Landsbankinn hf. - Financial Statement Release

Landsbankinn hf.: Financial Results for H1 2015

Landsbankinn reports an ISK 12.4 bn profit in H1 2015

In the first six months of 2015, Landsbankinn's after-tax profit was ISK 12.4
bn as compared with ISK 14.9 bn for the same period in 2014. Net interest
income amounted to ISK 16.2 bn, up by 6% as compared with the same period in
2014.Net commission income amounted to 3.4 bn increasing by 16% from the same
period the previous year. Value adjustments to lending decreased by ISK 9.6 bn
YoY; earnings from equities increased by just under ISK 5 bn during the same
period. Annualised ROE was 10.4% as compared with 12.8% for the same period the
previous year. 

The cost-income ratio decreased considerably; was 44.8% in H1 2015 as compared
with 54.9% for the same period last year. Operating expenses increased by 2%
YoY but a healthier revenue composition accounts for the decreasing cost-income
ratio. Customer deposits have increased by 13% during the year and lending by
6%, partly due to the merger with the savings bank Sparisjóður Vestmannaeyja in
late March. The impact of its operations now appears in the Bank's Income
Statements for the first time. During the first half of the year, new housing
loans amounted to ISK 31.7 bn as compared with ISK 21.5 bn for the same period
last year. Landsbankinn had the largest market share on the Icelandic stock
exchange in both equities and bonds during the first six months of the year. 

Steinthór Pálsson, CEO of Landsbankinn: "Landsbankinn's performance in the
first half of 2015 has been good, its income composition improving and its
financial position sound.  The Bank has benefited from positive developments in
the economy and on financial markets and transaction volume has increased
considerably.  The Bank's market share in lending and deposit-taking, as well
as capital markets, continues to increase.  According to a survey undertaken by
Gallup in June, Landsbankinn has the largest market share in the retail market,
or 35.1% - a record high.  This shows that customers appreciate Landsbankinn's
activities. 

Towards the end of March, Landsbankinn and Sparisjóður Vestmannaeyja merged. 
Integration of the two banks' operations has proceeded smoothly and the Bank
emphasises providing sound financial services where the savings bank used to
operate for the benefit of locals and the economy. 

In July, international rating agency Standard & Poor's (S&P) raised the Bank's
rating grade to BBB- with a positive outlook. Landsbankinn has now achieved an
investment grade which boosts trust in the Bank on international markets and
will facilitate its financing in the near future, both on domestic and
international markets. 

The government's plan to ease capital controls is likely to impact various
figures in the Bank's balance sheet.  Landsbankinn is well positioned to meet
the inevitable outflow of deposits owned by the failed estates in the event
that capital controls are lifted. 

During the first half of this year, Landsbankinn has worked to implement a new
strategy for the years until 2020. This new strategy involves significant
changes which are intended to deliver both short and long-term success.  The
strategy involves increasing operating efficiencies still further through such
measures as moving the Bank's centralised activities under one roof.
Landsbankinn has temporarily suspended plans to build such facilities to review
various opinions presented on the subject. The Bank's strategy emphasises
providing exemplary service to customers, developing electronic service
solutions, increasing the efficiency of support functions, modernising
technology and ensuring economy in the balance sheet while limiting risk.
Special emphasis is placed on promoting a performance-oriented culture in the
Bank. These factors, developed as 7 individual strategic project flows, are
intended to boost customer and employee satisfaction and loyalty, increase
efficiency and support satisfactory return on equity for the future."

Key figures from the profit and loss account and balance sheet for Q2 2015

  -- Landsbankinn's profit in Q2 2015 amounted to ISK 6 bn as compared with ISK
     10.6 bn for the same period in 2014.
  -- After-tax return on equity decreased between periods; was 10.1% in Q2 2015
     as compared with 18.4% in Q2 2014.
  -- Value changes in lending decreased considerably between periods, to ISK 0.2
     bn now as compared with ISK 7.3 bn in Q2 2014.
  -- Net interest income increased between periods, to ISK 8.9 bn in Q2 2015 as
     compared with ISK 7.4 bn in Q2 the previous year.
  -- Net commission income increased between periods, was ISK 1.8 bn in Q2 2015
     as compared with ISK 1.4 bn during the same period the previous year.

Key figures from the profit and loss account and balance sheet for H1 2015

Operations:

  -- In the first six months of 2015, Landsbankinn's after-tax profit was ISK
     12.4 bn as compared with ISK 14.9 bn for the same period in 2014.
  -- Return on equity (ROE) after taxes for the period was 10.4% as compared to
     a ROE of 12.8% for the same period of 2014.
  -- Net interest revenue during the first six months of the year amounted to
     ISK 16.2 bn as compared with ISK 15.2 bn in the same period in 2014.
  -- Net interest income as a ratio of average capital position was 2.8% in the
     first six months of 2015 as compared to 2.6% for the same period in 2014.
  -- Net commission income amounted to ISK 3.4 bn, increasing by 16% from the
     same period the previous year, mostly due to changes in the payment card
     market and increased capital markets activities.
  -- Other operating revenues increased by ISK 4 bn due, for the most part, to
     higher profit from equities.
  -- Value changes to lending in the first six months of 2015 were positive by
     ISK 1.8 bn, decreasing considerably, or from ISK 11.4 bn for the same
     period in 2014.
  -- Salaries and related expenses increase by 2% between periods due for the
     most part to the cost of severance agreements. Operating expenses less
     salaries and related expenses increased by 3% due mostly to increased
     contributions to the Depositors' and Investors' Guarantee Fund and the
     impact of merger.
  -- The cost-income ratio for the first six months of the year was 44.8%, as
     compared with 54.9% for the same time last year.

Full-time equivalent positions numbered 1,088 as at 30 June 2015, down from
1,162 the same time the previous year. Since year-end 2011, full-time
equivalent positions with Landsbankinn have been reduced by 18.4%, or by 245. 

Balance sheet:

  -- The Bank's equity amounted to ISK 239.9 bn and has decreased by 4% since
     the beginning of the year. Dividends in the amount of ISK 24 bn were paid
     to shareholders in Q1 2015.
  -- The Bank's capital adequacy ratio (CAR) is now 28.0%, up from 26.8% at the
     end of June 2014.
  -- Landsbankinn's total assets amounted to ISK 1,173 bn as at the end of June
     2015.
  -- Customer deposits have increased considerably and amount to ISK 621 bn as
     of the end of June 2015.
  -- New lending to customers in H1 amounts to ISK 95 bn, yet instalments, value
     changes and other factors contribute to a total increase in lending of ISK
     43 bn during the period. Of that amount, ISK 7 bn are due to the merger
     with Sparisjóður Vestmannaeyja in Q1.
  -- The Bank's liquidity position is very strong, both in foreign currency and
     Icelandic króna and well above regulatory limits.
  -- The Bank has a favourable foreign currency balance and assets in foreign
     currencies amount to around ISK 19 bn in excess of foreign currency
     liabilities.
  -- Total defaults by companies and households were 2.3% at the end of June
     2015 and remain unchanged this year to date.

Other aspects of operations in the first six months of 2015

  -- Landsbankinn hf. and Sparisjóður Norðurlands ses. signed a merger schedule
     on 30 June. The merger has not become effective, as it is subject to
     certain qualifications that have yet to be fulfilled.
  -- According to a survey undertaken by Gallup in June, Landsbankinn held the
     largest market share on the retail market during the first half of the
     year, or 35.1%, a record high.  New housing loans also increased sharply,
     amounting to ISK 31.7 bn in H1 2015 as compared with ISK 21.5 bn for the
     same period last year.
  -- At the end of June, Landsbankinn had the largest market share on the
     Icelandic stock exchange in both equities and securities. The Bank's market
     share in equities turnover was 30.3% and 21.5% in securities.
  -- In May, Ístak hf., a subsidiary of Landsbankinn, sold the company Ístak
     Ísland ehf. to Danish contractor Per Aarsleff AS.
  -- A survey by Gallup in March 2015, undertaken on behalf of Landsbankinn,
     showed that most respondents, or 40%, would select Landsbankinn as an asset
     management service.
  -- The Bank's AGM, held on 18 March, approved an ISK 24 bn dividend payment to
     the Bank's owners. Landsbankinn has paid over ISK 53 bn in dividends for
     the past three operating years.
  -- In March, Landsbankinn was the first bank in Iceland to be awarded the
     golden seal of PwC's Equal Pay Audit. Landsbankinn is also the largest
     company to participate in and pass the Equal Pay Audit.
  -- For the second year running, the magazine Global Finance has named
     Landsbankinn the best bank in Iceland.
  -- Also for the second year in a row, International Finance magazine named
     Landsbankinn the best bank in Iceland and Landsbankinn's online bank the
     best online banking service.
  -- A new version of online banking for individuals was introduced in January.
     In February, the panel of the Icelandic Web Awards named it the best
     service website.



For further information:

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

Hanna Kristín Thoroddsen, Investor Relations, ir@landsbankinn.is, tel: +354 410
7328

Attachments:

Landsbankinn 1H 2015 Results Presentation.pdf

Landsbankinn Consolidated Interim Financial Statement 30.06.2015.pdf

Landsbankinn 1H 2015 Results Press Release.pdf