Financing


Landsbankinn's financing rests on three main pillars - deposits from customers, market funding and equity. In October 2016, international rating agency Standard & Poor's revised Landsbankinn's credit rating to BBB/A-2 with a positive outlook.

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Customer deposits

The lion's share of Landsbankinn's financing is in the form of customer deposits which amounted to ISK 590 bn at year-end 2016, mostly non-indexed and unrestricted. Deposits from customers increased by ISK 31 bn during the year, despite an outflow of deposits classified as off-shore ISK assets following the easing of capital controls in 2016. Inflation-indexed deposits amounted to ISK 102 bn at year-end 2016, decreasing by ISK 2 bn between years.

Issuance of bonds on international markets

Landsbankinn continued issuing bonds on international markets under its ENTM programme. In 2016, the Bank issued 4.5Y bonds in the amount of EUR 500 m; 4Y bonds in the amount of SEK 1,000 m, and tapped existing bond classes in the amount of NOK 250 m and SEK 100 m. The issues were mostly used to finance prepayment of bonds issued to LBI hf. In addition, Landsbankinn issued bills and covered bonds on the domestic market.

Funding pillars (ISKm)
Debt repayment profile (ISKm)

Standard & Poor's

Long-term BBB
Short-term A-2
Outlook Positive
Issue date October 2016
   

EMTN programme

Landsbankinn has listed a Euro Medium Term Note (EMTN) programme in the amount of EUR 1.5 bn for the issue of bonds on overseas markets. The first issue under the ENTM programme was made in 2015 and further issues followed in 2015. Landsbankinn issued 4½Y bonds in the amount of EUR 500 m in September 2016 and 4Y bonds in the amount of SEK 1,000 m in November 2016. The Bank also tapped existing bond classes in April in the amount of NOK 250 m and SEK 100 m. Landsbankinn utilised funds from bond issues first and foremost to make prepayment of bonds issued to LBI hf. International debt issuance under the EMTN programme now weights most heavily in the Bank's financing.

Bonds issued to LBI hf.

Landsbankinn issued bonds to LBI hf. in accordance with the contractual settlement governing the transfer of assets and liabilities from LBI hf. to Landsbankinn in 2009. In 2016, Landsbankinn paid off in full all EUR-denominated bonds and made partial pre-payment of USD-denominated bonds. Bonds issued to LBI hf. amounted in total to USD 441 m at year-end 2016 and mature in 2020 and 2024.

Landsbankinn has held a credit rating from international rating agency Standard & Poor’s since early 2014. In October 2016, the Bank's rating was raised a notch and is currently BBB/A-2 with a positive outlook.

Covered bonds

Landsbankinn has set up an ISK 100 bn programme for the issuance of covered bonds. The issuance is primarily intended to finance the Bank's housing loan products, and to reduce fixed interest risk. Covered bonds were issued regularly in 2016 and two new series were issued; a non-indexed 5Y series and an indexed 12Y series. One covered bond series matured in 2016. New agreements were signed with market makers in the secondary market for covered bonds issued by Landsbankinn whereby three parties now act as market makers and offer amounts were raised.

Bills

Landsbankinn set up a bill and bond programme in the amount of ISK 30 bn in May 2015. Landsbankinn regularly issued bills on the domestic market in 2016.

Equity

Equity is the third main pillar of Landsbankinn's financing. The Bank's equity amounted to ISK 251 bn at year-end 2016, decreasing by ISK 13 bn during the year, due mostly to dividends paid to shareholders in the amount of ISK 28 bn. The Bank availed itself of an authorisation to buy back own shares, up to 2% of all issued shares. In 2016, 0.6% of shareholders took advantage of the buy-back offer. Landsbankinn's CAR at year-end 2016 was 30.2%.

Capital ratio

30.2%