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Landsbankinn hf.: Financial results of Landsbankinn in H1 of 2021

·6-min read
  • Landsbankinn’s profit in the second quarter of 2021 amounted to ISK 6.5 billion.

  • The Bank’s profit in the first half of 2021 amounted to ISK 14.1 billion.

  • Return on equity (ROE) was 10.8%.

  • The cost/income ratio was 43.7% and operating efficiency continues to improve.

  • Market share in the retail market was just below 39% - a record high.

  • Mortgage lending has grown by 14.0% from the beginning of the year and the Bank’s share in the housing loan market has never been higher.

  • Almost every week for three years, Landsbankinn has offered the lowest variable rate on non-indexed housing mortgages available to all customers.

  • Net fee and commission income increased by 21% since the beginning of the year, mainly from increasing asset management and corporate finance activity.

  • The number of subscriptions to the funds of Landsbréf, the Bank’s subsidiary, were up 19% and agreements for securities transaction services with the Bank increased by 34%.

  • Assets under management by Landsbankinn are ISK 643 billion, an ISK 90 billion increase from the beginning of the year.

  • Around 1,100 companies have become new Landsbankinn customers in the first six months of the year.

  • Around 4,500 accounts have been created through the Save in App function, launched towards the end of March.

Landsbankinn’s profit was ISK 14.1 billion during the first half of 2021, compared with a loss of ISK 3.3 billion for the same period in 2020. Return on equity (ROE) for the period was 10.8% on an annualised basis, compared with -2.7% during the same period of 2020.

In the first half of the year, net interest income was ISK 19 billion, the same amount as the previous year. Net fees and commissions amounted to ISK 4.4 billion, compared with ISK 3.6 billion for the same period the previous year. Other operating income was positive by ISK 6.9 billion; was negative by ISK 13.3 billion in the same period of 2020. The year-over-year change is explained by an ISK 2.8 billion impairment reversal, compared with an ISK 13.4 billion impairment in the same period of 2020 caused by uncertainty about the impact of the then nascent Covid-19 pandemic. Impairment reversals in the first half of the year are attributable to a less pronounced economic contraction in 2020 than expected and expectations for a turnaround in 2021.

The net interest margin as a ratio of total assets was 2.4% in the first half of 2021, compared with 2.5% in the same period the previous year.

Operating expenses were ISK 13 billion in the period, compared with ISK 13.2 billion for the same period last year. Salaries and related expenses were ISK 7.5 billion thereof, down by ISK 153 million between periods. Other operating expenses were ISK 4.5 billion, compared with ISK 4.6 billion for the same period last year.

The cost/income ratio for the first half of 2021 was 43.7%, compared with 54.1% in the same period in 2020.

Landsbankinn’s total assets increased by ISK 113 billion during the period, amounting to ISK 1,677 billion at the end of the first half of 2021. Loans to customers grew by ISK 54.6 billion during the first half of the year, mainly due to increased lending to individuals. Deposits from customers amounted to ISK 843 billion at the end of the first half of 2021, compared with ISK 793 billion at year-end 2020, increasing by ISK 50 billion.

As at 30 June this year, Landsbankinn’s equity amounted to ISK 267.9 billion and its capital ratio was 25.1%.

Lilja Björk Einarsdóttir, CEO of Landsbankinn:

“The Bank’s results for the first six months of the year are very good - return on equity is good, operational expenses have decreased, and all business segments had solid results. There is a notable increase in asset management activity and the Bank’s market share has never been higher.

Around mid-year 2020, we made considerable provisions for possible loan impairment. Few customer defaults and positive developments in the economy allow for the reversal of some of these provisions. The Bank continues to be well prepared to meet uncertainty caused by Covid-19.

Ongoing good operational results in recent years have given us an opportunity to improve customer pricing. For a span of almost 3 years, we have offered the lowest non-indexed mortgage loan rates. At the same time, we have emphasised swift and good customer service and continue to add new borrowing products. Our customers can get more favourable terms on fixed-rate loans if the mortgage ratio is below 60% and better again if the ratio is below 50%. We have also made it possible to fix interest rates directly in our banking app, making life much easier for customers.

Throughout the pandemic, we have provided strong support for our customers in the travel sector and for other customers experiencing difficulties. We consider it very important for companies to be able to begin the process of re-hiring and operating at full capacity after this difficult period. We have been leading in the construction market, financing thousands of apartments in the past year, and have continued to build solid relationships with leading contractors. Business with the seafood and fisheries sector has grown and the highlight in this sector year to date is undoubtedly the very successful public offering of Síldarvinnslan, coordinated by Landsbankinn Corporate Finance.

In the past year, public interest in investing savings in mutual funds and equities has grown considerably. In the first half of the year, the Bank’s subsidiary Landsbréf, launched two new funds. The fund Eignadreifing sjálfbær was added to the selection of asset allocation funds and is available to all interested parties through Landsbankinn online banking. Brunnur vaxtarsjóður, a venture capital fund, began operating after raising ISK 8.3 billion from institutional investors. A third fund, Horn IV, is set to be launched soon. This is a new ISK 15 billion venture capital fund following up on the success of former Horn funds; it is intended for institutional investors. Our success in asset management is a reflection of trust towards the bank and Landsbréf.

In early summer, I visited all outlets of the Bank and was especially pleased to feel the energy that characterises the Landsbankinn team. We’ve recently made changes that make it easier for employees to offer customers service and advice, regardless of geographical location. These changes were extremely successful and perfectly fit our strategy of maintaining a presence throughout Iceland, at the same time as we continue to promote our excellent digital service platform. Employee satisfaction is at a record high, rising alongside Landsbankinn topping the Icelandic Performance Satisfaction Index with the most satisfied customers in the banking market for two years in a row.

Our management of the Bank is sound, we are generating good returns for shareholders and connecting well with our customers. The Bank’s new strategy is a strong guiding light. We are on a journey of continuous development and we are driven to succeed. That’s Landsbankinn, an ever-smarter bank.”

Teleconference to present results

On Friday 23 July, at 10:00, the Bank will host a teleconference on its Q2 2021 results in English. Please register by email to ir@landsbankinn.is.

Landsbankinn’s financial calendar

Q3 2021 results 28 October 2021

Annual results 2021 3 February 2022.

For further information contact:

Rúnar Pálmason, Public Relations, pr@landsbankinn.is

Hanna Kristín Thoroddsen, Investor Relations, ir@landsbankinn.is

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