Landsbankinn hf. - Financial Statement Release

Landsbankinn hf. : Financial Results 2016

Landsbankinn profits by ISK 16.6 bn in 2016

  * Landsbankinn's after-tax profit in 2016 was ISK 16.6 billion.
  * Landsbankinn held a 37.1% market share in the retail market according to a
    Gallup survey. This is a record high.
  * Return on equity (ROE) was 6.6% in 2016, as compared to 14.8% in 2015.
  * Landsbankinn's cost-income ratio increased between years and was 48.4% in
    2016.
  * Value changes in the credit portfolio were negative by ISK 318 m as compared
    with positive value changes in the amount of ISK 18.2 bn in 2015.
    Landsbankinn expensed a total of ISK 5.4 bn in Q4 of 2016 to meet four
    Supreme Court rulings.
  * Landsbankinn's equity amounted to ISK 251.2 bn at year-end 2016 and its CAR
    was 30.2% of risk-weighted assets.
  * A proposal will be made to the AGM on 22 March to pay ISK 13 bn in dividend
    to shareholders for the year 2016. In addition, the Board of Directors
    intends to propose that the AGM approve payment of a special dividend.
  * Landsbankinn's annual report and risk report for 2016 are now published
    alongside the annual financial statements. The reports are available on the
    Bank's website.

The profit of Landsbankinn hf. in 2016 was ISK 16.6 bn after taxes, as compared
with ISK 36.5 bn in 2015. Return on equity (ROE) after-taxes was 6.6% for the
year 2016 as compared with a ROE of 14.8% in 2015. Net interest income amounted
to ISK 34.7 bn and net commission income was ISK 7.8 bn. Other operating income
amounted to ISK 6.1 bn. Value changes to the credit portfolio were negative by
318 m. Operating costs were ISK 23.5 bn.

Lending increased by 5% between years while the balance sheet contracted by 1%.
A proportionately larger share of Landsbankinn's assets is now interest-bearing,
which leads to increased interest revenue, and net interest income grew by over
ISK 2.3 bn between years. Landsbankinn's net commission income is up by 14%
between years. This is due mostly to increased activity on capital markets and
in asset management, and changes in the payment card market which return
increased commission income. At the same time, the Bank's financing cost for
payment cards also increases.

As a result of market developments, other operating income dropped by just under
ISK 9 bn between years.

Negative value changes to loans amounted to ISK 318 m. This is a turnaround from
2015 when value changes to loans were positive by ISK 18.2 bn. The recalculation
of foreign currency indexed loans has had a large impact on the Bank's financial
statements. In 2015, the Bank capitalised ISK 13.8 bn as a result of the
precedent set by rulings of the Supreme Court in cases No. 34/2015 and 35/2015
and rulings of the District Court of Reykjavík in November 2015 and January
2016. The main reason for the negative value changes in lending in 2016 is that
in December of 2016 and January of 2017, the Supreme Court ruled against the
Bank in four cases disputing the right of the Bank to an additional claim as a
result of recalculations of foreign currency indexed loans in accordance with
Central Bank interest rates instead of contractual interest rates in accordance
with final receipts. In these cases, the Supreme Court found the impact of the
additional claim to be so severe for the companies involved that the Bank should
absorb the disputed interest margin. These rulings may set a precedent for cases
involving other foreign currency indexed loans to corporates, where
circumstances are similar, yet further rulings are necessary to clarify the
precedent. As a result, the assessment of the financial impact of the rulings
might change to reflect future rulings. Expenses in the amount of ISK 5,435
million were recognised in Landsbankinn's consolidated income statement as a
result of these rulings towards the end of Q4 2016.

Salaries and other operating expenses decreased by 1.0% between years. Salaries
and related expenses increased by 2% while general operating expenses decreased
by 5%.

Pre-tax profit in 2016 amounted to ISK 25.2 bn, as compared to ISK 48.9 bn in
2015. Imputed taxes, including a special financial management tax on salaries,
amount to ISK 9.2 bn in 2016 as compared with ISK 13.1 bn in 2015.

Landsbankinn's total assets decreased by ISK 7.5 bn between years and at year-
end 2016, the Bank's assets amounted to a total of ISK 1,111 bn. Lending
increased by ISK 42 bn, due mostly to an increase in housing loans to private
individuals and increased lending to corporates. The default ratio continues to
decrease and stood at 1.5% at year-end 2016 as compared with 1.8% at year-end
2015.

At the end of 2016, deposits from customers amounted to ISK 590 bn as compared
with ISK 559 bn at year-end 2015.

Landsbankinn's equity at year-end 2016 was ISK 251.2 bn, as compared with ISK
264.5 bn at year-end 2015. In 2016, Landsbankinn paid ISK 28.5 bn in dividend to
shareholders.

Landsbankinn's total capital ratio at year-end 2016 was 30.2%, down by 0.2
percentage points from the previous year. The Financial Supervisory Authority,
Iceland (FME), sets the minimum requirement for total capital at 22.1%.

A proposal will be made to the AGM on 22 March 2017 that shareholders be paid a
dividend amounting to ISK 0.55 per share for the year 2016, a total amount of
ISK 13 bn. The dividend payment represents 78% of the year's profit. In
addition, the Board of Directors intends to propose that the AGM approve payment
of a special dividend, the amount of which will be disclosed in motions to the
AGM.



Hreiðar Bjarnason, interim CEO of Landsbankinn:

"Landsbankinn continues to be the largest financial undertaking in Iceland and
its financial position is very sound. The Bank's core operations yielded
positive results in 2016, net interest and commission income increased
considerably between years while operating expenses decreased.

Our market share in the retail market has never been higher and the Bank's
position in the corporate market and on financial markets remains strong.
Surveys show that customer satisfaction increased considerably during the year,
a fact we consider tremendously important, as the Bank emphasises providing
customers throughout Iceland with exemplary service at competitive terms.

For the second year running, Standard & Poor's raised the Bank's credit rating.
The Bank's current rating is BBB with a continued positive outlook. This is a
welcome recognition of the great work that has been done at the Bank in previous
years. Landsbankinn has emphasised ensuring profitability from core operations,
discounting large, irregular items. This strategy has yielded positive results
and the Bank will continue along this path."

Landsbankinn's financial calendar

22 March 2017 - Annual General Meeting

4 May 2017 - Q1 2017 results

27 July 2017 - H1 2017 results

26 October 2017 - Q3 2017 results

8 February 2018 - Annual Financial Statements 2017


For further information contact:

Rúnar Pálmason, Public Relations, pr@landsbankinn.is, tel: +354  410 6263 /
899 3745

Hanna Kristín Thoroddsen, Investor Relations, ir@landsbankinn.is, tel:
+354  4107310




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Attachments:

Landsbankinn Annual Results 2016 - Results Presentation.pdf

Landsbankinn Consolidated Financial Statements 2016.pdf

Landsbankinn Annual Results 2016 - Press-release.pdf