Lhv Group As · OMXTSE:LHV1T
Lhv Group As — AS LHV Group — Debt Investor Presentation (October 2015)
44 slides from Lhv Group As's debt investor presentation, October 2015
Slide 1: LHV Group – Presentation to investors, October 2015
LHV GROUP Presentation to investors – October 2015
Slide 2: Table of contents
Table of contents Introduction and summary of risks 3 LHV Group 7 Business areas LHV Bank 14 LHV Asset Management 26 Mokilizingas 35 Funding and capital 40 2
Slide 3: Organisation of the issue of subordinated bonds
Introduction Organisation of the issue of subordinated bonds This presentation has been prepared with the aim of introducing the planned issue of subordinated bonds by AS LHV Group (LHV) and giving background information for making potential investment decisions. The details of the issue have been p
Slide 4: Summary of risks – Investment risk (I)
Investment risk (I) Summary of risks Investing in the securities 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
Slide 5: Summary of risks – Investment risk (II)
Investment risk (II) Summary of risks Operating risk. Operating risk is a risk of potential loss Dependency on qualified staff. The results of operations caused by human, process or information system failures of the Group companies depend highly on the ability to and flaws. In addition to human, pr
Slide 6: Summary of risks – Investment risk (III)
Investment risk (III) Summary of risks Exposure to regulative changes. The Group operates in Contractual risks. The operations of the Group are highly regulated fields of business and its operations are materially dependent on the validity and enforceability of subject to a number of laws, regulatio
Slide 7: LHV Group Overview
Overview LHV GROUP
Slide 8: 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 and Latvia • For private customers, LHV mainly offers savings and inves
Slide 9: Business philosophy
LHV Group Business philosophy • LHV is focused on active, entrepreneurial 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 m
Slide 10: 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 small and medium sized enterprises • serving as an attractive and respected employer, endorsing progress, self-realisation and growth Retur
Slide 11: Group structure
LHV Group Group structure AS LHV Group Holding company 100% 50%+1 100% AS LHV Pank UAB Mokilizingas Estonia - banking Lithuania – consumer financing 65% AS LHV Varahaldus Estonia – investment funds AS LHV Finance Estonia – consumer financing 11
Slide 12: Economic results and business volumes
LHV Group Economic results and business volumes EURt 2010 2011 2012 2013 2014 • Compound annual Net interest income 1 322 3 517 6 057 11 838 20 343 growth growth in revenue: 56% Net fee and commission income 4 251 5 153 6 388 9 426 12 772 Other income 41 -1 023 894 2 769 484 • Compound annual growth
Slide 13: Nine quarters – consistent growth in profit
LHV Group Nine quarters – consistent growth in profit Net profit for the quarter (EURt) 5 116 4 006 • Growth in business volumes 3 008 serves to enhance efficiency 2 395 and boost profits 1 663 1 603 1 312 369 630 • Q4 2014 and Q1 2015 affected by disposal of business operations in Finland • Economi
Slide 14: LHV Bank
Business areas LHV BANK
Slide 15: Market overview
LHV Bank Market overview • There are 16 credit institutions operating in Estonia (with 7 branches of foreign banks) Deposits (EURbn) 15 • The volume of deposits in the banking market amounts to 10 EUR 15 billion • Deposits have grown every year over the past 20 years 5 • The aggregate market share o
Slide 16: Position
LHV Bank Position • Long-term ambition – among the top three home banks in Estonia • Customers – private persons and SMEs accumulating and investing in financial assets • Market – Estonia is the home market. We will expand to foreign markets when possible • Products – each of our product and service
Slide 17: Product portfolio dynamics
LHV Bank Product portfolio dynamics ATMs Acceptance of card payments Mobile Combo- bank cards Partner Bank Card Deposits, Cards Payments Internet bank loans 2009 2010 2011 2012 2013 2014 2015 Number of customers 17
Slide 18: Economic results and business volumes
LHV Bank Economic results and business volumes EURt 2010 2011 2012 2013 2014 • Interest income related to Net interest income 1 334 3 577 6 209 10 495 16 904 collection of deposits and issuing of loans has Net fee and commission income 2 830 2 789 2 591 2 981 3 558 become the main source of Other in
Slide 19: Nine quarters – a good foundation for profitable growth
LHV Bank Nine quarters – a good foundation for profitable growth Net profit for the quarter (EURt) 3 808 • Growing business volumes 2 842 support profit growth 1 791 • Growth in volumes enhances 1 438 953 efficiency 921 386 91 117 • Results for Q4 2014 and Q1 2015 were affected by disposal of busine
Slide 20: Business units
LHV Bank Business units Retail banking Active and independent private persons, affluent Profitability of business areas clients, SSEs. Everyday banking services, with focus 6 months 2015 (EURm) 6 on savings and investments. Communication with customers via electronic channels, sales 5 representative
Slide 21: LHV Bank – Retail banking Business overview
LHV Bank – Retail banking Business overview 80 000 Retail banking customer base 350 Retail banking deposits (EURm) 70 000 300 60 000 250 50 000 200 40 000 150 30 000 100 20 000 50 10 000 0 0 Time deposits Demand deposits 60 Retail banking loans (EURm) Distribution of retail banking net income 50 (6
Slide 22: LHV Bank – Corporate banking Business overview
LHV Bank – Corporate banking Business overview • Corporate banking customers are small and medium-sized Corporate deposit volumes (EURm) enterprises. 99% of the SMEs have Estonian owners. The 250 average loan size is 762 thousand 200 • The corporate banking department is staffed by 150 experienced c
Slide 23: LHV Bank – Asset quality (I)
LHV Bank – Asset quality(I) Corporate loan-fuelled growth 400 000 Volume of the loan portfolio (EURt) • The loan portfolio has continued its quick growth 300 000 200 000 • Corporate loans contribute over 70% of the total loan 100 000 portfolio, followed by leasing (10%) and hire-purchase (4%). Loans
Slide 24: LHV Bank – Asset quality (II) Modest share of overdue loans
LHV Bank – Asset quality(II) Modest share of overdue loans Corporate loans – share of overdue loans and • The rise in the share of loans overdue for more than 90 4% 4% provision rate days in the corporate loan portfolio in June 2015 was mainly conditioned by the dissolution of a company 3% 3% involv
Slide 25: Objectives and prospects
LHV Bank Objectives and prospects The objective of LHV Bank is to grow business volumes, whilst maintaining the current risk profile Our long-term ambition is to become a structurally important bank in Estonia, ranking among the top three banks with regard to customer numbers and business volumes, a
Slide 26: LHV Asset Management
Business areas LHV ASSET MANAGEMENT
Slide 27: Market overview
LHV Asset Management Market overview • Mandatory pension funds make up ~76% of the investment funds market in Estonia • NAV of assets under management: EUR 2,45 billion • Number of subscribers to funded pension: 671 000 • Net income from service fees: EUR ~27 million in 2015 • LHV Asset Management i
Slide 28: Second-pillar pension market forecast
LHV Asset Management Second-pillar pension market forecast • Mandatory pension funds are in the stage of organic growth, with the number of subscribers reaching the payout stage in the next few years being small • The fee for the management of the mandatory pension fund is regressive, bottoming at 0
Slide 29: Track record – a good foundation for rapid growth
LHV Asset Management Track record – a good foundation for 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 Launch of the sales outside mandatory Merger of LHV the office funded pension and Sees
Slide 30: Long-term yield – beating all indices
LHV Asset Management Long-term yield – beating all indices 190% 180% • LHV Pension Fund L 170% (progressive strategy) 160% +41% is 41% above the 150% Estonian pension +41% funds index EPI-50 140% 130% • LHV Pension Fund S (conservative 120% strategy) is 48% 110% LHV pf L above the Estonian 100% pens
Slide 31: Short-term yield – beating indices
LHV Asset Management Short-term yield – beating indices • LHV Pension Fund L 108% (progressive strategy) 107% is 3% (YTD) above the 106% Estonian pension funds index EPI-50 105% 104% • LHV Pension Fund S 103% (conservative strategy) is 1% (YTD) above the 102% Estonian pension funds 101% +3% index EP
Slide 32: Economic results and business volumes
LHV Asset Management Economic results and business volumes EURt 2010 2011 2012 2013 2014 • Growth in net fee income Net fee and commission income 1 433 2 377 3 804 5 810 8 456 has been in correlation with the growth in the NAV of Other income 0 26 26 0 0 assets under management Total income 1 433 2
Slide 33: Nine quarters – good predictability
LHV Asset Management Nine quarters – good predictability Net profit for the quarter (EURt) 1 250 • Growth in net fee income is in 1 240 1 175 1 044 direct correlation with the 819 growth in the NAV of assets 671 under management 474 520 290 • 10% drop of collected fees from August 2015 due to regula
Slide 34: Objectives and prospects
LHV Asset Management Objectives and prospects LHV Asset Management pursues the objective of offering the highest long-term yield to fund investors The mandatory funded pension market is in a stage of strong organic growth. The volume of mandatory pension funds grew by 20% in 2013 and 24% in 2014. In
Slide 35: Mokilizingas
Business areas MOKILIZINGAS
Slide 36: Overview of the Lithuanian consumer financing market
Mokilizingas Overview of the Lithuanian consumer financing market Hire-purchase market volume* (EURm) Consumer loan market volume** (EURm) 180 18% 250 6% 160 16% 5% 200 140 14% 120 12% 4% 150 100 10% 3% 80 8% Total market 100 2% 60 6% Market share of 40 4% Mokilizingas 50 1% 20 2% 0 0% 0 0% EURm EUR
Slide 37: Economic results and business volumes
Mokilizingas Economic results and business volumes EURt 2013 2014 • LHV consolidates MokiLizingas since July 2013 Net interest income 2 743 3 857 Net fee and commission income 1 677 760 • Mokilizingas has managed selected credit Other income -6 -2 portfolios of Snoras Bankas (which has terminated it
Slide 38: Eight quarters – foundations for profitable growth
Mokilizingas Eight quarters – foundations for profitable growth Net profit for the quarter (EURt) • At the end of 2013 and the 450 426 beginning of 2014, the previous portfolio was restructured. The volatility of results is mainly 208 176 conditioned by changes in the 92 credit impairment principles
Slide 39: Business expansion
Mokilizingas Business expansion Purchased in the summer of 2013, Snoro Lizingas has been successfully restructured. The strong new brand (Mokilizingas) has made the company the second largest market player on the Lithuanian consumer financing market. There are scores of market players on the Lithuan
Slide 40: Funding and capital
FUNDING AND CAPITAL
Slide 41: Simple and conservative financing
LHV Group Simple and conservative financing Simplified balance sheet – June 2015 • The Group finances its activities from customer deposits, subordinated debt Cash and and equity securities Customer deposits • The Group maintains a high liquidity buffer. As at June Loans to 2015, the buffer amounted
Slide 42: Capital adequacy
LHV Group Capital adequacy Risk weighted assets (EURm) • Credit risk RWA make up the majority of the RWA or capital requirement 400 300 • LHV Group’s minimum level of Tier1 own funds 200 is 12,21% and minimum level of total capital 16,47% 100 0 Laenud • The capital requirements applied to the klient
Slide 43: Shareholders – as at 30 June 2015
LHV Group Shareholders – as at 30 June 2015 Number of shares Participation Name of shareholder including Participation 3 357 920 14,4% AS Lõhmus Holdings Supervisory Board and Management Board 57,2% 2 978 367 12,8% Rain Lõhmus staff members 3,4% 1 637 897 7,0% Andres Viisemann 1 418 000 6,1% Ambient
Slide 44: Contact details
Erkki Raasuke Managing Director – LHV Group erkki.raasuke@lhv.ee M +372 502 4377 Erki Kilu CEO – LHV Bank erki.kilu@lhv.ee M +372 515 7232 Meelis Paakspuu CFO – LHV Group meelis.paakspuu@lhv.ee M +372 509 8336 AS LHV GROUP TARTU MNT 2, TALLINN 6 802 670 INFO@LHV.EE LHV.EE
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