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Notice on calling the annual general meeting of the shareholders

The Management Board of AS LHV Group (hereinafter LHV Group) hereby calls the general meeting of the shareholders (hereinafter the General Meeting), to be held on 26 March 2025 starting at 13:00 (Estonian time) at Hilton Tallinn Park Hotel (Fr. R Kreutzwaldi 23, Tallinn).

The list of shareholders entitled to participate in the General Meeting will be determined as of 7 (seven) days before the General Meeting, i.e., as at 19 March 2025 EOD of Nasdaq CSD settlement system.

Pursuant to the resolution adopted by LHV Group's Supervisory Board on 19 February 2025, the agenda of the General Meeting will be following, and the proposals of the Management Board and the Supervisory Board in regard to the agenda items are specified by each agenda item as follows, whereas the Supervisory Board has proposed to vote in favour of all draft resolutions specified under the agenda items.

1. Annual Report 2024

Approve the Annual Report of LHV Group for the financial year 2024 as submitted to the General Meeting.

2. Profit Distribution for Financial Year 2024

The consolidated net profit attributable to LHV Group as the parent company of the consolidation group in the financial year 2024 amounts to EUR 152,405 thousand. Transfer EUR 0 to the legal reserve. Approve the profit allocation proposal made by the Management Board and pay dividends in the net amount of 9 euro cents per share. The list of shareholders entitled to receive dividends will be established as at on 9 April 2025 EOD of Nasdaq CSD settlement system. Consequently, the day of change of the rights related to the shares (ex-dividend date) is set to 8 April 2025. From this day onwards, the person acquiring the shares will not have the right to receive dividends for the financial year 2024. Dividends shall be disbursed to the shareholders on 10 April 2025.

3. Financial Results of First Two Months of 2025

An overview of the economic results of LHV Group for the first two months of 2025.

4. Five-Year Financial Forecast

An overview of the five-year financial forecast of LHV Group.

5. Amendments to 2020–2024 Share Option Program

Approve the amendments of LHV Group's 2020–2024 share option program as presented to the General Meeting and authorize LHV Group's Supervisory Board to implement the 2020–2024 share option program in accordance with the program's terms.

6. 2025–2029 Share Option Program

Approve LHV Group's 2025–2029 share option program as presented to the General Meeting and authorize LHV Group's Supervisory Board to implement the 2025–2029 share option program in accordance with the program's terms.

7. Conditions of Performance Pay

As of 1 January 2026, to prospectively raise for the next five (5) years, i.e., for the period of the 2025–2029 share option program, the percentage of performance pay payable to the management members and equivalent staff of LHV Group and its group companies up to two hundred percent (200%) of their basic salary in accordance with the rationale presented to the General Meeting.

8. Acquisition of Own Shares

Approve the acquisition of LHV Group's own shares under the following conditions:

• The purpose of acquiring own shares is to create value for shareholders by using the acquired shares for the execution of applicable General Meeting's approved share option programs.

• The acquisition shall be executed within a period of up to five (5) years from the adoption of this resolution. The acquisitions may take place in one or multiple transactions within thirteen (13) months from each LHV Group's Supervisory Board decision to execute the acquisition of own shares.

• LHV Group is entitled to acquire a maximum of its own shares necessary for fulfilling the commitments arising from the General Meeting's approved share option programs. The acquisition may take place in portions corresponding to the required volume for a single year, multiple years, or the full duration of the applicable share option programs. This resolution shall also apply if the shareholders approve amendments to the share option programs that affect the acquisition volume. In any case, the total nominal value of the shares owned by LHV Group does not exceed 1/10 of the share capital.

• The price per share to be paid for own shares shall be no less than EUR 0.00 and must not exceed the closing price of the Nasdaq Tallinn Stock Exchange on the previous trading day, as determined before the execution date of each respective acquisition (or the date of announcement of the execution of the acquisition). The purchase price per share shall not exceed the average market price of the last 30 trading days by more than fifty percent (50%). The acquisition of shares shall be executed under market conditions in accordance with the rules of Nasdaq Tallinn Stock Exchange.

• The acquisition of own shares must not cause the net assets to become less than the total of share capital and reserves which pursuant to law or the Articles of Association shall not be paid out to shareholders.

Authorize LHV Group's Supervisory Board, in accordance with this resolution, applicable legislation and the General Meeting's approved share option programs, to decide and execute own shares acquisitions, determine the acquisition price, procedure, and other conditions, and to carry out all necessary actions related to the own shares acquisition. The Supervisory Board may delegate technical and procedural tasks related to the execution of the acquisition to the Management Board. The execution of the own shares acquisition shall be conditional upon the European Central Bank's consent.

9. Amendments to Articles of Association

Approve the new redaction of the Articles of Association of LHV Group, thereby amending clauses 4.1.5 and 4.1.6. with the following wording:

"4.1.5.   The Supervisory Board has set up the Audit Committee, the Risk and Capital Committee, the Nomination Committee and the Remuneration Committee and established the relevant terms of reference."

"4.1.6. The Supervisory Board shall be authorized, for a period of 3 (three) years from the entry into force of this version of the Articles of Association, to increase the share capital through contributions 1 (once) per year by up to 2% (two percent) of the share capital as valid at the time of the respective resolution. If the full 2% (two percent) limit has not been used in previous years, the unused portion may be carried forward within the authorization period. However, if the limit has been fully utilized, the increase in any following year shall not exceed 2% (two percent)."

The registration of the participants of the General Meeting will take place on the day of the meeting, 26 March 2025, between 12:00 and 12:45. The organizers of the General Meeting have the right not to consider later requests for registration and participation in the General Meeting. Registration of participation ensures the exercise of shareholder's rights during the General Meeting, including electronic voting for draft resolutions on the agenda of the General Meeting.

Shareholders who cannot or do not wish to take part in the General Meeting can vote on the draft resolutions on the agenda of the General Meeting before the General Meeting (hereinafter pre-voting) in the period from the determination of the circle of shareholders entitled to participate in the General Meeting (i.e., as of the end of the business day of the Nasdaq CSD settlement system on 19 March 2025) until 24 March 2025 at 17:00, whereas the simplified pre-voting via the website vote.lhv.ee/ (hereinafter meeting website) will be opened at 10:00 on 21 March 2025. A shareholder who has pre-voted is considered to be participating in the General Meeting, and the votes represented by the shares that shareholder holds are accounted as part of the General Meeting quorum.

Pre-voting under simplified procedure and registering participation and electronic voting during the General Meeting takes place through the meeting website. Shareholders who cannot or do not wish to participate in the pre-voting or register their presence electronically, will be allowed to register and vote at the meeting venue, as long as they arrive at the venue with sufficient time for registration. It is possible to pre-vote on the draft resolutions on the agenda of the General Meeting using the pre-voting ballots, which are available on LHV Group's website investor.lhv.ee/en/ (hereinafter investor website).

Shareholders whose rights are exercised by a representative at the General Meeting, must ensure that before the General Meeting takes place, the document(s) proving their right of representation are presented in writing to LHV Group's e-mail address group@lhv.ee or on working days between 9 to 17 to LHV Group's address Tartu mnt 2, Tallinn 10145, 1st floor no later than 17:00 on 25 March 2025. All documents submitted in a foreign language must be in English or translated into English by a sworn translator or an official equivalent to a sworn translator, certified and legalized or apostilled, unless otherwise provided by legal acts in force. LHV Group must also be informed of the withdrawal of the given authorization by the same deadline. LHV Group asks to take into account that shareholder's rights can be exercised via the meeting website by a person who has the right of sole representation of the shareholder. Holders of nominee accounts who wish to vote on a draft resolution in a proportion other than the total number of votes belonging to the respective shareholder, i.e., to distribute the votes belonging to the respective shareholder on the draft resolution between several predetermined options, will have the opportunity to do so on the meeting website. Such proportional voting is also possible with the pre-voting ballots published on the investor website.

In the counting the votes given by pre-voting and electronic voting during the General Meeting, only votes that followed the procedure for pre-voting and electronic participation will be counted. The procedure can be found on the investor website.

Shareholders can remotely watch the General Meeting's live stream and participate in discussions through the website investor.lhv.ee/uldkoosolek/. Access to the live stream does not require authentication or registration. Instructions for watching the broadcast and submitting questions can be found on the investor website.

Up to and including the day of the General Meeting, shareholders have the option of examining all documents submitted to General Meeting (including the notice on calling the General Meeting, draft resolutions, LHV Group's annual report for 2024, including the independent auditor's report, proposal for the profit distribution, the remuneration report, the Supervisory Board's report on its activities and assessment of the 2024 annual report and proposals for approving of the terms of performance pay, LHV Group's share option programs and LHV Group's Articles of Association) on the investor webpage. The procedure for pre-voting and electronic participation, instructions for watching the video broadcast, pre-voting ballots, and authorizations for appointing a representative at the General Meeting can also be found on the same page.

Before the General Meeting, shareholders can ask questions about the agenda items of the General Meeting by email group@lhv.ee, provided that the questions are received by LHV Group at least 1 (one) working day before the General Meeting, no later than 13:00 on 25 March 2025.

At the General Meeting, shareholders have the right to receive information from the Management Board, to request that additional items be included on the agenda, and to submit draft resolutions in regard to each agenda item. In regard to the procedure and term for exercising these rights, LHV Group proceeds from the provisions of section 287, subsections 293 (2) and 293¹ (4) of the Commercial Code and requests that the corresponding applications be sent by e-mail to group@lhv.ee or to LHV Group's location at Tartu mnt 2, Tallinn 10145.

Within 7 (seven) days of the General Meeting, the minutes of the General Meeting will be made available to shareholders on the investor website.

Sincerely,
Madis Toomsalu
Chairman of the Management Board of AS LHV Group

The largest financial group based on Estonian capital will be driven this year by an increase in business volumes and client activity, and by more efficient operations. However, in an environment of falling interest rates, the net profit of LHV Group in 2025 will decrease compared to the previous year.

*Calculated on the basis of the average end-of-month equity volumes
Business volumes in millions of euros

According to the latest financial plan, LHV Group’s business volumes will continue to grow significantly this year. The consolidated loan portfolio is set to grow by 17%, i.e. EUR 793 million, over the year to EUR 5.35 billion. Of this, EUR 223 million will come from corporate banking in Estonia and EUR 278 million from retail loans, while in the United Kingdom the plan is to increase lending by EUR 292 million. As a result of the improving economic environment, write-down costs are planned to decrease to EUR 10.2 million in 2025.

The focus remains on growing deposits. Consolidated deposits are expected to grow by EUR 648 million, i.e. 9%, to EUR 7.56 billion this year. Of the additional deposits, EUR 302 million are to be raised by LHV Pank in Estonia and EUR 388 by LHV Bank in the United Kingdom.

LHV Pank’s interest income will decrease, but net fee and commission income is planned to increase mainly from higher business volumes resulting from the growth and activation of the client base. It is planned to reduce the bank’s expenses by 2% compared to the previous year, which will be helped by the automation of processes. The goal is to continue to provide the best service to clients in all channels by developing digital channels and supplementing services.

The number of payments by financial intermediaries reached 75 million in 2024, and it will remain similar this year according to the financial plan.

In the United Kingdom, in addition to corporate loans, the focus is on introducing retail supply to the market and, consequently, increasing the number of retail clients. In the first half of the year, deposits and direct debits will be added to the new bank app, and the issuance of bank cards will begin. The plans for the second half of the year include the inclusion of other currencies and the opening of accounts for corporate clients. In order to expand the offering, LHV Bank plans to apply for a consumer credit activity licence, join the real-time euro payments scheme, and develop additional payment collection solutions.

According to the financial plan, the volume of funds managed by LHV will increase by 11% this year to EUR 1.74 billion, i.e. by EUR 177 million. The volumes are supported by increased contributions and the opening of the new LHV Euro Bond Fund. Varahaldus continues with an investment strategy that stands out clearly from its competitors, focusing on different high-yield asset classes. The forecast for 2025 does not include earning a success fee from pension funds.

The gross premiums of LHV Kindlustus will increase by 11% this year to EUR 42 million. It is planned to increase sales volumes and improve efficiency. This should be supported by extending the provision of property insurance to businesses as well. The goal of LHV Kindlustus is to position itself as the most preferred insurance partner on the market.

In summary, the financial plan for 2025 foresees a 7% decrease in the income of the LHV Group consolidation group to EUR 313 million. Expenditure is expected to increase by 2% to EUR 149.4 million. The company’s net profit for this year is estimated at EUR 125.1 million, which means a decrease of 17% compared to the previous record year. LHV Group’s return on equity (ROE) ratio will remain at 18.1% in 2025 and the company forecasts a cost/income ratio of 47.7%.

This year, in addition to the decrease in base interest rates, the profitability of LHV Group is affected by the interest expense and increased tax rates associated with the revaluation of liabilities and the growth of volume, while positively increasing efficiency, increasing net fee and commission income and lower write-downs due to the improvement of the economic environment, as well as increasing efficiency.

Comment by Madis Toomsalu, the Chairman of the Management Board at LHV Group:

“In recent years, LHV has developed into a financial institution with a significant impact on the Estonian economy. Over the course of five years, the volume of LHV’s loans and deposits has increased by as much as 2.6 times, with new loans issued in Estonia in the amount of EUR 7.6 billion, while the loan portfolio has grown by EUR 2.5 billion during this period. The bank belonging to LHV Group in the United Kingdom has also entered the growth phase from the creation phase, with its share increasing.

We will continue to be ambitious for the next five years. Of the business volumes, we expect our loan portfolio to double, including a fivefold increase in the loan portfolio in the United Kingdom. We also expect double growth from insurance activities, the volume of funds will increase more than one and a half times. Our goal is to provide the best access to financial services and capital through high-quality relations.

We want to fulfil our long-term growth ambitions more effectively than before. In Estonia, we continue to innovate technology, the main keywords here are moving systems to the cloud and thoroughly updating the data strategy. In the United Kingdom, we are opening the direction of retail banking, and throughout the year we are developing new products there.

In 2024, we will continue to grow business volumes to offset falling interest rates. However, the net profit will fall as planned, partly due to the increase in the advance income tax of the banks to 18%, which effectively is the taxation of current profits. The return on equity is influenced by capitalization that, supported by strong results, has grown above the optimal level and which, according to the financial plan, does not find fully efficient use within the group.”

Financial forecast for 2025–2029

AS LHV Group discloses its financial forecast for the next five years. The forecast has been prepared on the basis of the assumptions that the Estonian economy will grow from 2025, tax rates in Estonia will rise, and base interest rates will fall rapidly until mid-2025. It is expected that the long-term dividend policy will be maintained, that capital layers will be optimised, and that LHV Varahaldus will earn a success fee from 2026.

According to the long-term forecast, all important business volumes of LHV will grow organically over the next five years. The volume of loans will increase 1.9 times to EUR 8.87 billion in five years, with corporate loans increasing by EUR 1.2 billion, home loans by EUR 1.4 billion, and the United Kingdom loan portfolio by EUR 1.4 billion. The volume of deposits will increase by 65% to EUR 11.38 billion. The volume of funds will increase by 78% to EUR 2.77 billion in five years.

According to the financial forecast, within five years, revenue will grow faster than expenditure, with revenue from the United Kingdom taking on an increasing share. Costs are increasing mainly due to increased labour costs and IT costs. Due to changes in the economic environment and the growth of the credit portfolio, costs from write-downs will decrease in 2025, but they are expected to increase in the future.

According to the five-year forecast, LHV’s consolidated net profit will reach nearly EUR 268.5 million by 2029, with an average annual growth of 12%. Although this year the return on equity will be below the long-term target of 20%, it is planned to exceed it in the coming years. The Group’s cost/income ratio continues to decline.

LHV Group will amend the financial plan for 2025 if it becomes likely that the planned net profit will differ by more than 10% from the financial plan. The company will update its five-year forecast in early 2026.

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

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus, LHV Kindlustus, and LHV Bank Limited. The Group employs over 1,200 people. As at the end of December, LHV’s banking services are being used by nearly 460,000 clients, the pension funds managed by LHV have 114,000 active clients, and LHV Kindlustus is protecting a total of 170,000 clients. LHV Bank Limited, a subsidiary of the Group, holds a banking licence in the United Kingdom and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.

The year-end was a successful one for LHV, supported by strong loan issue and deposit taking. The company met the profit target set in the financial plan.

In 2024, AS LHV Group generated net revenue of 338.3 million euros, i.e., 11% more than in the previous year, thanks to strong business growth. Annual net interest income increased to 273.3 million euros (+8%) and net fee and commission income to 60.3 million euros (+24%). Consolidated expenditure for 2024 totalled 146.9 million euros, i.e., 14% higher than the previous year. The consolidated net profit of AS LHV Group in 2024 was 150.3 million euros, i.e., 9.4 million euros more than in 2023 (+7%).

Of the subsidiaries, AS LHV Pank earned a total of 140.5 million euros in net profit in 2024, UK Bank Limited 5.8 million euros, AS LHV Varahaldus 1.6 million euros, and AS LHV Kindlustus 1.2 million euros.

By the end of 2024, the consolidated assets of LHV Group increased to 8.74 billion euros, growing by 23% year-on-year, i.e., 1.64 billion euros. In Q4, the volume of assets increased by 12%.

The consolidated loan portfolio of LHV increased by 990 million euros to 4.55 billion euros (+28%) in 2024. In Q4, the loan portfolio increased by 10%, i.e., 426 million euros. Corporate loans increased by 328 million euros over the quarter and retail loans by 98 million euros.

The Group’s consolidated deposits grew by 1.18 billion euros over the year to 6.91 billion euros (+21%). In Q4, deposits increased by 624 million euros, i.e., 10%, while deposits of regular clients increased by 134 million euros.

The total volume of funds managed by LHV increased by 39 million euros to 1.56 billion euros (+3%) over the year. In the last quarter of the year, the volume of funds increased by 37 million euros (+2%).

The number of processed payments related to clients that were financial intermediaries amounted to 74.8 million payments in 2024 (+51% compared to 49.5 million payments in 2023). In Q4, 19.8 million such payments were made, i.e., 6% more than in Q3.

In Q4 of 2024, AS LHV Group’s consolidated net profit amounted to 36.3 million euros, which is 1.6 million euros more than in Q3 (+5%). On a year-on-year basis, quarterly profit increased by 11%. AS LHV Pank earned 34.8 million euros in net profit in Q4. In the last quarter of the year, LHV Bank Ltd earned a net profit of 640 thousand euros, AS LHV Varahaldus 509 thousand euros, and AS LHV Kindlustus 68 thousand euros. The return on equity attributable to the shareholders of the Group was 22% in Q4.

The Group’s consolidated net income increased by 2% in Q4 compared to the previous quarter of the year to 84.9 million euros. Net income was 1% higher than last year. Net interest income was generated at 66.6 million euros, and net fee and commission income at 17.3 million euros. Consolidated operating expenses were 40.8 million euros in Q4, which is 14% higher than in Q3 and 13% higher than a year earlier.

LHV Group continued its rapid growth in 2024. The strong end to the year was influenced by a good level of client activity and higher than previous fee and commission income. The decline in interest income was mitigated by strong growth in the loan portfolio. Thanks to the good quality of the portfolio and the improvement in the macroeconomic situation, LHV reduced write-downs. The updated financial plan was accurately fulfilled by the end of the year.

The number of clients of LHV Pank increased by 10,900 to 455 thousand clients in Q4. Over the year, the number of the bank’s clients increased by 38,000, i.e., more than 9%. At the end of the year, clients also actively used LHV’s banking services, and the decrease in interest income was offset by better fee and commission income, especially from investment banking. As interest income continues to be under pressure, the bank is paying attention to limiting costs by increasing efficiency. In this regard, LHV Pank announced layoffs in December, reducing the workforce by 44 people.

The loan issue intensified in the last months of the year and, in Q4, the loan portfolio of LHV Pank increased by 300 million euros. The quality of the loan portfolio has remained stronger than planned, and write-downs on loans were reduced. The deposits of LHV Pank increased by 577 million euros in the last quarter of the year, of which 180 million euros came from deposits of regular clients and 450 million euros from financial intermediaries, and platform deposits were reduced. The bank is still keeping the focus on growing deposits. At the beginning of October, the bank also issued 250 million euros worth of covered bonds.

At the beginning of December, The Banker magazine of the Financial Times declared LHV the best bank of the year in Estonia. Furthermore, Q4 included a review of several important cooperation projects: LHV will be the main sponsor of both Estonian football and the biathlon in the coming years.

The loan portfolio of LHV Bank operating in the United Kingdom grew by more than half for the second quarter in a row. The loan portfolio increased by 126 million euros, while another 119 million euros of loans have been approved but not issued by the Credit Committee. The quality of the loan portfolio is generally strong. The volume of the deposits of LHV Bank increased by 70 million euros, with a total of nearly 11,600 depositors being involved. The volume of payments by financial intermediaries rose to record levels at the end of the year.

In December, LHV Bank opened a new mobile bank for its first clients, through which private persons can open an account and make payments. Further, the offer and app will continue to be improved, and their wider introduction to the market will be held in order to attract deposits directly from retail clients.

By the end of the year, the number of active clients of LHV Varahaldus making monthly contributions was 114,000. Nearly 14,000 of them submitted applications for larger contributions to the II pillar. Seasonally, contributions to the III pillar were actively made again. Operating income and expenses for the quarter remained at the level of the previous quarter. The profit was affected by a more modest financial income from the growth of the funds’ own units than before, but the financial plan still managed to be outpaced.

The stock markets had a strong quarter driven by tech stocks and the U.S. market. The quarterly rate of return of the pension funds M and L managed by LHV was 1.0% and 0.6%, respectively, while XL decreased by 1.4% against the background of a weak December. The rate of return of the more conservative funds XS and S is 0.8% and 1.2%, respectively. Pensionifond Indeks increased by 4.2%; Pensionifond Roheline lost 5.7% in value over the quarter.

For LHV Kindlustus, strong sales results, but also seasonally increased loss events, set the tone at the end of the year. The number of policies in force and clients is in a stable growth trend. A good sales result was shown by most types of insurance. Revenue from the insurance service continued to grow, while operating expenses increased. Gross losses increased a little faster compared to earned income. For the year as a whole, LHV Kindlustus earned 1.2 million from net profit and, thus, outperformed the financial plan.

LHV Group’s annual cost/income ratio turned out to be 43.4%, and return on equity 24.5%. The Group’s liquidity and capitalisation remain strong. In November, LHV Group conducted a successful offering of subordinated bonds, raising 20 million euros in capital from investors. LHV Group will publish the financial plan and five-year forecast for 2025 on 13 February.

Comment by Madis Toomsalu, Chairman of the Management Board at LHV Group:

‘The changes taking place in the world are probably the biggest in the last half century. We are witnessing the growth of geopolitical ambitions, structural changes in the economy, the decline of free trade, and the exponential growth of technological development.

Despite the different directions, 2024 was a successful year for LHV. After the supervisory exchange, we were able to restore the historically ambitious growth in business volumes. With a strong growth of 1 billion euros, i.e., 28% of the loan portfolio and a higher base interest rate, we achieved the highest business volumes and financial results in history.

In Estonia, we have grown into the second largest bank in terms of corporate loans. At the same time, the volume of home loans and the insurance business are also growing rapidly. The number of the Estonian bank’s clients increased by 38,000 and activity increased in all the important areas. In the United Kingdom, the corporate loan portfolio already exceeded 300 million euros by the end of the year, which is why we are increasing our long-term expectations. This is also reflected in the mobile app launched at the end of the year.’

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

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus, LHV Kindlustus, and LHV Bank Limited. The Group employs over 1,200 people. As at the end of December, LHV’s banking services are being used by nearly 460,000 clients, the pension funds managed by LHV have 114,000 active clients, and LHV Kindlustus is protecting a total of 170,000 clients. LHV Bank Limited, a subsidiary of the Group, holds a banking licence in the United Kingdom and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.

Q3 of 2024 for LHV was marked by strong loan portfolio growth and the highest business volumes so far.

AS LHV Group earned EUR 84.9 million in revenue on a consolidated basis in Q3 of this year, which is 3% less than in Q2, but 4% more than at the same time a year ago. Of the revenue, net interest income accounted for EUR 67.4 million, and net fee and commission income for EUR 16.3 million. The Group’s operating expenses amounted to EUR 37.2 million in Q3, which is 1% less than in the previous quarter, but 14% more than a year earlier.

In Q3, AS LHV Group earned EUR 34.7 million in consolidated net profit. It was 10% lower than in Q2 and 12% less than in Q3 of 2023. The return on equity attributable to the Group’s shareholders was 22.4% in Q3.

During the quarter, AS LHV Pank earned EUR 34.1 million euros in net profit, AS LHV Varahaldus EUR 0.6 million, and AS LHV Kindlustus EUR 0.5 million. LHV Bank Limited reported a net loss of EUR 0.6 million in Q3.

By the end of September, the volume of LHV Group’s consolidated assets increased to EUR 7.82 billion. Over the quarter, the volume of assets increased by EUR 491 million, i.e. 7%. Compared to the previous quarter, the Group’s consolidated loan portfolio increased by EUR 236 million to EUR 4.13 billion (+6%; + EUR 246 million in Q2). Consolidated deposits increased by EUR 502 million to EUR 6.29 billion during the quarter (+9%; + EUR 150 million in Q2). The total volume of funds managed by LHV was EUR 1.52 billion at the end of September, which is EUR 8 million less than in the previous quarter (-1%; - EUR 11 million in Q2). The number of processed payments to financial intermediaries’ clients amounted to 18.8 million in Q3 (+3% compared to 18.3 million payments in Q2).

In the nine months of 2024, LHV Group has earned EUR 257.6 million in net income on a consolidated basis (+15% compared to 2023), and the total expenses have been EUR 110.4 million (+14%). This year, LHV’s consolidated loan portfolio has increased by EUR 564 million, i.e. 16%, and deposits (excluding deposits of financial intermediaries) by EUR 659 million (+14%).

The Group’s consolidated net profit for the nine months was EUR 114 million, which is EUR 5.8 million more than a year earlier (+5%). In nine months, AS LHV Pank earned EUR 105.7 million, LHV Bank Limited EUR 5.2 million, AS LHV Varahaldus EUR 1.1 million, and AS LHV Kindlustus EUR 1.1 million in net profit. LHV Group’s nine-month return on equity was 25.6%.

LHV’s nine-month net profit fell EUR 0.4 million short of the financial plan published at the beginning of October.

Although the business environment is still affected by the economic downturn, both the growth and quality of LHV’s loan portfolio remained at a strong level. In addition to the growing number of clients, the activity of clients was also at a good level. The share of overdue loans remains low, but both model-based discounts and discounts to individual clients have been added.

The number of clients of LHV Pank increased by 11,200 during the quarter, and a total of 37,200 bank clients (+9%) have been added in a year. The activity of clients in terms of settlements and the use of bank cards was good, and the active issuance of home loans continued: one in four home loans in Estonia continued to be taken out with LHV Pank. Retail loans increased by EUR 112 million over the quarter and corporate loans by EUR 47 million. The growth in deposits resulted in EUR 174 million from regular clients and EUR 52 million from financial intermediaries. Platform deposits were added in the amount of EUR 92 million. In a situation where interest rates on fixed-term deposits are falling, the bank’s focus remains on attracting deposits.

During the quarter, the offer of student loans was reopened, and with the help of LHV Pank, both Estonian Treasury Bills and several other securities offers were organised on the Baltic markets. In September, the Instar survey identified LHV Pank as the most preferred employer in Estonia in terms of students, business students, and experienced employees.

For LHV Bank operating in the United Kingdom, Q3 saw record loan growth, as the loan portfolio increased by EUR 76 million. There are EUR 150 million of loans approved by the Credit Committee but not yet issued. The quality of the loan portfolio remains strong, as there are no debtors. The focus on loans will continue to be relevant: to date, LHV Bank has entered into cooperation agreements with more than 50 loan brokers and has assembled the entire team. The deposits included by LHV Bank increased by EUR 189 million over the quarter. The payment volumes of financial intermediaries remained at the same level as in Q2. In September, the results reflected one-off expenses incurred in the previous months, which affected the quarterly profit.

The development of LHV Bank’s retail banking offering, mobile bank, and website continued. At the beginning of October, the mobile bank was opened for testing by own employees, the first accounts were opened and the first payments were made. At the beginning of July, LHV Bank joined the SEPA scheme, and joining the TIPS scheme is scheduled for April 2025.

All pension funds managed by LHV Varahaldus had a positive rate of return in Q3. The quarter was characterised by a more volatile and weaker time in the markets. The volume of the II pillar was affected by the movements of clients at the beginning of September and the exit from the II pillar, which reduced the number of active clients making monthly contributions by 2,000. At the same time, the volume of the III pillar exceeded the level of EUR 100 million. Business results were largely in line with the financial plan revised in October. Approximately 8,000 people had submitted applications for larger contributions to the II pillar by the end of the quarter, and applications for the coming year can be submitted until the end of November.

LHV Kindlustus continued on the path of good sales performance and profitability. For the second quarter in a row, home and travel insurance sales showed excellent growth. At the same time, there were few major loss events. The number of clients continued to grow. Net earned bonuses are outpacing the financial plan, with operating expenses being lower than planned. The decreasing net cost ratio supports the achievement of profitability goals.

As at the end of the quarter, LHV Group is well capitalised and the Group’s internal capital generation capacity exceeds loan growth. If the growth continues, there is a possibility that LHV Group will organise the offering of T2 bonds in Q4.

Comment by Madis Toomsalu, Chairman of the Management Board of the LHV Group: ‘During Q3, we achieved the highest business volumes in history, both in Estonian home and corporate loans, and in UK corporate loans. The total loan portfolio increased by EUR 236 million, showing a very strong result. To finance loan growth, deposits increased by EUR 502 million. In Estonia, the activity of clients continued to grow, and free euro payments bring in clients who make settlements and receive wages to their account. More and more clients are also using the insurance services of LHV. In the United Kingdom, the focus is on preparing for the launch of mobile banking, payments, and bank cards aimed at retail clients.’

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

LHV Group is the largest domestic financial group and capital provider in Estonia. The LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus, LHV Kindlustus, and LHV Bank Limited. The Group employs nearly 1,200 people. As at the end of September, LHV’s banking services are being used by 445,000 clients, the pension funds managed by LHV have 116,000 active clients, and LHV Kindlustus protects a total of 169,000 clients. LHV Bank Limited, a subsidiary of the Group, holds a banking licence in the United Kingdom and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.

As the financial results of AS LHV Group are ahead of the financial plan disclosed in February due to faster than forecast loan portfolio growth and higher interest levels, the company will publish an updated financial plan for 2024.

The updated financial plan builds on actual economic performance and takes into account the gradually falling interest rates and the slowly improving macroeconomic situation. The quality of the credit portfolio remains at the projected level, but the formation of provisions that continue to be forward-looking has been taken into consideration, primarily due to specific counterparties and changes in the model. A success fee for LHV Varahaldus has not been presumed in this year’s plan.

Compared to the financial plan released in February, the new financial plan forecasts 13% higher revenue, 5% higher expenses, and 25% higher net profit by the end of 2024. The higher growth in interest income is thanks to an 8% larger loan portfolio and higher interest rates than forecast in the previous financial plan. At the same time, fee and commission income is affected by the slower growth in the income from financial intermediaries.

Higher operating expenses are affected by the increase in the number of employees in recent years, one-off salary costs, IT costs, and the cost of developing the retail business in the United Kingdom. In addition, unlike what was expected in the previous plan, the fee of the Deposit Guarantee Fund did not decline this year.

In terms of business volumes, the increase in the volume of loans is mainly due to home loans and corporate loans in Estonia. The volume of the LHV Bank Ltd loans has remained at the same level as in the previous plan. Consolidated deposits are at the same level as previously forecast. The volume of funds has been reduced by 6% compared to the previous financial plan, whereas the number of payments by financial intermediaries has been increased by 12%.

The business activities of all companies belonging to the LHV consolidation group are profitable on an annual basis. The lower profitability of LHV Bank Ltd than previously planned is due, on the one hand, to the slower growth of the loan portfolio at the beginning of the year and the lower interest income earned from financial intermediaries and, on the other hand, developing an offer aimed at retail clients has been more expensive than previously planned.

LHV Group invests growing capital in the growth of loan portfolios at the expense of the profit earned. Capital adequacy remains at a good level. The updated financial plan forecasts a return on equity based on net profit of 4.5 percentage points higher than planned in February.

Comment by Madis Toomsalu, the Chairman of the Management Board at LHV Group: "The economy of Estonia and the United Kingdom need investment to grow. LHV is more profitable than in previous years, but based on the example of the decrease in our capital rates, the earned profit has gone to the maximum extent for issuing new loans. Therefore, in the financial plan for 2024, we have significantly increased loan volumes by more than 300 million euros. In August, we reached a loan portfolio of 4 billion euros, and by the end of the year we expect the loan portfolio to grow to 4.3 billion euros, which will translate into an annual growth of almost 800 million euros. In terms of profits, the forecast takes into account the 14% profit-based tax rate applied to banks."

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

LHV Group is the largest domestic financial group and capital provider in Estonia. The LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus, LHV Kindlustus, and LHV Bank Limited. The Group employs over 1,100 people. As at the end of August, LHV’s banking services are used by 441,000 clients, the pension funds managed by LHV have 118,000 active clients, and LHV Kindlustus protects a total of 168,000 clients. LHV Bank Limited, a subsidiary of the Group, holds a banking licence in the United Kingdom and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.

For LHV Group, Q2 of 2024 was marked by strong growth in its loan portfolio, which was also reflected in a strong financial result.

AS LHV Group generated a net profit of EUR 38.6 million in Q2, which is EUR 2.1 million less than in Q1 (-5%), but EUR 3 million more than in the same period a year ago (+8%). The return on equity attributable to LHV Group’s shareholders was 25.8% in Q2.

All subsidiaries of the Group were profitable during the quarter. In Q2, AS LHV Pank earned a net profit of EUR 34.8 million, LHV Bank Ltd EUR 0.9 million, AS LHV Varahaldus EUR 0.7 million, and AS LHV Kindlustus EUR 0.4 million.

In Q2 of 2024, the Group earned a total net income of EUR 87.3 million, which is 2% more than in Q1 and 17% more than in Q2 a year earlier. Of the quarterly revenue, net interest income amounted to EUR 70.4 million, and net fee and commission income to EUR 16.3 million. The Group’s consolidated operating expenses amounted to EUR 37.6 million in Q2, which is 6% more than in Q1 and 14% more than in Q2 of 2023.

By the end of June, LHV Group’s consolidated assets stood at EUR 7.33 billion. Over the quarter, the asset volume dropped by EUR 40.8 million, i.e., by 1%. Compared to the previous quarter, the consolidated loan portfolio increased by EUR 246 million to EUR 3.89 billion (+7%; +EUR 83 million in Q1). The Group’s consolidated deposits decreased by EUR 150 million over the quarter to EUR 5.78 billion (-3%; +EUR 203 million in Q1). At the same time, the deposits of regular clients grew. The total volume of funds managed by LHV decreased by EUR 11 million during the quarter and amounted to EUR 1.53 billion at the end of June (-1%; +EUR 21 million in Q1). The number of processed payments related to financial intermediaries’ clients amounted to 18.3 million in Q2 (+3% compared to 17.8 million in Q1).

Consolidated net income of AS LHV Group for 6 months of 2024 amounted to EUR 172.7 million (+21% compared to 2023) and total expenses reached EUR 73.1 million (+15% compared to 2023). The Group’s 6-month consolidated net profit was EUR 79.3 million, an increase of EUR 10.6 million, i.e., by 15%, compared to the previous year. Over the 6 months, AS LHV Pank earned a net profit of EUR 71.6 million, LHV Bank Ltd EUR 5.8 million, AS LHV Varahaldus EUR 0.5 million, and AS LHV Kindlustus EUR 0.7 million. LHV Group’s ROE for the first half of the year was 27.6%.

By the end of Q2, LHV Group exceeds the current financial plan in terms of net profit by EUR 16.2 million.

Although the economic situation is still difficult, the quality of LHV’s loan portfolio remained at a good level and loan volumes grew faster than planned. Interest income was also supported by the persistence of higher interest rates. The number of clients increased across the Group and there were no setbacks in the good level of activity.

The number of clients of LHV Pank increased by 5,400, whereas over the year, the number of bank clients has increased by 33,000, i.e., 8%. The activity among clients while using the daily banking services was good. During the quarter, the number of clients with investment assets exceeded 100,000.

The volume of loans increased strongly: the volume of retail loans increased by EUR 94 million over the quarter and the volume of business loans increased by EUR 100 million. The quarter was active in terms of home loans, as in addition to new loans, refinancing increased this volume. LHV’s market share in home loans reached 24% in May. Deposits were also in focus. The deposits of regular clients increased by EUR 137 million in Q2. At the same time, the deposits of financial intermediaries were reduced by EUR 176 million and platform deposits by EUR 180 million.

The quality of the loan portfolio as a whole has remained stronger than planned and the share of overdue loans continues to remain low. Forward-looking write-downs were made both for individual clients and on a model-by-model basis.

For investing clients, we were the first in Estonia to introduce automatic bond trading. During the quarter, the bank also began offering the LHV Instalment payment as a new product, which allows merchants to offer their clients more flexible payment options. At the end of May, in cooperation with EIF, we began offering favourable loans to apartment associations and small businesses that encourage sustainable investments. Leasing for electric cars also became more favourable. In June, we started cooperation with Bolt and Snabb to offer discounts to LHV bank card holders.

The loan portfolio of LHV Bank in the United Kingdom is growing, but deposit-taking is also picking up the pace. The loan portfolio increased by EUR 52 million over the quarter, with EUR 141 million in approved but not yet issued loans. The volume of retail deposits through three deposit platforms increased by EUR 119 million over the quarter. LHV Bank will continue to prepare for the retail banking offering, as well as to develop banking channels and promote brand awareness. The opening of a new mobile bank for clients is planned for the end of this year. While LHV Bank joined the euro standard payment scheme at the beginning of July, it is also planned to join the real-time payment scheme by the end of the year.

For LHV Varahaldus, Q2 was characterised by a good rate of return for pension funds. The quarterly rate of return of the LHV pension funds M, L, and XL was 2.2%, 2.8%, and 2.2%, respectively. The rate of return of the more conservative funds XS and S was 1.2% and 1.4%, respectively. Over the quarter, Pension fund Indeks increased by 4.7%, Pension fund Roheline decreased by 0.4%. The operating income of Varahaldus was similar to the previous quarter, with operating expenses slightly lower. Net profit is somewhat ahead of what has been planned due to the financial income arising from the rate of return on funds. The volume of the II pillar was affected by the movements of clients at the beginning of May, as well as the exit from the II pillar. The number of active clients making monthly contributions to the pension fund was 118,000 by the end of the quarter.

The sales results of LHV Kindlustus were in accordance with the financial plan in Q2, with the biggest growth seen in terms of products concerning travel and home insurance. The profitability of insurance is at a good level thanks to the growth of revenue, with the premiums of concluded contracts having increased by 12% year-on-year. As at the end of June, 168 thousand clients of LHV Kindlustus held a total of 241,000 valid insurance contracts.

As at the end of the half-year, LHV Group is well capitalised. In Q2, LHV Group organised the first major issue of MREL bonds to international markets in the amount of EUR 300 million. The capital raised by the AT1 bond in the amount of EUR 20 million was repaid to investors. The Group’s internal capital generation capacity exceeds the growth of loans.

Comment by Madis Toomsalu, the Chairman of the Management Board at LHV Group:

“For LHV, this was the half-year with the largest increase in loan volumes in its history. This year, we have issued more than EUR 770 million in new loans to Estonian people and companies. Additionally EUR 66 million has been issued in England. This is reflected in the strong growth of the entire portfolio, and in Q2 alone, LHV’s loan portfolio grew by EUR 246 million.

Against the backdrop of economic uncertainty, the confidence of companies to invest is crucial to restoring growth. However, the continuation of controversies is to be expected, where, alongside the financial difficulties of some companies and notices of redundancies, some have become increasingly bold in investing, and where the partial counterbalance to the tax increase is the falling interest rate.

LHV’s strong capitalisation and deposit base will continue to be aimed at supporting such investments. At the same time, our investment banking activity is also important, since LHV has organised almost all major public and targeted fundraisings, and in the near future, we are also organising an offer of Estonian government bonds.

I am glad to see that more and more Estonian people are finding their way to growing money with investments. When in May the number of LHV Pank’s clients with investment assets exceeded 100,000, we once again received evidence that our decades of work to promote the investor community have gone a long way.”

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

LHV Group is the largest domestic financial group and capital provider in Estonia. The LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus, LHV Kindlustus, and LHV Bank Limited. The Group employs over 1,100 people. As at the end of June, LHV’s banking services are being used by 433,000 clients, the pension funds managed by LHV have 118,000 active clients, and LHV Kindlustus protects a total of 168,000 clients. LHV Bank Limited, a subsidiary of the Group, holds a banking licence in the United Kingdom and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.

For LHV, the first quarter of the year demonstrated strong results, affected by the higher-than-planned increase in business volumes and the interest environment remaining at the same level.

In Q1 of 2024, AS LHV Group generated EUR 40.7 million in net profit. AS LHV Pank earned EUR 36.8 million and LHV Bank Limited EUR 4.9 million in net profit. AS LHV Varahaldus generated a net loss of EUR 220 thousand in Q1, and AS LHV Kindlustus generated a net profit of EUR 256 thousand. The return on equity attributable to the shareholders of the Group was 28.5% in Q1.

In Q1 2024, the consolidation group generated a net income of EUR 85.4 million, which is almost as much as in the previous quarter. Year-on-year, the consolidated income increased by 25%. Of the revenue, net interest income accounted for EUR 68.9 million, and net fee and commission income for EUR 15.5 million. Costs of the consolidation group in Q1 amounted to EUR 35.5 million, i.e., were 6% lower than in the previous quarter. Over the year, costs increased by 16%. Discounts were made in the total extent of EUR 2.9 million in Q1. In Q1, the consolidated net profit of the Group was 24% higher than in Q4 of 2023, and 23% higher than in Q1 of 2023.

As at the end of March, the volume of consolidated assets of LHV Group increased to a record EUR 7.37 billion (an increase of 21% over the year). Over the quarter, the volume of assets increased by EUR 245 million, i.e., 3%. LHV Group’s consolidated deposits increased by EUR 203 million over the quarter (+4%), to EUR 5.93 billion (+22% year-on-year). In Q1, the consolidated loan portfolio grew by EUR 83 million (+2%), to EUR 3.65 billion (+16% year-on-year). The total volume of funds managed by LHV increased by EUR 21 million over the quarter (+1%) to EUR 1.54 billion (the volume of funds has increased by 6% over the year). The number of processed payments related to financial intermediaries amounted to 17.8 million payments in Q1 (+12% compared to the 15.9 million payments in Q4).

The first quarter was positively characterised by the higher-than-planned increase in the loan portfolio volume and interest income. Even though client activity generally remained low, as is characteristic of the beginning of the year, some products saw record levels of use. The quality of the loan portfolio has remained stronger than expected; discounts were made proactively, considering the macroeconomic scenarios.

The number of LHV Pank clients increased by 10,500 over the quarter. Client activity in terms of the use of settlements and bank cards was lower compared to the previous quarter, but high in terms of home loans and micro loans granted to companies, for example. At that, against the backdrop of active refinancing of home loans, March was a record month for the LHV home loan. The portfolio of retail loans increased by EUR 30 million over the quarter. The volume of corporate loans granted by LHV Pank increased by EUR 37 million in Q1. The demand for loans is increasing.

The general focus of the bank is still on raising deposits. Among other things, LHV Pank introduced a new savings product for its clients – the LHV Savings Account – which enables 2% interest to be generated on funds while leaving said funds immediately accessible. The deposits of standard clients of LHV Pank increased by EUR 121 million over the quarter, the deposits of financial intermediaries increased by EUR 38 million, while deposits raised from platforms decreased by EUR 23 million. Demand deposits increased by EUR 37 million, while fixed-term deposits increased by EUR 100 million.

Over the quarter, the possibility to unblock a PIN was added to the LHV mobile app, and the possibility to automatically transfer regular investments to the tax declaration was added to the Internet bank. At the end of the quarter, LHV added a special offer on banking services for teachers to its selection. During the quarter, LHV was recognised as the bank with the best service in Estonia by the survey company Dive, and as the best employer in Estonia by CV-Online.

LHV Bank, which operates in the United Kingdom, is now independently financed, having paid back the EUR 66 million loan to its sister bank. LHV Bank also successfully launched the raising of deposits on a third platform – Hargreaves Lansdown. Right now, deposits from over 4,000 depositors have been raised.

LHV Bank focuses on growing its loan portfolio through a network of brokers and doubling its number of loan managers in the first half of the year. By the end of March, the loan portfolio had increased to EUR 95 million, and the credit committee had approved an additional EUR 79 million worth of loans which had not yet been issued. The development of retail banking, together with a new website and mobile bank, is also in the works. Over the quarter, financial intermediary clients showed activity: the volumes of payments of the segment were at a record high.

The result of LHV Varahaldus was affected by a EUR 4.9 million dividend payment to the parent company, accompanied by a tax expense of EUR 800 thousand. The volume of funds and the net profit are slightly ahead of the plan, primarily due to the good rate of return and financial revenue of larger funds. The number of active clients of Varahaldus decreased a little over the quarter, to around 120 thousand clients. 4,300 clients declared their wish to increase their II pension pillar contributions.

In the context of a very strong quarter for stock markets, the quarterly ROE of LHV pension funds M, L, and XL amounted to 1.5%, 2.9%, and 2.9%, respectively. The more conservative funds XS and S had a rate of return of 1.5% and 1.6%, respectively. Pensionifond Indeks increased by 8.7% over the quarter; Pensionifond Roheline decreased by 5.3%.

LHV Kindlustus continued on an optimal course of growth. As at the end of the quarter, LHV Kindlustus protects a total of 164 thousand clients, who have concluded a total of 233 thousand contracts. The sales volumes of Kindlustus increased by 32% over the quarter. Gross premiums in Q1 increased by 40% year-on-year. At the same time, the number of loss events has also increased, which is normal with the increase of the portfolio. 22,800 new loss events were registered, and 22,400 events were closed.

In Q1, the asset quality review conducted by the European Central Bank was completed, and LHV passed it successfully. The annual general meeting of shareholders in March decided to pay a record dividend of 13 cents per share to shareholders for the previous year. The dividends were paid on 12 April.

In terms of net profit and in a summary of 3, LHV Group was ahead of the financial plan published in February by EUR 7.8 million. The financial plan stands.

Comment by Madis Toomsalu, Chairman of the Management Board at LHV Group: ‘For LHV, it was a busy and strong quarter. The Estonian economy needs investments to restore its growth, and with the increase in loan volumes, we were able to make a moderate contribution here. In addition to corporate loans, home loans also increased strongly, as did the volume of loans decided in LHV Bank in England. At that, the loan quality of subsidiaries of the Group has remained at a good level. During the quarter, the results of the extensive asset quality review conducted by the European Central Bank were also published, and these showed LHV’s good capitalisation. Our focus is still on growing business volumes and increasing client activity.’

AS LHV Group’s reports are available at: https://investor.lhv.ee/en/reports/.

In order to introduce the financial results, LHV Group will be organising an investor meeting via the Zoom webinar environment. The virtual investor meeting will take place on 23 April, at 9:00, before the market opens. The presentation will be in Estonian. We kindly ask you to register at the following address: https://lhvbank.zoom.us/webinar/register/WN_alrjq24-S-2fEWnhE1LW_Q.

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus, LHV Kindlustus, and LHV Bank Limited. LHV employs more than 1,090 people. As at the end of March, LHV’s banking services are being used by 428,000 clients, the pension funds managed by LHV have 120,000 active clients, and LHV Kindlustus protects a total of 164,000 clients. LHV Bank, a subsidiary of LHV Group, holds a banking licence in the UK and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.

The Annual General Meeting of Shareholders of AS LHV Group (LHV Group) was held on 20 March 2024 at Hilton Tallinn Park Hotel. It was possible to participate in the meeting also electronically and vote remotely on the draft decisions on the agenda, including watch the meeting via video broadcast. Shareholders entitled to participate in the meeting could also vote before the meeting.

A total of 2,649 shareholders participated in the meeting, representing a total of 187,626,109 votes, which corresponds to 58.66% of all votes entitled to participate in the meeting.

Of the participants 2,498 shareholders, representing a total of 79,838,579 votes, voted before the meeting according to the procedure for pre-voting and electronic participation published with the notice on calling the meeting.

The notice on calling the Annual General Meeting was published in the stock exchange information system and on the Group’s website on 27 February 2024. On the same date, the notice was printed in Postimees daily newspaper.

The Annual General Meeting of the Shareholders of LHV Group adopted the following resolutions:

1. Annual Report 2023

Approve LHV Group's Annual Report for 2023 as presented to the General Meeting.

In favor: 174,084,896 votes (92.78 % of the represented votes)
Opposed: 97,040 votes (0.05 % of the represented votes)
Neutral: 57,937 votes (0.03 % of the represented votes)
Withheld: 13,386,236 votes (7.13 % of the represented votes)

2. Profit Distribution for Financial Year 2023

The profit attributable to LHV Group as the parent company of the consolidation group in the financial year 2023 amounts to EUR 140,938 thousand. Transfer EUR 0 to the legal reserve. Approve the profit distribution proposal made by the Management Board and pay dividends in the net amount of 13 euro cents per share. The list of shareholders entitled to receive dividends will be established as of 5 April 2024 EOD of the Nasdaq CSD settlement system. Consequently, the day of change of the rights related to the shares (ex-dividend date) is set to 4 April 2024. From this day onwards, persons acquiring the shares will not have the right to receive dividends for the financial year 2023. Dividends shall be disbursed to the shareholders on 12 April 2024.

In favor: 178,726,831 votes (95.26 % of the represented votes)
Opposed: 183,773 votes (0.10 % of the represented votes)
Neutral: 28,591 votes (0.02 % of the represented votes)
Withheld: 8,686,914 votes (4.63 % of the represented votes)

3. Dividend Policy

Considering the Dividend Policy serves as a guiding document for the Management Board to formulate dividend payment proposals, and acknowledging the technical refinements in its recent wording to uphold the principle of distributing 25% of LHV Group's pre-tax profit to shareholders, affirm the Supervisory Board's authority to establish the Dividend Policy and instruct the Management Board to ensure that shareholders are subsequently informed about significant future amendments to the Dividend Policy.

In favor: 175,774,866 votes (93.68 % of the represented votes)
Opposed: 262,260 votes (0.14 % of the represented votes)
Neutral: 1,560,855 votes (0.83 % of the represented votes)
Withheld: 10,028,128 votes (5.34 % of the represented votes)

4. Financial Results of First Two Months of 2024

An overview of the economic results of LHV Group for the first two months of 2024 was given by the CEO of LHV Group.

5. 5-Year Financial Forecast

An overview of the five-year financial forecast of LHV Group was given by the CEO of LHV Group

6. Recall of Supervisory Board Member

Recall Sten Tamkivi (personal identification code: 37803032724) from the Supervisory Board of LHV Group, effective immediately upon the adoption of this resolution.

In favor: 173,308,406 votes (92.37 % of the represented votes)
Opposed: 694,581 votes (0.37% of the represented votes)
Neutral: 1,116,676 votes (0.60% of the represented votes)
Withheld: 12,506,446 votes (6.67% of the represented votes)

7. Appointment of Supervisory Board Member

Appoint Liisi Znatokov (personal identification code: 48311040338), as new member of the Supervisory Board of LHV Group, with the term commencing immediately upon the adoption of this resolution and continuing for three years, i.e., from 20 March 2024 until 20 March 2027.

In favor: 168,328,106 votes (89.71% of the represented votes)
Opposed: 454,979 votes (0.24% of the represented votes)
Neutral: 1,306,344 votes (0.70% of the represented votes)
Withheld: 17,536,680 votes (9.35% of the represented votes)

All relevant documents associated with the Group’s General Meeting (including the notice on calling the General Meeting, draft resolutions, the Group's annual report for 2023, including the independent auditor's report, proposal for the profit distribution, the remuneration report, the Supervisory Board's report on its activities and assessment of the 2023 annual report, LHV Group’s dividend policy and the resume of Liisi Znatokov) have been presented in more detail on the Group’s website (https://investor.lhv.ee/en/general-meetings/#20.03.2024), where the minutes of the meeting shall also be made available at the latest 7 days after the General Meeting.

HV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus, LHV Kindlustus, and LHV Bank Limited. The Group employs over 1080 people. As at the end of February, LHV’s banking services are being used by 424,000 clients, the pension funds managed by LHV have 121,000 active clients, and LHV Kindlustus protects a total of 164,000 clients. LHV Bank Limited, a subsidiary of the Group, holds a banking licence in the UK and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.

The Management Board of AS LHV Group (hereinafter the LHV Group) hereby calls the general meeting of the shareholders (hereinafter the General Meeting), to be held on 20 March 2024 starting at 13:00 (Estonian time) at Hilton Tallinn Park Hotel (Fr. R Kreutzwaldi 23, Tallinn).

The list of shareholders entitled to participate in the General Meeting will be determined as of 7 (seven) days before the General Meeting, i.e., as at 13 March 2024 EOD of Nasdaq CSD settlement system.

Pursuant to the resolution adopted by LHV Group’s Supervisory Board on 21 February 2024, the agenda of the General Meeting will be following, and the proposals of the Management Board and the Supervisory Board in regard to the agenda items are specified by each agenda item as follows, whereas the Supervisory Board has proposed to vote in favour of all draft resolutions specified under the agenda items.

1. Annual Report 2023
   Approve LHV Group's Annual Report for 2023 as presented to the General Meeting.

2. Profit Distribution for Financial Year 2023
   The profit attributable to LHV Group as the parent company of the consolidation group in the financial year 2023 amounts to EUR 140,938 thousand. Transfer EUR 0 to the legal reserve. Approve the profit distribution proposal made by the Management Board and pay dividends in the net amount of 13 euro cents per share. The list of shareholders entitled to receive dividends will be established as of 5 April 2024 EOD of the Nasdaq CSD settlement system. Consequently, the day of change of the rights related to the shares (ex-dividend date) is set to 4 April 2024. From this day onwards, persons acquiring the shares will not have the right to receive dividends for the financial year 2023. Dividends shall be disbursed to the shareholders on 12 April 2024.

3. Dividend Policy
   Considering the Dividend Policy serves as a guiding document for the Management Board to formulate dividend payment proposals, and acknowledging the technical refinements in its recent wording to uphold the principle of distributing 25% of LHV Group's pre-tax profit to shareholders, affirm the Supervisory Board's authority to establish the Dividend Policy and instruct the Management Board to ensure that shareholders are subsequently informed about significant future amendments to the Dividend Policy.

4. Financial Results of First Two Months of 2024
   An overview of the economic results of LHV Group for the first two months of 2024.

5. 5-Year Financial Forecast
   An overview of the five-year financial forecast of LHV Group.

6. Recall of Supervisory Board Member
   Recall Sten Tamkivi (personal identification code: 37803032724) from the Supervisory Board of LHV Group, effective immediately upon the adoption of this resolution.

7. Appointment of Supervisory Board Member
   Appoint Liisi Znatokov (personal identification code: 48311040338), as new member of the Supervisory Board of LHV Group, with the term commencing immediately upon the adoption of this resolution and continuing for three years, i.e., from 20 March 2024 until 20 March 2027.

The registration of the participants of the General Meeting will take place on the day of the meeting, 20 March 2024, between 12:00 and 12:45. The organizers of the General Meeting have the right not to consider later requests for registration and participation in the General Meeting. Registration of participation ensures the exercise of shareholder's rights during the General Meeting, including electronic voting for draft resolutions on the agenda of the General Meeting.

Shareholders who cannot or do not wish to take part in the General Meeting can vote on the draft resolutions on the agenda of the General Meeting before the General Meeting (hereinafter pre-voting) in the period from the publication of the notice on calling the General Meeting (i.e., from 27 February 2024) until 17:00 on 18 March 2024, whereas the simplified pre-voting via the website https://vote.lhv.ee/ (hereinafter meeting website) will be opened at 10:00 on 15 March 2024. A shareholder who has pre-voted is considered to be participating in the General Meeting, and the votes represented by the shares that shareholder holds are accounted as part of the General Meeting quorum.

Pre-voting under simplified procedure and registering participation and electronic voting during the General Meeting takes place through the meeting website. Shareholders who cannot or do not wish to participate in the pre-voting or register their presence electronically, will be allowed to register and vote at the meeting venue, as long as they arrive at the venue with sufficient time for registration. It is possible to pre-vote on the draft resolutions on the agenda of the General Meeting using the pre-voting ballots, which are available on LHV Group's website https://investor.lhv.ee/en/ (hereinafter investor website).

Shareholders whose rights are exercised by a representative at the General Meeting, must ensure that before the General Meeting takes place, the document(s) proving their right of representation are presented in writing to LHV Group’s e-mail address group@lhv.ee or on working days between 9 to 17 to LHV Group's address Tartu mnt 2, Tallinn 10145, 1st floor no later than 17:00 on 19 March 2024. All documents submitted in a foreign language must be in English or translated into English by a sworn translator or an official equivalent to a sworn translator, certified and legalized or apostilled, unless otherwise provided by legal acts in force. LHV Group must also be informed of the withdrawal of the given authorization by the same deadline. LHV Group asks to take into account that shareholder's rights can be exercised via the meeting website by a person who has the right of sole representation of the shareholder. Holders of nominee accounts who wish to vote on a draft resolution in a proportion other than the total number of votes belonging to the respective shareholder, i.e., to distribute the votes belonging to the respective shareholder on the draft resolution between several predetermined options, will have the opportunity to do so on the meeting website. Such proportional voting is also possible with the pre-voting ballots published on the investor website.

In the counting the votes given by pre-voting and electronic voting during the General Meeting, only votes that followed the procedure for pre-voting and electronic participation will be counted. The procedure can be found on the investor website.

Shareholders can remotely watch the General Meeting's live stream and participate in discussions through the website https://investor.lhv.ee/uldkoosolek/. Access to the live stream does not require authentication or registration. Instructions for watching the broadcast and submitting questions can be found on the investor website.

Up to and including the day of the General Meeting, shareholders have the option of examining all documents submitted to General Meeting (including the notice on calling the General Meeting, draft resolutions, LHV Group's annual report for 2023, including the independent auditor's report, proposal for the profit distribution, the remuneration report, the Supervisory Board's report on its activities and assessment of the 2023 annual report and the resume of the new planned Supervisory Board member Liisi Znatokov) on the investor webpage. The procedure for pre-voting and electronic participation, instructions for watching the video broadcast, pre-voting ballots, and authorizations for appointing a representative at the General Meeting can also be found on the same page.

Before the General Meeting, shareholders can ask questions about the agenda items of the General Meeting by email group@lhv.ee, provided that the questions are received by LHV Group at least 1 (one) working day before the General Meeting, no later than 13:00 on 19 March 2024.

At the General Meeting, shareholders have the right to receive information from the Management Board, to request that additional items be included on the agenda, and to submit draft resolutions in regard to each agenda item. In regard to the procedure and term for exercising these rights, LHV Group proceeds from the provisions of section 287, subsections 293 (2) and 293¹ (4) of the Commercial Code and requests that the corresponding applications be sent by e-mail to group@lhv.ee or to LHV Group’s location at Tartu mnt 2, Tallinn 10145.

Within 7 (seven) days of the General Meeting, the minutes of the General Meeting will be made available to shareholders on the investor website.

Sincerely,
Madis Toomsalu
Chairman of the Management Board of AS LHV Group

According to the financial plan for 2024, LHV will respond to falling interest income this year by increasing business volumes, fee and commission income, and efficiency. However, projected write-downs and interest expenses will bring a more modest net profit compared to last year’s record profit.

*Calculated on the basis of the average end-of-month equity volumes for the period
Business volumes have been presented in millions of euros

The financial plan foresees a significant increase in LHV’s business volumes for the current year. According to the plan, the volume of consolidated deposits will increase by EUR 943 million, i.e. 16% to EUR 6.67 billion. A significant part of the growth should come from the deposits of retail clients, both in Estonia and the United Kingdom.

LHV forecasts that the consolidated loan portfolio will increase by EUR 476 million this year, which would mark an increase of 13% and a portfolio volume of EUR 4.04 billion by the end of the year. The increase is expected to come at the expense of EUR 151 million from the growth of loans to Estonian corporate banking and EUR 105 million from the growth of retail loans. In the United Kingdom, the loan portfolio is expected to grow by EUR 220 million. The financial plan also forecasts an increase in loan impairment and write-downs to EUR 23.4 million.

The number of payments by financial intermediaries will continue to grow rapidly this year by 32% to 62 million payments. This year, LHV Bank Limited plans to join the euro payments system directly and start offering settlement services to retail clients on the United Kingdom market.

The volume of funds managed by LHV will increase by 10% in the financial plan this year to EUR 1.67 billion, i.e. by EUR 149 million. The forecast does not include earning performance fees from pension funds.

The gross premiums of LHV Kindlustus will increase by 15% to EUR 36 million in 2024. It is planned to increase the insurance portfolio in order to optimise the income base and reduce the volatility of the portfolio, as well as to improve all financial indicators.

In summary, the financial plan foresees a minimal decrease in AS LHV Group consolidation group revenues to EUR 309.1 million by 2024, mainly due to a 6% decrease in net interest income due to a decrease in interest rates, as net fee and commission income is projected to grow by 27%. The expenses will increase by 7% to EUR 143.6 million. The company’s net profit for this year is forecast to be EUR 120.1 million, which means a decrease of 15% compared to the previous record year.

LHV Group’s return on equity (ROE) ratio will remain at 20.3% in 2024 and the company forecasts a cost/income ratio of 46.4%. Profitability is affected by the significantly increased interest expense associated with instruments issued to meet capital requirements, the increase in net fee and commission income and loan write-downs due to the economic environment and the growth of the credit portfolio.

Although LHV’s long-term dividend policy will hold, the 2024 financial plan takes into account the group’s management boards proposal to the supervisory board to pay 35 per cent of the LHV Group shareholders' 2023 profit before taxes in dividends, including income tax. That constitutes 0.13 euros per share.

Comment by Madis Toomsalu, the Chairman of the Management Board of LHV Group:

"Poorer economic prospects can be improved by investments. We want to contribute here and continue as one of the biggest financial providers of the Estonian economy. We have only just started as a bank in the United Kingdom, but we are already expecting the same growth in loan volumes as in Estonia for this year. In total, we want to increase loan volumes in the two markets by EUR 476 million in 2024. We also expect business volumes to grow from our other main businesses – payment services, pension funds, and insurance services. We also forecast an increase in fee and commission income from an increase in client activity.

Against the background of a general decrease in interest rates, we expect LHV’s interest income to decrease in 2024. We want to respond to interest expenses that have grown with a lag by increasing efficiency and cost discipline. Our capital levels remain strong, but the main focus is on attracting the necessary financing for lending activities, especially in the form of deposits.

In the long term, we continue to define ourselves as a growth company. For the next five years, we have planned an increase of EUR 3.8 billion for loans, EUR 5.2 billion for deposits, and EUR 1.2 billion for funds. At the same time, we expect LHV Bank Ltd to grow three times faster than we achieved in the first five years when we started with LHV Pank in 2009.

The main keywords of the long-term plan are increased group-wide activity of the client and the broad-based use of artificial intelligence. There are already significant opportunities to use artificial intelligence in many areas today, and we plan to both search for and use these opportunities. It must keep us effective and efficient in the years to come."

Financial forecast for 2024–2028

AS LHV Group discloses its financial forecast for the next five years. In preparing the forecast, the assumptions have been made that initially the recession will continue in Estonia, but economic growth will recover from 2025, inflation will slow down, while uncertainty will remain. A significant decline in the base interest rates until mid-2025 and then stabilisation is expected. It is also assumed that LHV’s dividend policy will remain, except for a one-off, larger dividend payment made in 2024, and Varahaldus will earn a performance fee from 2026.

*Calculated on the basis of the average end-of-month equity volumes for the period
Business volumes have been presented in millions of euros

According to the long-term forecast, all significant business volumes of LHV will grow over the next five years. The volume of deposits will increase by 1.9 times to EUR 10.90 billion, while the volume of loans will double to EUR 7.38 billion, and the volume of funds will increase 1.8 times to EUR 2.72 billion.

With an emphasis on efficiency, it is planned to grow income faster than costs. For income, the company forecasts annual growth of 10%, while expenses will grow by an average of 6% per year. The income side is being affected by the increasing share of the income of the bank in the United Kingdom. The increase in costs will be mainly due to an increase in labour costs and IT costs. Due to changes in the economic environment and the growth in the volume of the credit portfolio, the forecast also takes into account the growth of write-downs.

According to the forecast, LHV’s consolidated net profit will reach nearly EUR 233.8 million by 2028 with an average annual growth of 11%. In all years, it is planned to achieve the 20% target of return on equity (ROE). The Group’s cost/income ratio will continue to decline over the next 5 years.

LHV Group will amend the financial plan for 2024 if it becomes likely that the planned net profit will differ by more than 10% from the financial plan. The company will update its five-year forecast in early 2025.

AS LHV Group’s reports are available at: https://investor.lhv.ee/en/reports.

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus, LHV Kindlustus, and LHV Bank Limited. LHV employs more than 1,060 people. As at the end of December, LHV’s banking services are being used by 417,000 clients, the pension funds managed by LHV have 123,000 active clients, and LHV Kindlustus is protecting a total of 161,000 clients. LHV Bank, a subsidiary of LHV Group, holds a banking licence in the UK and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.

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

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

Among its subsidiaries, AS LHV Pank earned EUR 141.4 million in net profit in 2023, UK Bank Limited EUR 5.3 million, AS LHV Varahaldus EUR 1.7 million, and AS LHV Kindlustus earned a total of EUR 305 thousand in net profit over 12 months.
As of the end of 2023, the volume of LHV Group’s consolidated assets stood at a record EUR 7.13 billion, growing by 16% or EUR 990 million over the year. In Q4, the volume of assets increased by 8%.

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

LHV’s consolidated loan portfolio increased by EUR 353 million to EUR 3.56 billion (+11%) in 2023. In Q4, the loan portfolio grew by 6%, or EUR 186 million. Corporate loans increased by EUR 137 million and retail loans by EUR 49 million.
The aggregate volume of funds managed by LHV increased by EUR 187 million to EUR 1.52 billion (+14%). The last quarter of the year contributed EUR 68 million to growth (+5%).

The number of processed payments related to clients that were financial intermediaries amounted to 49.5 million payments in 2023 (+89% compared to 26.1 million payments in 2022). 15.9 million of such payments were made in Q4, which is one fifth more than in Q3.
In Q4 2023, the consolidated net profit of AS LHV Group was EUR 32.8 million. This is EUR 6.7 million less than in Q3 (-17%), however, it exceeded Q4 of last year by 35%. AS LHV Pank earned EUR 33.6 million in net profit in Q4, AS LHV Varahaldus EUR 0.5 million, and AS LHV Kindlustus EUR 0.4 million. LHV Bank Limited earned EUR 3.0 million in net profit in the last quarter of the year. The return on equity owned by the Group’s shareholders was 24.5% in Q4.

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

The results at the end of the year were strong for LHV, supported by client activity, but the declining economy and weakening confidence led to prudence. Interest income still dominates, but increasing interest expenses need to be taken into account, while service fee and commission income is also showing growth. By the end of the year, LHV fulfilled the financial plan by a small margin.
The number of clients of LHV Pank increased by more than 10,000 to 417 thousand clients in Q4. Over the year, the number of the bank’s clients increased by 39,500, or more than 10%. Client activity in everyday banking remained at a good level, and demand for loans is growing somewhat. Clients actively used investment services. At the end of the quarter, the bank expanded its favourable home loan offer to energy-efficient homes. LHV Pank was chosen as the most desirable employer in Estonia in the CVKeskus.ee survey.
The bank’s general focus was on taking deposits – the deposits of regular clients increased by EUR 153 million in the last three months of the year. Clients increasingly prefer term deposits, the share of which has grown to a third of all deposits. Volatility continued on the deposits of financial intermediaries.

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

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

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

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

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

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

Comment by Madis Toomsalu, Chairman of the Management Board at LHV Group:
"In 2023, LHV did well. Increasing business volumes and rising interest rates have strengthened the results, but the general economic downturn has made planning difficult. Interest rates are cyclical and a very rapid rise can be followed by a rapid decline. Achieving a good result has required a strong commitment and important strategic decisions. Over the past 12 months, in addition to our daily activities, the successful launch of LHV Bank in the United Kingdom, the growth of the insurance business, and the transition to the direct supervision of the European Central Bank have required us to pay special attention.
We intend to continue with ambitious goals and strategic activities so that our business activities will remain efficient and sustainable in the years to come. A large part of increasing efficiency lies in increasing technological capabilities, on which we have placed a significant emphasis both in the last quarter and in the future. We are going to face 2024 with the strength and confidence that is characteristic of us. We achieve good results on the basis of strong prerequisites – satisfied employees, clients and shareholders."

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

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus, LHV Kindlustus, and LHV Bank Limited. LHV employs more than 1,060 people. As of the end of December, LHV’s banking services are being used by 417,000 clients, the pension funds managed by LHV have 123,000 active clients, and LHV Kindlustus protects a total of 161,000 clients. LHV Bank, a subsidiary of LHV Group, holds a banking licence in the UK and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.

In Q3 of this year, AS LHV Group earned EUR 39.5 million in net profit. AS LHV Pank earned EUR 36.0 million in net profit, LHV Bank Limited EUR 3.2 million, AS LHV Varahaldus EUR 0.6 million, and AS LHV Kindlustus EUR 0.3 million. The return on equity attributable to the Group’s shareholders was 31.6% in Q3.

In Q3 of 2023, the Group generated consolidated revenue of EUR 81.5 million, i.e., 9% more than in the previous quarter. Of the revenue, net interest income accounted for EUR 68.1 million, and net fee and commission income for EUR 13.6 million. The operating expenses of the consolidation group amounted to EUR 32.8 million in Q3, i.e., 1% less than in Q2. Net profit for the quarter was EUR 3.8 million more than in the previous quarter (+11%) and 3.7 times higher than in the same period last year.

As at the end of September, LHV Group’s consolidated assets stood at EUR 6.59 billion. Over the quarter, assets increased by EUR 284 million, i.e., 5%. The Group’s consolidated deposits increased by EUR 254 million over the quarter to EUR 5.32 billion (+5%; EUR +195 million in Q2). The consolidated loan portfolio grew by EUR 122 million over the quarter to EUR 3.38 billion (+4%; EUR +104 million in Q2). The total volume of funds managed by LHV decreased by EUR 13 million to EUR 1.45 billion in Q3 (-1%; EUR +14 million in Q2). The number of processed payments related to clients who are financial intermediaries amounted to 13.2 million in Q3 (+18% compared to 11.2 million payments in Q2).

Consolidated net revenue of AS LHV Group for the nine months of 2023 amounted to EUR 224.8 million (+92% compared to 2022) and total expenditure was EUR 96.5 million (+54%). The consolidated net profit of the Group for the nine months was consequently EUR 108.2 million, i.e., EUR 71.1 million more than a year ago (+191%). Over the nine months, AS LHV Pank earned EUR 107.8 million in net profit, UK Bank Limited EUR 2.2 million in net profit, AS LHV Varahaldus EUR 1.1 million in net profit, and AS LHV Kindlustus EUR 0.1 million in net loss. The return on equity of LHV Group was 30.8% over the nine months. LHV outperformed the financial plan disclosed at the beginning of September by EUR 4.0 million with regard to net profit for the nine months.

A strong quarter for LHV, as previously expected, was characterised by the profitable performance of the Estonian enterprises, capital raising, and the development of business in the United Kingdom. Over the quarter, LHV updated its financial plan, increasing its profit target for the current year by 29%. In September, LHV Group organised a public offering of subordinated bonds, raising EUR 35 million in Tier II capital. A record 16,255 investors participated in the offering, which was oversubscribed 16 times.

In a still uncertain economic environment, we managed to increase the number of clients and client activity is improving. The focus has been on deposits: the shift of clients from demand deposits to fixed-term deposits continued. During Q3, demand deposits decreased by EUR 191 million, while fixed-term deposits increased by EUR 445 million, of which EUR 142 million was raised through deposit platforms. Deposits from regular clients increased by EUR 79 million over the quarter.

The quality of the loan portfolio has remained at a good level, despite a small change in the retail small loan portfolio, where an increase in delays has been observed. Growth in the Group’s loan portfolio has been as expected.

During the quarter, the number of LHV Pank’s clients increased by 6,600 to 407 thousand. Client activity in terms of settlement services and card usage remained at a good level. The loan portfolio of LHV Pank increased by EUR 176 million, of which EUR 83 million was issued to LHV Bank and EUR 95 million to clients, which in turn was split equally between retail and corporate banking. Demand for credit is showing some signs of growth after a more stable period. The new student loan period started, with more activity than last year. In September, the employer branding agency Instar named LHV Pank the most attractive employer for both Estonian students and experienced employees.

In August, the business of the UK branch of LHV Pank was successfully transferred to LHV Bank. As a result, servicing of clients’ payments in pounds, interfacing with payment systems, and the contracts related to servicing these payments were transferred to the new bank. The current UK branch is in the closing process. LHV Bank introduced a new IT system and replaced its loan system.

In addition to increasing its loan portfolio to EUR 61 million, LHV Bank started to attract deposits from the UK market through the Raisin deposit platform. Connections to other platforms are ongoing. Business volumes in the Banking Services segment were a record high in Q3, driven by growth in companies operating in new sectors. Strong results are reflected in better-than-planned profitability. In Q3, LHV Group increased the share capital of LHV Bank by EUR 12 million.

In the pension fund market, LHV’s actively managed funds had the best rate of return in Q3. Growth in LHV funds was led by bonds, private equity, and equity positions contributing to the energy sector, while the major equity markets were in the red.

The reason for the decline in the volume of funds managed by LHV Varahaldus was due to the payouts made at the beginning of September and the lower-than-expected rate of return. Pillar III assets grew quarter on quarter. The number of active pension clients decreased by 4,000 over the quarter, due to clients leaving pension Pillar II in September. The increase in profit from asset management has been supported by a lower-than-planned cost base.

The net revenue of LHV Kindlustus continued its upward trend, while expenses remained in line with the financial plan. In Q3, gross premiums fell. During the quarter, 15,300 new claims were registered and 17,600 were closed. As at the end of the quarter, clients had 228,000 valid insurance contracts. The number of clients covered by insurance increased to 160 thousand.

Comment by Madis Toomsalu, Chairman of the Management Board at LHV Group:
‘The record braking bond offering that took place at the end of the third quarter proved investors’ continuous belief in what we do. LHV’s capitalisation is at a good level, enabling us to go on with active lending in Estonia as well as in the UK. Our revenue base in Estonia is broad, but the results have mainly grown with the help of interest income. More and more also interest costs are increasing, which is why group efficiency is one of the main keywords for the upcoming financial planning. The performance of the UK bank is encouraging. Our loan portfolio and payment volumes are growing, and we are preparing for including deposits.’

AS LHV Group’s reports are available at: https://investor.lhv.ee/en/reports/.

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus and LHV Kindlustus in Estonia, and LHV Bank in the United Kingdom. The Group employs over 1,020 people. As at the end of September, more than 407,000 clients were using LHV’s banking services, LHV’s pension funds had 125,000 active clients, and 160,000 clients were covered by LHV Kindlustus. LHV Bank holds a banking licence in the United Kingdom and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.

AS LHV Group (hereinafter LHV) hereby announces a public offering of LHV’s subordinated bonds. The offering is conducted on the basis of the prospectus registered by the Estonian Financial Supervision and Resolution Authority (FSA) on 11 September 2023, that has been disclosed on the date of this announcement on the web pages of LHV and the FSA. The public offering of the subordinated bonds will be carried out only in Estonia.

This is the first issue of the subordinated bonds, in the amout of up to EUR 25 million, with the possibility to increase the issue size to up to EUR 35 million, under the new bond programme. Under the new bond programme, it is possible to raise up to EUR 200 million in total.

Main terms of the offering

LHV offers publicly up to 25,000 subordinated bonds of LHV „EUR 10.50 LHV Group subordinated bond 23-2033” with the nominal value of EUR 1,000, the maturity date 29.09.2033 and a quarterly paid fixed interest rate offered to the investor at the rate 10.50% per annum. In case of oversubscription of the bonds LHV has the right to increase the offering volume by up to 10,000 additional bonds as a result of which the total number of the bonds offered in the course of the public offering may be up to 35,000. Subordinated bonds will be offered at a price of EUR 1,000 per one bond. Subordinated bonds will be issued in a dematerialised book-entry form and registered in Nasdaq CSD SE under ISIN code EE3300003573.

The subscription period for the bonds will start on 12 September 2023 at 10:00 and will end on 26 September 2023 at 16:00. The offering will be targeted to Estonian retail and institutional investors.

Subordinated bond represents an unsecured debt obligation of LHV before the investor. The subordination of the bonds means that upon the liquidation or bankruptcy of LHV, all the claims arising from the subordinated bonds shall fall due and shall be satisfied only after the full satisfaction of all unsubordinated recognised claims in accordance with the applicable law. Among other things, with subordinated bonds, the risk of conversion of liabilities and claim rights (bail-in risk) must be considered.

Timetable of the offering

Submitting subscription undertakings

In order to subscribe for the subordinated bonds, during the subscription period, an investor has to submit a subscription undertaking to the custodian who holds the investor’s securities account opened at Nasdaq CSD SE, with the format accepted by the custodian and in accordance with the prospectus and offer conditions. The undertaking must be submitted before the end of the subscription period. The investor may use any method that such investor’s custodian offers to submit the subscription undertaking (e.g., physically at the client service venue of the custodian, over the internet or by other means). The subscription undertaking will be forwarded to Nasdaq CSD SE.

Listing and Admission to Trading of Subordinated Bonds

LHV intends to submit an application to Nasdaq Tallinn AS for the listing and admission to trading of the LHV’s subordinated bonds on the Baltic Bond List of the Nasdaq Tallinn Stock Exchange. The expected date of listing and admission to trading is on or about 2 October 2023.

While every effort will be made and due care will be taken in order to ensure the listing and the admission to trading of the subordinated bonds, LHV cannot ensure that the subordinated bonds will be listed and admitted to trading.

Availability of Prospectus and Terms of the Offering

The Prospectus has been published and can be obtained in electronic format from LHV’s website https://investor.lhv.ee and from the website of the Financial Supervision Authority https://www.fi.ee. Additionally, the Estonian translation of the Prospectus has been disclosed previously and made available together with the Prospectus on the LHV website https://investor.lhv.ee and is also available through the information system of Nasdaq Tallinn Stock Exchange. The terms and conditions of LHV’s first subordinated bonds offering together with the summary of the prospectus and translations to Estonian have been published and can be obtained in electronic format from LHV’s website https://investor.lhv.ee/.

Before investing into LHV’s subordinated bonds we ask you to acquaint yourself with the prospectus, the final terms and conditions of the offering and if necessary consult an expert.

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus, LHV Kindlustus, and LHV Bank Limited. The Group employs over 990 people. As at the end of August, LHV’s banking services are used by 403,000 clients, the pension funds managed by LHV have 127,000 active clients, and LHV Kindlustus protects a total of 160,000 clients. LHV Bank, a subsidiary of the Group, holds a banking licence in the UK and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.

Important information:

This notice is an advertisement for securities within the meaning of the Regulation No 2017/1129/EU of 14 June 2017 of the European Parliament and of the Council European Parliament and does not constitute an offer to sell subordinated bonds or invitation to subscribe to subordinated bonds. The offer to acquire the subordinated bonds is made solely on the basis of the prospectus that is approved by the Estonian Financial Supervision and Resolution Authority and made public on the day of the announcement of public offering. The Prospectus is available on the websites of the Estonian Financial Supervision and Resolution Authority and AS LHV Group on addresses fi.ee and investor.lhv.ee/en respectively, the last of which also contains the mentioned conditions and summary of prospectus. Before making an investment decision, investors should read the information published in the prospectus in order to understand all details related to the investment. The approval of the prospectus by the Estonian Financial Supervision and Resolution Authority should not be regarded as endorsement to AS LHV Group or the offered securities. The shares will be publicly offered only in the Republic of Estonia.

In relation to the better than forecast quality of the credit portfolio and higher base interest rates, AS LHV Group’s financial results for the current year have exceeded the financial plan published in February, which is why the company is publishing its updated financial plan for 2023.

The updated financial plan has accounted for the actual economic results and the continued slow increase of loan and deposit interest rates. While currently, the quality of the credit portfolio remains good, the macroeconomic situation is complicated and the financial plan has proactively taken the creation of provisions into account. A success fee for Varahaldus has not been presumed in this year’s plan.

Compared to the plan published in February, the updated financial plan for 2023 has forecast a 14% higher interest income, but a 4% lower fee and commission income. The higher revenue growth is due to larger business volumes, a higher interest rate, and pre-financing at a lower interest rate. At the same time, fee and commission income is affected by the lower income rate from investment services.

The expense forecast has been raised by 9%, but the impairment of loans has been reduced by 67% compared to the previous forecast. This indicates directly the levels forecast until the end of 2023 and does not indicate long-term levels of loan losses. The quality of the credit portfolio has been very strong and the level of loan impairment abnormally low. This has partly been facilitated by the high increase in prices, which has sharply decreased in the past few months. Operating expenses are affected by the significantly increased payment rate of the deposit guarantee fund, as well as the cost of services purchased. Going forward, we also expect an increase in interest expenses, originating both from the continuing increase of deposit expenses as well as the refinancing of previously issued long-term bonds.

The updated financial plan forecasts a 29% higher net profit and a 5.8 percentage point higher return on equity based on net profit.

The business volumes of the Group’s companies remain largely at the same level compared to the previous plan. The only significant difference is in terms of the larger UK loan portfolio and the increased volume of payments by financial intermediaries.

Comment by Madis Toomsalu, Chairman of the Management Board at LHV Group:

“After ten years of the zero interest rate policy of central banks, financial markets have moved back to their historic average, and figuratively speaking – money once again has a price. Although pulling away from the long-term anomaly is no easy task, it forms a basis for a more optimal and sustainable economic structure.

LHV has managed to grow its business in this controversial economic environment, and as the return of assets has increased faster than the cost of obligations in this cycle of rising interest rates, the results are surpassing the current financial plan. In the case of decreasing interest rates, the result would be the opposite. Investments made in the Estonian economy are mostly financed by banks. The underdeveloped capital markets have not offered enough competition. This is why the existence of strong and well-capitalised banks is of critical importance.

LHV intends to direct the profit earned back to the growth of loan volumes, raising additional funds from the market via capital instruments, at that. Together with the company’s self-financing, LHV’s capital is amplified in the economy to up to a tenfold final investment, or an even larger home loan portfolio.

LHV’s results are affected the most by the performance of the two banks in the Group. Recently, we separated our UK business from LHV Pank and transferred the servicing of our financial intermediary clients to LHV Bank. In addition, the updated plan has increased the volume of loans in the United Kingdom, as the current annual objective is already coming to fruition in September. In the current year, all important subsidiaries of the LHV Group are expected to achieve profitability, as even the revenue base of LHV Kindlustus is increasing, supported by increased business volumes, and its activities are profitable.’

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus, LHV Kindlustus, and LHV Bank Limited. The Group employs over 970 people. As of July, LHV’s banking services are being used by 404,000 clients, the pension funds managed by LHV have 127,000 active clients, and LHV Kindlustus protects a total of 161,000 clients. LHV Bank, a subsidiary of the Group, holds a banking licence in the UK and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.

The Estonian Financial Supervision and Resolution Authority (FSA) has issued a precept to AS LHV Pank as a result of supervisory proceedings in 2022 and also issued a 900,000 euro fine for misdemeanour. LHV Pank agrees with the supervisional remarks.

The FSA conducted an on-site inspection to assess the compliance of LHV Pank’s financial intermediaries business line’s control systems. The supervisory proceedings identified deficiencies regarding the assessment and management of money laundering and terrorist financing risks; as well as in the solutions for onboarding and monitoring of clients to faultlessly fulfil the due diligence measures set for the bank. The remarks included a lack of resources and shortcomings in the fulfilment of obligations.

According to Kadri Kiisel, the Chairman of the Management Board of LHV Pank, LHV was engaged in improving the risk control system of the financial intermediaries business line even before the beginning of the inspection. As of today, LHV has eliminated a large part of the 22 shortcomings identified by the FSA. Work will continue until the end of this year.

"The development of risk control is a continuous work for the bank that has been in focus side by side with the growth of the Financial intermediaries business line. We are treating the supervisory observations with appropriate priority and commitment. Among other things, we have implemented changes to the assessment and management of risk and significantly increased the team active with due diligence. The inspection results showed that the FSA’s expectations are at a high level and there is a need for improvement of indicated processes and procedures, so that we could more thoroughly know our customers as well as the activities of their end customers," Kiisel commented.

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank, LHV Varahaldus, LHV Kindlustus, and LHV Bank. The roup companies employ over 970 people. As of July, LHV’s banking services are being used by 404,000 clients, the pension funds managed by LHV have 127,000 active clients, and LHV Kindlustus protects a total of 161,000 clients. LHV Bank, a subsidiary of LHV Group, holds a banking licence in the UK and provides banking services to international financial technology companies, as well as loans to small and medium-sized enterprises.