Landsbankinn hf. - Company Announcement

Landsbankinn hf. : Landsbankinn Exercises Authorisation to Purchase the Bank's Own Shares

Landsbankinn's Board of Directors has decided to exercise an authorisation to
purchase the bank's own shares which was approved at the bank's AGM on 14 April
this year. The acquisition will amount to a maximum of 480 million shares, or
the equivalent of 2% of issued share capital. The objective of the repurchase
programme is to reduce the bank's equity while at the same time offering
shareholders an opportunity to sell their shares in the bank in a transparent
manner, as restrictions on the transfer of shares expired on 1 September 2016.

Landsbankinn's capital adequacy ratio is currently 28.6%, which substantially
exceeds regulatory requirements. The bank has lowered its equity by paying a
major portion of its profits in recent years as dividends. From 2013 to 2016
dividends paid by the bank amount to a total of ISK 82 billion.

Landsbankinn will offer to repurchase shares from shareholders during the
following three repurchase periods:[1]

  * 19 September 2016 to 30 September 2016
  * 31 October 2016 to 9 December 2016
  * 13 February 2017 to 24 February 2017

Those shareholders who decide to take advantage of the above-mentioned offer
must send the bank notification to this effect on a form available on the bank's
website. Notifications will be processed for each period in the order in which
they are received by the bank until the above-mentioned maximum is reached.
Should the maximum amount be reached during one repurchase period further
notifications will not be processed, regardless of whether this occurs during
the first, second or third period.

In accordance with the AGM's decision, Landsbankinn will offer to repurchase
each share during the above-mentioned periods at a share price determined by the
proportion of equity belonging to the bank's shareholders of the bank's share
capital, according to its most recently published results prior to the
commencement of the repurchase period concerned. The purchase price of the
shares may therefore change between repurchase periods in accordance with the
outcome of its quarterly or annual results preceding the respective repurchase
period.

Based on Landsbankinn's interim results for the first half of 2016, the equity
held by the bank's shareholders is ISK 247,249,765,805 and their outstanding
share capital is 23,781,690,382 ISK. In accordance with the above, Landsbankinn
will offer to purchase each share at a price of ISK 10.3966 during the first
repurchase period. Landsbankinn plans to announce its results for the first nine
months of 2016 on 27 October 2016 and its annual financial statements for 2016
on 9 February 2017. The bank will publish details of the price it will pay for
its own shares during the next repurchase period in connection with its
announcement of results. These announcements will be published on Landsbankinn's
website and in the news system of NASDAQ Iceland.

The bank's AGM on 14 April 2016 approved payment of a dividend of ISK 28,538
million for the 2015 financial year,[2] as well as the authorisation to purchase
own shares. The authorisation provided for an assessment to be made later in the
year as to whether, in view of circumstances, further funds could be disbursed
to owners. The bank's good performance this year gives scope for such action.
Repurchases of its shares by the bank in addition to the dividend payment will
thus reduce the bank's equity.

Landsbankinn's shareholders

When Landsbankinn was established on 7 October 2008 the Icelandic state provided
the bank with an initial equity contribution of ISK 775 million and subsequently
an additional ISK 121.2 billion, in the form of a bond maturing in 2018, for a
total amount of ISK 122 billion. In this manner the Icelandic state acquired
81.33% of the bank's share capital while LBI hf. (the insolvent estate of the
former Landsbanki Íslands hf.) owned 18.67%. In April 2013 Landsbankinn issued a
contingent bond to LBI in the amount of ISK 92 billion and in return LBI
transferred its holding in the bank to the Icelandic state.  This brought the
state's holding to around 98%. In tandem with this Landsbankinn's current and
former employees acquired part of the shares in the bank previously owned by LBI
under an agreement between the Icelandic state, the bank and LBI of 15 December
2009. These shares were subject to the restriction that they could not be
assigned prior to 1 September 2016, on the assumption that by that time shares
in the bank would have been listed on a regulated securities market. In 2015 the
savings banks Sparisjóður Norðurlands and Sparisjóður Vestmannaeyja were merged
with Landsbankinn and as a result over 400 guarantee capital owners received
payment for their holdings with shares in Landsbankinn. These shares were
subject to similar restrictions on assignment.

Landsbankinn has a total of 1,833 shareholders. The Icelandic state is the
largest shareholder, with a 98.2% stake, while the bank itself owns 0.91% of its
shares. Around 870 of the bank's current employees, some 530 former employees
and around 430 former guarantee capital owners of the two savings banks hold the
remaining 0.89%.  Landsbankinn's directors hold no shares in the bank.

Following each repurchase period Landsbankinn will disclose the total number of
shares purchased and whether the bank's CEO or managing directors have sold
shares in the bank.

Landsbankinn will send letters to shareholders with information on the
repurchase programme.

+ Notification to shareholders on the sale of shares

+ Further details of Landsbankinn's ownership


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[1]  The dates  for the  second and  third repurchase  period have been selected
based  on the anticipated  dates for announcement  of the bank's  results on 27
October  2016 and 9 February 2017. The reservation is  made that these dates for
the  second and third repurchase  periods may change if  alterations are made to
the timing of the bank's announcement of its results.

[2] Payment of dividends to shareholders in two equal instalments was approved
by the AGM on 14 April 2016, with the due date for the first payment 20 April
2016. The due date for the latter distribution is 21 September 2016, based on
the record date 14 April 2016, unless the bank has received notification that
the dividend has been assigned with the assignment of shares. Those shareholders
who sell their shares under the repurchase programme will not, in transferring
those shares, relinquish the second dividend payment arising from those shares;
they retain their entitlement to this payment even if they sell the shares
during the first repurchase period.






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