LHV Group — Management Reports 2023

Sep 7, 2023

LHV Group

Financial plan assumptions

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A strong credit portfolio with higher interest income

		Updated		Previous
Financial results, EURt	2022	FP2023	A YoY	FP2023	‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍
Total net income, incl.	173.543	299.714	+126,171	270.443	+29,271
Net interest income	129,111	246,390	+117,279	216,005	+30,385
Net fee and commission income	44,900	51.753	+6,853	53,808	-2,055
Total operating expenses	89,638	128,866	+39,228	118,690	+10,176
Earnings before impairment	83,905	170,848	+86,943	151,753	+19,095
Impairment losses	8,052	8,221	+169	24,589	-16,368
Earnings before taxes	75,853	162,627	+86,774	127,164	+35,462
Income tax expense	14,421	22,588	48,167	18,931	+3,657
Net profit, incl.	61,432	140,039	+78,606	108,233	+31,805
attr. to shareholders	59,808	138,725	+78,917	106,789	+31,935
		Updated		Previous
Business volumes, EURm	2022	FP2023	A YoY	FP2023	‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍
Deposits from customers	4,901	5,608	+707	5,653	-45
Loans (net)	3,209	3,506	+297	3,428	+78
Assets under management	1,332	1,544	+212	1,570	-27
Fin.intermediaries' payments, mil. pcs	26	41	+14	34	+ /
		Updated		Previous
Key figures	2022	FP2023	A YoY	FP2023	‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍
Cost / Income ratio (C/I)	51.7%	43.0%	- 8.7 pp	43.9%	- 0.9 pp
pre-tax ROE*	20.4%	33.8%	+ 13.4 pp	27.4%	+ 6.4 pp
ROE*	16.5%	29.1%	+ 12.6 pp	23.3%	+ 5.8 pp
T1 capital adequacy	18.4%	18.9%	+ 0.5 pp	18.4%	+ 0.5 pp
Total capital adequacy	21.7%	21.2%	- 0.5 pp	21.5%	0.3 pp -

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Revenue growth before expense growth

		Updated		Previous
Financial results, EURt	2022	FP2023	A YoY	FP2023	‍മ upd. FP
Total net income, incl.	161,674	247,941	486,267	227,337	+20,604
Net interest income	129.489	219,949	+90,460	198.153	+21,796
Net fee and commission income	32.408	27,045	-5,362	29,046	-2,000
Total operating expenses	64,545	83,133	+18,588	76,459	+6,674
Earnings before impairment	97,129	164,807	+67,679	150,877	+13,930
Impairment losses	2,996	7,176	+4,180	24,008	-16,831
Earnings before taxes	94,133	157,631	+63,498	126,870	+30,761
Income tax expense	13,260	20,867	+7,607	17,151	+3,716
Net profit	80,873	136.764	455,891	109.719	+27,045
		Updated		Previous
Business volumes, EURm	2022	FP2023	A YoY	FP2023	‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍
Deposits from customers	4,957	5,300	+343	5,197	+102
Loans (net)	3,187	3,454	+267	3,370	+83
		Updated		Previous
Key figures	2022	FP2023	A YOY	FP2023	‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍
Cost / Income ratio (C/I)	39.9%	33.5%	- 6.4 pp	33.6%	- 0.1 pp
pre-tax ROE*	29.0%	34.7%	+ 5.7 pp	29.6%	+ 5.1 pp
ROE*	24.9%	30.0%	+ 5.1 pp	25.5%	+ 4.5 pp
T1 capital adequacy	19.1%	20.3%	+ 1.2 pp	18.6%	+ 1.7 pp

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LHV Varahaldus - forecast Preparing to accept larger contributions to II pillar

		Updated		Previous
Financial results, EURt	2022	FP2023	A YoY	FP2023	മ upd. FP
Total net income	7,805	9,474	+1,669	9.510	-36
Total operating expenses	7,077	6,953	-124	6,956	-3
Earnings before taxes	728	2,521	+1,793	2,554	-33
Income tax expense	830	488	-342	488	-0
Net profit	-103	2,032	+2,135	2,066	-33
		Updated		Previous
Business volumes	2022	FP2023	A YoY	FP2023	‍ △ upd. FP
Assets under management, EURm	1,332	1,544	+212	1,570	-27
Active customers of PII funds, thous.	131	124	-8	135	-12
		Updated		Previous
Key figures	2022	FP2023	A YoY	FP2023	‍ മ upd. FP
Cost / Income ratio (C/I)	90.7%	73.4%	- 17.3 pp	73.1%	0.2 pp +
pre-tax ROE*	3.1%	11.5%	8.4 pp +	11.6%	0.2 pp

• Preparing for a new law amendment that will take effect next year, where instead of 2%+4% payment, applications can also be submitted for 4%+4% and 6%+4% payments
• · · During the first two seasons of the year, 35% fewer clients have exited II pillar compared to the previous year
• · Fond volumes are increasing
• · LHV pension funds have a clearly distinctive strategy in the market
• · · Expectation of earing the performance fee has been postponed to 2026 due to temporarily very high benchmark index

LHV Kindlustus - forecast Business volume growth supports reaching net profit

		Updated		Previous
Financial results, EURt	2022	FP2023	A YoY	FP2023	‍മ upd. FP
Total net income	1,487	4,878	+3,391	4,574	+304
Total expenses	3,181	4,572	+1,391	4,273	+298
Earnings before taxes	-1,693	307	+2,000	301	+6
Income tax expense	0	0	+0	0	+0
Net profit	-1,693	307	+2,000	301	+6
		Updated		Previous
Business volumes	2022	FP2023	A YoY	FP2023	‍മ upd. FP
Gross written premiums, EURm	17	32	+15	27	+5
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	2022	Updated FP2023	A YoY	FP2023	മ upd. FP
Key figures
Cost / Income ratio (C/I)	216.0%	93.7%	122.3 pp	93.6%	+ 0.1 pp
Net loss ratio	73.9%	67.9%	6.0 pp	66.1%	1.8 pp +
Net expense ratio	46.0%	31.8%	14.3 pp	32.8%	1.0 pp
pre-tax ROE*	-28.7%	6.4%	+ 35.0 pp	5.9%	0.5 pp +
ROE*	-28.7%	6.4%	35.0 pp	5.9%	+ 0.5 pp

• · The increased revenue base resulting from increased business volumes leads to positive profit
• · · Sales volumes for vehicle insurance and health insurance are significantly better than planned initially
• · The number of customers is in stable growth, supported by increasing synergy in the banking channel
• · Infotechnology and internal processes development continues
• The portfolio size achieved in 2023 ensures lower volatility in key ratios

Higher profitability through a larger loan portfolio and interest income

		Updated		Previous
Financial results, EURt	2022	FP2023	A YOY	FP2023	‍ മ upd. FP
Total net income, incl.	67	33,544	+33,478	28,487	+5,057
Net interest income	60	27,662	+27,602	7,984	+19,679
Net fee and commission income	0	5,949	+5,949	20,503	-14,554
Total operating expenses	11,737	29,432	+17,694	26,855	+2,577
Earnings before impairment	-11,670	4,113	+15,783	1,632	+2,480
Impairment losses	0	864	+865	581	+283
Earnings before taxes	-11,670	3,249	+14,919	1,051	+2,198
Income tax expense	0	0	+0	0	+0
Net profit	-11,670	3,249	+14,919	1,051	+2,198
		Updated		Previous
Business volumes, EURm	2022	FP2023	A YoY	FP2023	‍ △ upd. FP
Deposits from customers	0	347	+347	501	-154
Loans (net)	22	129	+107	59	+70
		Updated		Previous
Key figures	2022	FP2023	A YoY	FP2023	‍ △ upd. FP
Cost / Income ratio (C/I)	17,572.7%		87.7% -17,485.0 pp	94.3%	- 6.5 pp
pre-tax ROE*	-56.2%	8.0%	+ 64.2 pp	3.0%	+ 5.0 pp
ROE*	-56.2%	8.0%	+ 64.2 pp	3.0%	+ 5.0 pp

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Madis Toomsalu madis.toomsalu@lhv.ee

Meelis Paakspuu meelis.paakspuu@lhv.ee