Highlights of the Annual Financial Statement

Landsbankinn's operating profit after taxes amounted to ISK 10.5 bn in 2020 as compared with ISK 18.2 bn in 2019. After-tax ROE was 4.3% in 2020, compared to 7.5% in 2019.

Key figures and ratios31.12.202031.12.2019
Profit for the year 10,52118,235
Total net operating income 38,25351,517
Net interest income38,07439,670
Return on equity before taxes 5.1%9.6%
Return on equity after taxes 4.3%7.5%
Total capital ratio 25.1%25.8%
Interest spread as a ratio of average total assets 2.5%2.8%
Cost-income ratio 47.4%42.6%
Liquidity coverage ratio (LCR) 154%161%
FX liquidity coverage ratio (LCR FX) 424%769%
Total assets 1,564,1771,426,328
Loans / deposits 160.5%161.1%
Number of full-time positions at year-end 878893
All amounts in ISKm

At the end of 2020, the Bank's total capital ratio was 25.1% as compared with 25.8% at the beginning of the year. The Bank’s total regulatory capital requirement decreased from 20.5% at year-end 2019 to 18.8% at the end of 2020 because of a lower countercyclical capital buffer on domestic exposures, from 1.75% to 0%.

Net interest income was ISK 38.1 bn as compared with ISk 39.7 bn in 2019. In 2020, the net interest margin on average total asset position was 2.5% as compared with 2.8% the previous year.

Landsbankinn’s net fee and commission income in 2020 amounted to ISK 7.6 bn, an ISK 580 m decrease from 2019. Other operating income was negative by ISK 7.5 bn, compared with a positive result of ISK 3.6 bn for the same period of 2019. This decrease is driven mostly by impairment of financial assets in the amount of ISK 7.2 bn. The cost-income ratio grew between years, was 47.4% in 2020 as compared to 42.6% in 2019.

Income statement

Increased loan impairment is the main reason for lower year-over-year profit.

Net interest income amounted to ISK 38.1 bn in 2020, as compared with ISK 39.7 bn in 2019. The net interest margin on average total asset position was 2.5% compared to 2.8% the previous year.

Net fee and commission income for the year amounted to ISK 7.6 bn as compared with ISK 8.2 bn in 2019.

Net impairment on financial assets was ISK 12 bn as compared with impairment in the amount of ISK 4.8 bn in 2019. Increased impairment on financial assets is more or less directly attributable of Covid-19.

Other operating income amounted to ISK 4.6 bn in 2020, as compared with ISK 8.5 bn the previous year, which is a 46.1% decrease between years.

Income statement (ISKm) 20202019Change 2020%
Net interest income 38,074 39,670 -1,596 -4.0%
Net fee and commission income 7,6388,219-581-7.1%
Credit impairment losses -12,020-4,827-7,193149.0%
Other income and (expenses) 4,5618,455-3,894-46.1%
Total net operating income 38,25351,517-13,364-25.7%
Salaries and related expenses -14,767-14,458-3092.1%
Other operating expenses -9,064-9,534470-4.9%
Tax on liabilities of financial institutions -1,815-4,2042,389-56.8%
Total operating expenses -25,646-28,1962,550-9.0%
Profit before tax 12,60723,321-10,714-45,9%
Income tax -2,086-5,0863,000-59.0%
Profit for the year 10,52118,235-7,714-42.3%

Operating expenses in 2020 were ISK 25.6 bn, down by 9% between years. Wage cost increases by 2.1% between years while other operating expenses decreases by ISK 441 m, or 4.9%. The cost-income ratio for 2020 is 47.4%. The cost-income ratio is the ratio between the Bank's operating expenses and net operating revenue less value changes of financial assets. Full-time equivalent positions with the Bank decreased by 15 in 2020, from 893 to 878.

Balance sheet

The Bank’s total assets amounted to ISK 1,564 bn at year-end 2020, increasing by 9.7% during the year.

Assets (ISKm) 31.12.2020 31.12.2019 Change 2020 %
Cash and balances with Central Bank 67,604    69,824    -2,220    -3.2%
Bonds and debt instruments 119,330    115,262    4,068    3.5%
Equities and equity instruments 26,808    30,019    - 3,211    -10.7%
Loans and advances to financial institutions 48,073    47,929    144    0.3%
Loans and advances to customers 1,273,426    1,140,184    133,242    11.7%
Other assets 27,298    22,088    5,210    23.6%
Assets classified as held for sale 1,638    1,022    616    60.3%
Total1,564,177    1,426,328    137,849    9.7%

Main changes to the asset side of Landsbankinn’s balance sheet in 2020 include an 11.7% increase in loans to customers YoY, or ISK 133.2 bn. There was in increase in lending to both individuals and corporate customers. There was considerable growth in non-indexed housing loans, or ISK 153 bn, offset by repayment of inflation-indexed housing loans in the amount of ISK 27 bn. Total defaults by companies and households remained stable between years at 0.8%. Temporary Covid-19 relief measures and payment holidays led to lower values for loans 90 days in arrears. The Bank's total assets increased by ISK 137.8 bn during the year.

The Bank's market bond assets increased by ISK 4.1 bn during the year. Loans and receivables to credit institutions were ISK 48.1 bn at year-end, remaining almost unchanged between years.

Liabilities and equity (ISKm) 31.12.2020 31.12.2019 Change 2020%
Due to financial institutions and Central Bank 48,725   48,062   663    1.4%
Deposits from customers 793,427    707,813    85,614    12.1%
Borrowing 420,178    373,168    47,010    12.6%
Other liabilities 22,226    30,470    -8,244    -27.1%
Subordinated liabilities 21,366    19,081    2,285    12.0%
Total equity 258,255    247,734    10,521    4.2%
Total1,564,177    1,426,328    137,849    9.7%

Main changes to liabilities include an increase in customer deposits by 12.1% during the year, or by ISK 85.6 bn.  Deposits from financial institutions increased by ISK 663 m during the year and amounted to ISK 48.7 bn at year-end. Total borrowing by the Bank increased by ISK 47 bn in 2018, or by 12.6%.

The Bank’s equity amounted to ISK 258.3 bn at year-end 2020, up by ISK 10.5 bn during the year. No dividend was paid to shareholders for the 2019 operating year.

Liquidity position

The Bank's liquidity position both in total and in foreign currencies was sound in 2020 and its liquidity ratios well in excess of regulatory requirements. Liquid assets amounted to ISK 230 bn at year-end 2020.

Liquidity reserves (ISKm) 31.12.2020 31.12.2019 Change 2020 %
Cash and balances with the Central Bank 63,092    44,235    18,857    43%
Domestic bonds and debt instruments eligible as collateral with the Central Bank 65,401    19,665    45,736    233%
Foreign government bonds with 0% risk weight 41,161    82,320    -41,159    -50%
High quality liquidity assets 16,.654    146,220    23,434    16%
Loans and advances to financial institutions 60,811    57,584    3,227    6%
Total liquidity reserves 23,465    203,804  26,661    13%

The primary measurement of short-term liquidity risk is the liquidity coverage ratio (LCR) which measures the ratio of high quality liquid assets to net outflow over a 30-day period under specific stressed conditions.

Landsbankinn's LCR was 154% at year-end 2020 and the Central Bank of Iceland requires a 100% minimum LCR. The FX LCR for the same period was 424%; the CBI requires a 100% minimum. ISK LCR was 105% at year-end 2020. As of 1 January 2020, the CBI requires a 30% minimum.


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