Minichan

Landsbankinn hf. reported an after-tax profit for 2015 of ISK 36.5 billion, compared to ISK 29.7 billion in 2014. After-tax return on equity was 14.8% in 2015, compared to 12.5% in 2014.

The Bank's cost-income ratio decreased substantially year-on-year, from 56% in 2014 to 43.8% in 2015.

Income grew markedly this past year due to the increased scope of the Bank's activities and favourable financial market developments. Loans increased by 13% during the year while balance sheet expansion was less than 2%. A relatively larger share of Landsbankinn's total assets now bear interest, resulting in higher interest income; net interest income grew by over ISK 4 billion year-on-year. Landsbankinn's net fees and commissions grew by 17% from the previous year, due to increased capital markets, asset management activities and changes to the payment card market. These changes are offset to some extent by the Bank's higher interest expense on card transactions.

Other operating income increased by almost ISK 6 billion as a result of favourable securities markets developments and profit on sale of assets.

Net valuation adjustments of loans results in an entry of ISK 18 billion in pre-tax income in the financial statements. This is due to the reversal of a past year provisions on foreign currency linked loans to companies, which has now been resolved, as well as to improved quality of the Bank's loan portfolio. As in 2014 positive value adjustments make a substantial impact on the Bank's profit, although in 2014 pre-tax income recognised due to net valuation adjustment was ISK 2 billion higher, around ISK 20 billion.

The Bank's operating expenses decreased by 1.5% from the previous year. Salaries and related expenses increased by 1% while other operating expenses decreased by 5%.
Pre-tax profit in 2015 amounted to ISK 48.9 billion, as compared to ISK 39.5 billion in 2014. Taxes, including special financial activities tax on salaries, amount to ISK 13.1 billion in the 2015 statements, compared to ISK 10.5 billion in 2014.

Landsbankinn's total assets increased by ISK 20.3 billion during the year, amounting to ISK 1,119 billion at year-end 2015. Lending increased by ISK 93 billion, the major portion of which is housing mortgages to households plus the increase resulting from mergers with the savings banks Sparisjóður Vestmannaeyja and Sparisjóður Norðurlands. Corporate lending has also grown. The default rate continues to decline: it was 1.8% at year-end 2015, compared to 2.3% at year-end 2014.

At year-end 2015 customer deposits totalled ISK 559 billion, compared to ISK 551 billion at year-end 2014. Deposits increased by ISK 8 billion during the year despite a substantial outflow of the deposits of financial undertakings in winding-up proceedings prior to year-end.

At year-end 2015 Landsbankinn's equity was ISK 264.5 billion, almost ISK 14 billion higher than at year-end 2014, despite a dividend payment of ISK 23.7 billion to shareholders in March 2015.

At year-end 2015 Landsbankinn's capital adequacy ratio (CAR) was 30.4%, an increase of almost one percentage point from the previous year. By comparison, the capital requirement set by the Icelandic Financial Supervisory Authority (FME) for Landsbankinn is currently 21.8%.

A motion will be proposed to the Annual General Meeting, which has been moved to 14 April 2016, that a dividend be paid to shareholders equivalent to ISK 1.2 per share, or ISK 28.5 billion in total. The dividend is equivalent to almost 80% of 2015 profit.
Landsbankinn's CEO Steinþór Pálsson:

“2015 has proven to be a highly successful year for Landsbankinn. The Bank's income has risen significantly over the previous year while at the same time operating expenses have decreased. Uncertainty and risk have been reduced. Asset quality has risen and the Bank's funding has been reinforced through improved access to domestic and foreign credit markets. Liquidity is strong, and the Bank's equity is among the highest on record, despite large dividends paid. The integration of the savings banks Sparisjóður Vestmannaeyja and Sparisjóður Norðurlands was accomplished effectively, further strengthening Landsbankinn's presence outside the capital region.

In recent years return on equity has been high and exceeded expectations in 2015. Large, irregular income items have been a major factor here, primarily income recognised on valuations of loans. In 2015 the impact of these was an increase in after-tax profit of ISK 13.5 billion and of ISK 14.9 billion in 2014. Profits can be expected to decline considerably in the near term as the impact of these one-off items on the Bank's operations will ebb as time progresses.

Landsbankinn's strategy is to be a trusted financial partner for its customers and to ensure that customers, owners and society as a whole benefit from the Bank's work. The Bank emphasises economical and efficient operations, providing an acceptable return when large, irregular items are excluded. At the same time, we make it our aim to provide customers with exemplary services on competitive terms.

At the beginning of 2015 Landsbankinn adopted a new and ambitious strategy to 2020. Determined effort has been focused on implementing this strategy, the success of which is assessed regularly. The strategy has already brought visible results, both for customers and for the bank, and has contributed in no small part to the bank's highly successful outcome in 2015.”