Highlights of the annual financial statements

„Landsbankinn's 2015 operations were highly successful, with a good outcome in almost all its business segments. The bank's income has risen significantly over the previous year while at the same time operating expenses have decreased. Uncertainty and risk have been reduced. Asset quality has risen and the bank's funding has been reinforced through improved access to domestic and foreign credit markets. Liquidity is strong, and the bank's equity is among the highest on record, despite large dividends paid.“

- Landsbankinn's CEO Steinþór Pálsson,
in a news announcement accompanying the bank's results on 25 February 2016

View the accounts here (pdf)

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Key performance indicators (KPIs) 31/12/2015 31/12/2014
After-tax profit 36,460 29,737
Net operating income 72,363 63,149
Net interest income 32,324 28,073
Pre-tax ROE 19.9% 16.7%
ROE after taxes 14.8% 12.5%
Capital ratio (CAR) 30.4% 29.5%
Net interest margin as a ratio of average balance sheet position 2.4% 2.4%
Net interest margin 2.2% 1.9%
Cost-income ratio* 43.8% 56.0%
Overall liquidity ratio (LCR) 113% 131%
FX liquidity ratio (LCR FX) 360% 614%
Total assets 1,118,658 1,098,370
Loans / deposits ratio 145.2% 130.3%
Full-time equiv. positions 1,063 1,126

* Cost-income ratio = Total operating expenses net of equity-linked wages expense / (Net operating income – value adjustments to loans)
All amounts in ISKm

Landsbankinn's profit on operations totalled ISK 36.5 billion in 2015, as compared with ISK 29.7 billion in the previous year. Return on equity (ROE) was 14.8% as compared with a ROE of 12.5% for 2014. The bank's capital ratio has never been higher and at year-end was 30.4% compared to 29.5% at the beginning of the year.

Profit ISKm
Return on investment (ROE)
Capital ratio (CAR)

The bank's net interest income rose by ISK 4.3 billion YoY. In 2015 its net interest spread, interest income as a ratio of average balance sheet position, was 2.2% compared to 1.9% the preceding year.

The increase in income, together with a decrease in operating expenses results in a cost-interest ratio, excluding loan revaluations, of 43.8% in 2015, compared to 56% in 2014.

Balance sheet

At year-end 2015 the bank's total assets were ISK 1,118 billion at year-end 2015, an increase of almost 2% during the year.

The principal changes in the asset side of Landsbankinn's balance sheet during the year were an increase in the value of customer loans of ISK 93 billion and decreases in the bank's bond holdings of ISK 40 billion and in claims on credit institutions of ISK 29 billion.

The main changes in liabilities were an increase in customer deposits of almost ISK 8 billion while deposits of financial undertakings dropped by around ISK 113 billion. In accordance with an agreement between the bank and the Winding-up Board of LBI hf. Landsbankinn prepaid in Q4 2015 foreign currency bonds maturing in October 2016 and partly prepaid bonds maturing in October 2018. The amount of the prepayment was equivalent to around ISK 47 billion.

As a result of the bank's profit of around ISK 36.5 billion in 2015 its equity increases by ISK 13.7 billion despite a dividend payment of ISK 23.7 billion.

Cost-income ratio
Total assets (ISKm)
Interest spread (ISKm)
* Net interest margin as a ratio of average balance sheet position
Assets 31/12/2015  31/12/2014 Change in 2015
Cash and balances with the Central Bank 25,164 10,160 15,004 148%
Market bonds 203,684 243,589 -39,905 -16%
Equities 29,192 29,433 -241 -1%
Claims against credit institutions 20,791 49,789 -28,998 -58%
Loans to customers 811,549 718,355 93,194 13%
Other assets 16,323 28,832 -12,509 -43%
Assets held for sale 11,955 18,212 -6,257 -34%
Total 1,118,658 1,098,370
20,288 2%
Liabilities and equity 31/12/2015 31/12/2014 Change in 2015
Deposits from financial undertakings 56,731 53,827 2,904 5%
Customer deposits 559,051 551,435 7,616 1%
Borrowing 209,344 207,028 2,316 1%
Other liabilities 27,483 32,443 -4,960 -15%
Liabilities linked to assets held for sale 1,518 2,834 -1,316 -46%
Equity 264,531 250,803 13,728 5%
Total 1,118,658 1,098,370 20,288 2%

All amounts in ISKm

Equity (ISKm)
* Capital ratio

Liquidity position

The bank's liquidity is strong, in both ISK and foreign currencies. Liquid assets amounted to ISK 209 bn as of year-end 2015.

The measure used for short-term liquidity is the liquidity coverage ratio (LCR) which is the ratio of quality liquidity assets to overall net outflows over the next 30 days under stressed circumstances. At year-end 2015 Landsbankinn's LCR was 113%, while the Central Bank's minimum requirement is a minimum of 80%. As of the same time, Landsbankinn's LCR in foreign currency was 360%, and the Central Bank's minimum requirement for this ratio is a minimum of 100%.

Overall liquidity ratio (LCR)
FX liquidity ratio (LCR FX)
Liquid assets 31/12/2015 31/12/2014 Change in 2015
Liquid assets with central banks 25,024 10,160 14,864 146% 
Loans to financial institutions (maturity less than 7 days) 16,342 33,053 -16,711  -51% 
Bonds eligible for repurchase agreements 167,463 191,478  -24,015  -13% 
Total liquid assets 208,829 234,691
-25,862  -11% 

All amounts in ISKm

Liquidity developments in 2015 (ISKm)

Loans to customers totalled ISK 812 billion at year-end 2015, up 13% from ISK 718 billion at the beginning of the year.

The increase during the years consists of ISK 225 billion in new loans, ISK 13 billion in exchange rate impact, indexation and revaluations and ISK 14 billion of loans taken over through mergers. This is offset by instalments of ISK 153 paid by the bank's customers.

The bank's total assets rose by ISK 20 in 2015, in part due to the fact that its high FX liquidity enabled it to prepay some ISK 47 billion to LBI hf.

Deposits of financial undertakings rose by 5%, or ISK 2.9 billion, amounting to ISK 57 billion at year-end.

Customer deposits rose by almost ISK 8 billion during the year, totalling ISK 559 billion at year-end compared to ISK 551 at the beginning of the year.

Steinþór Pálsson, CEO

In recent years return on equity has been high and exceeded expectations in 2015. Large, irregular income items have been a major factor here, primarily income recognised on valuations of loans. In 2015 the impact of these was an increase in after-tax profit of ISK 13.5 billion and of ISK 14.9 billion in 2014. Profits can be expected to decline considerably in the near term as the impact of these one-off items on the Bank's operations will ebb as time progresses.“

From a press release 25 February 2016
Liabilities and equity
Breakdown of deposits (ISKm)
Assets for sale (ISKm)
Liabilities linked to assets held for sale (ISKm)

In September 2015 Landsbankinn and the Winding-up Board of LBI reached agreement for Landsbankinn to prepay in 2015 foreign-denominated bonds maturing in October 2016 and to prepay in part bonds maturing in October 2018. The amount of the prepayment was equivalent to around ISK 47 billion.

In October 2015 the bank issued senior unsecured notes totalling EUR 300 million nominal value, or the equivalent of ISK 42,600 million. The notes have a 3Y maturity, bear fixed 3% interest and were sold at terms equivalent to a 295 bp premium on EURIBOR. They were issued under the bank's EUR 1,000 million Euro Medium Term Note (EMTN) Programme and listed on the Irish Stock Exchange.

In December, Landsbankinn concluded its first Scandinavian senior unsecured issuance, with notes totalling NOK 250 million and SEK 250 million nominal value, equivalent to ISK 7,500 million. The notes have a 3½ Y maturity and bear 3M NIBOR and STIBOR interest in the respective currencies plus a 2.6% premium. They were also issued under the bank's EUR 1,000 million Euro Medium Term Note (EMTN) Programme and listed on the Irish Stock Exchange.

Funding repayment profile (ISKm)

The bank's operating profit in 2015 was ISK 36.5 billion, compared to ISK 29.7 billion the previous year. In 2015 the bank recognised significant amounts as loan revaluations, for a total of ISK 18.2 billion. Reversal of a precautionary provision in connection with exchange-rate-linked loans in 2015 explains positive loan revaluations of around ISK 13.8 billion.

Income statement 2015 2014 Change in 2015
Net interest income 32,324 28,073 4,251 15%
Net adjustment in valuation 18,216 20,128 -1,912 -9%
Net interest income after adjustment in valuation 50,540 48,201 2,339 5%

Net fees and commision income 6,841 5,836 1,005 17%
FX gain or loss -1,277 67 -1,344 -2006%
Other operating income 16,259 9,045 -7,214 80%
Total operating income 72,363 63,149 9,214 15%

Salaries and related expenses 13,754 13,567 187 1%
Other operating expenses 8,061 8,545 -484 -6%
Depreciation of fixed assets 663 942 -279 -30%
Depositors' insurance fund 1,254 1,034 220 21%
Total operating expenses 23,732 24,088 -356 -1%
Share in profit of associates, net of tax 248 465 -217 -47%
Profit before tax 48,879 39,526 9,353 24%
Income and banking taxes 12,419 9,789 2,630 27%
Profit for the period 36,460 29,737 6,723 23%

All amounts in ISKm

Taxes and fees paid to the state and institutions amounted to ISK 12.4 billion in 2015, an increase of ISK 2.6 billion. In 2015, net interest income amounted to ISK 32 billion compared with ISK 28 billion in 2014. Interest spread as a ratio of average balance sheet position was 2.4% in 2015 or the same as in 2014.

In recent years loan revaluations have been a major factor in fluctuations in performance. In 2015 loan revaluations amounting to around ISK 18 billion were recognised, compared to revaluations of ISK 20 billion in 2014. Net fees and commissions were ISK 6.8 billion in 2015, increasing by ISK 1 billion YoY. By far the greatest share of this increase is due to changes in the payment card market and growing capital markets activities.

Other operating income amounted to ISK 15 billion in 2015, compared to ISK 9.1 billion in 2014, which is an increase of 64%. Other operating income in 2015 is primarily profit on equities of around ISK 9.7 billion and ISK 2.8 billion in income from market bond trading. Mention should also be made of income recognised dur to the exercise of an option agreement between VISA Europe and VISA Inc. in connection with the sale of Landsbankinn's stake in Valitor Holding hf. of around ISK 2.4 billion.

Steinþór Pálsson, CEO

„At the beginning of 2015 Landsbankinn adopted a new and ambitious strategy to 2020. Determined effort has been focused on implementing this strategy, the success of which is assessed regularly. The strategy has already brought visible results, both for customers and for the bank, and has contributed in no small part to the bank's highly successful outcome in 2015.“
Change between 2014 and 2015 (ISKm)

Operating expenses in 2015 were ISK 23.7 billion, a decrease from the 2014 expenses of ISK 24.1 billion. Salary cost rose by almost ISK 200 million YoY while other operating expenses decreased by close to ISK 500 million. The cost-income ratio for the year was 43.8%. The cost-income ratio shows operating expenses as a ratio of net operating income, excluding loan revaluations. Full-time equivalent positions at Landsbankinn decreased by 63 during the year, from 1,126 to 1,063. If mergers with other financial undertakings are taken into consideration, the number of full-time equivalent positions at Landsbankinn has decreased by 21.1% since 2011.

2015 Performance (ISKm)