2014-03-04 17:37:25 CET

2014-03-04 17:38:28 CET


REGULATED INFORMATION

English Islandic
Landsbankinn hf. - Financial Statement Release

Landsbankinn: Financial Results for 2013 


Landsbankinn's profit after taxes amounted to ISK 28.8bn in 2013, as compared
with ISK 25.5bn in 2012. The increase is due mostly to increased commission
income, value change of lending and equities as well as cost reductions. 



Steinþór Pálsson, CEO of Landsbankinn:

Landsbankinn's performance is good and speaks to sound operations across all
units. The bank's revenue is growing while  significant reductions have been
achieved in operating expenses. Return on equity is acceptable despite a high
capital ratio. The bank took advantage of its high  foreign currency liquidity
position the second year running to make a large  instalment on its liability
with LBI hf. Landsbankinn paid ISK 10bn in dividends during the year and the
Board of Directors has agreed to move that the AGM authorise an ISK 20bn
dividend payment based on 2013 results. The benefit of good results to the
bank's owners, including the State Treasury as the largest shareholder, is
obvious. 

In 2013, the bank worked towards gaining a credit rating from an international
rating agency and in January 2014, Standard and Poor's (S&P) issued
Landsbankinn the rating grade  BB+ with a stable outlook. This facilitates the
bank's access to international credit markets. 

Encumbering taxes have been levied on financial undertakings and Landsbankinn's
imputed taxes increased by ISK 8.2bn in 2013, as compared with the previous
year, and currently amount to ISK 12.3bn. Such heavy taxation could clearly
affect terms offered to customers in the long term. 

Landsbankinn places great emphasis on supporting its customers to achieve
success and lending has grown steadily, as has the bank's involvement in
business and industry. Restructuring of corporates is now near completion;
their financial position has improved, creating room for investment. 

The year 2013 was, on the whole, favourable for Landsbankinn. Future
developments are under way, including in branch operations and electronic
payment services. Significant cost-efficiencies have been achieved and we will
continue our efforts in that regard. 



Key figures from the profit and loss account and balance sheet



Profit and loss:

» Landsbankinn's profit amounted to ISK 28.8bn in 2013, as compared with ISK
25.5bn in 2012. 

The bank's earnings have improved by 13% between years.

» After-tax return on equity (ROE) increases somewhat despite rising equity
levels. Profitability was12.4% in 2013, as compared to 12.0% in 2012. 

» Net interest revenue amounted to ISK 34.3bn in 2013 as compared with ISK
35.6bn in 2012. 

» The ratio of interest spread to average capital position fell slightly, was
3.1% in 2013 as compared to 3.2% in 2012. 

» Net commission income amounted to ISK 5.3bn, increasing by just over ISK 800m
from the previous year, or 19%. 

» Allowing for inflation, the real decrease of operating expenses amounts to
10.1% YoY. The bank's aim was to lower the  operating expenses by 5% in 2013. 

» Wages and wage-related expenses decrease by 4% between years. This decrease
is less wage provisions due to the reception of shares from LBI hf.; the same
amount is also entered as income in the bank's accounts. 

» Operating expenses less wages and related expenses drop by 9%.

» The cost-income ratio also declined between years, was 42.9% in 2013 as
compared to 45% in 2012. 

» Taxes for year 2013 amount to 12.3bn. This represents an increase of ISK
8.2bn between years. Imputed income tax grew by ISK 4bn; the special financial
management tax and special debt tax on financial undertakings each increased by
ISK 2bn. 

» Full-time equivalent positions at year-end were 1,183, down by 50 during the
year. 



Balance sheet:

» The bank's equity at year-end 2013 amounted to ISK 241.4bn.  Equity has
increased by 7% since year-end 2012 despite an ISK 10bn dividend payment in
2013. 

» The bank's capital adequacy ratio (CAR) is high, well above the minimum limit
set by the Financial Supervisory Authority (FME). It stood at 26.7% at year-end
2013, up from 25.1% at year-end 2012. 

» Landsbankinn's total assets amounted to ISK 1,152bn at year-end 2013. Growing
liquid assets account for the 6% YoY increase. The bank has issued just over
ISK 143bn in new lending during the year yet instalments and ISK appreciation,
leading to a decrease in the value of foreign currency loans, result in a total
increase in lending of ISK 14bn. 

» Customer deposits not counting financial undertakings grew by 8.5% during the
year, or around ISK 35.6bn. 

» The bank's liquidity position is very strong, both in foreign currency and
Icelandic króna and well above mandatory limits. The ratio of immediately
available funds against deposits was 49.8% at year-end 2013, as compared to
48.4% at year-end 2012. The bank's total liquidity position, including its
foreign currency liquidity position, is also well above the mandatory minimum
prescribed by the CB's new liquidity rules. 

» The bank's foreign balance is good and assets in foreign currencies amount to
around ISK 14.5bn in excess of foreign currency liabilities. 

» The item “Assets held for sale” decreased slightly during the year despite
the acquisition of Istak by the bank in the fall. The company has been
advertised for sale and the sale process is expected to conclude in the next
couple of months. 

» Total defaults by companies and households were 5.3% at year-end 2013, as
compared with 8.3% at the same time in the previous year. 



Key aspects of operations in 2013

» Landsbankinn issued a bond to LBI hf. in April in the amount of ISK 92bn. At
the same time, LBI hf. surrendered its entire holding in the bank to the State
and to Landsbankinn. 

» A new Board of Directors took over the helm following the AGM in April.
Tryggvi Pálsson is Chairman of the Board. 

» In June, Landsbankinn concluded its first issuance of covered bonds. These
are non-indexed with 3Y fixed rates at 6.3%. The amount of the issuance was ISK
1,920m at year-end 2013. Landsbankinn lowered the terms of non-indexed housing
loans parallel to the issuance. 

» In June, Landsbankinn sold the remaining 25% of its holding in the facilities
management company Reginn hf. the bank had sold 75% of shares in the company
when  it was listed on the stock exchange in 2012. 

» In September, Landsbankinn acquired all shares in construction company Istak,
previously a subsidiary of a Danish construction company E. Phil&Søn A/S which 
entered into bankruptcy proceedings in August. The company has already been
advertised for sale. 

» An agreement was reached on the distribution of shares in the bank to
employees in accordance with an agreement between LBI hf., the Ministry of
Finance and Landsbankinn, concluded in December 2009. 

» Landsbankinn's covered bonds were admitted for trade on NASDAQ OMX Iceland on
10 October. This is the first listing of bonds issued by the bank. 

» Landsbankinn paid dividends to its owners for the first time. Dividends
amounted to 39% of the previous year's profit, or just under ISK 10bn. The
dividend payment led to a decrease in equity in Q2. 

» Landsbankinn opened the first in what will be a new generation of branches at
Hagatorg, Reykjavík, in 2013. Service counters and cashiers' wickets disappear
in the new branch and key emphasis is placed on more comprehensive advice and
personal service to customers. 

» The bank made an optional and partial early redemption of the secured bonds 
to LBI hf. at the end of the year. 

» In 2013, the bank worked towards gaining a credit rating from an
international rating agency and, in January 2014, Standard and Poor's (S&P)
issued Landsbankinn the rating grade  BB+ with a stable outlook. 



Principal tasks ahead



Landsbankinn's operations

Landsbankinn's operations are expected to continue on the same sound track. The
bank aims to achieve a 15% real decrease in operating expenses in 2013-2015 and
has already achieved a 10% decrease. 



Reorganisation of customer services

In 2014, Landsbankinn will continue to develop and improve services to its
customers. A Corporate Banking Service Centre will be opened at Borgartún 33,
Reykjavík, this spring, merging under one roof the bank's entire range of
services to small and medium-sized enterprises in the capital city region. As a
result of this change, all other Landsbankinn branches in the area will focus
on services to individuals. 



Correction of illegal exchange rate indexed  loans

In 2013, Landsbankinn finalised the correction of recalculations of 18,000
loans containing provisions on unlawful exchange rate indexation, including
vehicle loans, real estate mortgages and credit to corporates. The total amount
of these corrections alone is around ISK 21bn. Rulings handed down by the
Icelandic Supreme Court in late 2013, on loan contracts paid off in full and
financial leasing agreements, provide that an additional 17,000  loans  must be
corrected and recalculated. Landsbankinn aims to finalise correction of all
these loans in the first half of 2014. Work is under way on translation of the
government's debt adjustment plan and the bank will implement the plan as soon
as all details are known. 



Agreement with LBI hf.

As at the end of 2013, Landsbankinn hf. owed LBI hf. ISK 237.7bn in foreign
currencies. Due to its strong liquidity position, Landsbankinn made partial
pre-payment in the equivalent amount of ISK 70bn in mid-2012 and again pre-paid
the equivalent amount of ISK 50bn in December 2013. The bank nevertheless
complied with the CB's stringent requirements on foreign currency liquidity
positions. The bank's financing cost decreases due to these pre-payments
alongside a significant reduction in collateralisation of the bank's assets. On
2 October 2013, the Winding-up Board of LBI hf. agreed to Landsbankinn's
request to commence discussions on possible amendments to the bonds. Under the
current terms and conditions, instalments on the bonds  are due in 2014 to
2018. 



For further information:

Kolbrun Gudlaugsdottir, Investor Relations, ir@landsbankinn.is , tel:  +354 
410 4014 

Kristjan Kristjansson,  Public Relations, pr@landsbankinn.is, tel: +354 410 4011