| Key performance indicators (KPIs) | 31.12.2019 | 31.12.2018 |
|---|---|---|
| After-tax profit | 18,235 | 19,260 |
| Net operating income | 51,517 | 53,910 |
| Net interest income | 39,670 | 40,814 |
| Pre-tax ROE | 11.3% | 12.8% |
| ROE after taxes | 7.5% | 8.2% |
| Capital ratio | 25.8% | 24.9% |
| Net interest margin | 2.4% | 2.7% |
| Cost-income ratio* | 42.6% | 45.5% |
| Liquidity coverage ratio (LCR) total | 161% | 158% |
| Liquidity coverage ratio (LCR) FX | 769% | 534% |
| Total assets | 1,426,328 | 1,326,041 |
| Loans / deposits ratio | 161.1% | 153.6% |
| Full-time equiv. positions | 893 | 919 |
* 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 18.2 bn in 2019 as compared with ISK 19.3 bn in 2018. After-tax ROE was 7.5% in 2019, compared to 8.2% in 2018. At the end of 2019, the Bank's CAR was 25.8% as compared to 24.9% 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) decreased by ISK 1.1 bn between years, to 2.4% in 2019 as compared with 2.7% in 2018.
Net fees and commissions amounted to ISK 8.2 bn, or an amount equivalent to that of 2018. Other operating income amounted to ISK 8.5 bn, as compared to ISK 3.6 bn the previous year. The increase is caused mostly by positive changes in the fair value of unlisted equities. The cost-income ratio decreased between years, was 42.6% in 2019 as compared to 45.5% in 2018.
Balance sheet
The Bank’s total assets amounted to ISK 1,426 bn at year-end 2019, increasing by 8% during the year.
Main changes to the asset side of the balance sheet in 2019 include a 7.1% increase in loans to customers YoY, ISK 75.7 bn. Lending to corporates grew by ISK 21.4 bn, while loans to retail customers increased by ISK 54.3 bn. The Bank's market bond assets increased by ISK 38.2 bn during the year. Loans and receivables due from credit institutions decreased by ISK 23.5 bn in 2019.
Main changes to liabilities include an increase in customer deposits by 2.1% during the year, or by ISK 14.8 bn. Deposits from financial institutions increased by ISK 13.5 bn during the year. Total lending by the Bank increased by ISK 58.8 bn in 2018, or by 18.7%. Landsbankinn issued subordinated bonds in the amount of EUR 5.5 bn in December. The issuance is a step towards optimising the Bank’s capital structure.
The Bank’s equity was ISK 247.7 bn at year-end 2019, increasing by ISK 8.1 bn during the year. A dividend payment in the amount of ISK 9.9 bn was paid to shareholders for the operating year 2018. The Bank's profit was ISK 18.2 bn in 2019.
Cost-income ratio
Total assets (ISKm)
Interest spread (ISKm)
*Interest spread as a ratio of assets and liabilities
| Assets (ISKm) | 31.12.2019 | 31.12.2018 | Change in 2019 | |
|---|---|---|---|---|
| Cash and balances with the Central Bank | 69,824 | 70,854 |
-1,030 | -1% |
| Bonds and debt instruments | 115,262 | 77,058 |
38,204 | 50% |
| Equities and equity instruments | 30,019 | 23,547 |
6,472 | 27% |
| Loans and advances to financial institutions | 47,929 | 71,385 |
-23,456 | -33% |
| Loans to customers | 1,140,184 | 1,064,532 |
75,652 | 7% |
| Other assets | 22,088 | 17,335 |
4,753 | 27% |
| Assets held for sale | 1,022 | 1,330 |
-308 | -23% |
| Total | 1,426,328 | 1,326,041 |
100,287 | 8% |
| Liabilities and equity (ISKm) | 31.12.2019 | 31.12.2018 | Change in 2019 | |
|---|---|---|---|---|
| Due to financial institutions and Central Bank | 48,062 | 34,609 |
13,453 | 39% |
| Customer deposits | 707,813 | 693,043 |
14,770 | 2% |
| Borrowing | 373,168 | 314,412 |
58,756 | 19% |
| Other liabilities | 30,470 | 31.027 |
-557 | -2% |
| Subordinated liabilities | 19,081 | 13,340 |
5,741 | 43% |
| Equity | 247,734 | 239,610 |
8,124 | 3% |
| Total | 1,426,328 | 1,326,041 |
100,287 | 8% |
Equity (ISKm)
* Capital ratioLiquidity position
The Bank's liquidity position in total and in foreign currencies was solid in 2019 and its liquidity ratios well in excess of regulatory requirements. Liquid assets amounted to ISK 204 bn at year-end 2019.
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 total LCR was 161% at year-end 2019 and the Central Bank requires a 100% minimum LCR. The foreign currency LCR for the same period was 769%; the Central Bank requires a 100% minimum. The Bank’s LCR for Icelandic króna was 61% at year-end 2019. As of 1 January 2020, the Central Bank requires a minimum LCR of 30%.
Aggregate liquidity ratio (LCR)
Central Bank requirement = 100%
FX liquidity ratio (LCR FX)
Central Bank requirement = 100%
| Liquidity reserve (ISKm) | 31.12.2019* | 31.12.2018* | Change in 2019 | |
|---|---|---|---|---|
| Cash and balances with the Central Bank | 44,235 | 35,291 |
8,944 | 25% |
| Domestic bonds and debt instruments eligible as collateral with the Central Bank | 19,665 | 9,738 |
9,927 | 102% |
| Foreign government bonds with 0% risk weight | 82,320 | 49,932 |
32,388 | 65% |
| High quality liquid assets | 146,220 | 94,961 |
51,259 | 54% |
| Loans and advances due from financial enterprises | 57,584 | 81,211 |
-23,627 | -29% |
| Total liquidity reserves | 203,804 | 176,172 |
27,632 | 16% |
*Liquidity value
Liquidity developments in 2019 (ISKm)
Loans to customers amounted to ISK 1,140 bn at the end of 2019, up from ISK 1,065 bn at the beginning of the year and thus increasing by ISK 75.7 bn.
There was an increase in lending to both retail and corporate customers. Total defaults by companies and households remained stable between years and stood at 0.8% at year-end 2019. The Bank's total assets increased by ISK 100.3 bn during the year.
Customer deposits increased by 2% in 2019, or by ISK 14.8 bn. Liabilities to credit institutions and the Central Bank increased by ISK 13.5 bn in 2019.
Assets
Liabilities and equity
Breakdown of deposits (ISKm)
Assets for sale (ISKm)
Liabilities linked to assets held for sale (ISKm)
S&P Global Ratings affirmed Landsbankinn’s credit rating of BBB+/A-2 and changed the outlook from stable to negative in July 2019.
Landsbankinn issued 3-year floating rate bonds in the amount of SEK 500 m and NOK 1,000 m in February at 175 basis point spread over STIBOR and NIBOR. In May, the Bank issued a floating rate 1.5-year bond in the amount of NOK 300 m at 83 basis point spread over NIBOR. The Bank also tapped issuance in the amount of SEK 600 m of a previously issued series with a 1.5-year remaining maturity at terms equivalent to an 85 basis point spread over STIBOR.
The remaining principal of the SEK 350 m and NOK 500 m bonds that matured in June was paid in full.
The Bank’s inaugural subordinated issuance in ISK was completed in December. The issued amount was ISK 5.5 bn and sold at a yield of 3.85%. The bonds are inflation-linked with a 10NC5 structure.
Regular auctions of covered bonds were held in 2019 where previously issued bonds were tapped and the non-indexed series LBANK CB 19 was paid in full at maturity in September.
Funding repayment profile (ISKm)
| Income statement (ISKm) | 2019 | 2018 | Change in 2019 | |
|---|---|---|---|---|
| Net interest income | 39,670 | 40,814 |
-1,144 | -2.8% |
| Net valuation adjustments and impairment | -4,827 | 1,352 |
-6,179 | -457.0% |
| Net interest income after net valuation adjustment | 34,843 | 42,166 |
-7,323 | -17.4% |
| Net fee and commission income | 8,219 | 8,157 |
62 | 0.8% |
| FX gain or loss | -584 | -1,497 |
913 | -61.0% |
| Other operating income | 8,455 | 3,587 | 4,868 | 135.7% |
| Total operating income | 51,517 | 53,910 |
-2,393 | -4.4% |
| Salaries and related expenses | 14,458 | 14,589 |
-131 | -0.9% |
| Other operating expenses | 9,534 | 9,348 |
186 | 2.0% |
| Total operating expenses | 23,992 | 23,937 |
55 | 0.2% |
| Profit before tax | 27,525 | 29,973 |
-2,448 | -8.2% |
| Income and banking taxes | -9,290 | -10,713 |
1,423 | -13.3% |
| Profit for the year | 18,235 | 19,260 |
-1,025 | -5.3% |
Net interest income amounted to ISK 39.7 bn in 2019, as compared with ISK 40.8 bn in 2018. The net interest margin on assets and liabilities was 2.4% compared to 2.7% the previous year.
Value changes to lending and claims were negative by ISK 4.8 bn as compared with a positive change in the amount of ISK 1.4 bn in 2018. Net interest income amounted to ISK 8.2 bn in 2019, the same as in 2018.
Other operating income amounted to ISK 8.5 bn in 2019, as compared with ISK 3.6 bn the previous year, which is a 136% increase between years. The increase is caused mostly by positive fair value changes in unlisted equities.
Change between 2018 and 2019 (ISKm)
Operating expenses in 2019 were ISK 24 bn, up by 0.2% between years. Wage cost decreased by 0.9% between years while other operating expenses increased by ISK 186 m, or 2.0%. The cost-income ratio for the year was 42.6%. 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 26 in 2019, from 919 to 893.
2019 Performance (ISKm)