Financials

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Highlights of the Annual Financial Statements


Profit (ISKbn)

19.3

Capital ratio

24.9%

Return on equity (ROE)

8.2%

View the accounts here (pdf)

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Key performance indicators (KPIs) 31.12.2018 31.12.2017
After-tax profit 19,260 19,766
Net operating income 53,910 53,512
Net interest income 40,814 36,271
Pre-tax ROE 12.8% 12.3%
ROE after taxes 8.2% 8.2%
Capital ratio  24.9% 26.7%
Net interest margin 2.7% 2.5%
Cost-income ratio* 45.5% 46.1%
Overall liquidity ratio (LCR) 158% 157%
FX liquidity ratio (LCR FX) 534% 931%
Total assets 1,326,041 1,192,870
Loans / deposits ratio 153.6% 153.0%
Full-time equiv. positions 919 997

* 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 19.3 bn in 2018 as compared with ISK 19.8 bn in 2017. After-tax ROE was 8.2% in 2018, the same as in 2017. At the end of 2018, the Bank's total capital ratio was 24.9% as compared to 26.7% at the beginning of the year.

Profit (ISKm)
Return on equity (ROE)
Capital ratio

The Bank's interest margin, net interest income as a ratio of average capital position, increased by ISK 4.5 bn between years, to 2.7% in 2018 as compared with 2.5% in 2017.

Landsbankinn’s net commission income amounted to ISK 8.2 bn as compared with ISK 8.4 bn the previous year, which is a 3.2% decrease between years. Other operating income amounted to ISK 3.6 bn, as compared to ISK 7 bn in 2017. Unfavourable conditions on securities markets are the main reason for the decrease. The cost-income ratio decreased between years, was 45.5% in 2018 as compared to 46.1% in 2017.

Balance sheet

The Bank’s total assets amounted to ISK 1,326 bn at year-end 2018, increasing by 11% during the year.

Main changes to the asset side of the balance sheet in 2018 include an ISK 138.9 bn increase in loans to customers and an ISK 40.3 bn decrease in the Bank's fixed-income assets.

Main changes to liabilities include an increase in customer deposits by ISK 87.9 bn. Borrowing grew by ISK 32.5 bn in 2018 with subordinated loans increasing by ISK 13.3 bn.

The Bank's equity decreased by ISK 6.4 bn between years as a result of an ISK 24.8 bn dividend payment made in 2018. The Bank's profit amounted to ISK 19.3 billion in 2018.

Cost-income ratio
Total assets (ISKm)
Interest spread (ISKm)
*Interest spread as a ratio of assets and liabilities
Assets (ISKm) 31.12.2018  31.12.2017 Change in 2018
Cash and balances with the Central Bank 70,854 55,192 15,662 28%
Market bonds 77,058 117,310 -40,252 -34%
Equities 23,547 27,980 -4,433 -16%
Loans and advances to financial institutions 71,385 44,866 26,519 59%
Loans to customers 1,064,532 925,636 138,896 15%
Other assets 17,335 18,238 -903 -5%
Assets held for sale 1,330 3,648 -2,318 -64%
Total 1,326,041 1,192,870 133,171 11%
Liabilities and equity (ISKm) 31.12.2018 31.12.2017 Change in 2018
Due to financial institutions and Central Bank 34,609 32,062 2,547 8%
Customer deposits 693,043 605,158 87,885 15%
Borrowing 314,412 281,874 32,538 12%
Other liabilities 31.027 27.642 3,385 12%
Subordinated liabilities 13,340 77 13,263 17,225%
Equity 239,610 246,057 -6,447 -3%
Total 1,326,041 1,192,870 133,171 11%


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

Liquidity position

The Bank’s liquidity position, both total and in foreign currencies, was robust in 2018 and well above regulatory requirements. Liquid assets amounted to ISK 176 bn at year-end 2018.

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

Landsbankinn's LCR was 158% at year-end 2018 and the Central Bank requires a 100% minimum LCR. The foreign currency LCR for the same period was 534%; the Central Bank requires a 100% minimum.

Aggregate liquidity ratio (LCR)
 
Central Bank requirement = 100%
FX liquidity ratio (LCR FX)
 
Central Bank requirement = 100%
Liquidity reserve (ISKm) 31.12.2018* 31.12.2017* Change in 2018
Cash and balances with the Central Bank 35,291 12,151 22,971 189% 
Marketable debt instruments and other securities mortgageable with the Central Bank  9,738 48,114 -38,375 -80% 
International trasury securities with 0% risk weighting 49,932 49,771 161  0% 
High quality liquid assets 94,961 110,036 -15,243 -14% 
Loans and receivables due from financial enterprises 81,211 57,074 24,137 42% 
Total liquidity reserve 176,172 167,110 8,894 5% 

*Liquidity value


Liquidity developments in 2018 (ISKm)

Loans to customers amounted to ISK 1,065 bn at the end of 2018, up from ISK 926 bn at the beginning of the year and thus increasing by ISK 139 bn.

There was an increase in lending to both retail and corporate customers. The default ratio continues to decline and stood at 0.8% at year-end 2018 as compared with 0.9% at year-end 2017. The Bank's total assets increased by ISK 133.2 bn during the year.

Customer deposits grew by 14.5% during the year, or by ISK 87.9 bn. Deposits from financial institutions and Central Bank increased by 2.5 bn in 2018.

Assets
Liabilities and equity
Breakdown of deposits (ISKm)
Assets for sale (ISKm)
Liabilities linked to assets held for sale (ISKm)

In July 2018, S&P Global Ratings affirmed the credit rating of Landsbankinn at BBB+/A-2 with unchanged stable outlook.

Landsbankinn issued its inaugural Tier 2 issuance of EUR 100 million in September 2018. The bonds mature in September 2028 and are callable in September 2023. The issuance is rated BBB- by S&P Global Ratings. The bonds have a fixed 3.125% coupon for the first five years and were sold at terms equivalent to a 285 basis point spread over mid-swaps in euros.

In October 2018 the Nordic Investment Bank (NIB) granted Landsbankinn a loan of USD 75 million with a maturity in October 2025.

Landsbankinn paid the remainder of the bond maturing in October 2018 at maturity with a payment of EUR 150 million.

Regular auctions of covered bonds were held in 2018 in which previously issued bonds were tapped by a nominal value of ISK 32 billion.

Funding repayment profile (ISKm)
Income statement (ISKm) 2018 2017 Change in 2018
Net interest income 40,814 36,271 4,543 13%
Net adjustment in valuation 1,352 1,785 -433 -24%
Net interest income after adjustment in valuation 42,166 38,056 4,110 11%



   
Net fees and commision income 8,157 8,431 -274 -3%
FX gain or loss -1,497 -1,375 -122 9%
Other operating income 5,084 8,400 -3,316 -39%
Total operating income 53,910 53,512 398 1%



   
Salaries and related expenses 14,589 14,061 528 4%
Other operating expenses 9,348 9,789 -441 -5%
Total operating expenses 23,937 23,850 87 0%
 
     
Profit before tax 29,973 29,662 311 1%
 
     
Income and banking taxes -10,713 -9,896 -817 8%
Profit for the year 19,260 19,766 -506 -3%


Net interest income amounted to ISK 40.8 bn in 2018, as compared with ISK 36.3 bn in 2017. The net interest margin on assets and liabilities was 2.7% compared to 2.5% the previous year.

Value changes were positive by ISK 1.4 bn as compared with a positive change in the amount of ISK 1.8 bn in 2017. Net fee and commission income amounted to ISK 8.2 bn in 2018, as compared with ISK 8.4 bn in 2017.

Other operating income amounted to ISK 3.6 bn in 2018, as compared with ISK 7 bn the previous year, which is a 49% decrease between years. Unfavourable conditions on securities markets are the main reason for the decrease

Change between 2017 and 2018 (ISKm)

Operating expenses in 2018 were ISK 23.9 bn, up by 0.4% between years. Wage cost increases by 3.8% between years while other operating expenses decreases by ISK 441 m, or 4.5%. The cost-income ratio for 2018 was 45.5%. This ratio is the difference between the Bank's operating expenses and net operating revenue with the exception of value changes. Full-time equivalent positions with the Bank decreased by 78 in 2018, from 997 to 919.

2018 Performance (ISKm)