Lhv Group As · OMXTSE:LHV1T
Lhv Group As — Debt Investor Presentation (September 2023)
32 slides from Lhv Group As's debt investor presentation, Sep 18, 2023
Slide 1: LHV Group
LHV Group 18 September 2023 AS LHV GROUP TARTU MNT 2, TALLINN 6 802 670 INFO@LHV.EE LHV.EE
Slide 2: Disclaimer
Disclaimer By attending this meeting where this presentation is made, or by reading the presentation slides or by accepting delivery of this document, you agree to be bound by the following limitations. This presentation has been drawn up by AS LHV Group (the Company) purely for informational purpos
Slide 3: Speakers today / Table of contents
Speakers today Table of contents Page Meelis Paakspuu Key investment highlights 4 Chief Financial Officer Business environment 5 Overview of LHV Group 9 Financial performance 14 Kadri Haldre Transaction details 23 Head of Treasury Appendix 27 3
Slide 4: Key investment highlights
LHV Group Key investment highlights The economy is expected to bottom out later this year or in early 2024*. Asset quality remains strong Estonia’s labour market stays strong despite a contraction in GDP in real terms. Nominal growth rate remains strong which helps businesses and households. LHV has
Slide 5: Business environment
Business environment
Slide 6: Structurally attractive Estonian market
Business environment Structurally attractive Estonian market LHV home markets Highlights of Estonia Member of EU, NATO and OECD Respectable position in global indices • #18 Ease of doing business (2019) • #4 World Press Freedom Index (2023) • #14 Corruption Perceptions Index (2022) • #5 PISA (2018)
Slide 7: The economy is expected to bottom out later this year or in early 2024
Business environment The economy is expected to bottom out later this year or in early 2024 Estonia's GDP growth in real terms • Economic recession did not deepen in 18% Q2. In nominal terms, the economy keeps growing which helps consumers 12% and businesses to cope with the slowdown in real GDP gro
Slide 8: Strong and growing market share in Estonia complemented by UK operations
Business environment Strong and growing market share in Estonia complemented by UK operations Corporate loans Household loans Services in the UK We target growing LHV has achieved 10% Banking Services the loan portfolio at market share, after a pace higher than offering home loans for the market ave
Slide 9: Overview of LHV Group
Overview of LHV Group
Slide 10: History and key milestones
Overview of LHV Group History and key milestones Acquisition of EveryPay 35 EURm public offering of shares Acquisition of Danske’s 273 EURm LHV Bank corporate and public acquired Bank sector portfolio North’s business 250 EURm covered activity bond issue The beginning of Card payment LHV UK 100 EURm
Slide 11: Legal structure
Overview of LHV Group Legal structure LHV Group Holding company 26.08.2004 61.4 EURm Date of foundation 575,000 16.4% Number of customers 1007 Number of employees Profit* ROE* Estonia UK Profit and ROE of 2022* 100% 100% 65% 100% 100% LHV Pank LHV Varahaldus LHV Kindlustus EveryPay LHV Bank Banking
Slide 12: Business units
Overview of LHV Group Business units LHV Pank LHV Bank Third largest bank in Estonia Focusing on three areas – banking services to international payment institutions, loans to corporates and services to e-commercials Long-term goal is to become the largest and most profitable bank in Estonia Ability
Slide 13: Committed to ESG goals
Overview of LHV Group Committed to ESG goals Environmental Social & Governance We have signed the UN Principles for Responsible Banking We act ethically and transparently and emphasise the and plan to meet all requirements for signatories importance of bona fide business and respect for partners, Co
Slide 14: Financial performance
Financial performance
Slide 15: Strong performance in the first 6 months of 2023
Financial performance Strong performance in the first 6 months of 2023 Loans to Deposits Total assets No of customers* Capital adequacy ratio Ratio 6.3 EURbn 575 thous 23.8% 48.8% Net loans Cost to income ratio NSFR 3.3 EURbn 44.4% 148% Deposits ROE** Ratio Cost to Income NPL ratio** 5.1 EURbn 30.7%
Slide 16: Combining growth with profitability
Financial performance Combining growth with profitability Results and volumes, EURm 2020 2021 2022 6m 2023 • The Group has shown a track record of Net profit 39.8 60.3 61.4 68.7 profitable growth over the past years Total assets 4,971 6,845 6,135 6,307 Loans (net) 2,209 2,677 3,209 3,253 • The numbe
Slide 17: LHV Pank – Main profitability driver in LHV Group
Financial performance LHV Pank – Main profitability driver in LHV Group… Financial results, EURt 2020 2021 2022 6m 2023 • Business volumes of LHV Pank have Net interest income 69,046 97,662 129,487 108,994 gone through a period of rapid growth Net fee and commission income 18,385 31,172 32,408 13,05
Slide 18: …with well diversified revenue sources
Financial performance …with well diversified revenue sources Revenues Customer base • Revenues are well diversified between the three main business lines (retail 10 banking, corporate banking, services to 5 financial intermediaries) 36 123 401 • LHV Pank is deposit funded mainly EURm thous. through
Slide 19: Simple balance sheet and diversified loan portfolio
Financial performance Simple balance sheet and diversified loan portfolio EURm Structure of assets EURm Structure of liabilities and equity • LHV has a straightforward balance 8,000 sheet. Assets are made up of loans and 8,000 6,845 6,845 6,135 6,307 liquidity 6,135 6,307 6,000 6,000 4,971 4,971 • F
Slide 20: High quality credit portfolio
Financial performance High quality credit portfolio Net loans by stages NPL coverage ratio* • Loan portfolio has a decent growth EURm 320% while portfolio quality has remained high 3,600 3,209 3,253 276% 2,677 2,700 2,209 240% 199% • Share of stage 3 loans is on a low level of 0.3% of the total port
Slide 21: Deposit funded business model and conservative liquidity management
Financial performance Deposit funded business model and conservative liquidity management Loans / deposits ratio EURm Deposits by customer type • LHV is running a conservative approach 5,808 to liquidity risk 100% 6,000 5,062 4,901 4,120 75% 65% 64% 4,500 • The loans to deposits ratio is at a very 5
Slide 22: Strong capital position with large buffers to requirements
Financial performance Strong capital position with large buffers to requirements Capital adequacy EURm Capital structure • LHV is classified as other systemically important institution („O-SII“) 28% 600 553 23.76% • The Central Bank of Estonia can set 75 Tier 2 systemic risk buffer requirement. 21%
Slide 23: Transaction details
Transaction details
Slide 24: HoldCo issuance strategy
Transaction details HoldCo issuance strategy Issuance Capital / MREL AT1 LHV HoldCo Tier 2 Group HoldCo Senior Issuance Funding OpCo LHV LHV Deposits, Kindlustus Varahaldus LHV Bank EveryPay LHV Pank Covered (insurance) (pension funds) bonds • Single Point of Entry strategy envisaged by LHV's resolu
Slide 25: Envisaged issuance to help fulfil MREL targets
Transaction details Envisaged issuance to help fulfil MREL targets 30.57% 32.79% • The MREL-TREA target is currently 19.08% but will increase to 24.57% from 24.58% 6.00% 9.03% 2024 Combined buffer 5.50% 3.22% Target set by EFSA 2.36% • In order to pay dividends, the combined MREL-eligible bonds buff
Slide 26: Indicative term sheet of issuance
Transaction details Indicative term sheet of issuance Issuer: AS LHV Group Status: Senior, Unsecured, Unsubordinated Form of Instrument: Reg S, Bearer, NGN Issuer Rating: Baa3 (stable) by Moody’s Expected Rating of Notes: Baa3 by Moody's Notional Amount: EUR [•] Pricing Date: [•] 2023 Issue Date: [•
Slide 27: Appendix
Appendix
Slide 28: Moody's issuer and senior unsecured rating of Baa3 (stable)
Appendix Moody’s issuer and senior unsecured rating of Baa3 (stable) LHV Pank Deposit Rating LHV Group Issuer and Senior Unsecured Rating Baa1 (positive) Baa3 (stable) • Moody’s mentions the bank’s strong capitalisation and • The rating reflects LHV Group’s principal role as a bank holding increasin
Slide 29: Outstanding subordinated bonds and MREL eligible instruments
Appendix Outstanding subordinated bonds and MREL eligible instruments LHV Group LHV Group LHV Group LHV Group LHV Group LHV Group LHV Group 8.00% AT1 9.50% AT1 10.50% AT1 Senior Senior 2028 T2 bond 2030 T2 bond bond bond bond preferred preferred Senior preferred Senior preferred CRR2 compliance Tier
Slide 30: Management Board
Appendix Management Board Madis Toomsalu Meelis Paakspuu Jüri Heero Martti Singi • Chairman of the the Management • Member of the Management Board of • Member of the Management Board of • Member of the Management Board of Board of AS LHV Group AS LHV Group and AS LHV Pank AS LHV Group and AS LHV Pan
Slide 31: Share information
Appendix Share information Overview: Top 5 shareholders Shareholding structure as of 06/2023: Regulated market Nasdaq Baltic Main list Rain Lõhmus Shareholders 35,940 21.5% Countries represented Security short name LHV1T 49 Andres Viisemann Estonian residents 76% Total Estonian residents Krenno OÜ 5
Slide 32: Meelis Paakspuu CFO; Kadri Haldre Head of Treasury
Meelis Paakspuu CFO meelis.paakspuu@lhv.ee Kadri Haldre Head of Treasury kadri.haldre@lhv.ee
LHV Group — Debt Investor Presentation (September 2023) on 6ix