Landsbankinn hf. - Company Announcement

Landabankinn hf.: Standard & Poor's revises the outlook for Landsbankinn to positive from stable

The international rating agency Standard and Poor's (S&P) has today, 14 October
2014, revised the outlook for Landsbankinn to positive from stable, and
affirmed the long- and short-term ratings at ‘BB+/B'. 

In its press release, S&P states that the agency foresees solid GDP growth for
Iceland for the next two years and expects economic imbalances to decline
further. S&P has revised its economic risk trend for Iceland to positive from
stable, and expect a continued improvement in the banking system's asset
quality. 

S&P also states that the agency's positive outlook on Landsbankinn largely
reflects the view that the banking sector is improving and S&P's positive
outlook on the Icelandic sovereign. On July 18, 2014, S&P revised the outlook
on the sovereign to positive due to strong growth and declining government
debt. The long-term rating of ‘BBB-' is one notch higher than the ratings on
the banks. In S&P's opinion, the ratings on the sovereign, and as well as S&P's
view of the banking sector, continue to be constrained by the risks associated
with the government's eventual removal of capital controls. However, S&P's
assumes that the authorities would approach the removal prudently to minimize
the impact on the economy and exchange rate. 

S&P further states that Landsbankinn, due to its larger capital base, could
benefit more if the sovereign would be upgraded and S&P's assessment of risks
related economic imbalances in the banking sector is revised to intermediate
from high. 

S&P's positive outlook on Landsbankinn reflects the agency's view that the
Bank's stand-alone credit profile (SACP) will likely improve alongside
improvements in the Icelandic economy. S&P states that they see a positive
trend for economic risk in the Icelandic banking sector and would expect to
upgrade the bank if its view on the sector continued to improve. 

S&P also anticipates that the preliminary agreement between Landsbankinn and
LBI hf. (formerly Landsbanki Íslands hf.) will extend the repayment profile of
legacy bonds due to the estate of LBI hf. 



For further information, please contact

Kristján Kristjánsson, pr@landsbankinn, 00 354 410 4011/00 354 899 9352