From the Chief Executive Officer

As the financial results show, the Bank delivered a strong performance in 2024, with a good fourth quarter. Annualised return on equity stood at 12.1%, exceeding the Bank’s target, while the cost-income ratio reached an all-time low of 32.4%.  

We remain committed to providing first-rate service through our app and digital solutions, as well as through our branches across Iceland. Surveys indicate growing satisfaction which encourages us to do even better.  

The Bank’s strong performance is built on a solid foundation. Over the past ten years, the Bank’s total assets have grown by ISK 1,083 billion and equity by ISK 74 billion, alongside total dividend payments to shareholders amounting to ISK 192 billion. Operating costs have remained stable, the number of full-time positions has decreased in tandem with technological advancements and the ratio of operating expenses to average total assets continues to fall.  

In other words, economy of scale has grown, the Bank’s balance sheet has doubled, equivalent to a 32% increase in real terms, with cost simultaneously decreasing by 25% in real terms.

Support investment activity and value creation 

The Bank’s strong financial position benefits society by increasing lending capacity. Total loan growth for the year amounted to ISK 177 billion, with around 60% of this increase coming from corporate lending. Landsbankinn remains the largest lender to the construction industry and has maintained a strong position in lending to fisheries, despite intense competition from foreign financial institutions, which can offer better terms due to greater economies of scale and lower taxes. Our focus on improving services for small and medium-sized enterprises has yielded strong results, and we see many opportunities in this market  

Successful funding in 2024 

The increase in lending is backed by strong financing, not least growing customer deposits, which increased by ISK 180 billion over the year. Competitive rates and first-rate digital services have played a key role in this development. Throughout the year, the number of customers using the Bank’s Smart Savings accounts in the app grew by 39%, allowing them to benefit from the best available rates on unrestricted accounts. Currently, around 59,000 individuals use this simple and favourable savings solution. Funding on both international and domestic capital markets was also successful. A noteworthy milestone was the issuance of senior non-preferred bonds, the first-ever issuance of its kind by an Icelandic bank. The success of these issuances confirms the Bank’s strong financial position, which was also reflected in an upgrade in its credit rating. We believe that all conditions are in place for further improvement of the credit rating over the coming 1-2 years. 

The Bank remained active in issuing green bonds on international markets, with two green bond issuances increasing the share of foreign funding to 61% in 2024. At the beginning of the year, Landsbankinn published an updated Sustainable Finance Framework, verified by Sustainalytics, and the green bond issuances were aligned with this new Framework. Sustainability is an important aspect of the Bank’s operation and we are working towards the goals of the Paris Agreement.

Robust growth in fee and commission income 

The Bank’s net interest margin declined during the year, reflecting the lower interest rate environment, and there was a slight decrease in net interest income. Fee and commission income grew, particularly due to strong performance in acquiring services, where the Bank has firmly established its position. In 2024, 757 new businesses joined our acquiring services, including several of the country’s largest retail companies. The acquiring service has expanded the Bank’s service offering, boosted customer satisfaction and created new growth opportunities in the corporate market: Nearly 40% of businesses that joined the service had no prior banking relationship with us. 

Similarly, the Bank’s acquisition of TM presents significant growth opportunities, both on the corporate and individual side. We believe that the integration of banking and insurance services will be beneficial for customers, cost-efficient and full of potential, as evidenced by the success of similar models across Europe. At the same time, the acquisition will diversify revenue streams and support long-term profitability. The Bank’s strategic focus in recent years, providing outstanding service across Iceland both on-site and through leading digital solutions, including a top-tier app, creates exciting opportunities for both the Bank and TM. 

High demand for inflation-indexed mortgages 

In 2024, approximately 3,800 borrowers reached the end of their fixed-rate period on non-indexed loans, which had been secured at historically low rates. As a result, monthly payments often increased significantly. We closely monitored this group and personally called each affected customer, offering guidance on available options. To reduce their payment burden, many borrowers switched to indexed mortgages. There were several instances of people who had previously held mortgages with other lenders refinancing with Landsbankinn. This led to a sharp increase in demand for indexed loans.  

This shift toward indexed loans presented operational challenges for the Bank, as these loans are primarily funded through indexed bond issuances and indexed deposits. By April 2024, the terms for issuing indexed bonds had worsened and growth in indexed deposits remained weak.  

Customer-focused change 

In light of rising financing costs, it was decided to adjust the offering of inflation-linked loans rather than solely resorting to interest rate increases to offset the higher financing expenses. We shortened the loan term and discontinued offering loans with equal payments, except for first-time buyers. We believe these changes have benefited customers more than interest rate hikes would have.  

Business with Eyrir Invest and Marel successful 

One of the most significant events on the Icelandic market last year was JBT’s acquisition of Marel. Landsbankinn has long held an indirect ownership stake in Marel through Eyrir Invest, dating back to Eyrir's refinancing in 2009. The value of this stake in Eyrir has fluctuated significantly over the years, at times impacting the Bank’s financial results considerably but overall, the Bank’s involvement with Marel and Eyrir has been successful. 

Positive impact on Icelandic society 

The vast majority of our customers use Landsbankinn's app for their banking needs. The app is intuitive, offering unique features not available elsewhere and user satisfaction surveys indicate high approval ratings. We are committed to continuous improvement, having released 33 app updates last year.  

We operate 35 branches and outlets across Iceland and this year we placed even greater emphasis on enabling employees all over the country to work on tasks that are not limited to geographic location. The results have been undeniably positive, reflected in shorter processing and wait times, as well as higher employee satisfaction, with staff appreciating the diverse and challenging work opportunities. Among the Bank’s upcoming projects are creating effective synergies with TM and meeting the next technological challenge, use of AI. We will continue to deliver good results for the Bank’s owners, support our customers and have a positive impact on Icelandic society. Landsbankinn is a trusted bank for a successful future and its performance in recent years proves that with a dedicated and ambitious team, anything is possible.