Highlights of the Annual Financial Statements


"Landsbankinn had positive operating results in 2017 and the Bank's performance was in line with expectations. Market share grew to reach a record high in the retail market, surveys showed increasing confidence in the Bank and customers are better satisfied with its services."

- Landsbankinn's CEO Lilja Björk Einarsdóttir,
in a news announcement accompanying the Bank's results on 15 February 2018

View the accounts here (pdf)

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Key performance indicators (KPIs) 31.12.2017 31.12.2016
After-tax profit 19,766 16,643
Net operating income 53,512 48,700
Net interest income 36,271 34,650
Pre-tax ROE 12.3% 9.9%
ROE after taxes 8.2% 6.6%
Capital ratio (CAR) 26.7% 30.2%
Net interest margin 2.5% 2.3%
Cost-income ratio* 46.1% 48.4%
Overall liquidity ratio (LCR) 157% 128%
FX liquidity ratio (LCR FX) 931% 743%
Total assets 1,192,870 1,111,157
Loans / deposits ratio 153.0% 144.7%
Full-time equiv. positions 997 1,012

* Cost-income ratio = Total operating expenses  / (Net operating income – value adjustments to loans)
All amounts in ISKm

Landsbankinn's operating profit after taxes amounted to ISK 19.8 bn in 2017 as compared with ISK 16.6 bn in 2016. ROE was 8.2% as compared with 6.6% in 2016. At the end of 2017, the Bank's CAR was 26.7% as compared to 30.2% at the beginning of the year.

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

Net commission income amounted to 36.3 bn in 2017, increasing by ISK 1.6 bn between years. The ratio of interest spread to average capital position was 2.5% in 2017, as compared with 2.3% in 2016.

Landsbankinn's net commission income is up by 8% between years. This is largely due to increased activity on capital markets and asset management and changes in the payment card market. As a result of market developments, other operating income increased by just under ISK 500 m between years. The cost-income ratio decreased between years, was 46.1% in 2017 as compared to 48.4% in 2016.

Balance sheet

The Bank’s total assets amounted to ISK 1,193 bn at year-end 2017, increasing by 7% during the year.

Main changes to the asset side of the balance sheet in 2017 include an ISK 72 bn increase in loans to customers and an ISK 37.6 bn decrease in the Bank's fixed-income assets.

Main changes to liabilities include an increase in customer deposits by ISK 15.4 bn and that amounts owed to the Central Bank of Iceland and credit institutions increased by ISK 12 bn. Other liabilities increased by ISK 57.9 billion. In 2017, the Bank paid off in full the outstanding amount on bonds issued to LBI ehf., and partially refinanced an unsecured bond class, maturing in October 2018, in the amount of EUR 300 m.

The Bank's equity decreases by ISK 5.2 bn between years as a result of an ISK 24.8 bn dividend payment made in 2017. The Bank's profit amounted to ISK 19.8 billion in 2017.

Cost-income ratio
Total assets (ISKm)
Interest spread (ISKm)
Assets 31.12.2017  31.12.2016 Change in 2017
Cash and balances with the Central Bank 55,192 30,662 24,530 80%
Market bonds 117,310 154,892 -37,582 -24%
Equities 27,980 26,688 1,292 5%
Claims against credit institutions 44,866 20,408 24,458 120%
Loans to customers 925,636 853,417 72,219 8%
Other assets 18,238 17,641 597 3%
Assets held for sale 3,648 7,449 -3,801 -51%
Total 1,192,870 1,111,157 81,713 7%
Liabilities and equity 31.12.2017 31.12.2016 Change in 2017
Deposits from financial undertakings 32,062 20,093 11,969 60%
Customer deposits 605,158 589,725 15,433 3%
Borrowing 281,874 223,944 57,930 26%
Other liabilities 27,693 25,069 2,624 10%
Liabilities linked to assets held for sale 27 1,095 -1,068 -98%
Equity 246,057 251,231
-5,174 -2%
Total 1,192,871 1,111,157 81,714 7%

All amounts in ISKm


56,731
56,731
56,731
Equity (ISKm)
* Capital ratio

Liquidity position

The Bank's liquidity position, both in Icelandic króna and foreign currencies, remains very strong. Liquid assets amounted to ISK 167.1 bn at year-end 2017.

The primary measurement of short-term liquidity risk is the liquidity coverage ratio (LCR) which measures the ratio of highly liquid assets to net outflow over a 30-day period under stressed conditions.

Landsbankinn's LCR was 157% at year-end 2017 and the Central Bank requires a 100% minimum LCR. The foreign currency LCR for the same period was 931%; the Central Bank requires a 100% minimum.

Aggregate liquidity ratio (LCR)
FX liquidity ratio (LCR FX)
Liquid assets 31.12.2017 31.12.2016 Change in 2017
Liquid assets with central banks 12,151 18,819 -6,668 -35% 
Loans to financial institutions (maturity less than 7 days) 57,074 16,732 40,342  241% 
Bonds eligible for repurchase agreements 97,885 125,159 -27,274  -22% 
Total liquid assets 167,110 160,710 6,400 4% 

All amounts in ISKm

Liquidity developments in 2017 (ISKm)

Loans to customers amounted to ISK 926 bn at the end of 2017, up from ISK 853 bn at the beginning of the year and thus increasing by ISK 72 bn.

New lending amounted to ISK 279 bn in 2017. Total lending increased by ISK 7 bn due to exchange rate impact, indexation and positive value changes. Instalments from customers amounted to ISK 213 bn during the year.

The Bank's total assets increased by ISK 81.7 bn during the year.

Customer deposits, not counting financial undertakings, grew by 2.6% during the year, or by ISK 15.4 bn. Deposits from financial undertakings increased by 12 bn in 2017.

Assets
Liabilities and equity
Breakdown of deposits (ISKm)

Landsbankinn has held a credit rating from international rating agency S&P Global Ratings since early 2014. In October 2017, the credit rating was raised by one notch and is currently BBB+/A-2 with a stable outlook.

In March 2017, Landsbankinn issued unsecured bonds in the amount of EUR 300 million. The bonds mature in March 2022, have a fixed 1.375% coupon, and were sold at terms equivalent to a 130 basis point spread above mid-swaps in euros.

In June 2017, Landsbankinn issued unsecured bonds in the amount of SEK 1 billion. The bonds mature in June 2020 and were issued in two classes: SEK 700 million floating rate at STIBOR + 1%, and SEK 300 million at a 0.75% fixed rate.

Funding repayment profile (ISKm)

In September 2017, Landsbankinn issued unsecured bonds in the amount of EUR 300 million. The bonds mature in March 2023, have a fixed 1.0% coupon and were sold at terms equivalent to an 85 basis point spread above mid-swaps in euros.

Income statement

The Bank's after-tax operating profit for 2017 amounted to ISK 19.8 bn, as compared to ISK 16.6 bn in 2016. At year-end 2017, loan impairment was positive by ISK 1.8 bn.

Income statement 2017 2016 Change in 2017
Net interest income 36,271 34,650 1,621 5%
Net adjustment in valuation 1,785 -318 2,103 -661%
Net interest income after adjustment in valuation 38,056 34,332 3,724 11%



   
Net fees and commision income 8,431 7,809 622 8%
FX gain or loss -1,375 -179 -1,196 668%
Other operating income 8,400 6,738 1,662 25%
Total operating income 53,512 48,700 4,812 10%



   
Salaries and related expenses 14,061 14,049 12 0%
Other operating expenses 9,789 9,465 324 3%
Total operating expenses 23,850 23,514 336 1%
 
     
Profit before tax 29,662 25,186 4,476 18%
 
     
Income and banking taxes -9,896 -8,543 -1,353 16%
Profit for the period 19,766 16,643 3,123 19%

All amounts in ISKm

Net interest income amounted to ISK 36.3 bn in 2017, as compared with ISK 34.7 bn in 2016. The ratio of interest spread to average capital position was 2.5% in 2017, up by 0.2% between years.

Value changes in the credit portfolio were positive by ISK 1.8 bn as compared with a negative change in the amount of ISK 318 bn in 2016. Net commission income amounted to 8,4 bn in 2017, an increase of ISK 622 bn between years. The increase is due first and foremost to changes in the payment card market and increased activity in market transactions.

Other operating income amounted to ISK 7 bn in 2017, as compared with ISK 6.6 bn the previous year, which is a 7% increase between years. The increase is due mostly to positive changes in the fair value of unlisted equities.

Change between 2016 and 2017 (ISKm)

Operating expenses in 2017 amounted to ISK 23.9 bn; an increase, as compared to ISK 23.5 bn in 2016. Labour cost remains unchanged between years and other operating expenses grew by ISK 324 m. The Bank's cost-income ratio for 2017 was 46.1%. This ratio is the difference between the Bank's operating expenses and net operating revenue with the exception of value changes to lending. Full-time equivalent positions with the Bank decreased by 15 in 2017, from 1,012 to 997.

2017 Performance (ISKm)