquidity to ensure capability to more aggressively invest and naturally make disbursements to customers if they change or exit funds.
Overview of AS LHV Kindlustus
The Q2 2024 sales results of AS LHV Kindlustus decreased from the The Q3 2024 sales results of AS LHV Kindlustus decreased from the previous quarter, largely due to competitors' price changes and the seasonal low consumer activity. Of insurance products, the results were the best in home and travel insurance – the sales figures of both products have exceeded the financial plan throughout 2024. The results of all-risks and motor TPL were largely influenced by competitors whose price changes reduced LHV's sales volumes a little. In August, we also applied some changes in the pricing of all-risks insurance in order to better adapt to market developments. The volume of insurance premiums from the health insurance product solution marketed in cooperation with Confido was EUR 1,709 thousand in Q3. The number of insurance contracts continues its slow but stable growth. As at the end of Q3, the company exceeded the main goals of the 2024 financial plan.
In the development of information systems, several important updates were completed in the claims adjustment programme and in the data warehouse created to improve the company's analytical capability. The development of both systems continues in Q4 2024. A great focus continues to be on improving cooperation and making processes more efficient with other LHV Group companies. The improvement and updating of several insurance terms and conditions commenced in Q3. All the amendments to the terms and conditions will be approved by the Management Board of the company and will enter into force at the beginning of Q4 2024.
As at 30 September 2024, LHV Kindlustus had 245 thousand valid insurance contracts and 169 thousand clients. Both indicators grew from the previous quarter.
The volume of gross insurance premiums was EUR 8,452 thousand and the net earned insurance premiums totalled EUR 7,985 thousand in Q3. The proportions of the products in the insurance portfolio remained the same as in the previous quarter.
During Q3, 24,729 new loss events were registered, and claims adjustment was completed in the case of 24,753 incidents. As at the end of the quarter, a total of 2,818 claim files were open. The net losses incurred in the period together with indirect claims adjustment costs were EUR 5,322 thousand.
The quarterly loss frequency of insurance products corresponded to the financial plan. There were a few major loss events. Of insurance products, the gross loss ratios were good in home and travel insurance. The company's profit in Q3 was EUR 452 thousand. Cumulatively, we are exceeding the 2024 profitability objectives. The volume of the company's operating expenses as at 30 September 2024 was below the planned level.
| EUR thousand | Q3 2024 | Q2 2024 | Change % | Q3 2023 | Change % |
|---|---|---|---|---|---|
| Gross insurance premiums | 8 452 | 8 963 | 6% | 7 525 | 19% |
| Net earned insurance premiums | 7 985 | 7 564 | -5% | 6 335 | 19% |
| Net losses incurred | -5 322 | -4 767 | -10% | -4 108 | 16% |
| Total net operating expenses | -2 304 | -2 411 | 5% | -1 930 | 25% |
| Underwriting result | 359 | 385 | 7% | 298 | 29% |
| Net profit | 452 | 428 | -5% | 299 | 43% |
.
As of the end of Q3, LHV Kindlustus employed 55 people.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income
| 112 493 330 498 92 119 Interest income -45 066 -123 728 -23 978 Interest expense 67 427 206 770 68 141 Net interest income 9 21 808 62 974 18 493 Fee and commission income -5 488 -14 849 -4 876 Fee and commission expense Net fee and commission income 10 16 320 48 125 13 617 103 678 -564 Net gains/losses from financial assets measured at fair value 695 619 -25 Foreign exchange gains/losses 1 297 -589 Net gain/loss from financial assets 798 359 1 430 Other income 319 -4 -19 Other expense -8 -20 166 -61 549 -16 309 Staff costs -17 079 -48 811 -16 498 Administrative and other operating expenses Profit before impairment losses on loans and 47 655 147 243 advances 48 673 0 0 0 Change in financial investments -15 170 Impairment losses on financial instruments 21 -7 276 -2 883 -6 281 -6 335 -6 335 -6 281 -6 314 Income tax expense -5 682 -18 088 |
(in thousands of euros) | Note | Q3 2024 | 9M 2024 | Q3 2023 | 9M 2023 |
|---|---|---|---|---|---|---|
| 235 908 | ||||||
| -49 759 | ||||||
| 186 149 | ||||||
| 51 287 | ||||||
| -13 441 | ||||||
| 37 846 | ||||||
| -1 214 | ||||||
| 1 463 | ||||||
| 249 | ||||||
| 546 | ||||||
| -25 | ||||||
| -47 827 | ||||||
| -48 642 | ||||||
| 128 296 | ||||||
| -180 | ||||||
| -1 929 | ||||||
| -18 017 | ||||||
| Net profit for the reporting period | 2 | 34 697 | 113 985 | 39 476 | 108 170 | |
| 39 84678 1 038 3 324 0 561 Other comprehensive income/loss: Items that may be reclassified subsequently to profit or loss: Unrealized exchange differences arising on the translation of the financial statements of foreign |
27 092 | |||||
| operations 1 094 2 821 -221 |
894 | |||||
| Total profit and other comprehensive income for the | ||||||
| 116 806 reporting period 35 791 39 255 |
109 064 | |||||
| Total profit of the reporting period attributable to: | ||||||
| Owners of the parent 34 385 113 215 39 058 |
107 065 | |||||
| Non-controlling interest 312 770 418 |
1 105 | |||||
| Total profit for the reporting period 2 34 697 113 985 39 476 |
108 170 | |||||
| Total profit and other comprehensive income attributable to: | ||||||
| Owners of the parent 35 479 116 036 38 837 |
107 959 | |||||
| Non-controlling interest 312 770 418 |
1 105 | |||||
| Total profit and other comprehensive income for the | ||||||
| reporting period 35 791 116 806 39 255 |
109 064 | |||||
| 16 | ||||||
| Basic earnings per share (in euros) 0.11 0.35 0.12 0.12 Diluted earnings per share (in euros) 16 0.10 0.35 |
0.34 0.33 |
The Notes on pages 25 to 41 are an integral part of the condensed consolidated interim financial statements.
| (in thousands of euros) | Note | 30.09.2024 | 31.12.2023 |
|---|---|---|---|
| Assets | |||
| Due from central bank | 4, 5, 6, 12 | 3 224 974 | 3 052 890 |
| Cash and cash equivalents | 4, 5, 6, 12 | 141 770 | 52 145 |
| Due from investment companies | 4, 6, 12 | 7 671 | 12 509 |
| Due from credit institutions | 1 600 | 1 850 | |
| Financial assets at fair value through profit or loss | 4, 6, 7 | 21 835 | 18 453 |
| Investments in debt securities at amortised cost | 7 | 238 098 | 321 888 |
| Loans and advances to customers | 4, 6, 8, 21 | 4 126 235 | 3 561 791 |
| Receivables from customers | 10 598 | 49 505 | |
| Other financial assets | 280 | 273 | |
| Other assets | 6 162 | 8 184 | |
| Financial investment | 1 000 | 1 000 | |
| Property and equipment | 19 | 17 969 | 22 109 |
| Intangible assets | 19 | 13 008 | 13 843 |
| Goodwill | 9 148 | 9 150 | |
| Total assets | 2 | 7 820 348 | 7 125 590 |
| Liabilities | |||
| Deposits of customers | 13 | 6 286 360 | 5 731 005 |
| Loans received and debt securities in issue | 13 | 679 551 | 563 728 |
| Financial liabilities at fair value through profit or loss | 7 | 1 172 | 1 843 |
| Accounts payable and other liabilities | 14 | 107 433 | 145 995 |
| Subordinated debt | 6, 20 | 106 079 | 126 653 |
| Total liabilities | 2 | 7 180 595 | 6 569 224 |
| Owner's equity | |||
| Share capital | 32 419 | 31 983 | |
| Share premium | 146 958 | 143 372 | |
| Statutory reserve capital | 4 713 | 4 713 | |
| Other reserves | 13 683 | 9 333 | |
| Retained earnings | 433 974 | 359 029 | |
| Total equity attributable to owners of the parent | 631 747 | 548 430 | |
| Non-controlling interest | 8 006 | 7 936 | |
| Total equity | 639 753 | 556 366 | |
| Total liabilities and equity | 7 820 348 | 7 125 590 |
Condensed Consolidated Interim Statement of Financial Position
The Notes on pages 25 to 41 are an integral part of the condensed consolidated interim financial statements.
Condensed Consolidated Interim Statement of Cash Flows
| (in thousands of euros) Note |
Q3 2024 | 9M 2024 | Q3 2023 | 9M 2023 | |
|---|---|---|---|---|---|
| Cash flows from operating activities | |||||
| Interest received | 114 020 | 332 642 | 89 996 | 230 897 | |
| Interest paid | -45 126 | -103 322 | -15 188 | -30 780 | |
| Fees and commissions received | 21 904 | 63 101 | 18 456 | 51 302 | |
| Fees and commissions paid | -5 509 | -14 880 | -4 877 | -13 442 | |
| Other income received | 289 | 1 032 | 189 | -183 | |
| Staff costs paid | -19 391 | -56 562 | -15 383 | -43 588 | |
| Administrative and other operating expenses paid | -17 237 | -40 825 | -13 672 | -40 467 | |
| Income tax paid | -11 917 | -23 996 | -5 188 | -17 557 | |
| Cash flows from operating activities before change in operating | |||||
| assets and liabilities | 37 033 | 157 190 | 54 333 | 136 182 | |
| Net increase/decrease in operating assets: | |||||
| Net increase/(decrease) in financial assets at fair value through profit or loss | 1 538 | 346 | -3 050 | -3 652 | |
| Loans and advances to customers | -238 570 | -570 296 | -128 087 | -162 690 | |
| Mandatory reserve at central bank | -2 547 | -1 694 | -2 231 | -4 156 | |
| Security deposits | 0 | 0 | 24 | 24 | |
| Other assets | -2 582 | -4 126 | -6 199 | -20 397 | |
| Net changes of investment securities at fair value through profit or loss and | |||||
| of investment securities at amortized cost | -105 218 | 80 741 | 101 538 | 105 974 | |
| Deposits with more than 3 months maturity | 0 | 250 | 0 | 0 | |
| Net increase/decrease in operating liabilities: | |||||
| Demand deposits of customers | 110 442 | 18 610 | -190 784 | -831 965 | |
| Term deposits of customers | 388 679 | 515 954 | 436 714 | 1 232 944 | |
| Financial liabilities held for trading at fair value through profit and loss | 1 130 | -671 | -123 | -3 415 | |
| Other liabilities | 23 828 | 9 887 | 6 513 | 34 381 | |
| Net cash generated from/used in operating activities | 213 733 | 186 417 | 268 648 | 483 230 | |
| Cash flows from investing activities | |||||
| Purchase of non-current assets | -1 560 | -4 040 | -1 375 | -6 797 | |
| Net cash flows from/used in investing activities | -1 560 | -4 040 | -1 375 | -6 797 | |
| Cash flows from financing activities | |||||
| Paid in share capital (incl. share premium) | 0 | 4 021 | 0 | 2 627 | |
| Dividends paid | 0 | -42 278 | 0 | -13 842 | |
| Loans received | 0 | 300 000 | 35 000 | 53 631 | |
| Prepayments of loans received | -62 830 | -200 000 | -49 864 | -147 520 | |
| Repayments of the principal of lease liabilities | 674 | -1 640 | -533 | -1 484 | |
| Net cash flows from/used in financing activities | -62 156 | 60 103 | -15 398 | -106 588 | |
| Effect of exchange rate changes on cash and cash equivalents | 6 | 6 004 | 12 697 | -251 | 1 675 |
| Net increase/decrease in cash and cash equivalents | 156 021 | 255 177 | 251 624 | 371 520 | |
| Cash and cash equivalents at the beginning of the period | 3 160 801 | 3 061 645 | 2 553 495 | 2 433 599 | |
| Cash and cash equivalents at the end of the period | 12 | 3 316 822 | 3 316 822 | 2 805 119 | 2 805 119 |
The Notes on pages 25 to 41 are an integral part of the condensed consolidated interim financial statements
| attributable | Non | |||||||
|---|---|---|---|---|---|---|---|---|
| Statutory | to owners | control | ||||||
| Share | Share | reserve | Other | Retained | of LHV | ling | ||
| (in thousands of euros) | capital | premium | capital | reserves | earnings | Group | interest Total equity | |
| Balance as at 01.01.2023 | 31 542 | 141 186 | 4 713 | 5 683 | 229 817 | 412 941 | 7 908 | 420 849 |
| Paid in share capital | 441 | 2 186 | 0 | 0 | 0 | 2 627 | 0 | 2 627 |
| Dividends paid | 0 | 0 | 0 | 0 | -12 617 | -12 617 | -1 225 | -13 842 |
| Change in accounting methods | 0 | 0 | 0 | 0 | -153 | -153 | -83 | -236 |
| Share options | 0 | 0 | 0 | 1 405 | 2 379 | 3 784 | 0 | 3 784 |
| Profit for the reporting period Other comprehensive |
0 | 0 | 0 | 0 | 107 065 | 107 065 | 1 105 | 108 170 |
| income/loss | 0 | 0 | 0 | 894 | 0 | 894 | 0 | 894 |
| Total profit and other comprehensive income for the |
||||||||
| reporting period | 0 | 0 | 0 | 894 | 107 065 | 107 959 | 1 105 | 109 064 |
| Balance as at 30.09.2023 | 31 983 | 143 372 | 4 713 | 7 982 | 326 492 | 514 542 | 7 705 | 522 246 |
| Balance as at 01.01.2024 | 31 983 | 143 372 | 4 713 | 9 333 | 359 029 | 548 430 | 7 936 | 556 366 |
| Paid in share capital | 436 | 3 586 | 0 | 0 | 0 | 4 022 | 0 4 022 |
|
| Dividends paid | 0 | 0 | 0 | 0 | -41 578 | 0 | -700 | -42 278 |
| Share options | 0 | 0 | 0 | 1 529 | 3 308 | 4 837 | 0 4 837 |
|
| Profit for the reporting period Other comprehensive |
0 | 0 | 0 | 0 | 113 215 | 113 215 | 770 | 113 985 |
| income/loss | 0 | 0 | 0 | 2 821 | 0 | 2 821 | 0 2 821 |
|
| Total profit and other comprehensive income for the |
||||||||
| reporting period | 0 | 0 | 0 | 2 821 | 113 215 | 116 036 | 770 | 116 806 |
| Balance as at 30.09.2024 | 32 419 | 146 958 | 4 713 | 13 683 | 433 974 | 631 747 | 8 006 | 639 753 |
Condensed Consolidated Interim Statement of Changes in Equity
Total equity
The Notes on pages 25 to 41 are an integral part of the condensed consolidated interim financial statements
Notes to the Condensed Consolidated Interim Financial Statements
NOTE 1 Accounting Policies
The condensed consolidated interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting", as adopted by the European Union. The condensed consolidated interim financial statements does not contain all the information necessary to be presented in the annual report.
These condensed consolidated interim financial statements should be read in conjunction with the group's annual financial statements as at 31 December 2023. The same accounting policies and methods of computation are followed in the condensed consolidated interim financial statements as compared with the most recent annual financial statements.
There are no significant changes in risk policies of the group, all the results including estimates and judgement of expected credit losses are in line with principles described in group's annual financial statements as at 31 December 2023.
The financial figures of the condensed consolidated interim financial statements have been presented in thousands of euros, unless otherwise indicated. The interim financial statements have been consolidated and include the results of AS LHV Group and its subsidiaries AS LHV Varahaldus (100% interest), AS LHV Pank (100% interest), LHV Bank Ltd (100% interest), AS LHV Paytech (100% interest) and AS LHV Finance (65% interest) and AS LHV Kindlustus (65% interest).
Correction in classification of investing and operating cash flows
Management identified a classification misstatement related to financial investments. Such purchased and sales have been previously classified under net cash flow from/used in investing activities but as these assets are operating activities in nature then the cash flows from purchases and sales should be classified under net cash generated from/used in operating activities. The presentation has been corrected by reclassifying the affected cash flow statement line items for the prior periods as follows:
| Q3 2023 | Increase/(Decrease) | Q3 2023 restated | |
|---|---|---|---|
| Administrative and other operating expenses paid Cash flow from operating activities before change in |
-13 672 | -431 | -14 103 |
| operating assets and liabilities | 54 333 | -431 | 53 902 |
| Net change in debt and equity securities | 0 | 101 538 | 101 538 |
| Other liabilities | 6 513 | 431 | 6 944 |
| Net cash generated from/used in operating activities | 117 246 | 151 402 | 268 648 |
| Net change in debt and equity securities | 101 538 | -101 538 | 0 |
| Net cash flow from/used in investing activities | 100 163 | 101 538 | -1 375 |
| 9M 2023 | Increase/(Decrease) | 9M 2023 restated | |
|---|---|---|---|
| Administrative and other operating expenses paid Cash flow from operating activities before change in |
-40 467 | -1 276 | -41 743 |
| operating assets and liabilities | 136 182 | -1 276 | 134 906 |
| Net change in debt and equity securities | 0 | 105 974 | 105 974 |
| Other liabilities | 34 381 | 1 276 | 35 637 |
| Net cash generated from/used in operating activities | 229 736 | 253 494 | 483 230 |
| Net change in debt and equity securities | 105 974 | -105 974 | 0 |
| Net cash flow from/used in investing activities | 99 177 | -105 974 | -6 797 |
NOTE 2 Business Segments
The Group divides its business activities into segments according to its legal structure, except LHV Pank divides its business activities by 3 main segments: retail banking, corporate banking and financial intermediates. Financial intermediates segment also includes the fee sharing on the basis of the cooperation agreement concluded with LHV Bank Ltd. The segments form a part of the Group, with a separate access to financial data and which are subject to regular monitoring of operating profit by the Group's decision-maker. The Management Board of AS LHV Group has been designated as the decision-maker responsible for allocation of funds and assessment of the profitability of the business activities. The result posted by a segment includes revenue and expenditure directly related to the segment.
The revenue of a reported segment includes gains from transactions between the segments, i.e. loans granted by AS LHV Pank to other group companies. The division of interest income and fee and commission income by customer location has been presented in Notes 9 and 10. The breakdown of interest income by customer location does not include the income from current accounts, deposits and investments in securities. The Group does not have any customers, whose income would account for more than 10% of the corresponding type of revenue.
| Q3 2024 | Retail banking |
Corporate banking |
Asset manage ment |
Hire purchase and consumer finance in Estonia |
Financial intermediates |
Insura nce |
LHV Bank |
Other activities |
Elimina tions |
Total |
|---|---|---|---|---|---|---|---|---|---|---|
| Interest income | 24 579 | 43 651 | 16 | 3 756 | -3 473 | 104 | 13 524 | 41 738 | -11 402 | 112 493 |
| Interest expense Intrabank interest |
-13 609 | -17 230 | 0 | -1 917 | -2 697 | -75 | -6 311 | -14 629 | 11 402 | -45 066 |
| income/-expense | 16 879 | -2 420 | 0 | 2 | 9 324 | 0 | 0 | -23 785 | 0 | 0 |
| Net interest income | 27 849 | 24 001 | 16 | 1 841 | 3 154 | 29 | 7 213 | 3 324 | 0 | 67 427 |
| Fee and commission income Fee and commission |
8 278 | 4 799 | 2 251 | 221 | 1 199 | 1 578 | 2 868 | 2 135 | -1 521 | 21 808 |
| expense | -4 607 | -1 236 | 0 | -190 | -244 | -20 | -638 | -3 | 1 450 | -5 488 |
| Net fee and commission income |
3 671 | 3 563 | 2 251 | 32 | 954 | 1 558 | 2 230 | 2 132 | -71 | 16 320 |
| Other income | 3 | 358 | 0 | 0 | 0 | -6 | -2 | 24 | -23 | 355 |
| Net gains/(-losses) from financial assets Administrative and |
0 | 0 | 96 | 0 | -1 | 120 | -66 | 649 | 0 | 798 |
| other operating expenses, staff costs |
-11 251 | -7 170 | -1 780 | -997 | -2 252 | -1 249 | -9 992 | -2 648 | 94 | -37 245 |
| Operating profit Impairment losses on |
20 273 | 20 752 | 583 | 876 | 1 856 | 452 | -617 | 3 481 | 0 | 47 655 |
| loans and advances | -95 | -6 278 | 0 | -695 | 0 | 0 | -184 | -25 | -7 276 | |
| Income tax | -2 666 | -2 113 | 0 | 0 | -542 | 0 | 200 | -158 | -402 | -5 682 |
| Net profit | 17 512 | 12 360 | 583 | 181 | 1 314 | 452 | -601 | 3 298 | -403 | 34 697 |
| 9M 2024 | Retail banking |
Corporate banking |
Asset manage ment |
Hire purchas e and consume r finance in Estonia |
Financial inte rmedia tes |
Insu rance |
LHV Bank |
Other activities |
Elimi nations |
Total |
|---|---|---|---|---|---|---|---|---|---|---|
| Interest income | 72 931 | 127 786 | 89 | 11 324 | -15 412 | 427 | 39 197 | 125 212 | -31 056 | 330 498 |
| Interest expense | -39 549 | -49 294 | 0 | -5 813 | -7 714 | -215 | -13 560 | -20 111 | 12 528 | -123 728 |
| Intrabank interest income/-expense |
48 778 | -6 232 | 0 | 6 | 30 578 | 0 | 0 | -73 130 | 0 | 0 |
|---|---|---|---|---|---|---|---|---|---|---|
| Net interest income | 82 161 | 72 260 | 89 | 5 517 | 7 452 | 212 | 25 637 | 31 970 | -18 528 | 206 770 |
| Fee and commission income Fee and commission |
24 634 | 12 019 | 6 673 | 664 | 3 270 | 4 837 | 8 845 | 6 741 | -4 709 | 62 974 |
| expense | -13 235 | -3 155 | 0 | -556 | -735 | -48 | -1 611 | -17 | 4 508 | -14 849 |
| Net fee and commission income |
11 399 | 8 865 | 6 673 | 108 | 2 535 | 4 789 | 7 234 | 6 724 | -201 | 48 125 |
| Other income | 3 | 1 200 | 0 | 0 | 0 | -14 | 155 | 136 | -70 | 1 411 |
| Net gains/(-losses) from financial assets Administrative and other operating |
-36 | -1 | 423 | 0 | -2 | 158 | -132 | 83 387 | -82 500 | 1 297 |
| expenses, staff costs | -33 542 | -22 044 | -5 278 | -2 828 | -6 944 | -4 015 | -28 202 | -7 778 | 271 | -110 360 |
| Operating profit Impairment gains/(- losses) on loans and |
59 985 | 60 280 | 1 907 | 2 798 | 3 041 | 1 130 | 4 692 | 114 440 | -101 029 | 147 243 |
| bond portfolio | -484 | -12 309 | 0 | -2 611 | 0 | 0 | -413 | 648 | 0 | -15 170 |
| Income tax | -7 683 | -6 742 | -800 | -566 | -1 833 | 0 | 926 | -1 046 | -343 | -18 088 |
| Net profit | 51 817 | 41 228 | 1 107 | -380 | 1 208 | 1 130 | 5 205 | 114 042 | -101 372 | 113 985 |
| Total assets 30.09.2024 Total liabilities |
2 912 702 | 4 025 400 | 19 931 | 87 400 | 4 | 25 282 | 727 430 | 885 344 | -863 146 | 7 820 348 |
| 30.09.2024 | 3 629 531 | 1 802 808 | 567 | 69 541 | 1 031 831 | 18 875 | 642 997 | 587 302 | -602 857 | 7 180 595 |
| Q3 2023 | Retail banking |
Corporate banking |
Asset manage ment |
Hire purchase and consumer finance in Estonia |
Financial inter mediates |
Insurance | LHV UK |
Other activities |
Elimi nations |
Total |
|---|---|---|---|---|---|---|---|---|---|---|
| Interest income | 23 255 | 34 759 | 18 | 3 965 | -7 408 | 95 | 10 725 | 33 649 | -6 938 | 92 119 |
| Interest expense Intrabank interest |
-10 568 | -6 201 | 0 | -1 711 | -1 917 | -45 | -1 636 | -8 837 | 6 938 | -23 978 |
| income/-expense Net interest |
20 701 | -8 465 | 0 | 2 | 9 573 | 0 | 0 | -21 811 | 0 | 0 |
| income Fee and commission |
33 388 | 20 092 | 18 | 2 255 | 248 | 50 | 9 089 | 3 001 | 0 | 68 141 |
| income Fee and commission |
9 071 | 1 717 | 2 257 | 236 | 565 | 1 489 | 2 748 | 1 563 | -1 152 | 18 493 |
| expense Net fee and commission |
-4 927 | -934 | 0 | -180 | 147 | 0 | -45 | -31 | 1 093 | -4 876 |
| income | 4 144 | 783 | 2 257 | 56 | 712 | 1 489 | 2 703 | 1 532 | -59 | 13 617 |
| Other income | -8 | 254 | 0 | 0 | 0 | -3 | 0 | 83 | -15 | 311 |
| Net profit | 23 369 | 13 443 | 604 | 584 | -3 900 | 299 | 3 166 | 2 127 | -216 | 39 476 |
|---|---|---|---|---|---|---|---|---|---|---|
| Income tax | -3 210 | -1 735 | 0 | -160 | -693 | 0 | 0 | -301 | -216 | -6 314 |
| Impairment gains/(-losses) on loans and bond portfolio |
-273 | -1 062 | 0 | -804 | 0 | 0 | -110 | -634 | 0 | -2 883 |
| Operating profit | 26 852 | 16 240 | 604 | 1 547 | -3 207 | 299 | 3 276 | 3 062 | 0 | 48 673 |
| Administrative and other operating expenses, staff costs |
-10 669 | -4 889 | -1 640 | -765 | -4 166 | -1 165 | -8 503 | -1 084 | 75 | -32 807 |
| Net gains/(- losses) from financial assets |
-2 | 0 | -31 | 0 | -1 | -72 | -13 | -470 | 0 | -589 |
| 9M 2023 | Retail banking |
Corporate banking |
Asset manage ment |
Hire purchase and consumer finance in Estonia |
Financial inter mediates |
Insurance | UK LHV | Other activi ties |
Elimi nations |
Total |
|---|---|---|---|---|---|---|---|---|---|---|
| Interest income | 61 365 | 93 825 | 19 | 11 626 | -16 090 | 201 | 21 312 | 81 216 | -17 565 | 235 908 |
| Interest expense Intrabank interest |
-21 541 | -13 723 | 0 | -4 397 | -4 147 | -107 | -2 041 | -21 367 | 17 565 | -49 759 |
| income/-expense | 53 614 | -24 828 | 0 | 3 | 25 898 | 0 | 0 | -54 688 | 0 | 0 |
| Net interest income | 93 437 | 55 274 | 19 | 7 232 | 5 660 | 94 | 19 271 | 5 161 | 0 | 186 149 |
| Fee and commission income Fee and commission |
25 084 | 4 663 | 6 593 | 715 | 4 832 | 3 301 | 5 725 | 3 751 | -3 377 | 51 287 |
| expense | -13 526 | -2 400 | 0 | -578 | 20 | 0 | -114 | -54 | 3 210 | -13 441 |
| Net fee and commission income |
11 559 | 2 263 | 6 593 | 137 | 4 852 | 3 301 | 5 611 | 3 698 | -167 | 37 846 |
| Other income | -7 | 444 | 0 | 0 | 0 | -9 | 0 | 139 | -46 | 521 |
| Net gains/(-losses) from financial assets Administrative and |
19 | 0 | 147 | 0 | 0 | -88 | -80 | 7 802 | -7 550 | 249 |
| other operating expenses, staff costs |
-30 851 | -14 037 | -5 159 | -2 709 | -11 101 | -3 415 | -22 425 | -6 982 | 211 | -96 469 |
| Operating profit Impairment losses on |
74 157 | 43 944 | 1 600 | 4 661 | -590 | -117 | 2 377 | 9 819 | -7 553 | 128 296 |
| loans and advances | -206 | 2 040 | 0 | -2 507 | 0 | 0 | -145 | -1 293 | 0 | -2 109 |
| Income tax | -7 396 | -5 739 | -488 | -512 | -1 293 | 0 | 0 | -1 678 | -911 | -18 017 |
| Net profit | 66 555 | 40 246 | 1 112 | 1 642 | -1 883 | -117 | 2 232 | 6 848 | -8 464 | 108 170 |
| Total assets 30.09.2023 |
2 665 140 | 3 250 120 | 22 506 | 95 962 | 0 | 47 904 | 337 557 | 946 946 | 774 965 | 6 591 170 |
| Total liabilities 30.09.2023 |
4 063 048 | 674 215 | 700 | 77 966 | 1 008 882 | 43 081 | 286 957 | 461 552 | 547 477 | 6 068 924 |
NOTE 3 Risk Management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The condensed interim financial statements do not include
all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the group's annual financial statements as at 31 December 2023. There have been no major changes in the risk management department or in any risk management policies since the year end.
To reduce liquidity risk, LHV Pank has issued mortgage bonds and involved funds from deposit platforms.
The escalated conflict in Ukraine in early 2022, did not have direct impact to LHV credit portfolio, because of historical restrictive lending to customers exposed to risks outside EU. However, changed environment needs to be considered, when issuing credits both to corporates and retail clients going forward.
The Estonian economy has been in recession for 3 years. So far, the cooling economy has had no significant negative impact on the credit portfolio quality. LHV is continuously monitoring credit portfolio quality and is in close dialog with customers, so that in case of a need, potential risks could be mitigated.
NOTE 4 Breakdown of Financial Assets and Liabilities by Countries
| 30.09.2024 | Estonia | Germany | Other EU | USA | UK | Other | Total |
|---|---|---|---|---|---|---|---|
| Due from banks and investment | |||||||
| companies | 2 594 744 | 0 | 271 611 | 18 236 | 490 547 | 877 | 3 376 015 |
| Financial assets at fair value | 8 193 | 612 | 12 602 | 19 | 402 | 7 | 21 835 |
| Financial assets at amortized cost | 159 746 | 0 | 78 352 | 0 | 0 | 0 | 238 098 |
| Loans and advances to customers | 3 864 181 | 1 269 | 31 214 | 669 | 223 474 | 5 428 | 4 126 235 |
| Receivables from customers | 10 598 | 0 | 0 | 0 | 0 | 0 | 10 598 |
| Other financial assets | 180 | 0 | 0 | 100 | 0 | 0 | 280 |
| Total financial assets | 6 637 642 | 1 881 | 393 779 | 19 024 | 714 423 | 6 312 | 7 773 061 |
| Deposits of customers | 4 470 949 | 26 177 | 1 018 324 | 40 743 | 374 342 | 355 825 | 6 286 360 |
| Loans received and debt securitioes in | |||||||
| issue | 0 | 0 | 679 551 | 0 | 0 | 0 | 679 551 |
| Subordinated debt | 106 079 | 0 | 0 | 0 | 0 | 0 | 106 079 |
| Financial liabilities at fair value | 1 172 | 0 | 0 | 0 | 0 | 0 | 1 172 |
| Accounts payable and other financial | |||||||
| liabilities | 87 908 | 0 | 0 | 0 | 0 | 0 | 87 908 |
| Total financial liabilities | 4 666 108 | 26 177 | 1 697 875 | 40 743 | 374 342 | 355 825 | 7 161 070 |
Unused loan commitments in the amount of EUR 558 333 thousand are for the residents of Estonia.
| 31.12.2023 | Estonia | Germany | Other EU | USA | UK | Other | Total |
|---|---|---|---|---|---|---|---|
| Due from banks and investment | |||||||
| companies | 2 444 445 | 0 | 367 348 | 27 363 | 280 092 | 146 | 3 119 394 |
| Financial assets at fair value | 8 998 | 6 | 9 140 | 303 | 1 | 5 | 18 453 |
| Financial assets at amortized cost | 166 205 | 0 | 155 683 | 0 | 0 | 0 | 321 888 |
| Loans and advances to customers | 3 448 545 | 845 | 25 917 | 560 | 80 913 | 5 011 | 3 561 791 |
| Receivables from customers | 49 505 | 0 | 0 | 0 | 0 | 0 | 49 505 |
| Other financial assets | 173 | 0 | 0 | 100 | 0 | 0 | 273 |
| Total financial assets | 6 117 871 | 851 | 558 088 | 28 326 | 361 006 | 5 162 | 7 071 304 |
| Deposits of customers | 4 028 335 | 132 432 | 1 023 330 | 72 933 | 372 131 | 101 844 | 5 731 005 |
| Loans received and debt securitioes in | |||||||
| issue | 0 | 0 | 563 728 | 0 | 0 | 0 | 563 728 |
| Subordinated debt | 126 653 | 0 | 0 | 0 | 0 | 0 | 126 653 |
| Financial liabilities at fair value | 1 843 | 0 | 0 | 0 | 0 | 0 | 1 843 |
| Accounts payable and other financial | |||||||
| liabilities | 128 456 | 0 | 0 | 0 | 0 | 0 | 128 456 |
| Total financial liabilities | 4 285 287 | 132 432 | 1 587 058 | 72 933 | 372 131 | 101 844 | 6 551 685 |
Unused loan commitments in the amount of EUR 495 653 thousand are for the residents of Estonia.
NOTE 5 Breakdown of Assets and Liabilities by Maturity Dates (undiscounted contractual cash flows)
| On | 0-3 | 3-12 | 1-5 | Over 5 | ||
|---|---|---|---|---|---|---|
| 30.09.2024 | demand | months | months | years | years | Total |
| Liabilities by contractual maturity dates | ||||||
| Deposits from customers | 3 785 852 | 1 078 305 | 1 417 084 | 21 073 | 381 | 6 302 695 |
| Loans received and debt securities in issue | 0 | 9 068 | 267 328 | 468 853 | 0 | 745 249 |
| Subordinated debt | 0 | 2 325 | 56 619 | 70 750 | 0 | 129 694 |
| Lease libility | 0 | 10 252 | 0 | 0 | 0 | 10 252 |
| Accounts payable and other financial liabilities | 0 | 77 656 | 0 | 0 | 0 | 77 656 |
| (excluding lease liability) | ||||||
| Unused loan commitments | 558 333 | 0 | 0 | 0 | 0 | 558 333 |
| Financial liabilities at fair value | 0 | 1 172 | 0 | 0 | 0 | 1 172 |
| Financial guarantees by contractual amounts | 0 | 61 500 | 0 | 0 | 0 | 61 500 |
| Foreign exchange derivatives liabilities notional | 0 | 139 573 | 0 | 0 | 0 | 139 573 |
| (gross settled) | ||||||
| Foreign exchange derivatives assets notional | 0 | -139 573 | 0 | 0 | 0 | -139 573 |
| (gross settled) | ||||||
| Total liabilities | 4 344 185 | 1 240 278 | 1 741 031 | 560 676 | 381 | 7 886 551 |
| Financial assets by contractual maturity dates | ||||||
| Due from central bank, banks and investment | ||||||
| companies | 3 374 415 | 0 | 1 600 | 0 | 0 | 3 376 015 |
| Financial assets at fair value and at amortised | ||||||
| cost (debt securities) | 0 | 5 831 | 166 404 | 79 234 | 1 044 | 252 513 |
| Loans and advances to customers | 0 | 240 717 | 705 435 | 2 911 064 | 1 977 785 | 5 835 001 |
| Receivables from customers | 0 | 10 598 | 0 | 0 | 0 | 10 598 |
| Other financial assets | 280 | 0 | 0 | 0 | 0 | 280 |
| Total financial assets | 3 374 695 | 257 146 | 873 439 | 2 990 298 | 1 978 829 | 9 474 407 |
| -969 490 | -983 132 | -867 592 | 2 429 622 | 1 978 448 | 1 587 856 | |
| Maturity gap from financial assets and liabilities | ||||||
| On | 0-3 | 3-12 | 1-5 | Over 5 | ||
| 31.12.2023 | demand | months | months | years | years | Total |
| Liabilities by contractual maturity dates | 3 789 133 | 578 393 | 1 328 891 | 70 035 | 339 | 5 766 791 |
| Deposits from customers | ||||||
| Loans received and debt securities in issue | 0 | 318 | 211 703 | 379 056 | 0 | 591 077 |
| Subordinated debt | 0 | 1 806 | 28 809 | 127 368 | 0 | 157 983 |
| Accounts payable and other financial liabilities | 0 | 128 456 | 0 | 0 | 0 | 128 456 |
| (excluding lease liability) | 0 | 495 653 | 0 | 0 | 0 | 495 653 |
| Unused loan commitments | 0 | 1 843 | 0 | 0 | 0 | 1 843 |
| Financial liabilities at fair value | ||||||
| Financial guarantees by contractual amounts | 0 | 55 061 | 0 | 0 | 0 | 55 061 |
| Foreign exchange derivatives liabilities notional | 0 | 148 397 | 0 | 0 | 0 | 148 397 |
| (gross settled) | ||||||
| Foreign exchange derivatives assets notional (gross settled) |
0 | -148 397 | 0 | 0 | 0 | -148 397 |
| 3 789 133 | 1 261 530 | 1 569 403 | 576 459 | 339 | 7 196 864 | |
| Total liabilities | ||||||
| Financial assets by contractual maturity dates | ||||||
| Due from central bank, banks and investment | 3 117 544 | 0 | 1 850 | 0 | 0 | 3 119 394 |
| companies | ||||||
| Financial assets at fair value and at amortised | 0 | 98 658 | 153 577 | 79 856 | 1 380 | 333 471 |
| cost (debt securities) Loans and advances to customers |
0 | 234 191 | 542 038 | 2 641 711 | 1 692 834 | 5 110 774 |
| Receivables from customers | 0 | 49 505 | 0 | 0 | 0 | 49 505 |
|---|---|---|---|---|---|---|
| Other financial assets | 273 | 0 | 0 | 0 | 0 | 273 |
| Total financial assets | 3 117 817 | 382 354 | 697 465 | 2 721 567 | 1 694 214 | 8 613 417 |
| Maturity gap from financial assets and liabilities | -671 316 | -879 176 | -871 938 | 2 145 108 | 1 693 875 | 1 416 553 |
It is possible to take a short-term loan from the central bank against the security of the majority of instruments in the bond portfolio. Fair value of the derivative contracts is presented in balance sheet and remaining of notional cashflows in off-balance.
NOTE 6 Open Foreign Currency Positions
| 30.09.2024 | EUR | CHF | GBP | SEK | USD | Other | Total |
|---|---|---|---|---|---|---|---|
| Assets bearing currency risk | |||||||
| Due from banks and investment companies | 2 857 675 | 2 705 | 498 629 | 1 228 | 8 660 | 7 119 | 3 376 015 |
| Financial assets at fair value and at amortised cost | 254 214 | 1 | 1 | 5 692 | 23 | 2 | 259 933 |
| Loans and advances to customers | 3 896 363 | 18 | 222 875 | 209 | 6 522 | 248 | 4 126 235 |
| Receivables from customers | 8 694 | 1 | 1 664 | -103 | 4 269 | -3 927 | 10 598 |
| Other financial assets | 100 | 0 | 180 | 0 | 0 | 0 | 280 |
| Total assets bearing currency risk | 7 017 047 | 2 724 | 723 350 | 7 026 | 19 473 | 3 441 | 7 773 061 |
| Liabilities bearing currency risk | |||||||
| Deposits from customers | 5 483 609 | 7 544 | 639 189 | 7 137 | 138 362 | 10 520 | 6 286 360 |
| Loans received and bonds issued | 679 551 | 0 | 0 | 0 | 0 | 0 | 679 551 |
| Financial liabilities at fair value | 1 172 | 0 | 0 | 0 | 0 | 0 | 1 172 |
| Accounts payable and other financial liabilities | 72 296 | 106 | 7 547 | 658 | 7 212 | 89 | 87 908 |
| Subordinated debt | 106 079 | 0 | 0 | 0 | 0 | 0 | 106 079 |
| Total liabilities bearing currency risk | 6 342 707 | 7 650 | 646 735 | 7 795 | 145 574 | 10 608 | 7 161 070 |
| Open gross position derivative assets at contractual value | 195 | 4 979 | 0 | 796 | 125 666 | 7 937 | 139 573 |
| Open gross position derivative liabilities at contractual value | 139 378 | 0 | 0 | 0 | 195 | 0 | 139 573 |
| Open foreign currency position | 535 156 | 53 | 76 614 | 28 | -630 | 770 | 611 991 |
| 31.12.2023 | EUR | CHF | GBP | SEK | USD | Other | Total |
|---|---|---|---|---|---|---|---|
| Assets bearing currency risk | |||||||
| Due from banks and investment companies | 2 810 963 | 1 047 | 283 486 | 1 480 | 13 570 | 8 849 | 3 119 394 |
| Financial assets at fair value and at amoritsed cost | 334 032 | 1 | 0 | 6 275 | 31 | 2 | 340 341 |
| Loans and advances to customers | 3 473 113 | 23 | 79 674 | 189 | 8 676 | 116 | 3 561 791 |
| Receivables from customers | 47 706 | 0 | 1 494 | 168 | 1 822 | -1 685 | 49 505 |
| Other financial assets | 100 | 0 | 173 | 0 | 0 | 0 | 273 |
| Total assets bearing currency risk | 6 665 914 | 1 071 | 364 827 | 8 112 | 24 099 | 7 281 | 7 071 304 |
| Liabilities bearing currency risk | |||||||
| Deposits from customers | 5 296 501 | 9 494 | 255 272 | 8 867 | 151 070 | 9 801 | 5 731 005 |
| Loans received and bond issued | 563 728 | 0 | 0 | 0 | 0 | 0 | 563 728 |
| Financial liabilities at fair value | 1 843 | 0 | 0 | 0 | 0 | 0 | 1 843 |
| Accounts payable and other financial liabilities | 107 544 | 30 | 11 775 | 479 | 6 597 | 2 031 | 128 456 |
| Subordinated debt | 126 653 | 0 | 0 | 0 | 0 | 0 | 126 653 |
| Total liabilities bearing currency risk | 6 096 269 | 9 524 | 267 047 | 9 346 | 157 667 | 11 832 | 6 551 685 |
| Open gross position derivative assets at contractual value | 0 | 8 359 | 0 | 1 334 | 133 071 | 5 633 | 148 397 |
| Open gross position derivative liabilities at contractual value | 94 218 | 0 | 54 179 | 0 | 0 | 0 | 148 397 |
| Open foreign currency position | 475 427 | -94 | 43 601 | 100 | -497 | 1 082 | 519 619 |
|---|---|---|---|---|---|---|---|
| -------------------------------- | --------- | ----- | -------- | ----- | ------ | ------- | --------- |
NOTE 7 Fair Value of Financial Assets and Liabilities
The Management Board of the Group has determined the fair value of assets and liabilities recognised at amortised cost in the balance sheet. To determine the fair value, future cash flows are discounted based on the market interest curve.
The below table provides an overview of the assessment techniques, which depend on the hierarchy of assets and liabilities measured at fair value:
| IFRS 9 | Level | Level 2 | Level 3 | Total | |
|---|---|---|---|---|---|
| 30.09.2024 | measurement | 1 | |||
| Cash and balances with central bank | AC | 0 | 3 167 381 | 0 | 3 167 381 |
| Due from banks and investment companies | AC | 0 | 151 041 | 0 | 151 041 |
| Debt securities | FVTPL | 14 646 | 0 | 0 | 14 646 |
| Debt securities | AC | 0 | 238 098 | 0 | 238 098 |
| Loans and advances to customers | AC | 0 | 0 | 4 126 235 | 4 126 235 |
| Receivables from customers | AC | 0 | 10 598 | 0 | 10 598 |
| Derivatives | FVTPL | 0 | 311 | 0 | 311 |
| Other financial assets | AC | 0 | 0 | 100 | 100 |
| Total assets | 14 646 | 3 567 429 | 4 126 335 | 7 708 410 | |
| Deposits from customers | AC | 0 | 6 286 360 | 0 | 6 286 360 |
| Loans received and debt securities in issue | AC | 0 | 679 551 | 0 | 679 551 |
| Subordinated debt | AC | 0 | 106 079 | 0 | 106 079 |
| Derivatives | FVTPL | 0 | 1 172 | 0 | 1 172 |
| Accounts payable and other liabilities | AC | 0 | 0 | 87 908 | 87 908 |
| Total liabilities | 0 | 7 073 162 | 87 908 | 7 161 070 | |
| 31.12.2023 | |||||
| Cash and balances with central bank | AC | 0 | 3 068 078 | 0 | 3 068 078 |
| Due from banks and investment companies | AC | 0 | 51 316 | 0 | 51 316 |
| Debt securities | FVTPL | 11 927 | 0 | 0 | 11 927 |
| Debt securities | AC | 0 | 321 888 | 0 | 321 888 |
| Loans and advances to customers | AC | 0 | 0 | 3 561 791 | 3 561 791 |
| Receivables from customers | AC | 0 | 49 505 | 0 | 49 505 |
| Derivatives | FVTPL | 0 | 301 | 0 | 301 |
| Other financial assets | AC | 0 | 0 | 273 | 273 |
| Total assets | 11 927 | 3 491 088 | 3 562 064 | 7 065 079 | |
| Deposits from customers | AC | 0 | 5 731 005 | 0 | 5 731 005 |
| Loans received and debt securities in issue | AC | 0 | 563 728 | 0 | 563 728 |
| Subordinated debt | AC | 0 | 126 653 | 0 | 126 653 |
| Derivatives | FVTPL | 0 | 1 843 | 0 | 1 843 |
| Accounts payable and other liabilities | AC | 0 | 0 | 128 456 | 128 456 |
| Total liabilities | 0 | 6 423 229 | 128 456 | 6 551 685 |
As of September 30, 2024, the liquidity portfolio in the amount of EUR 238 098 thousand is reflected in the amortised cost and the loss from the revaluation of the portfolio is refleced in the income statement in the line Impairment losses on loans and bonds in the total amount of EUR 26 thousand. The estimated market value of the securites recorded in the amortised cost as of September 30, is EUR 238 804 thousand.
Hierarchy levels:
-
- Level 1 the price quoted on active market
-
- Level 2 a technique which uses market information as input (rates and interest curves of arms-length transactions)
-
- Level 3 other methods (e.g. discounted cash flow method) with estimations as input
As at 30.09.2024 the fair value of corporate loans and overdraft is EUR 105 406 thousand (4.46%) higher than their carrying amount (31.12.2023: 78 899 thousand, 3.90% higher). Loans are issued in the bank's business segments on market conditions. Therefore, the fair value of retail loans does not materially differ from their carrying amount as at 30 September 2024 and 31 December 2023. In determining the fair value of loans, considerable management judgements are used (discounted cash flow method with current market interest is used for the valuation). Loans issued are thus categorised under hierarchy level 3.
Lease interest rates offered to customers generally correspond to interest rates prevailing in the market for such products. Considering that the interest rate environment has been relatively stable since the Group started to provide leasing, consequently the fair value of lease agreements does not materially differ from their carrying amount. As significant management judgment is required to determine fair value, leases are classified as level 3 in the fair value hierarchy.
Leveraged loans, hire-purchase and credit cards granted to customers are of sufficiently short-term nature and they have been issued at market terms, therefore the fair market rate of interest and also the fair value of loans do not change significantly during the loan term. The fair value level of leveraged loans, hirepurchase, credit cards and consumer loans is 3 as significant judgmental assumptions are used for the valuation process.
Other receivables from customers, along with accrued expenses and other current receivables have been generated in the course of ordinary business and are subject to payment over a short period of time. Their fair value does not thus differ from the carrying amount. These receivables and payables do not bear any interest. The fair value of accounts payable, accrued expenses and other payables is determined based on hierarchy level 3.
Customer deposits with fixed interest rates are mostly short-term with the deposits priced pursuant to market conditions. The majority of the customer deposits include demand deposits. The fair value of the deposits determined via discounting future cash flows does not thus materially differ from the carrying amount. In determining the fair value of customer deposits, considerable management judgements are used. Customer deposits are thus categorised under hierarchy level 3.
Subordinated loans were issued on market terms and considering the movements in loan and interest market, we can say that the market conditions are similar as they were when issuing the subordinated loans so that the fair value of the loans does not materially differ from their carrying value. In determining the fair value of loans, considerable management judgements are used. Subordinated debt are thus categorised under hierarchy level 3.
Swaps are instruments, where the fair value is determined via the model-based approach by using the inputs available on the active market. The fair value of such non-market derivatives is calculated as a theoretical net present value (NPV), by using independent market parameters and without assuming the presence of any risks or uncertainties. The NPV is discounted by using the risk-free profitability rate available on the market.
NOTE 8 Breakdown of Loan Portfolio by Economic Sectors and by Stages
| 30.09.2024 | Stage 1 | Stage 2 | Stage 3 | Provision | Total | % |
|---|---|---|---|---|---|---|
| Individuals | 1 364 064 | 205 735 | 7 248 | -8 193 | 1 568 854 | 38.0% |
| Agriculture | 87 124 | 15 392 | 2 | -300 | 102 218 | 2.5% |
| Mining and Quarrying | 727 | 417 | 39 | -17 | 1 166 | 0.0% |
| Manufacturing | 126 925 | 50 353 | 18 791 | -13 602 | 182 467 | 4.4% |
| Energy | 177 205 | 2 773 | 0 | -1 676 | 178 302 | 4.3% |
| Water and sewerage | 29 478 | 270 | 0 | -388 | 29 360 | 0.7% |
| Construction | 89 628 | 14 962 | 87 | -1 149 | 103 528 | 2.5% |
| Wholesale and retail trade | 129 357 | 50 553 | 662 | -2 350 | 178 222 | 4.3% |
| Transportation and storage | 70 940 | 8 590 | 6 | -678 | 78 858 | 1.9% |
| Accommodation and catering | 34 806 | 2 885 | 151 | -149 | 37 693 | 0.9% |
| Information and communication | 20 808 | 3 636 | 119 | -134 | 24 429 | 0.6% |
| Financial activities | 145 637 | 1 375 | 0 | -1 169 | 145 843 | 3.5% |
| Real estate activities | 946 004 | 146 887 | 8 420 | -8 059 | 1 093 252 | 26.5% |
| Professional, scientific and technical activities | 76 081 | 11 037 | 335 | -313 | 87 140 | 2.1% |
| Administrative and support service activities | 87 982 | 19 782 | 63 | -697 | 107 130 | 2.6% |
| Local municipalities | 48 556 | 4 786 | 0 | -127 | 53 215 | 1.3% |
| Education | 5 075 | 3 267 | 0 | -1 211 | 7 131 | 0.2% |
| Health care | 57 456 | 737 | 0 | -253 | 57 940 | 1.4% |
| Arts and entertainment | 45 681 | 24 534 | 0 | -1 976 | 68 239 | 1.7% |
| Other service activities | 19 537 | 1 798 | 15 | -102 | 21 248 | 0.5% |
| Total | 3 563 071 | 569 769 | 35 938 | -42 543 | ||
| Provision | -11 377 | -18 219 | -12 947 | |||
| Total loan portfolio | 3 551 694 | 551 550 | 22 991 | 4 126 235 | 100% |
| 31.12.2023 | Stage 1 | Stage 2 | Stage 3 | Provision | Total | % |
|---|---|---|---|---|---|---|
| Individuals | 1 266 071 | 89 683 | 7 593 | -6 572 | 1 266 071 | 38.1% |
| Agriculture | 96 489 | 4 410 | 6 | -341 | 96 489 | 2.8% |
| Mining and Quarrying | 915 | 583 | 54 | -81 | 915 | 0.0% |
| Manufacturing | 137 540 | 28 214 | 12 816 | -5 035 | 137 540 | 4.9% |
| Energy | 176 400 | 170 | 12 | -1 078 | 176 400 | 4.9% |
| Water and sewerage | 17 619 | 25 | 0 | -209 | 17 619 | 0.5% |
| Construction | 84 648 | 15 426 | 33 | -1 607 | 84 648 | 2.8% |
| Wholesale and retail trade | 184 463 | 14 518 | 1 336 | -1 903 | 184 463 | 5.6% |
| Transportation and storage | 67 992 | 9 586 | 0 | -695 | 67 992 | 2.2% |
| Accommodation and catering | 22 591 | 2 862 | 406 | -183 | 22 591 | 0.7% |
| Information and communication | 15 434 | 551 | 45 | -59 | 15 434 | 0.4% |
| Financial activities | 103 638 | 174 | 0 | -599 | 103 638 | 2.9% |
| Real estate activities | 784 846 | 87 849 | 824 | -7 356 | 784 846 | 24.3% |
| Professional, scientific and technical activities | 81 198 | 3 307 | 376 | -268 | 81 198 | 2.4% |
| Administrative and support service activities | 100 311 | 2 746 | 17 | -584 | 100 311 | 2.9% |
| Local municipalities | 58 391 | 4 946 | 0 | -275 | 58 391 | 1.8% |
| Education | 4 954 | 3 300 | 3 | -1 384 | 4 954 | 0.2% |
| Health care | 22 701 | 504 | 0 | -109 | 22 701 | 0.6% |
| Arts and entertainment | 37 591 | 21 657 | 0 | -1 309 | 37 591 | 1.6% |
| Other service activities | 12 858 | 827 | 7 | -78 | 12 858 | 0.4% |
| Total | 3 276 650 | 291 338 | 23 528 | -29 725 | ||
| Provision | -11 906 | -9 766 | -8 053 | |||
| Total loan portfolio | 3 264 744 | 281 572 | 15 475 | 3 561 791 | 100% |
NOTE 9 Net Interest Income
| Interest income | Q3 2024 | 9M 2024 | Q3 2023 | 9M 2023 |
|---|---|---|---|---|
| From balances with credit institutions and investment | 1 060 | 2 076 | 1 369 | 5 096 |
| companies From central bank |
33 377 | 101 248 | 25 125 | 56 833 |
| From debt securities | 1 703 | 6 138 | 2 640 | 5 905 |
| Leasing | 3 392 | 10 004 | 3 098 | 8 087 |
| Leverage loans and lending of securities | 437 | 1 243 | 362 | 1 041 |
| Consumer loans | 3 034 | 9 080 | 3 109 | 8 989 |
| Hire purchase | 723 | 2 244 | 855 | 2 637 |
| Corporate loans | 47 335 | 135 653 | 36 696 | 97 612 |
| Credit card loans | 320 | 911 | 265 | 742 |
| Mortgage loans | 19 473 | 57 071 | 17 045 | 44 670 |
| Private loans | 954 | 2 925 | 982 | 2 728 |
| Other loans | 685 | 1 905 | 573 | 1 568 |
| Total | 112 493 | 330 498 | 92 119s | 235 908 |
| Interest expense | ||||
| Deposits of customers and loans received | -34 883 | -97 039 | -18 832 | -35 200 |
| Other interest expense | -11 | -397 | -148 | -458 |
| Subordinated liabilities | -10 172 | -26 292 | -4 998 | -14 101 |
| including loans between related parties | -36 | -188 | -89 | -267 |
| Total | -45 066 | -123 728 | -23 978 | -49 759 |
| Net interest income | 67 427 | 206 770 | 68 141 | 186 149 |
19 893 68 492 13 270 47 388
Interest income on loans by customer location
| (interest on bank balances and bonds excluded): | Q3 2024 | 9M 2024 | Q3 2023 | 9M 2023 |
|---|---|---|---|---|
| Estonia | 71 970 | 211 884 | 61 942 | 166 414 |
| Great Britain | 4 383 | 9 152 | 1 043 | 1 660 |
| Total | 76 353 | 221 036 | 62 985 | 168 074 |
NOTE 10 Net Fee and Commission Income
| Fee and commission income | Q3 2024 | 9M 2024 | Q3 2023 | 9M 2023 |
|---|---|---|---|---|
| Security brokerage and commissions paid | 2 155 | 5 474 | 536 | 2 690 |
| Asset management and similar fees | 4 118 | 12 100 | 3 900 | 11 384 |
| Currency exchange fees conversion revenues | 1 835 | 6 212 | 1 408 | 4 112 |
| Fees from cards and payments | 9 931 | 28 394 | 9 283 | 24 513 |
| Other fee and commission income | 3 769 | 10 794 | 3 366 | 8 588 |
| Total | 21 808 | 62 974 | 18 493 | 51 284 |
| Fee and commission expense | ||||
| Security brokerage and commissions paid | -777 | -2 338 | -608 | -1 838 |
| Expenses related to cards | -2 024 | -5 740 | -1 909 | -5 743 |
| Expenses related to acquiring | -2 289 | -5 605 | -2 357 | -5 753 |
| Other fee and commission expense | -398 | -1 166 | -2 | -107 |
| Total | -5 488 | -14 849 | -4 876 | -13 441 |
| Net fee and commission income | 17 092 | 48 897 | 13 617 | 37 846 |
| Fee and commission income by customer location: | Q3 2024 | 9M 2024 | Q3 2023 | 9M 2023 |
| Estonia | 20 189 | 57 114 | 9 556 | 29 037 |
| Great Britain | 1 619 | 5 860 | 4 831 | 11 136 |
| Total | 21 808 | 62 974 | 14 387 | 40 173 |
NOTE 11 Operating Expenses
| Q3 2024 | 9M 2024 | Q3 2023 | 9M 2023 | |
|---|---|---|---|---|
| Wages, salaries and bonuses | 14 474 | 44 960 | 11 708 | 35 055 |
| Social security and other taxes* | 5 692 | 16 589 | 4 600 | 12 771 |
| Total personnel expenses | 20 166 | 61 549 | 16 309 | 47 827 |
| IT expenses | 3 820 | 10 391 | 3 428 | 10 311 |
| Information services and bank services | 490 | 1 402 | 370 | 1 200 |
| Marketing expenses | 1 338 | 2 969 | 847 | 2 743 |
| Office expenses | 669 | 1 833 | 636 | 2 169 |
| Transportation and communication expenses | 182 | 519 | 128 | 406 |
| Staff training and business trip expenses | 484 | 1 316 | 328 | 1 080 |
| Other outsourced services | 3 225 | 9 317 | 4 149 | 9 977 |
| Other administrative expenses | 3 990 | 11 407 | 3 902 | 13 278 |
| Depreciation of non-current assets | 2 236 | 7 970 | 2 119 | 6 078 |
| Operational lease payments | 185 | 521 | 463 | 852 |
| Other operating expenses | 460 | 1 166 | 129 | 549 |
| Total other operating expenses | 17 079 | 48 811 | 16 498 | 48 642 |
| Total operating expenses | 37 245 | 110 360 | 32 807 | 96 469 |
NOTE 12 Balances with the Central Bank, Credit Institutions and Investment Companies
| 30.09.2024 | 31.12.2023 | |
|---|---|---|
| 149 441 | 49 466 | |
| 57 593 | 55 899 | |
| 7 671 | 12 509 | |
| 3 167 381 | 3 012 179 | |
| 3 374 415 | 3 117 544 | |
| 3 316 822 | 3 061 645 | |
The breakdown of receivables by countries has been presented in Note 4. The minimum reserve requirement as at 30 September 2024 was 1% (31 December 2023: 1%) of all financial resources (customer deposits and loans received). The reserve requirement is to be fulfilled as a monthly average in euros or in the foreign financial assets approved by the central bank.
NOTE 13 Deposits of Customers and Debt Securities in issue
| Financial | Non-financial | ||||
|---|---|---|---|---|---|
| Deposits by type | Individuals | entities | entities Public sector | 30.09.2024 | |
| Demand deposits | 840 834 | 1 103 083 | 1 758 957 | 82 978 | 3 785 852 |
| Term deposits | 1 360 157 | 150 231 | 952 030 | 38 090 | 2 500 508 |
| Total | 2 200 991 | 1 253 314 | 2 710 987 | 121 068 | 6 286 360 |
| Financial | Non-financial | ||||
| Deposits by type | Individuals | entities | entities Public sector | 31.12.2023 | |
| Demand deposits | 745 430 | 1 220 273 | 1 747 979 | 74 778 | 3 788 460 |
| Term deposits | 1 040 349 | 97 380 | 761 184 | 43 632 | 1 942 545 |
| Total | 1 785 779 | 1 317 653 | 2 509 163 | 118 410 | 5 731 005 |
| Debt securities in issue | Covered bond | Preferred senior bond | 30.09.2024 |
|---|---|---|---|
| Debt securities | 249 876 | 429 675 | 679 551 |
| Total | 249 876 | 429 675 | 679 551 |
| Debt securities in issue | Covered bond | Preferred senior bond | 31.12.2023 |
| Debt securities | 249 718 | 314 010 | 563 728 |
|---|---|---|---|
| Total | 249 718 | 314 010 | 563 728 |
In June 2020, LHV Pank made a successful debut issue of EUR 250 million in covered bonds to international investors. 31 institutional investors participated in the 5-year issue and the interest rate was 0.12%. The issue by LHV Pank was the first debut issue since the beginning of the COVID-19 crisis. The issue received an Aa1 rating from Moodys and was listed on the Dublin Stock Exchange. This issue was refinanced during 2024 second and third quareter in full amount.
In September 2021, LHV Group issued EUR 100 million of preferred bonds with a four-year maturity, which includes the option to call back the transaction after the third year. The issue received a Baa3 rating and was listed on the Dublin Stock Exchange.
In November 2022, LHV Group Carried out a tap issue of senior unsecured bonds with a maturity date in September 2025. As a result, LHV raised additional funds in the amount of EUR 88 million.
In the second quarter of 2023, MREL eligible unsubordinated bonds were issued in the amount of 18 million euros, and in the fourth quarter, an additional issue in the amount of EUR 100 million took place.
| Financial liabilities | 30.09.2024 | 31.12.2023 |
|---|---|---|
| Trade payables and payables to merchants | 4 689 | 2 131 |
| Other short-term financial liabilities | 9 921 | 16 288 |
| Lease liabilities | 10 252 | 13 415 |
| Payments in transit | 46 218 | 48 632 |
| Financial guarantee contracts issued | 1 379 | 615 |
| Liabilities from insurance services | 15 449 | 47 375 |
| Subtotal | 87 908 | 128 456 |
| Not financial liabilities | ||
| Performance guarantee contracts issued Non-financial liabilities |
1 939 | 1 750 |
| Tax liabilities | 11 325 | 10 630 |
| Payables to employees | 5 464 | 4 408 |
| Other short-term liabilities | 797 | 751 |
| Subtotal | 19 525 | 17 539 |
| Total | 107 433 | 145 995 |
Payables to employees consist of unpaid salaries; bonus accruals and vacation pay accrual for the reporting period and the increase in liabilities is caused by the increase in the number of employees during the year. Payments in transit consist of foreign payments and payables to customers related to intermediation of securities transactions. All liabilities, except for financial guarantees, are payable within 12 months and are therefore recognised as current liabilities.
NOTE 15 Contingent Liabilities
| Irrevocable transactions | Performance guarantees |
Financial guarantees |
Letter of credit | Unused loan commitments |
Total |
|---|---|---|---|---|---|
| Liability in the contractual amount as at 30 | |||||
| September 2024 | 112 864 | 61 500 | 1 412 | 558 333 | 734 109 |
| Liability in the contractual amount as at 31 | |||||
| December 2023 | 56 217 | 55 061 | 3 732 | 495 653 | 610 663 |
NOTE 16 Basic Earnings and Diluted Earnings Per Share
In order to calculate basic earnings per share, net profit attributable to owners of the parent has been divided by the weighted average number of shares issued. The dilution effect when calculating the Diluted earnings per share comes from the share options granted to management and key employees.
| Q3 2024 | 9M 2024 | Q3 2023 | 9M 2023 | |
|---|---|---|---|---|
| Total profit attributable to owners of the parent (EUR | ||||
| thousand) | 34 385 | 113 215 | 39 058 | 107 065 |
| Weighted average number of shares (in thousands of units) | 324 189 | 322 011 | 319 833 | 317 629 |
| Basic earnings per share (EUR) Weighted average number of shares used for calculating the |
0.11 | 0.35 | 0.12 | 0.34 |
| diluted earnings per shares (in thousands of units) | 329 672 | 327 544 | 325 517 | 323 464 |
| Diluted earnings per share (EUR) | 0.10 | 0.35 | 0.12 | 0.33 |
NOTE 17 Capital Management
The goal of the Group's capital management is to:
- ✓ ensure continuity of the Group's business and ability to generate return for its shareholders;
- ✓ maintain a strong capital base supporting the development of business;
- ✓ comply with capital requirements as established by supervision authorities.
The amount of capital that the Group managed as of 30.09.2024 was 634 254 thousand euros (31.12.2023 596 357 thousand euros). The goals of the Group's capital management are set based on both the regulative requirements and additional internal buffer.
The Group follows the general principles in its capital management:
- The Group must be adequately capitalized at all times, ensuring the necessary capital to ensure economic preservation in all situations;
- The main focus of the capital management is on tier 1 own funds, because only tier 1 own funds can absorb losses. All other capital layers in use are dependent of tier 1 own funds volume;
- Capital of the Group can be divided in two: 1) regulative minimum capital and 2) capital buffer held by the Group. In order to reach its long-term economic goals the Group must on one hand strive towards proportional lowering of the regulative minimumcapital (through minimizing risks and high transparency). On the other hand, the Group must strive towards sufficient and conservative capital reserve, which will ensure economic preservation even in the event of severe negative risk scenario;
- The risk appetite set by the Group is an important input to capital management planning and capital goal setting. Higher risk appetite requires marinating higher capital buffer.
| Capital base | 30.09.2024 | 31.12.2023 |
|---|---|---|
| Paid-in share capital | 32 419 | 31 983 |
| Share premium | 146 958 | 143 372 |
| Reserves | 4 713 | 4 713 |
| Other reserves | 1 826 | -996 |
| Accumulated loss | 320 757 | 229 287 |
| Intangible assets (subtracted) | -20 705 | -21 278 |
| Profit for the reporting period (COREP) | 55 285 | 129 740 |
| Other adjustments | -7 | -8 |
| Dividends to be distributed | 0 | -41 578 |
| Deferred tax assets that rely on future profitability and do not arise from temporary differences | ||
| net of associated tax liabilities | -1 028 | 0 |
| CET1 capital elements or deductions | -7 035 | -382 |
| CET1 instruments of financial sector entities where the institution has a significant investment | -4 262 | -3 496 |
| CET1 instruments of financial sector entities where the institution has not a significant | ||
| investment | 0 | 0 |
| Total Core Tier 1 capital | 528 921 | 471 357 |
| Additional Tier 1 capital | 35 307 | 55 000 |
| Total Tier 1 capital | 564 228 | 526 357 |
| Subordinated liabilities | 70 026 | 70 000 |
| Total Tier 2 capital | 70 026 | 70 000 |
| Total net own funds | 634 254 | 596 357 |
The Group has complied with all regulative capital requirements during the financial year and in previous year.
NOTE 18 Transactions with related parties
In preparing the financial statements of the Group, the following entities have been considered related parties:
- owners that have significant impact on the Group and the entities related to them;
- members of the management board and legal entities controlled by them (together referred to as management);
- members of the supervisory board;
- close relatives of the persons mentioned above and the entities related to them.
| Transactions | Q3 2024 | 9M 2024 | Q3 2023 | 9M 2023 |
|---|---|---|---|---|
| Interest income | 726 | 2 171 | 101 | 279 |
| incl. management | 65 | 200 | 49 | 129 |
| incl. shareholders that have significant influence | 661 | 1 971 | 52 | 150 |
| Fee and commission income | 41 | 135 | 33 | 149 |
| Incl. management | 3 | 21 | 8 | 24 |
| incl. shareholders that have significant influence | 38 | 114 | 25 | 125 |
| Interest expenses from deposits | 68 | 162 | 37 | 81 |
| incl. management | 14 | 49 | 8 | 12 |
| incl. shareholders that have significant influence | 54 | 113 | 29 | 69 |
| Interest expenses from subordinated loans | 36 | 188 | 89 | 267 |
| incl. management | 1 | 3 | 3 | 7 |
| incl. shareholders that have significant influence | 35 | 185 | 86 | 260 |
| Balances | 30.09.2024 | 31.12.2023 |
|---|---|---|
| Loans and receivables as at the year-end | 37 018 | 28 579 |
| incl. management | 4 904 | 4 717 |
| incl. shareholders that have significant influence | 32 114 | 23 862 |
| Deposits as at the year-end | 14 644 | 9 351 |
| incl. management | 1 419 | 2 448 |
| incl. shareholders that have significant influence | 13 225 | 6 903 |
| Subordinated loans as at the year-end | 1 581 | 4 462 |
| incl. management | 72 | 172 |
| incl. shareholders that have significant influence | 1 509 | 4 290 |
The table provides an overview of the material balances and transactions involving related parties. All other transactions involving the close relatives and the entities related to members of the management board and supervisory board and the minority shareholders of the parent company AS LHV Group have occurred according to the overall price list. The management and shareholders with significant influence include also their related entities and persons.
Loans granted to related parties are issued at market conditions.
In Q3, salaries and other compensations paid to the management of the parent AS LHV Group and its subsidiaries totalled EUR 811 thousand (Q3 2023: EUR 693 thousand), including all taxes. As at 30.09.2024, remuneration for September and accrued holiday pay in the amount of EUR 203 thousand (31.12.2023: EUR 179 thousand) is reported as a payable to management. The Group did not have any long-term payables or commitments to the members of the Management Board and the Supervisory Board as at 30.09.2024 and 31.12.2023 (pension liabilities, termination benefits, etc.). In Q3 2024, the remuneration paid to the members of the Group's Supervisory Board totalled EUR 30 thousand (Q3 2023: EUR 20 thousand).
Management is related to the share-based compensation plan. In Q3 2024 the share-based compensation to management amounted to EUR 589 thousand (Q3 2023: EUR 580 thousand).
The Group has signed contracts with the members of the Management Board, which do not provide for severance benefits upon termination of the contract. In any matters not regulated by the contract, the parties adhere to the procedure specified in the legislation of the Republic of Estonia.
NOTE 19 Tangible and intangible assets
| Costs incurred for | |||||||
|---|---|---|---|---|---|---|---|
| the acquisition of | Total | ||||||
| (in thousands of euros) | Tangible assets |
Right of use assets |
Total tangible assets |
Intangible assets |
customer contracts |
intangible assets |
|
| Balance as at 31.12.2022 | |||||||
| Cost | 15 815 | 12 165 | 27 980 | 15 421 | 17 595 | 33 016 | |
| Accumulated depreciation and amortisation | -6 264 | -4 858 | -11 122 | -9 006 | -10 156 | -19 162 | |
| Carrying amount 31.12.2022 | 9 551 | 7 307 | 16 858 | 6 415 | 7 439 | 13 854 | |
| Purchase of non-current assets | 3 422 | 8 766 | 12 188 | 3 838 | 0 | 3 838 | |
| Depreciation/amortisation charge | -1 753 | -5 344 | -7 097 | -3 427 | -1 297 | -4 724 | |
| Recalculation of the accumulated | |||||||
| amortisation | 86 | 14 | 100 | 537 | 0 | 537 | |
| Write-off of on-current assets | -56 | 116 | 60 | -736 | 0 | -736 | |
| Capitalised selling costs | 0 | 0 | 0 | 0 | 875 | 875 | |
| Balance as at 31.12.2023 | |||||||
| Cost | 19 181 | 21 047 | 40 228 | 19 060 | 18 470 | 37 530 | |
| Accumulated depreciation and amortisation | -7 931 | -10 188 | -18 119 | -12 234 | -11 453 | -23 687 | |
| Carrying amount 31.12.2023 | 11 250 | 10 859 | 22 109 | 6 826 | 7 017 | 13 843 | |
| Purchase of non-current assets | 931 | 434 | 1 365 | 1 890 | 0 | 1 890 | |
| Depreciation/amortisation charge | -2 592 | -1 786 | -4 378 | -2 694 | -898 | -3 592 | |
| Recalculation of the accumulated | |||||||
| amortisation | 10 | -1 137 | -1 127 | -112 | 0 | -112 | |
| Exchange rate differences | 16 | -1 454 | -1 438 | 194 | 0 | 194 | |
| Capitalised selling costs | 0 | 0 | 0 | 0 | 785 | 785 | |
| Balance as at 30.09.2024 | |||||||
| Cost | 20 128 | 20 027 | 40 155 | 21 032 | 19 255 | 40 287 | |
| Accumulated depreciation and amortisation | -10 529 | -11 657 | -22 186 | -14 928 | -12 351 | -27 279 | |
| Carrying amount 30.09.2024 | 9 599 | 8 370 | 17 969 | 6 104 | 6 904 | 13 008 |
NOTE 20 Subordinated debts
Subordinated debts (in thousands of euros)
| Year of issue |
Amount | Interest rate |
Maturity date | |
|---|---|---|---|---|
| Subordinated Tier 2 liabilities | 2020 | 35 000 | 6.0% | September 30 2030 |
| Subordinated Tier 2 liabilities | 2023 | 35 000 | 10.5% | September 29 2033 |
| Additional subordinated Tier 2 liabilites | 2020 | 15 000 | 9.5% | Perpetual |
| Additional subordinated Tier 2 liabilites | 2022 | 20 000 | 10.5% | Perpetual |
| Subordinated debt as at 30.09.2024 | 105 000 | |||
| Subordinated debt as at 31.12.2023 | 125 000 |
NOTE 21 Changes in impairments
| Changes in impairments | Balance as at 01.01 |
Impairment provisions/reversals set up during the year |
Written off during the reporting perion |
Balance as at 30.09 |
|---|---|---|---|---|
| Corporate loans | -21 068 | -16 617 | 5 541 | -25 364 |
| Consumer loans | -4 310 | -3 746 | 2 395 | -5 077 |
| Investment financing | -11 | -3 | 8 | -11 |
| Leasing | -2 107 | -1 038 | 928 | -2 542 |
| Private loans | -2 229 | -1 435 | 1 149 | -2 338 |
| Total 2024 | -29 725 | -22 839 | 10 021 | -42 543 |
| Changes in impairments | Balance as at 01.01 |
Impairment provisions/reversals set up during the year |
Written off during the reporting perion |
Balance as at 31.12 |
| Corporate loans | -15 498 | -14 602 | 9 032 | -21 068 |
| Consumer loans | -2 108 | -3 231 | 1 029 | -4 310 |
| Investment financing | -13 | -5 | 7 | -11 |
Private loans -1 014 -1 688 473 -2 229 Total 2023 -20 642 -20 284 11 201 -29 725
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Shareholders of AS LHV Group
AS LHV Group has a total of 324 188 933 ordinary shares, with a nominal value of 0.1 euro.
As at 30 September 2024, AS LHV Group has 38 971 shareholders:
- 147 883 563 aktsiat (45.62%) were held by members of the Supervisory Board and Management Board, and related parties.
- 176 305 370 aktsiat (54.38%) were held by Estonian entrepreneurs and investors, and related parties.
Top ten shareholders as at 30 September 2024:
| Number of | Participation | Name of shareholder |
|---|---|---|
| shares 37 162 070 |
11,5% | AS Lõhmus Holdings |
| 33 910 370 | 10,5% | Viisemann Investments AG |
| 25 449 470 | 7,9% | Rain Lõhmus |
| 12 446 070 | 3,8% | Krenno OÜ |
| 11 310 000 | 3,5% | AS Genteel |
| 10 875 280 | 3,4% | AS Amalfi |
| 10 828 210 | 3,3% | Ambient Sound Investments OÜ |
| 7 188 990 | 2,2% | SIA Krugmans |
| 6 691 020 | 2,1% | Bonaares OÜ |
| 6 037 590 | 1,9% | OÜ Merona Systems |
Shares held by members of the Management Board and Supervisory Board
Madis Toomsalu holds 1 568 980 shares.
Martti Singi holds 1 042 209 shares and Unitas OÜ holds 77 540 shares.
Meelis Paakspuu holds 816 140 shares.
Jüri Heero holds 980 530 shares and Heero Invest OÜ holds 306 820 shares.
Rain Lõhmus holds 25 449 470 shares, AS Lõhmus Holdings 37 162 070 shares and OÜ Merona Systems 6 037 590 shares.
Andres Viisemann holds 564 760 shares. Viisemann Holdings OÜ holds 1 300 000 shares and Viisemann Investment AG holds 33 910 370 shares.
Tauno Tats does not hold shares. Ambient Sound Investments OÜ holds 10 828 210 shares.
Tiina Mõis holds 49 880 shares. AS Genteel holds 11 310 000 shares.
Heldur Meerits does not hold shares. AS Amalfi holds 10 875 280 shares.
Raivo Hein does not hold shares. OÜ Kakssada Kakskümmend Volti holds 5 003 370 shares, Astrum OÜ holds 3 890 shares and Lame Maakera OÜ holds 483 120 shares.
Liisi Znatokov does not hold shares.
Supervisory Boards and Management Boards of AS LHV Group and its Subsidiaries
AS LHV Group
Supervisory board: Rain Lõhmus, Andres Viisemann, Tiina Mõis, Heldur Meerits, Raivo Hein, Tauno Tats, Liisi Znatokov Management board: Madis Toomsalu, Martti Singi, Meelis Paakspuu, Jüri Heero
AS LHV Varahaldus
Supervisory board: Madis Toomsalu, Andres Viisemann, Kadri Kiisel Management board: Vahur Vallistu, Eve Sirel
AS LHV Pank
Supervisory board: Madis Toomsalu, Rain Lõhmus, Andres Viisemann, Tiina Mõis, Heldur Meerits, Raivo Hein Management board: Kadri Kiisel, Jüri Heero, Annika Goroško, Meelis Paakspuu, Indrek Nuume, Martti Singi
AS LHV Finance
Supervisory board: Kadri Kiisel, Madis Toomsalu, Veiko Poolgas, Jaan Koppel Management board: Heidy Kütt
AS LHV Kindlustus
Supervisory board: Madis Toomsalu, Erki Kilu, Veiko Poolgas, Jaan Koppel Management board: Martti-Sten Merilai, Taavi Lehemaa
LHV UK Limited
Board of Directors: Erki Kilu, Andres Kitter Directors: Madis Toomsalu, Paul Hancock, Keith Butcher, Sally Veitch
AS LHV Paytech
Supervisory board: Kadri Kiisel, Madis Toomsalu, Erki Kilu, Andres Kitter Management board: Lauri Teder
Signatures of the Management Board to the Condensed Consolidated Interim Report
The Management Board has prepared the summary of results for January to September 2024 period the condensed consolidated interim financial statements of AS LHV Group for the 9-months period ended 30 September 2024.
The management board confirms that according to their best knowledge the interim report presents a fair view of LHV Group AS's assets, liabilities, financial position and profit or loss of the issuer and the entities involved in the consolidation as a whole and contains a description of the main risks and doubts.
22.10.2024
Madis Toomsalu
Martti Singi
Meelis Paakspuu
Jüri Heero