Markets


The scope of assets under management by the Landsbankinn Group grew in 2019 and customers received good returns on their assets. Customer services were variously improved and securities transactions were made more accessible.

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The scope of Landsbankinn's asset management continued to grow in 2019. At year-end, the Group had around ISK 475 billion under management.

Sophisticated and universal asset management

Landsbankinn offers universal asset management services suited to both individuals who are building their asset portfolios as well as larger portfolio holders. The Bank assists customers in selecting savings options and to build asset portfolios tailored to fit individual needs and aims. Landsbankinn offers customised asset management for legal entities, including companies, charities and pension funds.


Assets under management by the Group*

475ISK billion

*Including pension savings

Total assets under management by the Landsbankinn Group (ISK bn)*
*Including pension savings.

Íslenski lífeyrissjóðurinn yields very good returns

Íslenski lífeyrissjóðurinn pension fund performed very well in 2019. The fund is managed by Landsbankinn who handles management and daily operation of the fund. Real net returns of the fund’s divisions ranged between 4.6-12.5%, according to unaudited results. Real net return of the mutual insurance division was 10.4%. Average real net return of the mutual insurance division over the past 5 years was 5.8% and 4.9% in the past 10 years. The real net return of Líf I, the fund’s largest private pension scheme, was 12.5% in 2019. The average real net return of Líf I over the past 5 years was 5.9% and 5.8% in the past 10 years.

The fund has grown considerably in recent years with net assets available for pension payments currently amounting to ISK 100 bn. Since 2015, the fund has doubled in size, a growth driven both by an increase in fund members and good returns.

Increase of active fund members in 2019

11%
Pension savings under management (ISK bn)*
*Including Lífeyrisbók pension savings accounts.

Access to international stock exchanges

In June 2019, Landsbankinn became a member of the NASDAQ exhanges in Stockholm, Copenhagen and Helsinki and can now trade directly in listed securities on these markets. These markets offer a plethora of investment opportunities in different types of securities and sectors. Previously, the Bank needed to rely on the service of another financial undertaking to trade in these stock exchanges, with associated costs. Landsbankinn’s access to the stock exchanges cuts customer costs in securities transactions.

Responsible investment on a global stage

Ensuring a good product selection is important to Landsbankinn, both domestically and abroad. Landsbréf hf., a subsidiary of the Bank, offers investment in foreign UCITS and Landsbankinn partners with several well-known overseas fund management companies. The Bank works with various international partners, including UBS, LGT Capital Partners, AllianceBernstein, BlackRock, T. Rowe Price Funds, UBS and Axa Investment.

Work has been on-going on the implementation of Landsbankinn’s policy on responsible investment ever since it was adopted in 2013. The aim is to allow the Bank to integrate social responsibility and investment decisions.

Around mid-year 2019, Landsbankinn and Landsbréf signed a service agreement providing for the EGS rating of issuers of equities and bonds in portfolios under management by the latter two companies. This is the natural escalation of the integration of procedures for responsible investment, continuing along the path which the Bank and its subsidiary Landsbréf have set for themselves in recent years.

More space is devoted to responsible investment in the chapter on human resources and the community.

  • Timely attention to pension savings is important as pension plays a large role in determining the quality of life after retirement and can create scope for early retirement.

Umræðan: Lifið eftir vinnu**In Icelandic

Landsbankinn Corporate Finance participated in diverse projects

Landsbankinn co-ordinated the PO and listing of bonds for Almenna leigufélagið, Fagfjárfestasjóðurinn, Landsbréf - BÚS I and Landsbankinn based on an issuing schedule. Landsbankinn Corporate Finance also partnered with Municipality Credit Iceland for the proposed issuance of green bonds. Landsbankinn was one of two co-ordinators of Marel’s PO in Iceland, held in connection with an international stock offering linked to the company’s listing on Euronext, Amsterdam. Other projects include management of the sale process involving the petrol stations of Dælan and consultancy service for the owners of Bernhard during the sale of the operation of the Honda agency in Iceland to Bílaumboðið Askja.

Important market making

Robust market-making with the notes of main issuers is vital to the domestic market. In 2019, Landsbankinn acted as market maker with the shares of Arion Bank, Eimskip, Heimavellir, Sýn, Icelandair, Marel, Festi, Origo, Reginn, Reitir, Síminn, Sjóvá, Skeljungur and VÍS. Landsbankinn is primary dealer and market maker for bonds issued by the National Treasury, the Housing Financing Fund, Municipality Credit Iceland and the City of Reykjavík. Landsbankinn is also market maker in covered bonds issued by Arion Bank and Íslandsbanki.

Foreign exchange that satisfies customer needs

Foreign currency exchange is an important part of the services Landsbankinn Markets provides. Companies have increasingly taken advantage of hedging to safeguard cash flow and anchor both income and expenses. Landsbankinn is market maker with the Icelandic króna in the interbank market and as such ideally placed to meet customer needs for both spot and hedging purposes.

Turnover in securities has increased in recent years. Landsbankinn Markets collaborated with Municipality Credit Iceland (MCI) on achieving certification of MCI’s green bond framework. Markaðir also co-ordinated the sale of the bonds.

In 2019, Landsbankinn signed a Statement of Commitment to the FX Global Code, a set of principles of good practice for foreign exchange. The Code is intended to foster trust, fairness and appropriate transparency in the FX market. The Bank has familiarised itself with the Code and its guidelines and has taken necessary steps to adjust its operation to the Code.

Cooling economy and improving inflation outlook

During the first nine months of the year, economic growth measured only 0.2% as compared with 4.8% growth in 2018. This cooling is due mainly to decreasing tourist arrivals by 14.2% in 2019. Landsbankinn Economic Research expects economic growth to slow considerably in coming years following the robust growth period of recent years. According to Economic Research’s forecast, GDP contracted slightly for the entire year 2019, resulting in negative growth of around 0.4%. Moderate growth of 2% is expected in 2020, stepping up slightly in 2021 and 2022.

The inflation outlook improved in the latter half of 2019 and inflation is now expected to remain at or around target in the coming 3 years, as economic growth is expected to harmonise with Iceland’s production capacity. In December 2019, inflation was 2.0% as compared with 3.7% in December 2018. The inflation outlook also trended towards target in 2019. The break-even inflation rate on the bond market was 2.1-2.5% towards year-end 2019 as compared with 4.4-4.7% at year-end 2018.

The Monetary Policy Committee (MPC) of the Central Bank of Iceland (CBI) began the rate-cutting process with a 0.5 percentage point cut of policy rates on 21 May 2019, on the MPC’s first meeting following the bankruptcy of WOW air and definitive information about the capelin catch failure. In total, the MPC cut rates by 1.5 percentage points in 2019 and the CBI’s key rate, the seven-day term deposit rate, was 3.0% at year end.

ISK stable in 2019

The ISK exchange rate was fairly stable in 2019. At year-end 2019, the EUR stood at ISK 133.1, as compared to ISK 137.7 at the end of 2018. The EUR was dearest at ISK 141.8 at around mid-July; cheapest at ISK 132.6 in late March. The price of the EUR rose by 2.0% in total, the USD by 4.3% and the GDP by 8.3% between end-of-year 2018 and year-end 2019.

Turnover on the FX interbank market was ISK 181 billion, or similar to that of 2018 (ISK 187 billion). Turnover by the CBI was ISK 14.4 bn, or 8.6% of total turnover.

Fluctuation of the ISK on the FX market (measured as the standard deviation of daily changes in the EUR/ISK exchange rate on an annualised basis) was 6.6% in 2019 as compared with 8.1% in 2018 and 10.4% in 2017.


Macroeconomic forecast


  • Landsbankinn Economic Research published its macroeconomic forecast with a horizon of 2022 in October 2019.

Economic Research's macroeconomic forecast

A good year on the bond market

Economic growth cooled significantly in 2019 following the robust growth of recent years. Despite the fall of WOW air and negative pressure in the domestic economy, the selected shares index, having regard for dividend payments (OMXI10GI), rose by 33.2% in 2019. Rate cuts in 2019 alongside a significant increase in the price of Marel’s shares, which weigh heavily in the index, have boosted the selected shares index upwards. The successful double-listing of Marel on Euronext, Amsterdam was a positive development for Iceland’s largest listed company.

The Main List index (OMXIGI) rose by 27.8% in 2019 and if all companies are given equal weight, the increase was 14.7%. Having regard for dividends, the shares of Marel rose most, by around 68.5%, with shares in Síminn coming in second at around 44.6%. Icelandair’s stock increased most, by 21.2%, with shares in Sýn falling by 16.3%.

The year was also successful on many global stock markets. The MSCI World Index rose by 25.2% during the year, measured in USD, and the S&P 500 by 28.0%.

2019 was coloured by a high degree of uncertainty about the operating environment of airlines Icelandair and WOW air, first due to the bankruptcy of WOW air and later due to problems with Icelandair’s Boeing MAX aircraft.

One new company, Icelandic Seafood International, was taken into the Main List of the domestic stock exchange in 2019. The abolishment of capital controls in spring of 2019 had a positive impact on the stock market and the Icelandic stock market was upgraded to a frontier market by FTSE-Russel in fall. The hope is that the equity market will be classified as a frontier market by MSCI 2020.