From the Chief Executive Officer

At the start of 2021, we began work based on our new and ambitious strategy headlined Landsbankinn, an ever-smarter bank. Landsbankinn, an ever-smarter bank, is undergoing continuous development and utilising digital technology to provide financial services with a personal touch.

Lilja Björk Einarsdóttir, CEO

The new strategy is based on targets shaped three years ago to support systematic changes from conventional service to self-service solutions - all these targets were achieved with panache. The Bank had previously finalised upgrading its core systems, in collaboration with the Icelandic Banks' Data Centre (RB), first of the domestic banks.

Trust is paramount

Landsbankinn, an ever-smarter bank, is built on solid foundations. The Bank’s technological infrastructure is sound, its team of employees dynamic and its strategy is focused on exemplary customer service with the aim of establishing long-term banking relationships and creating mutual benefit. In shaping the new strategy, conversations with customers made it clear that they place paramount importance on mutual trust and that the Bank’s operation must be responsible and sound. Trust is the most important aspect of the Bank’s operation and it was the sincere will of its employees that the new strategy be based on this simple yet strong value; trust.

Good collaboration across the Bank

In 2020, our determination, adaptability and agility were put to the test as circumstances changed almost overnight. The Bank’s team once again proved its solution and service-driven mindset. Many of the Bank’s departments were under a great deal of pressure, including the Customer Service Centre, branches and the staff in Loan Administration. They received support from all other departments, to implement new systems solutions, amend work processes and to provide direct customer.

To make a long story short, good collaboration and organisation enabled us to prevent the pandemic from having any material impact on the Bank’s ability to maintain its service level, despite temporary restrictions on access to branches.

By ensuring that we were able to continue to provide customers with service, regardless of geographical location, we maintained uninterrupted service and met greatly increased demand for housing loans.

Full drive in digital development

In response to changed circumstances, we sharpened our focus on making authenticated digital signatures available, and it is a testament to the results that use of digital signatures tripled between years. A new lending process was designed for government-guaranteed Covid-19 support loans and this will lead the way for other digital lending processes, even if relatively few companies took advantage of loans guaranteed by the government. Our digital credit assessment proved extremely useful when demand for housing loans increased. The digital credit assessment is an example of a solution that is not only convenient for the Bank’s customers, it also provides the Bank with a competitive edge and thereby increased revenue. We have utilised our time well this year and introduced various new features useful to companies who bank with us and simplify day-to-day operation.

Still great uncertainty in the travel sector

When the pandemic turned everyday life of the general public upside down as well as operations for most companies, the Bank responded quickly, communicating clear information about measures to respond to the sudden events and the changes that followed. An agreement that was signed in spring 2020 between banks and pension funds, on deferment of instalments and interest payments, was an important contribution to stability and reduced uncertainty. In the fall, when general relief measures had run their course, the Bank was well placed to assist companies and individuals still dealing with income loss. In most cases, individuals needed no further assistance. On the other hand, there is still great uncertainty about the future outlook and, in some cases, it has been necessary to undertake financial restructuring. In general, the travel sector is placing its trust in achieving a vaccination status that will put the country in a stronger position by late summer 2021, a timeline which accords with forecasts and government expectations.

Loan loss provisions colour results

Banks are always subject to the risk of credit loss and, naturally, this risk increased in the pandemic. The Bank’s provisions for impairment were increased accordingly. The risk and need for provisions for impairment were reassessed every quarter. A large provision to meet possible credit loss contributes negatively to the Bank’s financial results and accounts for the main difference between 2019 and 2020 results. The Bank is well placed to withstand possible shocks and despite an unprecedented economic situation it has not yet been tested against such conditions in any significant way.

Interest rates lowered six times

Landsbankinn lowered interest rates six times in 2020, with both individuals and companies benefiting from the rate cuts.

The Bank has never granted as much in home mortgages as in 2020, with favourable terms and good service driving the Bank’s growing market share in the housing loan market.

Uncertainty about economic developments has caused companies to show restraint and demand for corporate lending has been low. Lending to fisheries and seafood nevertheless increased in the year.

The Bank’s fee and commission income was similar in 2020 as in 2019, despite less travel and lower activity in the service sector. Securities markets made a strong showing in the fourth quarter.

Important milestones in funding

The Bank’s funding was successful and, in February, the Bank obtained its most favourable lending terms over the past decade. Covid-19 and growing uncertainty in the markets affected both credit ratings and financing terms, with the Bank’s credit rating being lowered by one notch due to external circumstances. The Bank’s debt has fluctuated in the markets. It started improving significantly as the year progressed but has not yet reached the levels of February 2020.

In early 2021, the Bank was assigned a credit rating for its domestic covered bonds, the first such credit rating achieved by an Icelandic bank. This increases the attractiveness of the bonds and enhances their viability as an important source of funding. We also finalised our initial sustainable finance framework, in early 2021, which had been in the works since mid-2020. No issuance has as yet taken place under the framework but we plan to take advantage of it soon in 2021.

Major digital advances

The Bank’s services have undergone enormous changes in the past three years. We have made major advanced in digitalising services and usage continues to grow. In 2020, we placed special emphasis on improving services to smaller corporates.

We will continue to simplify life for customers in various ways in accordance with our new strategy. We utilise the data we have to provide continuous and good service in an effective manner.

We achieved excellent results by boosting collaboration between employees in different divisions. Our new strategy places even more emphasis on collaboration and by taking advantage of the considerable momentum the Bank has as the country’s largest and most dynamic bank.

Improved efficiency and increased job satisfaction

Considerable operational efficiencies have been achieved by Bank in line with changes to services in the past three years, resulting in full-time equivalent positions reduced by 12%. Our clear strategy is still to maintain a presence around the country yet to align services slowly but surely with increased digital service offering. One service outlet was closed and work is underway to move our operation to more suitable housing in several locations. The historical Landsbankinn building in Selfoss was sold. Operation continues out of the old building for a while and will move to new premises in Selfoss in due course. Job satisfaction at the Bank has never been higher and employees are as before proud of their workplace. In a year that had no shortage of challenges, it was a nice change to see that job satisfaction and pride had increased at the same time as most employees have worked remotely for a large part of the year, providing services through these difficult times.

New and more accessible website

A new website for the Bank was designed and launched in the year. Much has been done to simplify the new web, making it more accessible, clearer and approachable than its predecessor. It is a comprehensive website for all our services, such as online banking, the app and various self-service solutions like the digital credit assessment, applications and more. On the website, and in all our service channels, we are mindful of the mutual long-term interests of both customers and the Bank. Alongside products and services, our customers are offered robust financial information and the Bank’s services and website are designed to comply with the strictest IT security and privacy requirements.

Grateful for trust and loyal custom

Landsbankinn is in a strong position to handle the turnaround we will see once the battle against the virus is over. Despite making considerable provisions for loan losses, the Bank’s operation is yielding positive results and profitability nearing its medium-term expectations.

We have set ourselves ambitious long-term targets and the Bank’s entire operation is performing well.

The Bank’s employees outdid themselves this past year and their drive is palpable. We are thankful to customers for placing their trust and loyalty in us. It remains the Bank’s strategy to continuously develop, deliver excellent results and provide good service to customers and simplify their lives. That’s Landsbankinn, an ever-smarter bank.

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