Highlights of the Annual Financial Statement

The profit of Landsbankinn in 2023 was ISK 33.2 billion after taxes, compared with ISK 17.0 billion in 2022. After-tax return on equity for 2023 was 11.6%, compared with 6.3% the previous year.

Reykjastræti 6
Key figures and ratios31.12.202331.12.2022
Profit for the year33,16716,997
Net interest income57,55946,464
Total net operating income73,84853,253
Return on equity after taxes11.6%6.3%
Total capital ratio23.6%24.7%
Minimum Requirement for Own Funds and Eligible Liabilities (MREL)37.9%40.4%
Interest spread as ratio of average total assets3.0%2.7%
Cost-income ratio33.7%46.8%
Liquidity coverage ratio (LCR)181%134%
Liquidity coverage ratio EUR (LCR FX 2022)1499%351%
Total assets1,960,7761,787,024
Loans / deposits155.5%159.6%
Average number of full-time equivalent positions during the year849843
Number of full-time positions at year-end817813
All amounts in ISKm

Landsbankinn returned solid results in 2023. The Bank is well funded, its cost-income ratio among the lowest in the international banking sector and dividend capacity is strong. All aspects of the Bank’s operation returned good results and return on equity was 11.6%, higher than the Bank’s long-term profitability target. Higher returns on liquid assets, a turnaround in the stock market, lending growth and altered balance sheet composition are the main drivers of increased profit between years. It is good to see that the household interest margin remains stable despite high interest rate levels.

The Bank's total capital ratio at year-end 2023 was 23.6% (2022: 24.7%). The Bank’s capital requirement decreased from 20.7% to 20.2% from year-end 2022 to year-end 2023.

The cost-income ratio in 2023 was 33.7%, down from 46.8% in 2022.

In 2023, the interest margin as a ratio of average total assets was 3.0% (2022: 2.7%).

The Bank’s net interest income was ISK 57.6 billion (2022: ISK 46.5 billion).

Landsbankinn's net fee and commission income was ISK 11.2 billion in 2023 (2022: ISK 10.6 billion). Other operating income amounted to ISK 5.1 billion, compared with a negative operating income of ISK 3.8 billion in 2022.

Income statement

Landsbankinn's after-tax profit in 2023 was ISK 33.2 billion.

Net interest income amounted to ISK 57.6 billion in 2023 (2022: ISK 46.5 billion). The net interest margin on average total asset position was 3.0% (2022: 2.7%).

Landsbankinn's net fee and commission income was ISK 11.2 billion in 2023, as compared with ISK 10.6 billion in 2022. 

Net impairment of financial assets was negative by ISK 3.1 billion and includes an ISK 1.7 billion collective provision against uncertainty related to natural disaster on the Reykjanes peninsula. At year-end 2022, there was a net credit release of ISK 2.5 billion. The year-over-year change is mainly caused by non-fulfilment and the aforementioned natural disaster, plus the reversal of a collective provision for Covid-19.

Other operating income was ISK 8,3 billion in 2023, compared with negative operating income in the amount of ISK 6,3 billion in 2022. The fair value of listed inflation-indexed market bonds is the weightiest component.

Income Statement (ISKm)20232022Change%
Net interest income57,55946,46411,09524%
Net fee and commission income 11,15310,6235305%
Net impairment changes -3,1202,473-5,593-226%
Other income and expenses 8,256-6,30714,563-231%
Total net operating income 73,84853,25320,59539%
Salaries and related expenses -15,866-14,474-1,39210%
Other operating expenses -10,092-9,289-8039%
Tax on liabilities of financial institutions -2,290-2,097-1939%
Total operating expenses -28,248-25,860-2,3889%
Profit before tax 45,60027,39318,20766%
Income tax -12,433-10,396-2,03720%
Profit for the year 33,16716,99716,17095%

Operating expenses in 2023 were ISK 28.2 billion (2022: 25.9 billion). Wages and related expenses were ISK 15.9 billion, up by 9.6% between years, mostly because of contractual increases. Other operating expenses amounted to ISK 10.1 billion in 2023, as compared with ISK 9.3 billion in 2022.

The cost-income ratio for 2023 is 33.7%. 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 increased by 4 in 2023, from 813 to 817.

Balance sheet

Total assets amounted to ISK 1,960.8 billion at year-end 2023, with the balance sheet growing by 9.7%, or ISK 173.8 billion, between years.

Assets (ISKm)31.12.202331.12.2022Change%
Cash and balances with Central Bank75,35042,21633,13478%
Bonds and debt instruments148,182125,26522,91718%
Equities and equity instruments 19,01219,106-940%
Loans and advances to financial institutions 54,10128,62125,48089%
Loans and advances to customers 1,630,8941,544,36086,5346%
Other assets 33,23727,4565,78121%
Total assets 1,960,7761,787,024173,75210%

Main changes to the asset side of Landsbankinn’s balance sheet in 2023 include a 5.6% increase in loans to customers, or by ISK 86.5 billion. Lending to customers increased by 6%, or ISK 87 billion. Lending to corporates grew by ISK 63 billion in 2023 but the total increase is ISK 58 billion, having regard for ISK 5.5 billion exchange rate impact. Lending to retail customers increased by ISK 29 billion, thereof ISK 26 billion in housing mortgages, or around 4%.

Lending growth was moderate in 2023 with loans in arrears and problem loans remaining close to historically low levels.

Cash and balances with the Central Bank decreased by ISK 33.1 billion between years and amounted to ISK 75 billion at year-end 2023.

The Bank's market bond assets grew by ISK 22.9 billion during the year. Loans and receivables to credit institutions increased by ISK 25.5 billion during the year to stand at ISK 54.1 billion at year-end.

Liabilities and equity (ISKm) 31.12.202331.12.2022Change%
Due to financial institutions and Central Bank 29,9686,63423,334352%
Deposits from customers 1,048,537967,86380,6748%
Borrowings 513,687476,86436,8238%
Other liabilities 44,65434,8199,83528%
Subordinated liabilities 20,17621,753-1,577-7%
Equity 303,754279,09124,6639%
Total liabilities and equity 1,960,7761,787,024173,75210%

Deposits from customers are the Bank’s primary source of funding. Total deposits amounted to ISK 1,048.5 billion at year-end 2023, an increase of ISK 80.7 billion or 8.3% between years. Household deposits increased by 72 billion in 2023.

Deposits are mainly non-indexed and unrestricted. Deposits from financial institutions increased by ISK 23.3 billion and were ISK 30.0 billion at year end.

In November 2023, S&P confirmed Landsbankinn’s credit rating of BBB/A-2 and revised the outlook from stable to positive.  A positive outlook reflects S&P’s expectation that economic risk is declining for Icelandic banks.

EMTN-issuance and covered bond issuance on both domestic and international markets has been the Bank’s main source of market funding. The carrying value of such funding increased in total by ISK 34 million in 2023. The Bank’s bond issuance on international markets was successful in 2023, with both demand and terms reflecting improved access by the Bank following rather worse access for smaller issuers to global credit markets in the wake of the pandemic.

Landsbankinn’s equity at year-end 2023 was ISK 303.8 billion (2022: 279.1 billion). Total assets amounted to ISK 1,960.8 billion at year-end 2023, with the balance sheet growing by 9.7%, or ISK 173.8 billion, during the year.

Landsbankinn's Annual General Meeting, held on 23 March 2023, approved a motion from the Board of Directors to pay a dividend to shareholders for the operating year 2022 corresponding to ISK 0.36 per share in two tranches. The former dividend payment of ISK 0.18 per share was paid to shareholders on 29 March 2023 and the latter, ISK 0.18 per share, was paid out on 20 September 2023. The total dividend amounted to ISK 8.5 billion or the equivalent of 50% of profit for the year 2022.

The 2023 AGM also renewed the Bank’s authorisation to acquire up to 10% of the nominal value of own share capital. The authorisation is valid until the 2024 AGM.

The Board of Directors intends to propose to the AGM of Landsbankinn 2024, scheduled to be held on 20 March this year, that the Bank pay shareholders a dividend in accordance with its dividend policy, amounting to ISK 16.5 billion. Calculation of the Group’s capital ratios as at year-end 2023 is inclusive of this foreseeable dividend payment.

In October 2023, the Resolution Authority of the Central Bank of Iceland announced the annual MREL requirement for Landsbankinn.  The decision requires the Bank to at all times maintain a minimum 21.6% MREL funds as percentage of its risk-weighted exposure (RWE). The Bank also anticipates that the Resolution Authority will in the latter part of 2024 introduce a subordination requirement of 13.5% of the Bank’s RWE.

Liquidity position

Liquidity and funding ratios are well above regulatory requirements and within the Bank’s internal risk limits. The Bank’s liquidity position at year-end 2023 is strong. The total liquidity coverage ratio (LCR) was 181%, 129% in ISK and 1,499% in EUR. Liquid assets amounted to ISK 277.7 billion at year-end 2023.

Liquidity reserves (ISKm) 31.12.202331.12.2022Change%
Cash and balances with the Central Bank 73,45141,83831,61375.6%
Domestic bonds and debt instruments eligible as collateral with the Central Bank 74,45075,180-730-1.0%
Foreign government bonds with 0% risk weight 75,45740,06335,39488.3%
High quality liquidity assets 223,358157,08166,27742.2%
Loans and advances to financial institutions 54,31628,70425,61289.2%
Total liquidity reserves 277,674185,78591,88949.5%

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