From the CEO, Steinþór Pálsson

Reliable and professional financial services are a key prerequisite for a strong economy and general welfare. Landsbankinn is Iceland's largest financial undertaking and those of us who work in the bank realise how important a role it plays in ensuring that individuals and corporates can obtain capable financial services that encourage economic growth and prosperity without threatening stability, and at the same time safeguard consumers' interests.

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Landsbankinn's strategy is clear. The bank's future vision is to set the example to be followed. This means placing priority on customers, so that they feel that they are enjoying the mutual benefit of their business. At the same time the bank needs to be an attractive investment. Landsbanki intends to be a reliable partner in financial affairs and to operate in harmony with the community and the environment. We want people to say, "This is what a bank should be like!"

To ensure the implementation of its strategy, the bank has adopted targets and prepared a detailed work programme which will be followed in the coming years. The targets are focused on satisfied and loyal customers, cost efficiency, profitability, pursuing activities that accord with the bank's risk appetite and ensuring it has qualified and energetic employees.

Landsbankinn had a very successful 2015. Despite stiff competition in the market the bank's position is strong and its market share is growing. To mention a few examples: In the retail market, the bank increased its lead. At year-end Landsbankinn's market share was 36.1%, the highest ever, and making it the retail market leader. The bank also leads the way in corporate lending and growth in asset management was strong, both at the bank itself and in Landsbréf, the bank's subsidiary. Landsbankinn was also the leader in equity market trading.

Steinþór Pálsson, CEO of Landsbankinn

The bank's 2015 financial results were the best yet: profit amounted to ISK 36.5 billion and return on equity was 14.8%. It is important that earnings on core banking activities deliver an acceptable return for shareholders and Landsbankinn's target is a longer-term return on equity of 10%. Profitable operations are necessary for the bank to be able to invest to meet customer demands, now and in the future, for efficient and secure financial services.

Profits (ISKm)

At year-end 2015 Landsbankinn's equity amounted to ISK 264.5 billion and its capital as a ratio of risk-weighted assets was 30.4%. Risk in the bank's activities has fallen rapidly, in part due to disposal of risky assets and lower defaults, as at year end the default rate was 1.8%. The bank's strong position enables it to pay sizeable dividends to its shareholders and at its AGM the Board of Directors proposes to pay a dividend of ISK 28.5 billion in 2016 on its 2015 activities. With regard to dividends, it is Landsbankinn's policy to pay shareholders the majority of each year's profit, which ensuring that the bank's financial situation will continue strong. If the Board's proposal is adopted by the AGM this will bring the total dividends paid by the bank in 2013-2016 to ISK 81 billion. By far the greatest share of those dividends have gone to the Treasury and, together with the substantial taxes paid by the bank, benefit the entire society.

In recent years large one-off items, such as positive loan revaluations, have made a major contribution to the bank's results, and this year was no exception. As the bank cannot depend forever upon high revenues resulting from positive revaluations, it is important that its operations be efficient and economical. Its cost-income ratio decreased significantly from the previous year. Operating expenses decreased while income increased due to expansion of its activities. Efforts to increase cost efficiency in operations and improve the bank's competitive position will continue.

Landsbankinn has set out a clear policy regarding corporate social responsibility – for the fifth year in a row, in tandem with its Annual Report the bank publishes a CSR report. One of the most important aspects of the bank's CSR policy is to promote increased gender equality within the bank, for instance, wage equality. Landsbankinn's positive achievement in this regard was confirmed in March 2015, when it was awarded the golden seal of PwC's Equal Pay Audit, the first bank in Iceland to receive such recognition.

Those of us who work in the bank appreciate how many people elect to do their banking with us. To Landsbankinn's employees I express my thanks for their very positive contribution.