Highlights of the Annual Financial Statements

"The Bank's core operations yielded positive results in 2016 - net interest and commission income increased considerably between years while the Bank’s operating expenses decreased. Our market share in the retail market has never been higher and the Bank's position in the corporate market and on financial markets remains strong."

- Landsbankinn's interim CEO Hreiðar Bjarnason,
in a news announcement accompanying the Bank's results on 9 February 2017

View the accounts here (pdf)

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Key performance indicators (KPIs) 31.12.2016 31.12.2015
After-tax profit 16,643 36,460
Net operating income 48,217 72,363
Net interest income 34,650 32,324
Pre-tax ROE 9.9% 19.9%
ROE after taxes 6.6% 14.8%
Capital ratio (CAR) 30.2% 30.4%
Net interest margin 2.3% 2.2%
Cost-income ratio* 48,4% 43.8%
Overall liquidity ratio (LCR) 128% 113%
FX liquidity ratio (LCR FX) 743% 360%
Total assets 1,111,157 1,118,658
Loans / deposits ratio 144.7% 145.2%
Full-time equiv. positions 1,012 1,063

* Cost-income ratio = Total operating expenses  / (Net operating income – value adjustments to loans)
All amounts in ISKm

Landsbankinn's after-tax operating profit amounted to ISK 16.6 bn in 2016, as compared with ISK 36.5 bn in 2015. ROE was 6.6% as compared with 14.8% in 2015. At the end of 2016, the Bank's CAR was 30.2% as compared to 30.4% at the beginning of the year.

Profit ISKm
Return on investment (ROE)
Capital ratio (CAR)

The Bank's interest margin, net interest income as a ratio of average capital position, increased by ISK 2.3 bn between years, to 2.3% in 2016 as compared with 2.2% in 2015.

Landsbankinn's net commission income is up by 14% between years. This is due mostly to increased activity on capital markets and changes in the payment card market. As a result of market developments, other operating income dropped by just under ISK 9 bn between years. The cost-income ratio increased between years, was 48.4% in 2016 as compared to 43.8% in 2015.

Balance sheet

The Bank’s total assets amounted to ISK 1,111 bn at year-end 2016, decreasing by 1% during the year.

Main changes to the asset side of the balance sheet in 2016 include an ISK 42 bn increase in loans to customers and an ISK 49 bn decrease in the Bank's fixed-income assets.

As regards liabilities, the main changes involve an ISK 30.7 bn increase in customer deposits. In 2016, Landsbankinn made an ISK 61 bn pre-payment to the bond issued to LBI hf. in October 2008.

The Bank's equity decreases by ISK 13.3 bn between years as a result of an ISK 28.5 bn dividend payment; the Bank's after-tax profit amounted to ISK 16.6 bn in 2016.

Cost-income ratio
Total assets (ISKm)
Interest spread (ISKm)
Assets 31.12.2016  31.12.2015 Change in 2016
Cash and balances with the Central Bank 30,662 25,164
5,498 22%
Market bonds 154,892 203,684
-48,792 -24%
Equities 26,688 29,192
-2,504 -9%
Claims against credit institutions 20,408 20,791
-383 -2%
Loans to customers 853,417 811,549
41,868 5%
Other assets 17,641 16,323
1,318 8%
Assets held for sale 7,449 11,955
-4,506 -38%
Total 1,111,157 1,118,658
-7,506 -1%
Liabilities and equity 31.12.2016 31.12.2015 Change in 2016
Deposits from financial undertakings 20,093 56,731
-36,638 -65%
Customer deposits 589,725 559,051
30,674 5%
Borrowing 223,944 209,344
14,600 7%
Other liabilities 25,069 27,483
-2,414 -9%
Liabilities linked to assets held for sale 1,095 1,518
-423 -28%
Equity 251,231 264,531
-13,300 -5%
Total 1,111,157 1,118,658
-7,501 -1%

All amounts in ISKm

Equity (ISKm)
* Capital ratio

Liquidity position

The Bank's liquidity position, both in Icelandic króna and foreign currency, remains very strong. Liquid assets amounted to ISK 161 bn at year-end 2016.

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

Landsbankinn's LCR was 128% at year-end 2016 and the Central Bank requires a 90% minimum LCR. The foreign currency LCR for the same period was 743%; the Central Bank requires a 100% minimum.

Aggregate liquidity ratio (LCR)
FX liquidity ratio (LCR FX)
Liquid assets 31.12.2016 31.12.2015 Change in 2016
Liquid assets with central banks 18,816 25,024
-6,205 -25% 
Loans to financial institutions (maturity less than 7 days) 16,732 16,342
390  2% 
Bonds eligible for repurchase agreements 125,159 167,463
-42,304  -25% 
Total liquid assets 160,710 208,829
-48,119  -23% 

All amounts in ISKm

Liquidity developments in 2016 (ISKm)

Loans to customers totalled ISK 853 bn at the end of 2016, up from ISK 821 bn at the beginning of the year and thus increasing by ISK 812 bn.

New lending amounted to ISK 267 bn in 2016. Total lending decreased by ISK 25 bn due to exchange rate impact, indexation and positive value changes. Instalments from customers amounted to ISK 197 billion during the year.

The Bank's total assets decreased by ISK 7.5 bn in 2016.

Customer deposits, not counting financial undertakings, grew by 5.5% during the year, or by ISK 30.7 bn. Deposits from financial undertakings decreased by ISK 36.6 bn, first and foremost in relation to the Central Bank's currency auction in June 2016.

Hreiðar Bjarnason, interim CEO

"Our market share in the retail market has never been higher and the Bank's position in the corporate market and on financial markets remains strong. Surveys show that customer satisfaction increased considerably during the year, a fact we consider tremendously important, as the Bank emphasises providing customers throughout Iceland with exemplary service at competitive terms."

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

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.

In September 2016, Landsbankinn issued non-indexed bonds in the amount of EUR 500 million. The bonds mature in March 2021, have a fixed 1.625% coupon and were sold at terms equivalent to a 190 basis point spread above mid-swaps in euros.

In November 2016, Landsbankinn issued non-indexed bonds in the amount of SEK 1 bn. The bonds mature in 4.5 years and were issued in two tranches; SEK 750 million at a 1.375% fixed rate and SEK 250 million floating rate at STIBOR + 1.5%. The bonds are issued under Landsbankinn’s EUR 1.500 million EMTN programme and are listed on the Irish Stock Exchange.

Funding repayment profile (ISKm)

The Bank's operating profit for 2016 amounted to ISK 16.6 bn, as compared to ISK 36.5 bn in 2015. Impairment of loans amounted to ISK 318 m in 2016. In 2016, the Supreme Court ruled against the Bank in three cases that test the precedent for correcting previous recalculations of foreign currency indexed loans in accordance with Supreme Court rulings No. 600/2011 and 464/2012.

The Supreme Court found the impact of the additional claim to be so severe that the Bank should absorb the disputed interest margin, caused by illegal foreign currency indexation of the loans in question.

These rulings may set a precedent for cases involving other foreign currency indexed loans to corporates, where circumstances are similar, yet further rulings are necessary to clarify the precedent. As a result, the assessment of the financial impact of the rulings might change to reflect future rulings. Expenses in the amount of ISK 5,435 million were recognised as a result of these rulings towards the end of Q4 2016.

Income statement 2016 2015 Change in 2016
Net interest income 34,650 32,324
2,326 7%
Net adjustment in valuation -318 18,216
-18,534 -102%
Net interest income after adjustment in valuation 34,332 50,540
-16,208 -32%

Net fees and commision income 7,809 6,841
968 14%
FX gain or loss -179 -1,277
1,098 -86%
Other operating income 6,255 16,259
-10,004 -62%
Total operating income 48,217 72,363
-24,146 -33%

Salaries and related expenses 14,049 13,754
295 2%
Other operating expenses 7,586 8,061
-475 -6%
Depreciation of fixed assets 611 663
-52 -8%
Depositors' insurance fund 1,268 1,254
14 1%
Total operating expenses 23,514 23,732
-218 -1%
Share in profit of associates, net of tax 483 248
235 95%
Profit before tax 25,186 48,879
-23,693 -48%
Income and banking taxes -8,543 -12,419
3,876 -31%
Profit for the period 16,643 36,460
-19,817 -54%

All amounts in ISKm

Net interest income amounted to ISK 34.7 bn in 2016, as compared with ISK 32.3 bn in 2015. The ratio of interest spread to average capital position was 2.3% in 2016, up by 0.1% between years.

Value changes in lending have in recent years caused considerable fluctuations in the Bank's operating performance. In 2016, ISK 5.4 bn were expensed as a result of Supreme Court rulings, as compared with a positive value change of ISK 18 bn in 2015. Net commission income amounted to 7.8 bn in 2016, an increase of ISK 1 bn between years. The increase is due first and foremost to changes in the payment card market and increased activity in market transactions.

Other operating income amounted to ISK 6 bn in 2016, as compared with ISK 14.9 bn the previous year, which is a 59% decrease between years. The year-on-year decrease is a result of market developments in 2016.

Hreiðar Bjarnason, interim CEO

"Standard & Poor’s raised Landsbankinn's credit rating for the second year in a row, to BBB with a positive outlook. This is a welcome recognition of the great work that the Bank has done in previous years."
Change between 2015 and 2016 (ISKm)

Operating expenses in 2016 amounted to ISK 23.5 bn which represents a YoY decrease, from ISK 23.7 bn in 2015. Labour cost increased by just under ISK 295 m between years and other operating costs decreased by ISK 513 m. The Bank's cost-income ratio for 2016 was 48.4%. This ratio is the difference between the Bank's operating expenses and net operating revenue discounting value changes to lending. Full-time equivalent positions with the Bank decreased from 1,063 to 1,012 in 2016, down by 51.

2016 Performance (ISKm)