Reliable communication and increased use of self-service solutions

Customers adapted quickly to new solutions and emphasis was placed on enhancing the quality of communication with customers through increased use of self-service solutions and robust information sharing. High interest rate levels, persistent inflation and the expectation that it will continue to persist in conjunction with looming difficult collective bargaining negotiations in the labour market impacted the market significantly in 2023.

Some market fluctuation is to be expected in early 2024. Collective bargaining will be a large influencing factor, instrumental as it is to the development of both inflation and domestic interest rates levels. Developments at Marel and Alvotech will also be interesting to follow.

Growing assets under management

The main goal of Asset Management & Capital Markets is to contribute to increased returns and the safeguarding of our customers’ assets. As always, we emphasise asset diversification and work in accordance with investment strategy authorisations. The investment strategy of Private Banking yielded positive return figures in 2023 and assets under management grew considerably.

Strong forex turnover

Turnover in the forex market remained strong and income from FX trading was similar to the record levels attained in 2022. Our customers adapted quickly to a new solution launched in early 2023, when Landsbankinn became the first Icelandic financial undertaking to offer self-service FX trading, i.e. the option to send and receive bids for FX transactions.

45 years of FX trading

"I was a fresh graduate from Menntaskólinn in Akureyri secondary school when I came to work for Landsbankinn in 1078 and really only intended to work for the Bank for a short time. I accepted work at Landsbankinn in Akureyri but always intended to study physical therapy.

But then I just kept working at the Bank and am retiring from Landsbankinn after a rather varied career in banking. I have been involved in currency throughout my career yet the nature of the work has changed a lot through the years.

I worked at Akureyri til 1980 when I moved to Reykjavík and started working at Landsbankinn’s Austurbær branch. I worked there until 1982, then moved back to Akureyri and lived there until 1995, when I moved to Norway where I worked for three different banks.

In Akureyri, I worked in a department that handled collection and guarantees. We received invoices from overseas, for companies that were importing goods. Everything was possible - import of cars, food and practically everything that could be bought and sold. Iceland was undergoing significant changes at this time, developments that were on-going since WWII, and import was an important sector.

At that time, I processed such receivables and handled tourist currency - everything was rationed. We also managed guarantee letters, mainly for the import sector but also for exports to a lesser degree. In the era of the co-op factories in North Iceland, export blossomed and import was not far behind.

The currency was regularly devalued at that time and there was no market with Icelandic króna. The banks purchased the currency directly from the Central Bank and this continued for quite some time.

When I began, importers regularly had to apply to postpone payment. We had to find the toll code for the product in a binder and determine whether the code required an exemption to postpone payment. Then we had to apply for exemption with the Central Bank with an application that was mailed to the Central Bank. Processing of such applications could take days or weeks. Fax machines were a revolution in this process!

It wasn’t until I returned to Landsbankinn in 1996 that the Trade department was created and it is the forerunner of the capital markets currency brokerage we know today. We began by calling customers to offer currency for purchase and sale which led to the formation of a more active market. We were the first to offer this service in June 1996. There were two of us in FX trading for customers at the time, one handled the ISK market, two were in the interbank market and one person handled back-office activities. He certainly had his hands full! We also handled deposits and money market facilities and this is where the FX market has its roots in Iceland.

Recent years have been dynamic in the FX market. The environment has changed, we have worked under capital controls more than once as well as various other limitations. In the period following abolition of all capital controls, the FX market has been strong, especially in the past two years."

Improve communication with customers through self-service solutions

We have focused on advertising Landsbankinn’s pension fund services and products. We will continue to inform customers about the advantages of our B2B system. Landsbankinn is the first domestic financial undertaking to offer automatic translation of securities transaction data to customers’ books.

There was an increase in new parties with direct market access agreements and we have partnered with new international investment houses.

Good flow of interesting and informative material

Events and information targeting customers and employees has been well received and well attended. In addition to hosting events, we publish varied articles on securities trading to the Bank’s content and news site, Umræðan.

Fund managing firm LGT Capital Partners, a leader in sustainable investment, visited Landsbankinn to introduce their products and asset management methodology, based on utilisation of ESG data in both direct investment and portfolios under management. Landsbankinn has enjoyed a successful partnership with LGT CP for several years and the Bank’s customers can invest in the Firm’s varied selection of funds.

Landsbankinn and LGT CP paid joint visits to customers and pension funds to present the LGT Sustainable Equity Fund Global. The fund emphasises global equities and ESG in its investments.

LGT CP’s approach to integrating ESG factors was introduced to Landsbankinn’s employees and Landsbréf fund managers at a special event.

Growing customer numbers in pension savings

New pension customers continued to join us in 2023, up by 6% from the previous year. We continued to polish our services and launched new self-service options. One of the goals we reached in 2023 was an upgrade to pension savings in the app, which includes a new design og statements and summaries and two new pages that show detailed information about the development of both mandatory and supplementary pension savings.

Changes to the entitlement tables and articles of association of Íslenski lífeyrissjóðurinn pension fund entered into effect on 1 January 2023, reflecting death and reversionary tables published by the Ministry of Finance and Economic Affairs at year-end 2021. The tables are based on suggestions by the Association of Icelandic Actuarial Mathematicians. The main change from the previous technical basis is that life expectancy now differs for year of birth. As the fund now expects to pay pension longer for those born later, earning of entitlement falls based on rising year of birth.

The main changes to the fund's Articles of Association are to the effect that the combined mandatory premium changes as the part of mutual insurance in all payment plans increases.

Mixed funds in the lead

Landsbréf hf., the Bank’s subsidiary, performed well in 2023 despite challenging market conditions in the first half of the year, especially in the domestic market. Inflation increased throughout the year, along with interest rates. In the last few weeks of the year, markets took a more positive turn with the expectation that the rate-hike cycle was coming to a close. Investors also responded to a clearer understanding of the position of the two largest companies on the stock exchange, Marel and Alvotech, about which there had been considerable uncertainty earlier in the year.

In broad terms, Landsbréf’s operation is twofold, i.e. fund management on the one hand and asset management on the other. As regards fund management, Landsbréf’s results were good having regard for market conditions and competitors. Bond funds yielded good returns in the year, as did Landsbréf’s international equity funds, with poorer performance from domestic equities. Even so, Landsbréf's equity funds performed well in comparison with competitors.

Landsbréf's mixed funds, i.e. funds that invest in both international and domestic equities and bonds, performed very well in 2023, leading the Icelandic fund market.

Landsbréf managed 41 funds at year-end 2023, both UCITS and AIFs. Landsbréf offers a varied selection of funds and most investors can find options and opportunities that meet their needs.

Two new funds were created in 2023, the initiative fund FW Horn slhf. And the AIF Landsbréf- Eignadreifing varfærin hs., which will open to investment in the first quarter of 2024.

In addition, Landsbréf took over operation of the initiative fund TF II slhf. at shareholders’ request - it was previously managed by another fund operator. Returns on portfolios under asset management were also good. Landsbréf Asset Management only handles asset portfolios for Landsbankinn’s customers, including pension funds managed by the Bank.

Active and responsible management coupled with good asset diversification has repeatedly proven its worth. Landsbréf is leading in this regard and the company’s employees take pride in being worthy of the trust thousands of fund members place in Landsbréf when they invest in the company’s funds.

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