2018 Results Lilja B. Einarsdttir Hreiar Bjarnason CEO CFO 2018 - PowerPoint PPT Presentation

2018 Results Lilja B. Einarsdóttir Hreiðar Bjarnason CEO CFO

2018 Results DISCLAIMER This presentation is for information purposes only and shall not be construed as an offer or solicitation for the subscription or purchase or sale of any financial instrument. The information set out in this presentation has not been independently verified. No representation or warranty is made by Landsbankinn as to the accuracy, completeness or fairness of the information or opinions contained in this presentation. This presentation may contain projections and forward-looking statements which are subject to a number of risks and uncertainties that could cause actual results to differ materially and could adversely affect the financial effects described herein. Landsbankinn accepts no liability whatsoever for any direct or indirect loss, howsoever arising, from use of this presentation. Landsbankinn assumes no obligation to update this presentation, provide any additional information or correct any errors, which may eventually become apparent. 2 Landsbankinn

2018 Results Highlights ■ Operations The net interest spread was 2.7% at year-end 2018, as compared to 2.5% at year-end 2017. ■ After-tax ROE remains unchanged between 2017 and 2018 at 8.2%. Highlights of Q4 2018 ■ The cost-income ratio in 2018 was 45.5%, as compared with 46.1% in 2017. ■ After-tax profit in Q4 of 2018 was ISK 3.9 bn, as compared with ISK 2.9 bn ■ The effective income tax rate for 2018 is 26.2%. for the same period of 2017. ■ Net interest income was ISK 11 bn, as compared with ISK 9.2 bn in Q4 Balance sheet 2017. ■ Value changes in Q4 were negative by ISK 286 bn as compared with a ■ negative change in the amount of ISK 282 bn in Q4 of 2017. Total assets amounted to ISK 1,326 bn at year-end 2018, an increase of just over 11% from the previous year. ■ Return on equity (ROE) after taxes was 6.5% in Q4 as compared with an ROE of 4.8% for the same quarter in 2017. ■ Total lending increased by ISK 139 bn in 2018, or by 15%. Lending to Key figures from profit and loss in 2018 corporates increased by ISK 82 bn and lending to households by ISK 57 bn. ■ Net profit in 2018 was ISK 19.3 bn after taxes, as compared with ISK 19.8 bn in 2017. ■ Deposits increased by ISK 90 billion during the year. Retail deposits ■ Net interest income amounted to ISK 40.8 bn, up by 13% as compared account for around ISK 34 billion of the increase. with 2017. ■ Landsbankinn issued Tier 2 bonds in the amount of EUR 100 million in ■ Value changes during the period were positive by ISK 1.4 bn as compared September 2018. The issuance is a step towards further optimising the with a positive change in the amount of ISK 1.8 bn in 2017. Bank’s capital structure. ■ Net fee and commission income for the period amounted to ISK 8.2 bn as compared with ISK 8.4 bn in 2017, which is a 3% decrease. ■ Landsbankinn's equity at year-end 2018 amounted to ISK 239.6 bn, down by 3% since the beginning of the year, which is due to an ISK ■ Other operating income amounted to ISK 3.6 bn, as compared to ISK 7.0 24.8 bn dividend payment during the year. bn in 2017. ■ Salaries and related expenses increase by ISK 528 m, which is a 4% ■ The total capital ratio is now 24.9%, down from 26.7% at year-end increase from 2017. 2017, and well above the FME’s requirement of 20.5%. The Bank's liquidity position is strong, overall and in foreign currencies, and well above regulatory requirements. 3 Landsbankinn

2018 Results Main results 2018 2017 Q4 2018 Q4 2017 Profit after taxes 19,260 19,766 3,867 2,925 Return on equity after taxes 8.2% 8.2% 6.5% 4.8% Interest spread as a ratio of assets and liabilities 2.7% 2.5% 2.8% 2.5% Cost-income ratio* 45.5% 46.1% 47.3% 50.7% 31.12.2018 31.12.2017 Total assets 1,326,041 1,192,870 Loans to customers 1,064,532 925,636 Deposits from customers 693,043 605,158 Equity 239,610 246,057 Total capital ratio 24.9% 26.7% Net stable funding ratio NSFR total 120% 124% Net stable funding ratio NSFR FX 166% 179% Liquitidity ratio LCR total 158% 157% Liquitidity ratio LCR FX 534% 931% Arrears (>90 days) 0.8% 0.9% Full-time eqv. positions 919 997 *Cost-income ratio = Total operating expenses/ (total operating income - net adjustments in valuation) 4 Landsbankinn Amounts in ISKm

2018 Results Development of KPIs Total capital ratio Adjusted return on equity Return on equity FME capital requirement 35% Impact of bank levy 16.0% 16% 1.2% 30% 13.8% 14% 30.4% 30.2% 29.5% 1.3% 25% 26.7% 12% 24.9% 9.8% 9.5% 23.3% 10% 20% 22.1% 21.8% 21.4% 1.60% 7.7% 1.30% 20.5% 8% 15% 1.10% 12.5% 14.8% 6% 10% 6.6% 8.2% 8.2% 4% 5% 2% 0% 0% 2014 2015 2016 2017 2018 31.12.14 31.12.15 31.12.16 31.12.17 31.12.18 LCR total Liquidity coverage ratio total Cost-income ratio excluding valuation adjustments Regulatory requirements 60% 180% 160% 56.0% 50% 158% 157% 140% 48.4% 46.1% 45.5% 40% 120% 43.8% 131% 128% 100% 113% 30% 80% 20% 60% 40% 10% 20% 0% 0% 2014 2015 2016 2017 2018 31.12.14 31.12.15 31.12.16 31.12.17 31.12.18 5 Landsbankinn

2018 Results Ownership Icelandic State Icelandic State Treasury Treasury Landsbankinn Landsbankinn The Icelandic State The Icelandic State ~ 900 other shareholders - Own shares - Own shares Financial Investments Financial Investments (ISFI) (ISFI) 1.6% 1.6% 98.2% 98.2% 0.2% The Finance Ministry published an ownership policy In regards to Landsbankinn the policy states, ■ ■ in July 2017 in regards to equity holdings in financial The government will retain a significant equity ■ companies that are supervised by the Icelandic State stake in the bank (34-40%) to ensure stability in Financial Investments (ISFI). the domestic financial sector. The remaining equity stake will be sold in the next ■ few years given favorable market conditions. Equity in Landsbankinn will be listed on a stock ■ exchange. 6 Landsbankinn

2018 Results Credit rating 1 3 5 7 Fundamental factors for Landsbankinn: 9 25.10.2017 11 25.10.2016 Very strong capital and earnings ■ 21.07.2015 13 15 Adequate liquidity position ■ 17 19 Average funding profile ■ 31.12.2014 30.06.2015 31.12.2015 30.06.2016 31.12.2016 30.06.2017 31.12.2017 30.06.2018 31.12.2018 Adequate business position ■ Landsbankinn hf. Republic of Iceland - Foreign currency Moderate risk position ■ Icelandic sovereign Landsbankinn hf. Long-term rating A BBB+ Short-term rating A-1 A-2 Outlook Stable Stable Last rating action March 2017 October 2017 7 Landsbankinn

2018 Results Financial objectives Objective 2018 Guidelines Return on equity 1 9.8% Expected ROE excluding bank levy in 2019 is 8.0 – 9.0%. ≥ 10% (ROE) [8.2%) [Expected ROE in 2018 including bank bank levy in 2019 is 6.5% - 7.5%]. Cost-income ratio ≤ 45% 45.5% Expected ratio in 2019 is 43-47%. (C/I ratio) The Bank's aim is to maintain capital ratios above the FME's capital Total capital ratio ≥ 23% 24.9% requirements at any given time, plus a 1.5-2.5% management buffer. (TCR) The Bank also aims to be in the highest category for risk-adjusted capital ratio, as determined and measured by the relevant credit rating agencies. Common Equity Tier 1 capital The Bank intends to raise subordinated market funding, if suitable and ≥ 18% 23.6% favourable for the Bank‘s capital structure (CET1) The aim is also to make special dividend payments to further optimise the Bank's Dividend payout ratio ≥ 50% 78% 2 capital structure. 1 Special tax on financial institutions of 0.376% is levied of the carrying amount of total liabilities at year-end, excluding tax liabilities, in excess of ISK 50,000 million as determined for tax purposes. The special income tax on financial institutions is a non-deductible expense. 2 Regular dividend payout ratio of last year profit. In addition, AGM in March 2018 approved a special dividend payment. 8 Landsbankinn

2018 Results Landsbankinn‘s successes Source: Gallup 9 Landsbankinn

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Income Statement 11

2018 Results 10,000 15,000 20,000 25,000 30,000 5,000 0 Landsbankinn 19,766 Profit 2017 4,543 Net interest income - 433 Net adjustments in valuation - 274 Net fee and commission income Income Statement Change from 2017 to 2018 Amounts in ISKm - 3,316 Other income - 122 FX gain (loss) - 528 Salaries and related expenses 441 Other operating expenses - 817 Taxes 19,260 Profit 2018 12

2018 Results Income Statement 2018 2017 Change Q4 2018 Q4 2017 Change Net interest income 40,814 36,271 13% 10,968 9,201 19% Net adjustments in valuation 1,352 1,785 -24% -286 -282 2% Net interest income after adjustments in valuation 42,166 38,056 11% 10,683 8,920 20% Net fee and commission income 8,157 8,431 -3% 2,355 1,840 28% Other net operating income 3,587 7,025 -49% -197 1,111 -118% Total operating income 53,910 53,512 1% 12,840 11,870 8% Salaries and related expenses 14,589 14,061 4% 3,835 3,753 2% Other operating expenses 9,348 9,789 -5% 2,373 2,411 -2% Total operating expenses 23,937 23,850 0% 6,208 6,164 1% Profit before tax 29,973 29,662 1% 6,632 5,706 16% Income tax expense and tax on liabilities of financial 10,713 9,896 8% 2,765 2,782 -1% institutions Profit for the year 19,260 19,766 -3% 3,867 2,925 32% 13 Landsbankinn Amounts in ISKm