Effective collaboration is key

We are seeing a turn for the better, though not full recovery, in the operation of many companies who were negatively affected by the pandemic. An ever-growing part of our services are accessible via the app, online banking or other self-service solutions and our customers are clear that they want this trend to continue.

The last two years under the pandemic have had an extensive impact on all banking service and altered our services to customers in many ways. We have focused on improving corporates’ access to digital services around the clock, boosting efficiency in daily banking and meeting as well as possible the changing needs of companies that themselves have depended on employees working from home and several restrictions on on-site work. In the early days of the pandemic, we became aware of the importance of maintaining the best user experience, of continuing to offer personal service and finding ways to do so even faster. The valuable experience we garnered these two years from strong digital development to improve corporate banking will continue to add value in both the Bank’s future and that of our customers.

Our customers are quick to adapt to changed conditions and take new solutions into use. In all main bank transactions for corporate customers, i.e. domestic and international payments, and claim collection, self-service levels are at 97-99%. Corporates manage employee access rights independently in online banking, create new users in online banking, B2B access, amend access rights to reflect job requirements and select add-ons in online banking and the app, in addition to creating all bank account types, debit cards and credit cards independently. All these actions can be carried out in a few simple steps and the reception has been fantastic. Landsbankinn has topped the Icelandic Performance Satisfaction Index for three years running, aided by all these initiatives.

Corporates happiest with digital solutions

Our customers are as before satisfied with our service, as confirmed in a Gallup survey of the corporate market. Companies who bank with Landsbankinn are most satisfied with the service of their main bank of business. Our self-service solutions receive the highest marks of the banks’ customers, a rating that confirms our experience. Our customers were also most satisfied of the three large banks with Landsbankinn’s response to the Covid-19 pandemic.

Digital development and responding to the economic consequences of Covid-19 have been our largest tasks in the past two years and we are very pleased that customers appreciate our handling of them.

The chapter on smarter banking provides a more in-depth review of digital services.

Satisfied customers

Most satisfied with their bank of business

Self-service solutions received top marks

Most satisfied with response to Covid-19

Most actions available in the app

Recently, we have focused on making more actions available to companies through the app and now, SMEs can use it to tend to the largest part of banking business. We simplified the onboarding process and becoming a Landsbankinn customers has never been easier for corporates. A reputation for good service and first-rate digital solutions gets around and a record number of companies became Landsbankinn customers, with just under 2,500 new corporate customers joining us in 2021. Of these, around 90% onboarded independently.

The Bank’s market share in corporates was 33.6% at year-end 2021, according to the Bank’s definitions and data.

Digital service and personal advice

The companies that bank with Landsbankinn are varied, both big and small and located throughout Iceland. We want to simplify life for our customers by letting them tend to their banking business in the app and online banking whenever it suits. If customers need our help, we have a strong team of experts standing by in the Corporate Call Centre. Companies can also rely on sound advice from our many account managers and other experts with extensive knowledge and connections with industry.

We place a large premium on solid business relationships, personal advice and long-term partnerships. By making our products and services even more accessible through online banking and the app, we free up time for personal and professional advice on the larger issues. In our experience, companies appreciate this strategy.

Strive to anticipate customer needs

“My job is extremely varied. The basics consist of evaluating lending opportunities, monitoring outstanding loans and maintaining regular relations with company managers. We account managers are also the corporate customers’ link into the Bank. This means that we work a great deal with other employees in various department, as corporates generally require multiple services that extend beyond our specialisation in Corporate Banking. Our role includes anticipating customer needs and facilitating business with other Bank departments and divisions. This is all not to mention the various small jobs that pop up on a daily basis, communicating information to customers, consulting and other issues.

When a new loan is paid out, the work is usually just beginning. We need to maintain very open lines of communication with management and monitor developments closely. We make regular visits to customers and such visits strengthen the business relationship a great deal. We account managers feel how much our customers appreciate these visits.

One of the companies I act as Account Manager for is Algalíf in Reykjanesbær. Algalíf produces high-grade natural astaxanthin from microalgae, which is sold as a vitamin and food supplement. Our partnership with Algalíf began for real in 2015, when the Bank agreed to extend credit in the amount of ISK 900 million to enlarge the company’s factory at Ásbrú. The company’s Norwegian owners had already provided a similar amount and manufacturing of the company’s products was going well. We considered this the right moment to channel funds into the company, fully aware of the fact that there were still uncertainties and certain risks involved. The company’s current position is strong and collaboration with Orri Björnsson, CEO, and the company’s owners has been exemplary throughout. This has fostered trust and credibility, which is key to such projects.”

Successful meetings

In connection with the economic forecast published by Landsbankinn Economic Research in May 2021, we hosted a series of remote meetings on the economy, tourism and the circular economy. There were four meetings for various geographical locations, either by region or multiple regions. Guests from each region addressed the meetings, adding local flair that was well received.

Oversubscribed offerings

Landsbankinn Corporate Finance achieved very good results and managed or participated in many successful projects. In May, we coordinated the PO of Síldarvinnslan hf. and listing of the company on Nasdaq Iceland's main list. We were well pleased with double over-subscription in the offering. Around 6500 new shareholders joined the company’s shareholder group, purchasing shares for ISK 29.7 billion. We were co-managers of the stock offering of Íslandsbanki hf. in June. Around 24000 new shareholders joined the company, purchasing new shares for around ISK 55 billion in a ninefold oversubscribed offering.

Landsbankinn Corporate Finance acted as consultant on the utilisation of warrants attached to new shares in Icelandair, coordinated successful bond issuances for various companies and managed the issuance and admittance to trade of such bonds on Nasdaq Iceland.

Corporate Finance acted as advisor to Reginn hf. in a transaction involving real estate developer Klasi ehf. and Hagar hf. Reginn and Hagar concluded a subscription agreement to shares in real estate developer Klasi. The agreement provides that Reginn holds one third of share capital in Klasi and the companies will collaborate on the further development of Klasi and its subsidiaries. Sustainable development of the company’s assets is one of the objectives of the partnership. The merged company will be in a position to support sustainable city development through a varied mix of commercial, service and residential housing.

Emphasis on sustainable financing of corporates

We are a leader in sustainable financing and such projects are growing in number. In 2021, we launched Landsbankinn’s Sustainable Financing Label, issued to companies who borrow from us. In order to receive the Label, financing must meet sustainability criteria and fall into one of the eleven project categories defined in the Bank’s Sustainable Finance Framework. Projects which fall under the scope of the Framework include switching public transport to renewable energy, renewable energy production, certified sustainable fisheries, eco-friendly buildings and social development projects. The first recipient of the Label was UR Seafood (Útgerðarfélag Reykjavíkur hf.), followed by Orka náttúrunnar and Ljósleiðarinn.

Deposits can also be sustainable

Not only lending can be sustainable - we introduced a new sustainable savings account for both corporate and retail customers in 2021, Vaxtareikningur sjálfbær. Deposits to the account are used to finance projects that contribute to sustainable development, under the terms of Landsbankinn’s Sustainable Finance Framework, just like with sustainable financing. Companies can take advantage of this option to invest funds in a way that positively impacts the environment and society.

Many corporates were cautious

Lending contracted by 2.3% during the year, with companies maintaining a cautious stance in response to the pandemic. Market share in corporate lending was nevertheless 41.5% based on the 9 month financial statements of the three commercial banks in 2021, increasing slightly between years. Companies could apply for support loans until 31 May 2021 and those with previous support loans were offered an extension of the loan term and repayments by 12 month, in accordance with authorities’ rules. Most of the companies who took advantage of this were in the travel sector, which has been hardest hit by the pandemic.

Growth in vehicle and equipment financing

Corporate vehicle and equipment loans contracted considerably in 2020, especially with travel sector companies. Investment started off slowly in 2021 only to pick up the pace, reflecting a great deal of accumulated investment need. The result was an increase in vehicle and equipment loans compared with the previous two years, or 73% growth between years.

Eco-friendly vehicles and equipment

An ever-growing percentage of loans issued by Landsbankinn Vehicle & Equipment Financing to companies is for eco-friendly vehicles and equipment. Just under 70% of all newly registered passenger cars in 2021 were electric or hybrid. This development was clearly reflected in the loan book.

Growth in funding of non-profit activities

Landsbankinn has been leading in construction financing in recent years. We have focues on maintaining frequent and open communication with our customers in order to understand and identify their needs.

We maintained a high level of activity in this field in 2021, providing funding for new residential housing both for the general market and rental market. The projects are tied to various parts of the country, though most are in the capital region. Numerous new construction projects funded by the Bank are under way or in the preparation phase. Project financing of non-profit activities has increased significantly alongside high activity in rental housing construction and development of affordable housing for first-time buyers.

Large construction projects

projects

Smaller construction projects

projects

Financed residential housing

3.781

apartments

General rental housing

858

apartments

New lending to the construction sector fluctuates based on such factors as time to sell. The sale of residential housing in 2021 was extremely rapid, with assets frequently sold already during construction. This development led to lower demand for credit and thereby lower lending to these project despite higher loan pledges.

Support for the travel sector

We continued to work closely with our customers to tackle the wide-reaching change the pandemic caused.

Companies with various ties to the travel sector have been hard hit and been forced to deal with unforeseeable circumstances and changing Covid-19 restrictions. We have done our utmost to meet the different needs of our customers in the travel sector, endeavouring to ensure that they will be ready to receive their own customers when travel increases again and the pandemic ends.

Number of travellers
2019	2,013,200
2020	486,308
2021	687,789
2022	1,500,000*
2023	1,800,000*
Figures from the Icelandic Tourist Board *Forecast by Landsbankinn Economic Research

Success in seafood and fisheries

Following numerous challenges and difficulties in 2020, the seafood and fisheries sector pursued growth again in 2021. Investment increased and production and sale was more successful. The outlook is bright for 2022, especially as regards capelin. Fish farming also had a good 2021, with record production and sale. The coming years provide opportunities for growth, both in aquaculture and on land.

Lending to the seafood and fisheries sector is again the largest portfolio in the Bank’s loan book, excepting only loans to individuals. The success of the seafood and fisheries sector is also reflected in credit quality, with defaults at a minimum. We continue to strive to grow with our customers and support their development. We actively seek out new opportunities in seafood and fisheries and aim to be leading in financial services to Icelandic fisheries companies.

Extensive changes in retail and services

In general, the retail and service sector performed well in 2021, notwithstanding numerous challenges to operations in the past year. Consumer spending and consumption patterns have altered radically as a result of the pandemic, with greatly increased e-commerce calling for extensive and rapid changes in the retail and service sector. We have been leading in business with companies in retail and service and have provided solid support for our customers in the year.

Agriculture kept its footing in the pandemic

Agriculture has kept its footing in the pandemic, with smooth production levels and good sales despite a changing market. Retail sale increased considerably in the year while wholesale decreased.

Development and restructuring is on-going in the dairy sector. Dairy producers continue to become fewer and those who continue manage to grow through the acquisition of quota and investment in increased automation. Vegetable production is generally successful, with opportunities for improvement lying in larger production units and more varied produce. As before, sheep farming is struggling. Agriculture has historically been an important part of the Bank’s operation and this will continue. We intend to remain a staunch supporter of farmers.

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