Lhv Group As · OMXTSE:LHV1T
Lhv Group As — IPO Roadshow (May 2016)
53 slides from Lhv Group As's IPO roadshow presentation, May 2016
Slide 1: LHV Group Presentation to investors – May 2016
LHV GROUP Presentation to investors – May 2016
Slide 2: Table of contents
Table of contents LHV Group 4 Business areas LHV Bank 11 LHV Asset Management 19 Mokilizingas 28 Asset quality 33 Capital and liquidity 36 Share and shareholders 40 Public offering of shares – summary of risks 44 Annexes 49 Economic environment 50 2
Slide 3: Why list LHV’s shares on the stock exchange?
Why list LHV’s shares on the stock exchange? • LHV’s mission is to create Estonian capital. We want to give the Estonian people the opportunity to participate in the process, and profit as a shareholder • LHV has taken the first step on a longer journey. Becoming a publicly traded company helps us s
Slide 4: LHV Group Overview
Overview LHV Group
Slide 5: Overview
LHV Group Overview • LHV Group is the largest domestic provider of capital in Estonia. LHV’s customers include private persons and SMEs. In addition to Estonia, LHV offers financial services in Lithuania • The services provided to private customers revolve around safeguarding and growing the custome
Slide 6: 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 7: Long-term objectives
LHV Group Long-term objectives Estonia’s Most Desirable Employer 2016 (CV Keskus)* LHV has set its sights on: 1. (1) Eesti Energia 2. (2) Skype Technologies 3. (4) Eesti Telekom • being the best financial service provider to private customers 4. (3) Transferwise Ltd Estonia branch 5. (5) Swedbank en
Slide 8: Management
LHV Group Management General meeting External auditor Supervisory Board Risk and Capital Remuneration Committee Audit Committee Committee Risk management Management Board Internal auditor Financial management LHV Bank (100%) LHV Varahaldus (100%) Mokilizingas (50%+1) Supervisory Board Supervisory Bo
Slide 9: Economic results and business volumes
LHV Group Economic results and business volumes • Average annual growth in revenue EURt 2011 2012 2013 2014 2015 for the last 5 years: 52%, growth in Net interest income 3 517 6 057 11 838 20 343 23 232 expenses: 16% Net fee and commission income 5 153 6 388 9 426 12 772 14 665 Other income -1 023 8
Slide 10: Good start in 2016
LHV Group Good start in 2016 Net profit for the quarter (EURt) 5 116 • Faster-than-expected growth in customer numbers, both in Bank 4 006 3 415 3 248 3 466 and Asset Management 3 008 Extraordinary 2 395 1 663 1 603 Base • All business areas are viable and gaining ground Q1 14 Q2 14 Q3 14 Q4 14 Q1 1
Slide 11: LHV Bank
Business areas LHV Bank
Slide 12: Market overview – deposits and loans are in balance
LHV Bank Market overview – deposits and loans are in balance 18 • There are 16 banks operating in Estonia Deposits (EURbn) 15 • The volume of deposits in the banking market 12 amounts to EUR 15 billion Other 9 – Deposits have grown every year over the past Corporate 6 22 years Private 3 – The aggreg
Slide 13: Market overview – banking market is profitable
LHV Bank Market overview – banking market is profitable • Market’s annual revenue base: 650 EURm Profit posted by the Estonian banking – Net interest income: 420 EURm market (EURm) – Net fee and commission income: 160 EURm 800 – Net other income: 70 EURm 600 • Market’s annual cost base: 290 EURm 400
Slide 14: Business philosophy
LHV Bank Business philosophy • LHV Bank is focused on active, entrepreneurial and LHV’s core products independent customers • pension – LHV Bank’s customers are private persons engaged • deposits in saving and investment, and SMEs • investments • business loans – Financial products are offered to pr
Slide 15: Economic results and business volumes
LHV Bank Economic results and business volumes EURt 2011 2012 2013 2014 2015 • Main source of income: interest Net interest income 3 577 6 209 10 495 16 904 18 758 income from issue of loans Net fee and commission income 2 789 2 591 2 981 3 558 4 853 • Fee and commission income from Other income -79
Slide 16: Good start in 2016
LHV Bank Good start in 2016 Net profit for the quarter (EURt) 3 808 • Deposits grew by 26 EURm and 2 842 2 871 loans by 22 EURm in Q1 2 208 2 134 1 438 1 791 Extraordinary • More than 6,800 new customers 953 Base have opened an account in the first 921 three months. Records have been broken in payme
Slide 17: Business areas
LHV Bank Business areas Profitability of business areas 2015 Retail banking – Active and independent private persons, well-off (EURm) individuals (Au-customers) and SMEs. Everyday banking services, 10 with a focus on savings and investments. Communication with customers via electronic channels. 8 6
Slide 18: Objectives and prospects
LHV Bank Objectives and prospects • We have positioned ourselves as the third-largest full-service home bank in Estonia – Our long-term ambition is to become a structurally important bank in Estonia, ranking among the top three banks in terms of customer numbers and business volumes, as well as effi
Slide 19: LHV Asset Management
Business areas LHV Asset Management
Slide 20: Market overview
LHV Asset Management Market overview Market value of funds, % of total market (December 2015) Mandatory pension funds 78% • LHV Asset Management is focused, Equity funds above all, on mandatory pension funds Real estate funds • Mandatory pension funds make up 78% Voluntary pension funds of the inves
Slide 21: Second-pillar pension market forecast
LHV Asset Management Second-pillar pension market forecast • Mandatory pension funds are in the stage of strong organic growth, with the number of subscribers reaching the payout stage in the next few years being small • The fee for the management of mandatory pension funds is regressive, bottoming
Slide 22: Market leader in terms of long-term yield
LHV Asset Management Market leader in terms of long-term yield • LHV’s pension funds rank first in all risk categories in terms of long-term yield (10 years) • Danske Capital AS’s funds, which were purchased by LHV, have provided second-best long-term yields • Due to the investment strategy chosen,
Slide 23: Unique sales strategy
LHV Asset Management Unique sales strategy • Customers are mainly engaged through out-of-office sales • LHV Asset Management does not segregate the second-pillar management fees (costs are incurred at the time of sale) • Sales are seasonal – subscribers may transfer the second-pillar funds to anothe
Slide 24: Economic results and business volumes
LHV Asset Management Economic results and business • Growth in net fee income has been in volumes correlation with the growth in the NAV of EURt 2011 2012 2013 2014 2015 funds. From the summer of 2015 the growth in net fee income has been Net fee and commission income 2 377 3 804 5 810 8 456 9 196 s
Slide 25: New customers fuel business growth
LHV Asset Management New customers fuel business growth Net profit for the quarter (EURt) 1 240 1 250 1 229 • Drop in active customer numbers 1 175 1 044 998 triggered a short-term rise in fees in 819 2014–2015 595 520 • LHV pension funds ranked first in all categories in terms of yield in 2015, wit
Slide 26: Purchase of Danske Capital AS
LHV Asset Management Purchase of Danske Capital AS • Danske Capital funds engage 6% of second-pillar customers, but have a market share of 9% in terms of volume • Increase in the number of middle-aged customers contributes to a rise in average amounts collected • Customer income of LHV Asset Managem
Slide 27: 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 long-term organic growth • The NAV of mandatory pension funds grew by 24% in 2015 and 19% in 2015
Slide 28: Mokilizingas
Business areas Mokilizingas
Slide 29: 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) 200,0 20% 300 5,5% 150,0 15% 200 5,0% 100,0 10% Total market 100 4,5% 50,0 5% ML market share 0,0 0% 0 4,0% EURm EURm Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q
Slide 30: Economic results and business volumes
Mokilizingas Economic results and business volumes EURt 2013 2014 2015 • LHV consolidates MokiLizingas since July 2013 Net interest income 2 743 3 857 4 884 Net fee and commission income 1 677 760 618 • Mokilizingas has managed selected Total income 4 414 4 615 5 502 credit portfolios of Snoras Bank
Slide 31: Start of the year met expectations
Mokilizingas Start of the year met expectations Net profit for the quarter (EURt) 525 426 • Consumer financing is modest in 339 the start-of-the-year off-season. 208 The portfolio contracted by EUR 176 185 0.5m in the quarter 92 42 57 • Tight price competition prompts Q1 2014 Q2 2014 Q3 2014 Q4 2014
Slide 32: Objectives and prospects
Mokilizingas Objectives and prospects • Mokilizingas’ unambiguous, transparent pricing and innovative products allow the company to stand out in a highly competitive market • To prevent excessive merchant fees, Mokilizingas is developing its own electronic channels. Mokilizingas’s credit card will b
Slide 33: Asset quality
Asset quality
Slide 34: Growth fuelled by business loans
Asset quality Growth fuelled by business loans Loan portfolio volume (EURm) • Business loans make up a bulk of the Group’s loan portolio 500 • A majority of business loans involve real estate 400 Other financing Lithuania 300 • Major loans are liable to affect the risk level of the Hire-purchase 200
Slide 35: Portfolio of overdue loans remains stable
Asset quality Portfolio of overdue loans remains stable Business loans • The portion of overdue business loans has 2,5% decreased. Overdue debt is well secured 2,0% 1 - 30 days • Leasing debt remains stable. Debt collection 1,5% 31 - 60 days allowed to lower provisions 1,0% 61 - 90 days • Hire-purch
Slide 36: Capital and liquidity
Capital and liquidity
Slide 37: Equity and own funds
Capital and liquidity Equity and own funds 800 Simplified balance sheet (March 2016 EURm) 700 • Balance sheet and off-balance 600 sheet assets of the Group and the Cash and 500 securities Bank are weighted by risk to 400 RWA Customer determine the risk-weighted assets 300 deposits (RWA) 200 Loans to
Slide 38: RWA growing faster than self-generated capital
Capital and liquidity RWA growing faster than self-generated capital Risk-weighted assets (EURm) + 32% • The growth in the Group’s RWA is 500 448 + 62% decelerating but still exceeds ROE 400 300 Operational risk 200 • A bulk of RWA is subject to credit Market risk 100 risk, i.e. LHV Bank’s lending C
Slide 39: Conservatively financed and liquid
Capital and liquidity Conservatively financed and liquid EURm Loan to deposit ratio 700 100% 600 80% Deposits • The Group is financed conservatively. 500 400 available for Loans amount to 68% of the deposits 60% lending 300 Loans engaged 40% 200 100 20% Ratio (right axis) 0 Laenud 0% • Deposits main
Slide 40: Share and shareholders
Share and shareholders
Slide 41: Major shareholders of LHV Group
Share and shareholders Major shareholders of LHV Group • AS LHV Group has 23 356 005 ordinary shares with a nominal value of 1 euro • As at 31 March 2016, AS LHV Group had 272 shareholders Shareholder (Top 10) Participation (%) including Participation (%) AS Lõhmus Holdings 14,4 Supervisory Board an
Slide 42: Share option programme
Share and shareholders Share option programme • The purpose of the share option programme is to create conditions where the long-term objectives and interests of the management and equivalent staff of AS LHV Group and the group companies would be harmonized with the long-term interests of the shareh
Slide 43: Engagement of equity
Share and shareholders Engagement of equity Previous share issues (EURm) • Major capital was first engaged in 2009 in connection with the 80 application for the authorization of 70 LHV Bank 60 50 • LHV Group posted the first profit in 2013. Previous capital engagements 40 occurred in the conditions
Slide 44: IPO - public offering of shares and listing on the Tallinn Stock Exchange
IPO - public offering of shares and listing of the shares on the Tallinn Stock Exchange
Slide 45: Public offering and listing of shares
IPO Public offering and listing of shares LHV is planning to issue 2 000 000 new shares at a price of 6.95 euros per share. The issue of new shares amounts to 8.56% of LHV’s current shares. The issue targets Estonian retail and institutional investors. This constitutes an initial public offering of
Slide 46: Summary of risks (I)
IPO Summary of risks (I) 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 materialize, investors may lose a part or all
Slide 47: Summary of risks (II)
IPO Summary of risks (II) Operating risk. Operating risk is a risk of potential loss caused by qualified personnel and motivate existing management and human, process or information system failures and flaws. In addition to employees. human, process or information system failures and flaws, the oper
Slide 48: Summary of risks (III)
IPO Summary of risks (III) Maintaining capital adequacy ratios. Credit institutions and investment firms are subject to strict capital adequacy requirements subject to frequent reforms and changes. Exposure to regulatory actions and investigations. LHV provides various financial services and product
Slide 49: Annexes
Annexes
Slide 50: Economic environment
Economic environment
Slide 51: Macroeconomy – stable and balanced
Economic environment Macroeconomy – stable and balanced 20% 15% Foreign trade balance • The economic growth has dropped down to 2%. The 10% forecast for the next three years is 2% - 3% 5% • The low levels of public sector debt, balanced budget and 0% foreign trade balance keep national risks at bay
Slide 52: Regional financial markets – Estonia in good position
Economic environment Regional financial markets – Estonia in good position 2 000 • Despite the difference in the size of the economies and the Baltic banking market: earnings before taxes (EURm) population, the banking markets of the three Baltic States 1 500 are quite similar 1 000 • The impact of
Slide 53: Contact details
Erkki Raasuke LHV Group – Managing Director erkki.raasuke@lhv.ee M +372 502 3477 Erki Kilu LHV Bank – CEO erki.kilu@lhv.ee M +372 515 7232 Meelis Paakspuu LHV Group - CFO meelis.paakspuu@lhv.ee M +372 509 8336 AS LHV GROUP TARTU MNT 2, TALLINN 6 802 670 INFO@LHV.EE LHV.EE