LHV Group (LHV1T) Investor update summary

Macroeconomic and Market Outlook

• Estonia's GDP is expected to grow 0.5% in 2025 and 2.2% in 2026, with inflation stabilizing at 2–2.5% from 2027 onward; recovery is supported by easing inflation and improved external demand.

• Estonia's state budget deficit remains high at 4.5%, mainly due to infrastructure and defense spending, with geopolitical uncertainty persisting.

• Wage growth in Estonia is expected to stabilize at 4.5%, with unemployment declining only gradually and purchasing power recovering to 2020 levels by late 2026 or early 2027.

• The UK market is forecasted to grow at 1.5% GDP, with inflation reaching 2% by early 2027 and unemployment around 5%.

• Bank of England's base rate is projected at 3.6% by end-2026.

Strategic Priorities and Growth Plans

• Focus remains on strengthening core businesses in Estonia and the UK, with scalable retail offerings, digital channels, and enhanced digital customer experience.

• UK loan portfolio is set to grow faster, increasing its group share from 14% to 25–30% by 2030.

• Plans to double group profit from EUR 117 million to EUR 290 million by 2030, with loans expected to grow from EUR 5.5 billion to EUR 10.1 billion.

• Cost-income ratio targeted to fall below 40% and return on equity to exceed 20% from 2027.

• Consideration of selective expansion into other European markets, with a focus on incremental steps.

Operational and Financial Performance (2025–2026)

• Total income is projected to grow by 9.4% to EUR 333.6m in 2026, with net profit expected to remain stable at EUR 117.9m.

• Loan portfolio is forecast to increase by 11.3% to EUR 6.1bn, and deposits by 5.4% to EUR 8.6bn in 2026.

• Asset management and insurance subsidiaries delivered strong performance, with insurance premiums up 13% against a declining market.

• Operational expenses are projected to grow 6% annually, driven by UK expansion, cloud migration, and increased IT staffing.

• Conservative loan loss provisions of EUR 15 million are forecasted for 2026.