From the Chief Executive Officer
We simplify life for our customers by offering first-rate digital service while emphasising personal communication and professional advice.
Lilja Björk Einarsdóttir, CEO of Landsbankinn
The results of the Icelandic Performance Satisfaction Index, which we topped for the banking market the third year running, confirms that we are on the right path. Our own surveys also show that satisfaction with our services continues to grow. Our teams in the Customer Service Centre, the Corporate Banking Service Centre and branches throughout Iceland - the teams that are in closest contact with customers - experience an increase in customer satisfaction and confidence in our relationships. This makes us very proud and thankful.
New organisational structure supports the Bank’s strategy
Since the beginning of 2021, we have worked systematically on our new strategy headlined Landsbankinn, an ever-smarter bank. The strategy is followed up with detailed metrics to monitor success. We made good headway with the strategy in 2021 and achieved all our main goals.
We changed and strengthened the Bank’s organisational structure to advance our strategy, forming a new division that combines important departments that handle human resources and marketing as well as research, sustainability and communication.
This new divisions is called Community and the name reflects the Bank’s emphasis on being an important link in Icelandic society, a trailblazer in sustainability and corporate social responsibility but also refers inward, to the workplace community. Our intention is to strengthen and fortify the Bank’s message about learning, communication, development and human resources.
In its simplest form, our strategy and vision on financial service is to enable customers to take care of all general banking business independently. Alongside robust self-service solutions, we offer expert knowledge and advice when needed and successful and sound asset management. We aim to tailor service to the needs of customers, both individuals and corporates, providing more holistic and specialised service to larger entities. We provide universal financial services and want to have a positive impact on the society we are a part of.
Excellent performance in 2021
As borne out by our financial statements, Landsbankinn’s operation was successful in 2021. Profitability was 10.8%, which is in line with our goals. Revenue has increased while operational improvements have enhanced efficiency surely and steadily, and costs have remained stable over the past years. Growth in fee and commission income exceeded our goals considerably, mostly from increased market activity and successful asset management. We worked on several well executed share offerings in 2021 and Landsbankinn Corporate Finance coordinated the IPO of Síldarvinnslan, which was very successful.
The Bank’s good performance and strong financial standing give considerable scope to pay a dividend to shareholders. The Bank’ equity is considerably higher than regulatory requirements demand and also higher than we consider appropriate in the long term. We see this as an opportunity to optimise the Bank’s capital structure by lowering equity through dividend payments alongside continued diversification of funding.
Landsbréf’s operation has also been successful and it is noteworthy how much the company has grown in recent years. A recent organisational change resulted in a stronger entity, with the transfer of all fund management to Landsbréf while Landsbankinn’s employees can now focus their energy even better on sale and customer service.
Another metric of success is international rating agency Sustainlytics’ evaluation of the Bank’s sustainability rating. Sustainalytics measures banks around the world and rated Landsbankinn as having negligible risk of experiencing material financial impact from ESG factors - a leading rating on a global level.
Every link in the chain is strong
One of the characteristics of banking activity is that much more happens behind the scenes than customers are aware of. The services we offer, digital service channels, personal advice or other, are usually the last link in a long chain. In order to offer first-rate service, the entire chain must hold. Landsbankinn’s chain is extremely strong and underpins the Bank’s success. Our team is ambitious and hard-working and the Bank’s corporate culture is strong and success oriented. We build management of risk factors in our operation, service and products on extensive and deep knowledge. The Bank’s strategy is to offer employees access to all the training and learning necessary to meet rapid changes and develop on the job. We want to foster a culture that encourages people to speak up and ensure that new solutions reach customers quickly.
We continue to focus on strengthening the Bank’s infrastructure to promote efficiency and security. One of our most important tasks in the near future is the move to new housing. The move revolutionises the entire workplace and will promote increased collaboration, strengthen the Bank’s corporate culture even further and increase visibility and cooperation among staff. The Bank’s employees are excited about the move and ready to take on the resulting challenges.
2021 saw the completion of restructuring of the Icelandic Banks' Data Centre (RB), a joint project involving financial institutions and the Central Bank. This is a great step towards increasing efficiency in the financial system. Landsbankinn’s employees showed plenty of initiative in this work. We consider it of prime importance to simplify the operating environment of the banks to strengthen our competitive position against large, international tech giants who are moving into financial service.
Pioneering measurement of the carbon footprint of lending
Landsbankinn has adopted a clear strategy to work on sustainability in society and we focused on sustainability in 2021. One of the major tasks was the Bank’s calculation and publication of emissions from its loan book in accordance with the Partnership for Carbon Accounting Financials (PCAF) methodology.
Landsbankinn was one of the first banks globally to calculate the carbon footprint of its loan book.We have in recent years worked to steer the Bank’s operation towards sustainability and minimising its carbon footprint.
The greatest impact is not from the Bank’s traditional operation but indirect, from its loan book. A closer look at the impact shows that a mere 1% of the Bank’s carbon footprint is from its operation; 99% is from lending activity. Our role is to contribute to development and well-being in society through our operation. By measuring emissions from our loan book, we can support companies and individuals through necessary changes in the future.
New Sustainability Policy and increased emphasis on sustainable finance
We completed revision of the Bank’s Sustainability Policy in 2021 and published our initial Sustainable Finance Framework. We issued green bonds under the Framework, becoming one of the largest domestic issuers of green bonds. We continued to assist our customers, including to shape their owe financial frameworks for the issuance of sustainability bonds. Part of our customer service is to assist customers to share their sustainability work and, in 2021, we awarded our first Sustainable Financing Label to companies who have received funding from the Bank for projects that fall under the Sustainable Finance Framework. This allows corporates to make their work on sustainable projects visible. We launched two new projects that give customers the opportunity to invest their savings in sustainability. Landsbréf presented a new investment fund, Eignadreifing sjálfbær, which invests in companies who succeed on the sustainability platform and in general operations, and the Bank created sustainable savings account Vaxtareikningur sjálfbær. Deposits to the account are only allocated to projects that promote sustainability.
Strong support for society
Part of the Bank’s Sustainability Policy is to provide varied support for projects that have a positive impact on society. Through the Bank’s Community Find, we provide grants for various projects and scholarships for exceptional students. The Fund is only one part of our extensive support system which includes partnering with sports and youth clubs throughout Iceland and grants to various projects such as Reykjavík Pride, Iceland Airwaves, Reykjavík Culture Night and Skólahreysti.
Towards the end of 2021, we decided to establish a new grant fund, the Sustainability Fund.Initial allocation from the Fund will take place now in spring. The total amount of the allocation will be ISK 10 million and the focus will be on projects linked to the energy transition this time around.
We are very proud of our support for society and see that our customers appreciate this strategy.
Record number of new retail customers
We place a large premium on offering competitive terms and have over the past three years led the field in offering the most favourable terms on non-indexed housing mortgages, in addition to simplifying and speeding up the application process for mortgage loans and credit assessments. This has encouraged an increasing number of people to take out mortgages with Landsbankinn, both to purchase real estate and to refinance at better terms. The Bank’s share in the mortgage market has grown rapidly and currently makes up around 29.1% of total lending; 41% if only the three large commercial banks are included. News about favourable terms and good service spreads and, in 2021, individuals who are active customers of the Bank increased by 5,100, a record increase in the span of one year. Landsbankinn's market share in the retail market is now 39.5% - a record high. Our focus on maintaining a presence throughout Iceland no doubt plays a large part in these developments, as our market share is even higher outside of the capital region, or around 45%.
Record number of new corporate customers
The Bank’s clear strategy of offering first-rate digital service has led to the development of several new digital solutions and services that have boosted customer satisfaction and created new business opportunities. One example is that in December 2020, onboarding of new corporate customers was made a digital process, making it quick and easy to register new corporate customers in the app. Once this possibility was enabled, more companies and sole proprietors became customers than ever before, or a total of around 2,500 in 2021. Around half of new corporate customers transferred from other banks. Our market share in the corporate market grew to 33.6%, with the Bank’s share in total lending to corporates holding steady at just over 40%.
Key role in robust industrial activity
We are focused on fostering business relationships that support domestic industry and attractive investments. As before, the Bank maintained high lending levels to the construction sector, financing the construction of around 3,800 apartments in 2021. Around 25,000 households finance their real estate purchase with favourable Landsbankinn mortgages and an average of just over 700 families and individuals took out mortgages with the Bank in every single month of the year. We emphasise tailoring our services to customer needs. In 2022, we expect to see increased demand for funding from corporates alongside growing activity in the economy - a welcome change from the past two years, during which companies have been cautious. This is a marker of growing optimism and hopefully an end to the pandemic. We are also ready to assist companies to seek funding on debt capital markets or through stock offerings. We will continue to develop our app and online banking and to add new services.
It is especially good to report that defaults by retail customers of the Bank have never been lower than in 2021.The same applies to corporates, though special relief measures introduced in response to Covid-19 skew the numbers somewhat.
The same applies to corporates, though special relief measures introduced in response to Covid-19 skew the numbers somewhat.
Funding was successful in the year and a newly confirmed credit rating gives reason for continued optimism though changes in the world economy, brought on by Covid-19, could possibly lead to deteriorating funding terms. Then again, the Bank’s funding is diverse, supported most recently by the sustainable finance programme that has opened new markets to the Bank. Deposits from customers who entrust us with the safekeeping and investing of their funds form around half of the Bank’s funding. We will continue to emphasise security and sound operations and to offer varied means of investing and saving funds.
Landsbankinn is still popularly referred to as the Bank “where all of Iceland banks”. This is an old slogan but we are still proud of being connected to the entire country.
We aim for continuous advancement, to maintain a presence in all of Iceland, simplify customers’ lives and provide first-rate financial service to all manner of industry and companies of all shapes and sizes.
We want people throughout Iceland to choose Landsbankinnin order to get access to banking service around the clock and seek expert advice, both on-site and through remote meetings.Last but not least, we want to develop in line with society.That’s Landsbankinn, an ever-smarter bank.