| Key performance indicators (KPIs) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| After-tax profit | 19,260 | 19,766 |
| Net operating income | 53,910 | 53,512 |
| Net interest income | 40,814 | 36,271 |
| Pre-tax ROE | 12.8% | 12.3% |
| ROE after taxes | 8.2% | 8.2% |
| Capital ratio | 24.9% | 26.7% |
| Net interest margin | 2.7% | 2.5% |
| Cost-income ratio* | 45.5% | 46.1% |
| Overall liquidity ratio (LCR) | 158% | 157% |
| FX liquidity ratio (LCR FX) | 534% | 931% |
| Total assets | 1,326,041 | 1,192,870 |
| Loans / deposits ratio | 153.6% | 153.0% |
| Full-time equiv. positions | 919 | 997 |
* 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 19.3 bn in 2018 as compared with ISK 19.8 bn in 2017. After-tax ROE was 8.2% in 2018, the same as in 2017. At the end of 2018, the Bank's total capital ratio was 24.9% as compared to 26.7% 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, increased by ISK 4.5 bn between years, to 2.7% in 2018 as compared with 2.5% in 2017.
Landsbankinn’s net commission income amounted to ISK 8.2 bn as compared with ISK 8.4 bn the previous year, which is a 3.2% decrease between years. Other operating income amounted to ISK 3.6 bn, as compared to ISK 7 bn in 2017. Unfavourable conditions on securities markets are the main reason for the decrease. The cost-income ratio decreased between years, was 45.5% in 2018 as compared to 46.1% in 2017.
Balance sheet
The Bank’s total assets amounted to ISK 1,326 bn at year-end 2018, increasing by 11% during the year.
Main changes to the asset side of the balance sheet in 2018 include an ISK 138.9 bn increase in loans to customers and an ISK 40.3 bn decrease in the Bank's fixed-income assets.
Main changes to liabilities include an increase in customer deposits by ISK 87.9 bn. Borrowing grew by ISK 32.5 bn in 2018 with subordinated loans increasing by ISK 13.3 bn.
The Bank's equity decreased by ISK 6.4 bn between years as a result of an ISK 24.8 bn dividend payment made in 2018. The Bank's profit amounted to ISK 19.3 billion in 2018.
Cost-income ratio
Total assets (ISKm)
Interest spread (ISKm)
*Interest spread as a ratio of assets and liabilities
| Assets (ISKm) | 31.12.2018 | 31.12.2017 | Change in 2018 | |
|---|---|---|---|---|
| Cash and balances with the Central Bank | 70,854 | 55,192 | 15,662 | 28% |
| Market bonds | 77,058 | 117,310 | -40,252 | -34% |
| Equities | 23,547 | 27,980 | -4,433 | -16% |
| Loans and advances to financial institutions | 71,385 | 44,866 | 26,519 | 59% |
| Loans to customers | 1,064,532 | 925,636 | 138,896 | 15% |
| Other assets | 17,335 | 18,238 | -903 | -5% |
| Assets held for sale | 1,330 | 3,648 | -2,318 | -64% |
| Total | 1,326,041 | 1,192,870 | 133,171 | 11% |
| Liabilities and equity (ISKm) | 31.12.2018 | 31.12.2017 | Change in 2018 | |
|---|---|---|---|---|
| Due to financial institutions and Central Bank | 34,609 | 32,062 | 2,547 | 8% |
| Customer deposits | 693,043 | 605,158 | 87,885 | 15% |
| Borrowing | 314,412 | 281,874 | 32,538 | 12% |
| Other liabilities | 31.027 | 27.642 | 3,385 | 12% |
| Subordinated liabilities | 13,340 | 77 | 13,263 | 17,225% |
| Equity | 239,610 | 246,057 | -6,447 | -3% |
| Total | 1,326,041 | 1,192,870 | 133,171 | 11% |
Equity (ISKm)
* Capital ratioLiquidity position
The Bank’s liquidity position, both total and in foreign currencies, was robust in 2018 and well above regulatory requirements. Liquid assets amounted to ISK 176 bn at year-end 2018.
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 LCR was 158% at year-end 2018 and the Central Bank requires a 100% minimum LCR. The foreign currency LCR for the same period was 534%; the Central Bank requires a 100% minimum.
Aggregate liquidity ratio (LCR)
Central Bank requirement = 100%
FX liquidity ratio (LCR FX)
Central Bank requirement = 100%
| Liquidity reserve (ISKm) | 31.12.2018* | 31.12.2017* | Change in 2018 | |
|---|---|---|---|---|
| Cash and balances with the Central Bank | 35,291 | 12,151 | 22,971 | 189% |
| Marketable debt instruments and other securities mortgageable with the Central Bank | 9,738 | 48,114 | -38,375 | -80% |
| International trasury securities with 0% risk weighting | 49,932 | 49,771 | 161 | 0% |
| High quality liquid assets | 94,961 | 110,036 | -15,243 | -14% |
| Loans and receivables due from financial enterprises | 81,211 | 57,074 | 24,137 | 42% |
| Total liquidity reserve | 176,172 | 167,110 | 8,894 | 5% |
*Liquidity value
Liquidity developments in 2018 (ISKm)
Loans to customers amounted to ISK 1,065 bn at the end of 2018, up from ISK 926 bn at the beginning of the year and thus increasing by ISK 139 bn.
There was an increase in lending to both retail and corporate customers. The default ratio continues to decline and stood at 0.8% at year-end 2018 as compared with 0.9% at year-end 2017. The Bank's total assets increased by ISK 133.2 bn during the year.
Customer deposits grew by 14.5% during the year, or by ISK 87.9 bn. Deposits from financial institutions and Central Bank increased by 2.5 bn in 2018.
Assets
Liabilities and equity
Breakdown of deposits (ISKm)
Assets for sale (ISKm)
Liabilities linked to assets held for sale (ISKm)
In July 2018, S&P Global Ratings affirmed the credit rating of Landsbankinn at BBB+/A-2 with unchanged stable outlook.
Landsbankinn issued its inaugural Tier 2 issuance of EUR 100 million in September 2018. The bonds mature in September 2028 and are callable in September 2023. The issuance is rated BBB- by S&P Global Ratings. The bonds have a fixed 3.125% coupon for the first five years and were sold at terms equivalent to a 285 basis point spread over mid-swaps in euros.
In October 2018 the Nordic Investment Bank (NIB) granted Landsbankinn a loan of USD 75 million with a maturity in October 2025.
Landsbankinn paid the remainder of the bond maturing in October 2018 at maturity with a payment of EUR 150 million.
Regular auctions of covered bonds were held in 2018 in which previously issued bonds were tapped by a nominal value of ISK 32 billion.
Funding repayment profile (ISKm)
| Income statement (ISKm) | 2018 | 2017 | Change in 2018 | |
|---|---|---|---|---|
| Net interest income | 40,814 | 36,271 | 4,543 | 13% |
| Net adjustment in valuation | 1,352 | 1,785 | -433 | -24% |
| Net interest income after adjustment in valuation | 42,166 | 38,056 | 4,110 | 11% |
| Net fees and commision income | 8,157 | 8,431 | -274 | -3% |
| FX gain or loss | -1,497 | -1,375 | -122 | 9% |
| Other operating income | 5,084 | 8,400 | -3,316 | -39% |
| Total operating income | 53,910 | 53,512 | 398 | 1% |
| Salaries and related expenses | 14,589 | 14,061 | 528 | 4% |
| Other operating expenses | 9,348 | 9,789 | -441 | -5% |
| Total operating expenses | 23,937 | 23,850 | 87 | 0% |
| Profit before tax | 29,973 | 29,662 | 311 | 1% |
| Income and banking taxes | -10,713 | -9,896 | -817 | 8% |
| Profit for the year | 19,260 | 19,766 | -506 | -3% |
Net interest income amounted to ISK 40.8 bn in 2018, as compared with ISK 36.3 bn in 2017. The net interest margin on assets and liabilities was 2.7% compared to 2.5% the previous year.
Value changes were positive by ISK 1.4 bn as compared with a positive change in the amount of ISK 1.8 bn in 2017. Net fee and commission income amounted to ISK 8.2 bn in 2018, as compared with ISK 8.4 bn in 2017.
Other operating income amounted to ISK 3.6 bn in 2018, as compared with ISK 7 bn the previous year, which is a 49% decrease between years. Unfavourable conditions on securities markets are the main reason for the decrease
Change between 2017 and 2018 (ISKm)
Operating expenses in 2018 were ISK 23.9 bn, up by 0.4% between years. Wage cost increases by 3.8% between years while other operating expenses decreases by ISK 441 m, or 4.5%. The cost-income ratio for 2018 was 45.5%. This ratio is the difference between the Bank's operating expenses and net operating revenue with the exception of value changes. Full-time equivalent positions with the Bank decreased by 78 in 2018, from 997 to 919.
2018 Performance (ISKm)