Hello and welcome to LHV Group's fourth quarter and full year 2025 results presentation. My name is Mihkel, and today I have with me Meelis Paakspuu, Group CFO; Kadri Kiisel, CEO of LHV Bank in Estonia; and also Erki Kilu, CEO of LHV Bank in the United Kingdom.

I will start with group-level highlights. It has been challenging year for us, but on the other hand, our net income was €305 million, net profit reached €117 million, and also our loan portfolio had a significant growth during the year, 20%, and also, which is very good news, is the deposits, which have grown 18% year-over-year.

On a group level, we have reached 16% return on equity. If I talk about the subsidiary highlights, then in Estonia, we have increased our loan volumes and deposits both by 11%.

In the UK, where we have quite recently also started our retail offering, by the year-end, we have been able to reach 5,000 retail customers. Having said that, also we have seen a significant growth in our loan portfolio, which has more than doubled to €782 million worth.

On a group level, looking at our other subsidiaries, our asset management has performed really, really well. They have obtained the best performance with the second and third pillar pension funds on the Estonian market, which is a significant result.

Then also our insurance business has grown quite significantly and doubled the net profit, while the premiums were up 13% versus small market decline in Estonia. Then we are obviously very pleased about the award from Nasdaq.

Once again, we are the best company for investor relations. Also through the year, we have obtained quite a few awards, for example, Best Bank in Estonia by Euromoney, and also by The Banker.

Looking more closely into the fourth quarter and December results. Our net interest income has increased quarter-over-quarter by 8%, which is a very good, let's say, change of trend compared to the quarters before.

Also another significant increase in the net fee income, increasing 20% quarter-over-quarter. If we look at our group-level metrics in terms of business activity, then both the total loan portfolio, the deposits, assets we have under management in the asset management subsidiary, the total number of customers, and also the number of clients in the financial intermediaries business, and the payment volumes are the highest so far.

In December also, we saw good change in the net interest margin. As stated before, the pretax return on equity in fourth quarter on a group level was 20%, and the net ROE was 16.1%, which overall, I think given the conditions of the market, are very good.

As mentioned in the beginning, the difference compared to our own financial plan was slightly behind, but nevertheless, as we are used to ambitious plans, given the market conditions, we are content with the overall result. Now I would like to give word to our CFO, Meelis Paakspuu, who will dig bit deeper into the financials.

Hello from my side as well. That's first presenting the balance sheet.

That's in LHV, we deliberately keep balance sheet structure very, very simple. In asset side, it is divided between loan portfolio and liquidity portfolio, very small amount of something else.

That and liquidity portfolio is always in top-grade assets, that's government bonds or mostly in central bank cash. That on liability side, we are looking that's the funding is local, that there is no cross-financing within the group, that Estonian bank is funding it from Estonian retail deposits, issuing covered bonds, and in very small amount, also deposit platforms.

UK bank is currently primarily using platform deposits, but step by step is increasing also its own deposit base, that as we already have 5,000 customers and around 12, 13% of deposit base is coming from our own customers. That on capital side, that capital is a key component of the banking, that this is the most important item what has to be there, and you can't run bank with very low capitalization.

Our internal capital adequacy targets are at 20% levels. As at the end of 2025, we had 22.85%, and this doesn't include Q4 profits yet.

We are recalculating capital adequacy backwards whenever there is some kind of new information that either it is including last quarter's profits or there is some miscalculation. Here in 2025, we had first time ECB on-site audit regarding capital adequacy, and this lowered our capital adequacy as it was end of 2024 by 150 basis points.

We still completed and fulfilled all the regulations. That so when we're looking as of now, all together changes what were brought out in this audit are already implemented, so that we are pretty sure that our capital adequacy is very strong.

That and we are monitoring it always on weekly basis as well. Another area what is a critical area is liquidity.

Another item where we want to be conservative. We don't want to take risk in this that there might be an shortage of liquidity.

That so two main items in form of ratios, LCR and NSFR. That LCR is about how much liquidity you need against potential outflows within 30 days.

That's a official ratio or regulatory ratio is at 100 minimum at 100. We have the ratio of 185, that's much, much higher level.

The another ratio is NSFR. It is an stable funding ratio, that how much stable funding you need against this type of assets what we have.

Again, regulatory ratio is at 100. We are running at 157%.

Both of these ratios are on same level or better than our competition. That and also when looking at the balance sheet's loan-to-deposit ratio, that then this is a pretty solid state.

We don't want to increase or decrease it, that seems to be in right level. The risks what we are able to control and it is the largest risk in the balance sheet is the credit quality and credit risk what we are taking.

That here, Stage 3 ratio what went up in the Q1 due to two large cases has been coming down to 1.6% level, but this is just one factor. The more important factor is when looking at the Stage 3 that how well the Stage 3 is collateralized.

In the table top right that is shown that the Stage 3 in total is 49.9 million, and from that, 42.8 is well collateralized, and 7.1 is less collateralized. That outcome is that everything what is less collateralized, this is provisioned.

We are having it really in very strong state. This is also presented by the cost of risk ratio, that picture is very, very nice.

On profitability side, net interest margin low point was in Q3 as we were commenting in October, that and it is starting to pick up, slightly going upwards in Q4. When looking at return on equity and cost/income, that so again, things are slightly getting better.

That in Q4, we were writing down some goodwill, this was an slightly negative side. From another side, we were earning success fee from the asset management, more or less netting each other out.

When we are looking that the total year, then we ended up with net profit of €8 million short compared to the financial plan. That mostly it came from the net interest income, but this was that we were taking interest rates from the market.

We predicted how our client base is moving and acting based on that. Interest rates didn't move exactly on this way, that so clients acted slightly different as well, that all in all, on deposit side, there were more term deposits than we predicted earlier.

That and on cost side, there is slightly higher costs due to the personnel costs and also partner-tech costs. That but looking at the volumes, loans, deposits are ahead of plan, asset under management more or less in line with this, and financial intermediaries payments clearly better than our plans.

That overall return on equity 16% and profit €117 million comparing with competition, it's very, very solid number. Now giving the table over to Kadri.

Thank you, Meelis. I will give some insights about Estonian bank activities and results and the financials in general.

A bit more information what we succeeded and what didn't go as planned. In total, I would say, if I have to conclude the year somehow, then I would have to say that there were no tailwinds from base rates, tough competition.

We entered the financial planning period last year with increasing cost base. We had quite many challenges, and of course the market didn't help us to get through them.

I think that in general, we could say that we did quite good progress, and I will give you some more details about it. The most proud of, of course, the local business volumes.

We are here to help companies to grow their business. We are here to help people to buy homes.

Strong growth in deposits and volumes is definitely something to be proud of. We can almost say that we have half a million customers.

Not yet the exact number, but we will be there in the first quarter of this year. Increasing the customer base for 8%, to 36,000 customers in Estonia, it's still quite a large number.

We helped companies finance the projects with more than €1 billion, and every fourth mortgage was taken from LHV. If we look into the mortgage market, then I think it's quite optimistic view to point out that if last year, 2024, the mortgage portfolio grew mostly with our refinancing campaign, then this year, we can say that 20% increase in new sales was quite huge outcome, and it shows that the market has activated and we are in a better place.

Also one of the changes that had impact for our revenues is of course the fact that we increased investment services prices almost by half, not doing just for the decreasing of prices, but of course beside that was the idea and hypothesis that we have to improve our offering, and with that we can activate our customer base. I will show you later on that this proved to be correct.

In general, of course net income, net profit, there was a decrease comparing to last year. I'm still very happy with the results for growing our business activities and of course business volumes.

What I'm not so happy about is of course the 19% return on equity. We have exceeded the target set from our investor base to meet the 20% ROE target, and this year it didn't happen.

Still, if we compare it and benchmark with European banks in general, then I think we are still in the top players list with that number. If we talk more about the operation activities, and then I think we've made quite a lot of improvements in terms our technological improvements.

The one main focus for 2025 was to improve our technological capabilities, and of course one main target was to migrate all our systems to the cloud infrastructure, and we managed to fulfill that. We are ending the final migration phase in the first quarter of this year.

We are improving in quite a good pace. Then of course, if we talk about LHV, we cannot not talk about AI.

We've been testing quite many different tools, and can say that we have equipped our people with I believe not the best ones, but best for us different tool sets, and from this stage, we can continue with improving the automation phase. Probably in quite a good place, but not happy with the results ourselves.

We are benchmarking this one to our own targets, and we can do better, and we can improve within this year. Of course, rewriting the legacy systems.

LHV Bank has been on the market over 15 years, we can say that we have of course some improvements needed to done with our technological platform as well. Nonetheless, even if the focus was on technology, then we still managed to make some improvements to the customers as well.

Money Request 2.0 in the beginning of the year. Why I even mention it?

Because it's just a feature that helps us if we integrate it into different processes, it helps us improve the customer offering and different customer solutions in whenever places where we need to make transfers from other banks also outside of LHV. Mastercard Click to Pay, which is competitor to Apple Pay, not as good as Apple Pay, but still to improve our offerings.

LHV Premium offering to premium segment with value offering, customers have accepted it quite well. We started the sales in September and managed to end the year with almost 6,000 customers, and feedback is quite good.

Of course, the latest improvement or the new version of the app design. It went live this month, but we started it last year and it's been quite a journey and tested out with a smaller group by the end of the year.

I think it's a good thing we decided to launch it so that we would get an feedback from the customers, and 2,000 customers gave us a feedback. If we have to divide it somehow, then 60% was constructive feedback, and 40% were happy with the design and the solution, we can learn from that and the feedback was quite good, we can point out three, four things that we can improve in following months.

Of course, Mihkel also mentioned some of the recognitions from the bank as well, and on top of those mentioned also being a top employer and stockbroker of the year, and of course bank with the best services in Estonia. If to deep dive a bit more into the business volumes, we talked about the customer deposits growth.

If we compare it to Estonian market dynamics, then we see that we have grown our deposit base faster than the market, we have gained market share. If we look at the deposit structure, below picture on the right, and then this is LHV's deposit structure, then I think we see the improvement that actually helps also lower the funding cost, which was one of the main drivers of the lower interest income as planned last year.

If we look at the loans, then it's quite a similar trend. We increased our loan base by 11% if the market increased 8%, and if we have to divide it between mortgage and corporate loans, which are the two drivers of our business volumes, then the corporate loans grew approximately 8% along with the market, a bit lower trend, and mortgage loans approximately 14%.

Of course if to look at the dynamics of the revenue or the income side, then we see the declining dynamics. Still, I would like to point out, if we look at the net interest income, then we see that the low point came in third quarter, in the end of third quarter, and we see already a rise in the last quarter, which makes the dynamics for this year a lot better, and we can see an increase in interest rate base.

Also with net fees, the dynamics show first of all the lowering the prices for the investment services in the end of the first quarter, but we managed to increase the base so that there is a slight mismatch from previous year, and we see the growth dynamics going forward, I think we're in quite a solid place. Expenses.

I defined that if we went into financial planning phase last year, then it was troubling that the cost base were increasing, our main target was to cut that dynamic and slow or basically kill the increase of the cost base. We managed to do that, and of course we managed to do that so that we have managed to do also some important investments, for example, the cloud infrastructure.

So 60% of our cost base is personnel-related because we have in-house development teams, and of course the IT expenses is the second one standing out. If we look how we have managed to pull the financial plan together, it's mentioned that we didn't manage to fulfill the net profit target.

We missed it by 7 million, and it's mainly driven by the funding cost. We see that this year, the funding cost is more stabilized, but of course for this year, there are new challenges, but we can talk about those already on Thursday when we are introducing the financial plan.

Still, I would like to emphasize that the business volumes were in target and slightly better. Of course, the return on equity 19% is still very good number, comparing to different banks in Europe and taking into account the market condition.

Thank you, and I will give to Erki.

Thank you. A few words about LHV Bank.

It was the second full year for LHV Bank in the UK, and it's good to say that it was another very strong growth year for us. We managed to double the deposits, and also the growth in loans were more than 100%, and it's good to say that we did it all with quite good profitability as well.

Net profit was more than £5 million, and it gave a bit more than 5% ROE after profit. In LHV Bank, we have three business lines.

Banking Services was the first line. We started with it already a few years ago.

That business line is not growing that much. We managed to increase the payment volumes by 17% in 2025.

The deposit base was also a bit higher than in the beginning of the year, but as there is pressure on sharing the interest rate with the clients as well, then I can see it from the next slides that the Banking Services part in our all income is reducing year-over-year. Good thing is that the second business lines, SME lending, that we started two years ago, is growing very rapidly.

That's going through the brokers network. Most of the SME loans in the UK are sold through the broker companies, and our work has been to just have good relationships with brokers and broaden the network.

That's growing, that's a good thing. In 2025, we also launched a third business line, which is Retail Banking.

We can say that taking the deposits from platforms was also kind of like a retail banking. We have more than 25,000 customers from the platforms, but it's still using the same platform than other banks are using, and that brings also their own risks with them.

We started with retail banking in May last year, had the first campaign, maybe wasn't the best campaign of the year, but we learned from that. We had another campaign in November, and that showed very clearly that we can be attractive for retail customers as well.

Then we reached around 100-plus new customers per day level, which is good. It shows that when we have market-level interest rates, strong marketing support, then we can attract direct customers as well.

Everything what we do in retail is app-based business, opening accounts, making payments, issuing cards, and offering various term deposits, easy access accounts. That's all for the customers who really want to save, who want to increase their savings.

We also joined instant euro payment scheme in 2025. That's important because we now have capability to offer this euro payments also directly to our Banking Services customers.

They don't need to go through the Estonian bank anymore. Some of the clients have been started to use that already, and we hope to see more clients transferring to that direct connection through LHV Bank in the next years.

Not too many awards have been received so far, but still it's good to say that Sunday Times gave us the best places to work award in last year. Now going deeper to numbers.

It's sometimes easy to grow from zero as well, but if we take the growth in the last year and compare it to the growth what we had in 2024, then it has accelerated. The pipeline is also very strong.

We have more than €100 million worth offers out which are signed. That means that the first quarter, the first half year should become also very strong in this year.

Deposits grow according to our needs. We can increase or decrease the interest rates there according to our needs.

It's good to say that direct deposits form already more than 12% of all deposit base by today. Interest income is mainly coming from the SME lending.

That's result of the growing loan book. Fees received are mainly coming from Banking Services directly or then shared with LHV Bank in Estonia.

Here you can see that although the volumes grow, then there is still a pressure from the client side to lower the fees and also share the interest income more than we used to do in previous years. Expenses remain almost the same compared to Q4 2024.

We can see small peaks here in Q2 and Q4 in marketing expenses, and that was exactly what I explained about our campaigns also in these quarters. All in all, interest income was better than planned, and that's because of the much higher loan portfolio.

Secondly, the expenses were also a bit higher than planned, but just because of two marketing campaigns that we were not planning to have a year ago. All in all, the result was better by £700,000 in last year.

Giving back to Mihkel.

All right. Thank you, Erki.

I will add some more flavor on our asset management. As mentioned in the beginning, the two pension funds that they are managing in the second and third pillar were the best performers in Estonia, which was definitely annual highlight.

On the other hand, this sales channels were changed during the year, the decision was made that all the active sales will be moving to digital channels and no more in physical channels like retail stores, etc. There was some changes in the concept of the pension fund names.

Then last but not least, also the asset management team launched a new eurobond fund, which is basically concentrating on the highly rated debt instruments, which is available for the public market. As mentioned, due to the good performance of the funds, the pension fund of the asset management also earned a success fee.

All in all, the net profit was 4.1 million, which was a significant increase from the year ago. Both the second and third pillar funds volumes increased quite a lot year-over-year as well.

The second pillar funds reached €1.5 billion, and then third pillar funds are growing from a quite small base. Due to the good result, the return on equity was also almost 20%.

Just to highlight once more in detail, what we see is that the assets under management have started to increase through the year. Having said that, we are not happy with the client number, the effort on sales, on making sure that our sales channels are working better, this is a big focus during this year, we will definitely keep an eye on that to make sure that the great results delivered by the team will be also then hopefully appreciated by new customers as well, both from LHV and broader market.

Just a quick glance on the financials. As mentioned before, in terms of group, the asset management is quite small in terms of contribution, but having said that, we are very happy with the bottom line and the overall result.

Last but not least, also a few words about our insurance business. There was a good growth, 13% year-over-year in terms of premiums, and the number of customers also went up quite significantly, 36% year-over-year.

Also the return on equity was very good. It was a good growth year for the business, delivering 2.5 million to the bottom line, which contributes to the group as well.

Overall, the insurance market has been challenged through 2025, the market hasn't done that well. One large segment is related to car sales.

That definitely has had a dampener, and there's been quite significant yeah, price war in that segment. Overall, challenging market, but the targets were met, so that's shows good work of the team, and yeah, we're happy with the result on the insurance side.

Summarizing once more, as said, I think the overall group result was good. We are used to putting high targets, yes, we indeed missed the group net income and profit target somewhat, but overall it was a very good foundational year in terms of volumes, both on the deposits and loan side, in terms of all the activities that Erki and Kadri mentioned as well in terms of what we have actually continued to build in the background.

Very happy with the results on the UK side especially, both on the lending growth and the fact that we have sort of established ourselves more on the retail market as well and learned on how to increase the volumes. Yes, as mentioned in addition, obviously the kicker from the asset management and good results from the insurance as well were a highlight in the end of the year.

Thank you very much for listening, and I think we're open for questions.

Thank you Mihkel, Meelis, Kadri, and Erki for the presentation. Let's continue now with the Q&A section as we have quite a few questions already waiting there.

Let's take these bottom-up. First question: LHV's lending market share in Estonia barely changed in the second half of 2025.

Could you please name the factors behind that?

Sorry, repeat the question, the last part of the question, the second part. Uh...

Glad to.

LHV's lending market share in Estonia barely changed in the second half of 2025. Could you please name the factors behind that?

You mean about the market in general? The lending market share,

yeah.

I don't even think that we have the total number of the market share by the end of the year. I think we have the third quarter.

I think the main reason is probably our own target of how we wanted to lend out, that for basically the amortization of our own lending portfolio. The market share comes actually by the end of the year, we can actually compare it I think somewhere in May, in the beginning of the May, because usually the best overview of the total market and the share how is defined is given by the Financial Inspection or the FSA overview.

Before that, we wouldn't make any conclusions. In general, I think that our growth in loans was as we planned, and even increased it a little bit.

There was dynamics in, for example, we targeted the growth corporate loans a bit more, and mortgages a bit less. Overall, the outcome was as planned, and even a bit higher.

I believe we achieved the result, but with a bit of different composition in terms of corporate and retail loans,

yeah.

Thank you. Could you please share your view on stablecoins, and how that could be developed into LHV's business line akin to payment infrastructure it already has?

We are quite deliberately, let's say, researching both the opportunities and also the risks. Obviously, given the fact that you have, I think, if we think about UK, if we think about Europe and US, quite different concepts in terms of legal structure and on how these are addressed.

We think that the volumes, the usage, the application, it's growing quite rapidly. I think the fact that in Europe it's still quite underdeveloped.

We are tinkering with the ideas and concepts, and yeah, trying to figure out what we could potentially do there. We are definitely keeping a keen eye on the developments.

Is it possible to specify from which sector in Q4 impairment reversals came from? Also, what is the outlook for 2026 in term of impairments?

Outlook for 2026 will come on Thursday, not yet today. Reversal of impairments in Q4, these were mostly model-based, and also the another aspect was that last year, we added certain impairments, but with this year, from a different regulatory view, we had to release.

It was a net effect zero, but annually, we added them in late 2024, and late 2025, we have to release them as well. Is

it possible to estimate cost savings from the use of AI?

I think I can start, and if Kadri wants to add anything. It's actually quite complex task to estimate cost saving per se.

I think the logic or the foundation how we view this is that how can we grow our business by not adding complexity, adding additional FTEs. That brings the whole AI discussion more into the light.

I think the sort of foundation is how can we use it in order to scale further, how we can simplify processes, how we can review processes. I think the condition there is that once you start using more AI, it actually brings in more costs.

It's also a bit of a process to figure out what's the sort of optimal way. There's a I think massive development in terms of use cases.

Last six months again have been full of news releases in some of the tools that Kadri mentions that we're using as well. I would say that definitely sort of built into our strategy, built into our story to use it in a good way.

I think it's really more about reviewing end-to-end processes, and really really making sure that we can use the tools in a way that they are managed well and the risks are managed as well. Definitely it's a big driver.

It's not just for us, it's for most of the banks, large part of the economy going forward. That's the broader expectation.

Please elaborate on the full-year 2025 operational expenses level, which was quite significantly above the original financial plan. Were there any one-off items, and what levers do you have to improve the cost efficiency in 2026?

In general, there was only one one-off item, that it was about writing off the goodwill partially. It's a goodwill related to Paytech, that it was 1.6 6 million euros.

Otherwise, additional cost base came from two two major blocks. One was related to FTEs, that we thought that we are able to reduce FTEs more than we actually were at the end of the year doing, that we plan to have more automatization in place, that yes, we have had some, but in the late year, its effect is not in 2025.

This was one. Another one is marketing costs,

that both costs in Estonian side and in UK side. As Erki earlier mentioned, that in UK, we did another second marketing campaign in Q4, what was not in any of the plans.

What loan growth do you see for the Estonian market and for LHV in 2026? I think for this question, we can come back on Thursday when we will publish the financial plan for 2026.

Unfortunately, at this stage, we cannot answer this question. We'll come back this on Thursday.

Has cost of financing on group level normalized based on Q4 run rate, or do you see more room to improve it in 2026?

This is also slightly partially the question for Thursday, but when we are talking about still looking backwards 25, then yes, markets are way better in 2025 compared to the years before that. Still, same time, interest rates have decreased, but we are still in this kind of 2% level in euros, and British pound two times higher.

There is still room for changes in the deposit composition. Looking at the funding side, LHV is step-by-step starting to issue larger transaction deals, what also brings the costs down.

There is still room. Do you see expected surge in defense infrastructure spending benefiting Estonian lending market and LHV, as it partly will be financed via loans?

I think I can start, and if Kadri wants to add anything. Yes, definitely it will have a significant impact to the expected GDP growth during this year, and we will hopefully have a part in that infrastructure development as well.

This is expected to be one of the sort of cornerstones in the growth this year, plus hopefully consumers activating more as well. Short answer is yes, we hope to see that in our business as well, but maybe on the Estonian side if Kadri wants to add anything.

I agree with what Mihkel said, and it definitely creates some kind of positive outcome for Estonian economy in general. Rather, if we talk about financing, it depends on the project, and it depends on the financial plan.

We definitely don't see the defense sector as a sector that we don't want to finance, but we look one project at a time, and where we can actually come and help with the financing, then of course we do that, but it depends on the project.

What are the main challenges currently for the UK business, and on what will the focus be this year? Regarding this year, we will again come back to this on Thursday, but, Erki, maybe you can slightly disclose what are the challenges from last year that have maybe transferred to this year.

As the main business is still the SME lending, then I don't see too many issues with that. The team is very strong, we can deliver new sales in this year, in the next year with the same team.

That's not the biggest risk. I think the biggest risk is still the cost of funds, and by that I mean how we can attract cheaper funding from the depositors.

We are active on three deposit aggregators at the moment and onboarding the fourth one, so that will also help us to take the cost of funds a bit down on the platforms. Still, there is quite heavy competition.

How to attract customers directly, that's the main question for us in this year and in the following years as well.

Risk-weighted assets grew 2% quarter-on-quarter basis, much less than loan growth. Any particular reason?

Yes, there was a clear reason for that, and this is coming from the composition of the loan portfolio. In the last quarter, the growth came from the mortgages, and the same time, the corporate side slightly even decreasing.

Mortgages risk weight is due to almost three times lower than the corporate ones.

Thank you. For now, we have gone through all of the questions.

Thank you for all of the questions. Thank you for the presenters.

As mentioned, on Thursday, we have the webinar where we will present 2026 financial plan and also the five-year forecast. Hope to see you everybody there.

Thank you for participating, and I wish you a beautiful day.

Thank you.

Thank you.

Thank you.