LHV Group Reports Strong Q1 Performance Amid Market Challenges
At the auditor's suggestion, LHV Group has updated its financial results, reflecting declared but unpaid dividends as liabilities. Consequently, adjustments in the figures for liabilities, equity, and return on equity were made, echoing the company's commitment to transparency.
In the first quarter, LHV experienced significant business volume growth, although profits decreased due to falling interest rates and increased impairments. The total net profit for Q1 was reported at EUR 29.2 million, with LHV Pank contributing EUR 25.2 million and LHV Bank Ltd adding EUR 2.1 million. Meanwhile, AS LHV Varahaldus noted a net profit of EUR 103 thousand, and AS LHV Kindlustus contributed EUR 665 thousand during the same period. The return on equity attributed to shareholders amounted to a robust 17.0% in Q1.
Consolidated Revenue and Financial Overview
Overall, LHV Group achieved consolidated revenues of EUR 79.4 million in Q1 2025, reflecting a decrease of 6% compared to the previous quarter and a 5% decrease from the same period last year. A significant portion of the income came from net interest income, amounting to EUR 62.0 million, while net fee and commission income accounted for EUR 14.1 million. Total operating expenses for the group reached EUR 37.5 million, representing an 8% reduction from Q4 but a 10% increase year-over-year. Notably, impairments surged to EUR 5.7 million, double the amount from the previous year, causing a 20% decline in net profit compared to Q4 and a striking 28% drop year-over-year.
Asset Growth and Customer Engagement
At the close of March, LHV Group reported consolidated assets totaling EUR 8.51 billion, reflecting an impressive annual growth of 15%. However, the asset volume decreased by 3% over the quarter, equating to EUR 228 million. The group saw a growth in the consolidated loan portfolio of EUR 177 million, or 4%, bringing it to EUR 4.73 billion, which marks a significant year-on-year growth of 30%. Despite the decrease in consolidated deposits of EUR 306 million (-4%) to EUR 6.60 billion, a year-on-year increase of 11% remained, showcasing the resilience of the group's operations.
LHV witnessed a surge in customer engagement, with the number of payments processed by financial intermediaries reaching a record 20.1 million in Q1, reflecting a 1% increase from the previous quarter. This engagement is indicative of the bank's strategy to promote active usage of its services.
Client Growth and Product Innovations
LHV Pank added approximately 9,700 new clients this quarter, demonstrating the effectiveness of their banking services. Despite a reduction in bank deposits by EUR 309 million, primarily due to drops in deposits from financial intermediaries, the overall customer engagement remains strong. LHV Pank was recognized for delivering exceptional service in Estonia, further enhancing its reputation.
The loan portfolio of LHV Pank increased by EUR 35 million over the quarter. Particularly noteworthy is the continuity of home loans, as the portfolio grew by EUR 81 million to surpass EUR 1.5 billion. The bank's loan quality maintained its robustness, further accentuated by a positive shift in model-based impairments, although some specific cases did lead to increased provisions.
International Expansion and Market Positioning
In light of significant growth in the United Kingdom, LHV Bank's loan portfolio surged by EUR 142 million to reach EUR 490 million. Future growth is anticipated as EUR 167 million in loans approved await issuance. To sustain this momentum, an increase of EUR 12 million in share capital was executed in March.
Deposits taken by LHV Bank grew by EUR 115 million, with initial customers now accessing their retail banking mobile app. Significant improvements in account opening processes and service offerings, such as fixed-term deposits, have been instituted to attract a broader client base.
Business Performance of Subsidiaries
Despite recent stock market uncertainties impacting LHV Varahaldus, its pension funds have shown resilience with superior performance compared to competitors. The quarterly returns for their actively managed pension funds were 3.0%, 3.8%, and 4.5% for M, L, and XL funds, respectively. Conversely, their conservative funds yielded 1.5% and 2.1%.
LHV Kindlustus continued to witness growth, increasing sales by EUR 2.1 million year-on-year amidst broader market challenges in insurance. The company reported the absence of significant loss events but noted an uptick in travel insurance claims.
Commitment to Shareholders and Future Strategy
LHV Group remains well-capitalized, fulfilling all capital requirements with a comfortable margin. At the recent annual general meeting, shareholders were rewarded with a dividend of 9 cents per share for the previous fiscal year. However, the group's net profit for Q1 fell slightly short of the financial objectives set earlier.
Chairman of the Management Board, Madis Toomsalu, commented on the evolving global trade policy landscape, emphasizing the potential impact on growth. He highlights the importance of supporting entrepreneurial ventures and regulatory initiatives to stimulate market activity.
In summary, LHV Group is positioned to continue its growth trajectory, supported by strategic management decisions and a commitment to enhancing customer engagement and service quality.
Frequently Asked Questions
What financial results did LHV Group report for Q1 2025?
LHV Group reported a net profit of EUR 29.2 million for Q1 2025, with total consolidated revenues amounting to EUR 79.4 million.
How did LHV Group's asset portfolio change?
The consolidated assets of LHV Group amounted to EUR 8.51 billion, with a year-on-year growth rate of 15%.
What factors influenced LHV's profitability?
The profitability was impacted by decreasing interest rates and higher impairments, contributing to a profit decrease compared to previous quarters.
What was the growth trajectory of LHV Pank's loan portfolio?
LHV Pank's loan portfolio increased by EUR 35 million in Q1 2025, with home loans contributing EUR 81 million to this growth.
How did LHV Group perform in terms of shareholder returns?
The group declared a dividend of 9 cents per share for the previous fiscal year, demonstrating its commitment to rewarding shareholders, even as net profit fell short of expectations.
