Strategy and Governance

Landsbankinn's goal is to ensure that customers achieve results with the Bank and that both parties enjoy a mutual benefit. The Bank is a dynamic force that operates in harmony with its environment and society. Customers should to be able to say: This is what a bank should be like!

Fara neðar

In 2016, work continued on implementing the strategy. The largest projects involved changes to the Bank's internal functioning and corporate culture. New computer systems were taken into use and older systems decommissioned. Processes were simplified and de-materialised and changes made to sales and advisory service to customers with the aim to tailor the relationship to the needs and expectations of individual customers.

Well organised implementation of a clear strategy

Seven strategic projects and five key goals ensure implementation of the strategy for the years leading up to 2020.

Key to successful implementation of the strategy is its division into seven strategic projects. The strategic projects clearly set out responsibility for decision-taking and tasks within each project.

Administration of the implementation process is very clear. The Executive Board monitors and ensures effective progress control and the Strategic Development Committee, a sub-committee of the Board of Directors, monitors the process of implementation. Implementation is driven by tasks based on the goals of each strategic project and successful conclusion of a task moves the performance indicators of the strategy.

This process has been supplemented with clear information provision to all employees, through frequent news bulletins on the Intranet.

  • We put the customer first.
  • We build on strong partnerships and continuous progress.
  • At Landsbankinn, every single individual is responsible for achieving success.

The five key goals

  • Customer satisfaction
  • Profitability for the Bank
  • Cost-efficiency
  • Risk appetite
  • Employee satisfaction

Key to successful implementation of the strategy is its division into seven strategic projects. The strategic projects clearly set out responsibility for decision-taking and tasks within each project.


Market share in the retail market


Strategic project 1: Excellence in service - Individuals

Landsbankinn emphasises providing excellent service to both private and corporate customers through all contact points. The Bank's market share increased in 2016, up to a record 37.1% in the retail market.

In 2016, around 8300 customers accepted an invitation to receive so-called 360° advice, a comprehensive financial review for individuals. Gallup's surveys show that customers are very satisfied with the service and, according to a Gallup survey from September 2016, those customers who had received 360° advice were the most satisfied customers in the banking system. Emphasis was placed on the Better Banking project in 2016, which focuses on instructing and assisting customers in the use of self-service solutions. Further details about services for private individuals are presented in the chapter Personal Banking

Strategic project 2: Excellence in service - companies and markets

Landsbankinn continues to hold a very strong market share in the corporate market and, according to surveys Gallup carries out for the Bank, satisfaction among its corporate customers is increasing. The Bank leads in many areas, including among larger companies, and is largest in construction financing, both apartment and hotel construction. The Bank also increased its market share among trade and services customers. Further details about services for corporates are presented in the chapter Corporate Banking.

Landsbankinn's Markets division achieved significant successes across the board in 2016. Continuing its strong trend from 2015, Landsbankinn maintained the largest market share on the equity market in the Stock Exchange and held the second largest share in securities. Landsbankinn’s market share in supplementary pension savings grew from 17% to 19%. Further details about Landsbankinn's services for market participants and other actors on the financial market are presented in the chapter Markets.

Principal points in the new strategy on digital banking

  • Self-service as the first choice in banking to simplify the activity for customers.
  • Automation of processes to increase customer satisfaction.
  • Utilisation of data to improve advisory service and enable customers to better control their finances.
  • Collaboration with other strong companies to increase benefit to customers.

Strategic project 3: Electronic services for customer

In 2016, Landsbankinn focused its future vision for the use of digital technology and set out a strategy for the years leading up to 2020.

The new strategy places even more emphasis on self-service as the first choice in banking. Emphasis on digital solutions is also intended to boost efficiency in-house.

Further details about new features and technological developments in Landsbankinn's operation are presented in the chapter Developments in Banking.

Strategic project 4: Effective support units

Some success was achieved in increasing operational efficiency. Operating expenses are decreasing and full-time equivalent positions are falling in number. This success can be traced to more effective support units, optimisation in real estate operation and reduced IT cost, to name a few factors and discounting the effect of increases due to collective bargaining agreements.

Further details about the Bank's operation are presented in the chapter Financials.

Strategic project 5: Up-to-date technology

The single most extensive project Landsbankinn has undertaken with an eye to modernising its technological infrastructure is the introduction of a new deposit and payment system, Sopra, in collaboration with the Icelandic Banks' Data Centre. The project is multifaceted, complex and requires a lot of man-hours. Initial plans assumed that the system could be launched in spring 2016; revised estimates place its implementation in the first six months of 2017. The system will replace many other and, in some cases, very old core systems. Implementation of the new system is necessary in order for the Bank to continue to simplify and modernise its technological infrastructure.

Full-time equiv. positions

Strategic project 6: Effective balance sheet composition

The Bank's profitability, less effects from value increases in lending and taxes on total liabilities, is increasing.

An important milestone was reached in Landsbankinn's financing in H2 of 2016 when the Bank issued EUR and SEK denominated bonds. The euro bonds amount to EUR 500 m and are issued for a term of 4.5 years, maturing on 15 March 2021. They have a fixed 1.625% coupon and were sold at terms equivalent to a 190 basis point spread above mid-swaps in euros. Landsbankinn also issued 4Y bonds in Swedish krona in the amount of SEK 1 bn. They have a fixed and a floating rate and were sold at terms equivalent to a 150 basis point spread above mid-swaps in Swedish krona. The proceeds from the bond issues were primarily used to pre-pay bonds issued to LBI hf.

In October 2016, Landsbankinn's credit rating was raised a notch and is currently BBB/A-2 with a positive outlook.

Landsbankinn is currently working on obtaining authorisation to utilise the internal ratings-based (IRB) approach to assess credit risk. As part of that effort, a new rating model for corporates was taken into use in 2016. The IRB approach provides a more accurate credit risk assessment which would allow the Bank to better manage the composition of the balance sheet with regard for underlying risk.

Strategic project 7: Performance-oriented culture

Employee satisfaction and pride in the workplace increased in 2016.

Great emphasis is placed on promoting a performance-oriented culture at Landsbankinn and a strong corporate culture is considered one of the key components of success. In 2016, concerted efforts were made to strengthen the Bank's corporate culture.

Other IT projects

  • Merger of the Bank's various lending systems into one core system. Lending systems had grown numerous following mergers with other financial undertakings in recent years.
  • A so-called API service framework was introduced.
  • Documentation for housing loans was automated and made much more effective.
  • A customer relationship management (CRM) system has been implemented in most of the Bank's divisions. CRM allows for better management of communication with customers which in turn allows the Bank to provide customers with better service.

The methodology Landsbankinn uses to strengthen corporate culture focuses primarily on ensuring that employees and operating units set clear, measureable goals and decide on actions to achieve those goals within a set timeframe.

Last year, the aim was to increase customer satisfaction with regard to achieving mutual benefit for the Bank and its customers. Each division and departments set supporting goals that served this overarching goal and worked to achieve them, meeting weekly to discuss each group's progress. It is pleasant to be able to report that the Bank achieved its goal of increased customer satisfaction in 2016.

Support and on-going backup for management has been a key factor of performance management. Such support has been in the form of education and training. Each group receives on-going backup from a coach from amongst the Bank's employees. The coach supports each group's leader and provides advice. The groups have also used special software designed to organise group goals and projects and through which weekly advances can be registered. The Bank's managing directors closely monitor the progress of their groups and the CEO monitors the overarching success of the Bank with an eye to achieve the main goals.

Further details about employees and the Bank's human resources policy are presented in the chapter Human Resources.

The State's net profit from Landsbankinn amounts to ISK 139 bn

Upon the establishment of Landsbankinn hf. in fall of 2008, the Icelandic State provided the Bank with equity in the amount of ISK 122 bn. In so doing, the State gained an 81.33% share in the Bank. Ownership of the Bank changed as of 11 April 2013, when an 18.67% share, held by Landskil on behalf of the Winding-up Board of LBI hf., was transferred to the Icelandic State and Landsbankinn in accordance with an agreement between the parties from December 2009. Following this change, the State's holding in the Bank increased to 99.4%, having regard for outstanding shares and own shares held by the Bank, or what amounts to ISK 250 bn, based on the Bank's equity.

Since the establishment of Landsbankinn and up to and including the year 2016, the Bank has paid ISK 81 bn in dividend to the State, or what amounts to two-thirds of the initial purchase price. Having regard for the State's interest expenses, dividends and the initial purchase price, costs incurred by the State for purchasing shares in the Bank amount to ISK 111.5 bn whereas the holding was valued at ISK 250 bn at year-end 2016. The State's net profit thus amounts to ISK 138 bn.

The National Treasury also holds shares in Landsbankinn through its ownership of shares in savings banks Sparisjóður Vestmannaeyja and Sparisjóður Norðurlands. These holdings have not been taken into account in the above summary. Having regard for the shares in the savings banks, the State owns a 99.7% shareholding in Landsbankinn.

The State's profit from shares in Landsbankinn

Net financing cost -111,514
Interest in equity 249,663
State's net profit 138,148

*Based on book value of equity as of 31.12.2016.
All figures in ISKm.

Corporate governance at Landsbankinn

The governance structure of Landsbankinn forms the foundation for solid relations between shareholders, the Board of Directors, executives, employees and other stakeholders and encourages objectivity, integrity, transparency and responsibility in the management of the Bank. Each year, Landsbankinn reviews compliance with recognised guidelines on corporate governance to determine whether the Bank complies with such guidelines at each time.

In December 2014, the Centre of Corporate Governance recognised Landsbankinn hf. as a model of corporate governance. The Centre's conclusion was based on a review of governance practices carried out by Deloitte in November 2014. Deloitte's review of Landsbankinn's governance provided a clear overview of the Bank's governance practices and indicated that Landsbankinn could in many ways serve as a model of good corporate governance to other companies.

Landsbankinn complies with recognised guidelines on corporate governance and publishes an annual Corporate Governance Statement. The Statement includes information on the Board of Directors and its sub-committees.

Corporate Governance Statement