Slide 1: LHV Group – Presentation to investors, May 2014
LHV GROUP Presentation to investors – May 2014
Slide 2: Table of contents
Table of contents Introduction and summary of risks 3 LHV Group 5 Business areas LHV Asset Management 12 LHV Bank 19 Lithuanian business 33 Capitalisation 38 Shareholders 41 2
Slide 3: Investment risk (I) – Summary of risks
Investment risk (I) Summary of risks Investing in shares issued by LHV Group entails various risks. Every potential investor should thoroughly consider the risks involved, the scope and probability of the risks, and other relevant circumstances. If the risks are realised, investors may lose a part o
Slide 4: Investment risk (II) – Summary of risks
Investment risk (II) Summary of risks Liquidity risk LHV has a large part of its funding as current liabilities (mainly demand deposits). LHV constantly monitors its liquidity position. Nonetheless, the liquidity reserves may prove insufficient in case of adverse events. Reputation risk LHV has impl
Slide 5: LHV Group Overview
Overview LHV GROUP
Slide 6: LHV Group Overview
LHV Group Overview LHV Group is the largest domestic provider of capital in Estonia. LHV’s customers include private persons, SMEs and institutional investors. In addition to Estonia, LHV offers financial services in Lithuania, Finland and Latvia. For private customers, LHV mainly offers savings and
Slide 7: Business philosophy
LHV Group Business philosophy LHV is focused on active, entrepreneural and independent customers. LHV’s products and services are simple, transparent and relevant. LHV communicates with customers mainly via modern electronic communication channels and through means preferred by customers. LHV makes
Slide 8: Objectives
LHV Group Objectives LHV has set its sights on: • being the best financial service provider to private customers engaged in saving and investment, as well as to SMEs • serving as an attractive and respected employer, endorsing progress, self- realisation and growth • pursuing an annual return on equ
Slide 9: Group structure
LHV Group Group structure AS LHV Group Holding company AS LHV Pank (100%) AS LHV Finance (65%) Estonia - banking, investment services Estonia – consumer financing LHV Pank Finland (branch) Finland – consumer financing LHV Pank Latvia (branch) Latvia – investment services AS LHV Varahaldus (100%) Est
Slide 10: Economic results and business volumes
LHV Group Economic results and business volumes EURt 2009 2010 2011 2012 2013 • Average annual growth Net interest income 614 1 322 3 517 6 057 11 838 in revenue 58% Net fee income 3 930 4 490 5 270 6 489 9 490 • Average annual growth Net financial income -678 -323 -1 107 819 2 715 in expenses 33% T
Slide 11: Nine quarters – a good start in 2014
LHV Group Nine quarters – a good start in 2014 Net profit/loss for the quarter (EURt) • Profit posted in all quarters since the 2 500 2 034 1 663 beginning of 2013 2 000 426 MokiLizingas • One-off disposal of 1 500 1 312 Asset securities portfolio in 13 520 1 000 Management Q1 provided a financial 6
Slide 12: LHV Asset Management
Business areas LHV ASSET MANAGEMENT
Slide 13: Market overview
LHV Asset Management Market overview • Mandatory pension funds make up ~72% of the investment funds market in Estonia • NAV of assets under management: EUR 1,89 billion • Number of subscribers to funded pension: 655 000 • Annual net income from service fees: EUR ~28 million • LHV Asset Management is
Slide 14: Foundations for a rapid growth
LHV Asset Management Foundations for a rapid growth Number of LHV’s pension fund customers exceeds 100,000 LHV becomes the third asset manager in the mandatory funded pension market LHV launches sales outside Launch of the Merger of LHV the office mandatory and Seesam funded pension Asset LHV starts
Slide 15: Fund performance – beating all indices
LHV Asset Management Fund performance – beating all indices 230% 210% • LHV Pension Fund L (progressive strategy) 190% +58% is 58% above the 170% Estonian pension +48% funds index EPI-50 150% 130% • LHV Pension Fund S (conservative 110% LHV pf L strategy) is 48% EPI-50 90% above the Estonian LHV pf
Slide 16: Economic results and business volumes
LHV Asset Management Economic results and business volumes EURt 2009 2010 2011 2012 2013 • Growth in the NAV of assets under manage- Net fee income 948 1 433 2 403 3 831 5 811 ment is in strong Net financial income 503 241 -341 333 183 correlation with growth in net fee income Total income 1 450 1 6
Slide 17: Nine quarters – a strong and foreseeable trend
LHV Asset Management Nine quarters – a strong and foreseeable trend • Net fee income is Net profit/loss for the quarter (EURt) growing rapidly and 800 predictably 700 671 • Marketing expenses 600 520 maintain their previous 474 500 level 400 304 290 • Management fees of 300 funds expected to drop 20
Slide 18: Objectives and prospects
LHV Asset Management Objectives and prospects LHV Asset Management aims at growing 1,5 times faster than the market in the next three years • The mandatory funded pension market is still in a stage of strong organic growth • The volume of mandatory pension funds grew by 30% in 2012 and 20% in 2013.
Slide 19: LHV Bank
Business areas LHV BANK
Slide 20: Market overview
LHV Bank Market overview • There are 16 credit institutions operating in Estonia (with 8 18 branches of foreign banks) Deposits (EURbn) 13 • The volume of deposits in the banking market amounts to EUR 13,5 billion 8 • Deposits have grown every year over the past 20 3 years • The aggregate market sha
Slide 21: Position
LHV Bank Position • Long-term ambition – the third largest bank in Estonia • Customers – private persons and SMEs accumulating and investing in financial assets • Market – LHV is an Estonian bank. We will expand to foreign markets when possible • Products – each of our product and service is valuabl
Slide 22: Business units
LHV Bank Business units Retail banking Active and independent private persons, wealthier private persons, SMEs. Everyday banking services, with focus on savings and investments. Communication with customers via electronic channels, sales representatives and telemarketing. Corporate banking SMEs (loc
Slide 23: Product portfolio dynamics
LHV Bank Product portfolio dynamics Au- Multiple account card customer Partner Bank Card gold card Mobile bank Hire- purchase Leasing Partner Cards Credit Card Deposits Internet Loans Payments bank 2009 2010 2011 2012 2013 2014 Number of customers 23
Slide 24: Economic results and business volumes
LHV Bank Economic results and business volumes EURt 2009 2010 2011 2012 2013 • Within five years, Net interest income 587 1 334 3 577 6 209 10 495 rapidly growing interest income has been Net fee income 3 000 3 078 2 880 2 665 3 045 created alongside net Net financial income 289 268 -887 384 2 342 i
Slide 25: Nine quarters – a good start in 2014
LHV Bank Nine quarters – a good start in 2014 • Growing interest income Net profit/loss for the quarter (EURt) supports profit growth 2 000 1 674 1 500 • One-off disposal of securities portfolio in 13 921 Q1 provided a financial 1 000 income of 1 950 500 386 117 thousand euros 91 0 0 • The first qua
Slide 26: LHV Bank – Retail banking Business overview
LHV Bank – Retail banking Business overview Retail banking customer base (number of customers) Assets of brokerage-related clients (EURm) 55 000 LHV Bank has 50 000 140 The volume of 50 000 customers (+28% 120 customers’ assets 45 000 CAGR), 30 000 amounts to EUR customers hold assets 100 40 000 300
Slide 27: LHV Bank – Retail banking Quality of assets
LHV Bank – Retail banking Quality of assets Quality of the card portfolio Quality of the leasing portfolio 9% 9% 8% 8% 7% 7% 6% 6% 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% 12.2012 01.2013 02.2013 03.2013 04.2013 05.2013 06.2013 07.2013 08.2013 09.2013 10.2013 11.2013 12.2013 01.2014 02.2014 03.2014 12.20
Slide 28: LHV Bank – Corporate banking Business overview
LHV Bank – Corporate banking Business overview Corporate loan portfolio by fields of activity Corporate banking customers are small and medium-sized 100% enterprises. 99% of the SMEs have Estonian owners. The 90% average loan amount is EUR 575 000. 80% Other 70% 60% Wholesale and retail The corporat
Slide 29: Prospects – towards a better balance
LHV Bank – Corporate banking Prospects – towards a better balance Distribution of the loan portfolio as at 2014 Q1 (EURm) Growth - 12 months (EURm) Other 35,4 3,5 Entertainment 11,7 6,9 Real estate 60,3 34,0 Holding companies 21,0 4,3 Wholesale and retail 8,1 6,9 Manufacturing 25,3 13,0 0 10 20 30 4
Slide 30: Quality of assets – new portfolio, strong collaterals
LHV Bank – Corporate banking Quality of assets – new portfolio, strong collaterals Distribution of the loan portfolio, by ratings Share of overdue loans in the corporate loan 35% 2012.12 3,0% portfolio (%) 30% 2013.12 2,5% 25% 2014.03 2,0% 20% > 30 days 1,5% 15% > 90 days 10% 1,0% Low risk High risk
Slide 31: LHV Finance and LHV Bank Finland Consumer financing
LHV Bank – LHV Finance and LHV Bank Finland Consumer financing LHV Finance’s hire-purchase portfolio Finnish consumer loan portfolio (EURm) (EURm) 20 8 15 6 10 4 2 5 0 0 13 Q2 13 Q3 13 Q4 14 Q1 10 11 11 11 11 12 12 12 12 13 13 13 13 14 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 overdue for more than
Slide 32: Objectives and prospects
LHV Bank Objectives and prospects The objective of LHV Bank is to enhance business volumes, whilst maintaining and improving the current risk profile Objectives for 2014: • To implement the plan to launch new products and offers • To increase the deposit portfolio by EUR 50 million • To increase the
Slide 33: Lithuanian business
Business areas LITHUANIAN BUSINESS
Slide 34: Market overview
Lithuanian business Market overview Hire-purchase market volume* (EURm) Consumer loans market volume** (EURm) 132,8 20% 160 155,6 20% 130,3 127,8 149,0 130 143,8 124,9 15% 15% 123,2 Total market 15,1% 140 133,5 120 13,1% 11,8% 10% 10% 10,5% 11,0% Market share 120,3 of 120 110 5% MokiLizingas 5% 4,5%
Slide 35: MokiLizingas Economic results and business volumes
Lithuanian business – MokiLizingas Economic results and business volumes EURt 13 Q3 13 Q4 14 Q1 • LHV consolidates MokiLizingast since Net interest income 696 789 829 July 2013 Net fee income 354 287 249 • Recovery of new sales and careful Net other income -3 -2 0 pricing is boosting interest income
Slide 36: Quality of assets – improving and satisfactory
Lithuanian business - MokiLizingas Quality of assets – improving and satisfactory 20% Overdue hire-purchase amounts and provisions (% of the portfolio) 15% Write-off 10% over 360 days 5% 91-360 days 0% Provisions 18% Overdue consumer loan amounts and provisions (% of the portfolio) 16% 14% Write-off
Slide 37: New business development
Lithuanian business - Finasta New business development • LHV Group together with Razfin has made an offer to the bankruptcy trustee of Snoras Bankas for the purchase of Finasta Bankas and Finasta Asset Management • The details of the transactions are currently being negotiated • Finasta Bankas is a
Slide 38: Capitalisation
CAPITALISATION
Slide 39: Capital allocation
Capitalisation Capital allocation Increase of Subordinated Return on New issue Data for 2013 Equity EURm capital loan EURm equity June 2014 requirement Asset Management 5,19 1,55 40% 27% 0,00 Bank 26,87 10,00 11% 63% 12,00 Mokilizingas 3,24 0,00 27% nm 0,00 LHV Group (consolidated) 31,95 19,64 16% 6
Slide 40: Previous issues and share price
40 12 14 10 0 2 4 6 8 12.2006 1,0 03.2007 06.2007 09.2007 Capitalisation 12.2007 1,3 03.2008 06.2008 1,5 09.2008 12.2008 03.2009 2,0 06.2009 09.2009 12.2009 03.2010 2,1 Share issue size EURm (left) 06.2010 09.2010 2,2 12.2010 03.2011 Previous issues and share price 06.2011 09.2011 2,5 12.2011 03.201
Slide 41: Shareholders
SHAREHOLDERS
Slide 42: Shareholders – as at May 2014
LHV Group Shareholders – as at 1 May 2014 Shareholder (holding over 1%) Participation (%) including Participation (%) Rain Lõhmus 34 Supervisory Board 66 Andres Viisemann 13 Staff members 4 Ambient Sound Investments OÜ 6 Mai Kaarepere 6 Tiina Mõis 5 Heldur Meerits 4 Olaf Herman 3 Tõnis Sildmäe 3 Lem
Slide 43: AS LHV Group contact details
AS LHV GROUP TARTU MNT 2, TALLINN 6 802 670 INFO@LHV.EE LHV.EE