Financials

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Highlights of the Annual Financial Statements


Profit (ISKbn)

18.2

Capital ratio

25.8%

Return on equity (ROE)

7.5%

View the accounts here (pdf)

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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%

 

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

Liquidity 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)