Highlights of the Annual Financial Statement

Landsbankinn's operating profit after taxes amounted to ISK 28.9 bn in 2021 (2020: ISK 10.5 bn). Return on equity was 10.8% in 2021 (2020: 4.3%).

Landsbankinn's headquarters
Key figures and ratios31.12.202131.12.2020
Profit for the year28,91910,521
Total net operating income62,33038,253
Net interest income38,95338,074
Return on equity before taxes13.6%5.1%
Return on equity after taxes10.8%4.3%
Total capital ratio26.6%25.1%
Interest spread as ratio of average total assets2.3%2.5%
Cost-income ratio43.2%47.4%
Liquidity coverage ratio (LCR)179%154%
Foreign currency liquidity coverage ratio (LCR FX)556%424%
Total assets1,729,7981,564,177
Loans / deposits154.1%160.5%
Number of full-time equiv. positions at year-end816878
All amounts in ISKm

At the end of 2021, the Bank's CAR was 26.6% as compared to 25.1% at the beginning of the year. The Bank’s capital requirement increased from 18.8% to 18.9% from year-end 2020 to year-end 2021. On 29 September 2021, the Financial Stability Council determined to increase the countercyclical capital buffer on financial undertakings, effective as of 29 September 2022. The Central Bank of Iceland’s Resolution Authority has begun the process of determining Landsbankinn’s MREL and the decision is expected in the first half of 2022.

The Bank’s net interest income was ISK 39.0 bn (2020: ISK 38.1 bn). In 2021, the interest margin as a ratio of average total assets was 2.3% (2020: 2.5%).

Landsbankinn's net fee and commission income was ISK 9.5 billion in 2021 (2020: ISK 7.6 bn). Other operating income amounted to ISK 13.9 bn (2020: ISK -7.5 bn). The cost-income ratio in 2021 was 43.2% (2020: 47.4%).

Income statement

Growing market share coupled with efficient and effective operation form the basis for solid performance in 2021.

Net interest income amounted to ISK 39.0 bn in 2021 (2020: ISK 38.1 bn). The net interest margin on average total asset position was 2.3% (2020: 2.5%). Landsbankinn's net fee and commission income was ISK 9.5 bn in 2021 (2020: ISK 7.6 bn).

Net release of credit impairment was ISK 7,0 bn (2020: ISK 12,0 bn charge). This reversal reflects the better standing of both households and corporates than expected in the aftermath of Covid-19.

Other operating income amounted to ISK 6.9 bn in 2021 (2020: ISK 4.6 bn), which is a 50.3% increase between years.

Income Statement (ISKm)20212020Change 2021%
Net interest income38,95338,0748792%
Net fee and commission income9,4837,6381,84524%
Credit impairment losses7,037-12,02019,057159%
Other income and expenses6,8574,5612,29650%
Total net operating income62,33038,25324,07763%
Salaries and related expenses-14,759-14,76780%
Other operating expenses-9,105 -9,064-410%
Tax on liabilities of financial institutions-2,013-1,815-19811%
Total operating expenses-25,877-25,646-2311%
Profit before tax36,45312,60723,846189%
Income tax-7,534-2,086-5,448261%
Profit for the year28,91910,52118,398175%

Operating expenses in 2021 were ISK 25.9 bn, up by 0.9% between years. The increase is attributable to a higher bank tax while wages and related expenses and other operating expenses remain unchanged YoY.

The cost-income ratio for 2021 is 43.2%. 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 decreased by 62 in 2021, from 878 to 816.

Balance sheet

Landsbankinn's total assets grew by ISK 165.6 bn between years and amounted to ISK 1,730 billion at year-end 2021.

Assets (ISKm)31.12.202131.12.2020Change 2021%
Cash and balances with Central Bank82,42567,60414,82121.9%
Bonds and debt instruments150,435119,33031,10526.1%
Equities and equity instruments33,34726,8086,53924.4%
Loans and advances to financial institutions47,23148,073-842-1.8%
Loans and advances to customers1,387,4631,273,426114,0379.0%
Other assets27,99227,2986942.5%
Assets classified as held for sale9051,638-733-44.7%

Main changes to the asset side of Landsbankinn’s balance sheet in 2021 include a 9% increase in loans to customers, or by ISK 114.0 bn. Lending to individuals grew but contracted on the corporate side. There was considerable growth in non-indexed lending to households, or ISK 156 bn, offset by repayment of inflation-indexed housing loans in the amount of ISK 27 bn. Total defaults by corporates and households developed favourably in 2021, with a decreasing probability of default and historically low past due ratios. There is still some uncertainty about loans with moratoria applied in response to the pandemic and, at year-end 2021, the carrying amount of such loans with was ISK 74 billion.

The Bank's market bond assets grew by ISK 31.1 bn during the year. Loans and receivables to credit institutions decreased slightly in 2021, standing at ISK 47.2 bn at year-end.

Liabilities and equity (ISKm)31.12.202131.12.2020Change 2021%
Due to financial institutions and Central Bank10,42548,725-38,300-78.6%
Deposits from customers900,098793,427106,67113.4%
Other liabilities29,80322,2267,57734.1%
Subordinated liabilities20,78521,366-581-2.7%
Total equity282,645258,25524,3909.4%

Main changes to liabilities include an increase in customer deposits by 13.4% in 2021, or by ISK 106.7 bn. Deposits from financial institutions decreased by ISK 38.8 bn during the year to stand at ISK 10.4 bn at year end. Total lending by the Bank increased by ISK 65.9 bn in 2021, or by 15.7%.

Landsbankinn’s equity at year-end 2021 was ISK 282.6 bn (year-end 2020: 258.3 bn). The Bank’s AGM, held on 24 March 2021, approved a motion from the Board of Directors to pay a dividend in the amount of ISK 4.5 bn for the 2020 operating year. The dividend has been paid out to shareholders. The Board of Directors intends to propose to the Annual General Meeting (AGM), scheduled to be held on 23 March 2022, that a dividend of ISK 0.61 per share be paid to shareholders for the operating year 2021. The total dividend of ISK 14,409 million corresponds to around 50% of the consolidated profit in 2021. Should the AGM approve the dividend proposal, the Group‘s capital base will decrease by an amount equal to the dividend payment and the Bank’s capital ratios, in accordance with the Act on Financial Undertakings, will decrease by 1.3 percentage points.

Liquidity position

The Bank's liquidity position both in total and in foreign currencies was sound in 2021 and its liquidity ratios well in excess of regulatory requirements. Liquid assets amounted to ISK 280.3 bn at year-end 2021.

Liquidity reserves (ISKm)31.12.202131.12.2020Change 2021%
Cash and balances with the Central Bank79,27163,09216,17925.6%
Domestic bonds and debt instruments eligible as collateral with the Central Bank74,22865,4018,82713.5%
Foreign government bonds with 0% risk weight69,21941,16128,05868.2%
High quality liquidity assets222,718169,65453,06431.3%
Loans and advances to financial institutions57,56660,811-3,245-5.3%
Loans and advances to financial institutions280,284230,46549,81921.6%

The primary measurement of short-term liquidity risk is the liquidity coverage ratio (LCR) which measures the ratio of high quality liquid assets to net outflow over a 30-day period under specific stressed conditions.

Landsbankinn's LCR was 179% at year-end 2021 and the Central Bank of Iceland (CBI) requires a 100% minimum LCR. The foreign currency LCR for the same period was 556%; the Central Bank requires a 100% minimum. The ISK LCR was 120% at year-end 2021. As of 1 January 2022,the CBI requires a 40% minimum.

Great progress with new accounting and financial system

“One of the largest projects we worked on in Financial Reporting in 2021 was implementation of the Bank’s new accounting and financial system. The new system replaces several older systems, increases automation and provides a much improved overview of operations - this is only to name a few of its benefits. As in all large projects at the Bank, many of us were involved in one way or another.


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