Investor Presentation May 2017
Investor Presentation 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
Investor Presentation The Big Picture – Iceland at a glance Reykjavík Capital city 338,350 (1 Jan 2017) Population Size 102,775 km 2 Government Parliamentary Constitutional Republic Center-right coalition formed 11 Jan 2017 - the Independence Party, Bright Future and the Reform Party Althingi Legislature - 63 members elected for term every four years - Last elections took place 29 Oct 2016 Full independence in 1944 Political Member of UN in 1946, OECD 1948, NATO milestones 1949. Joined EFTA in 1970 and accessed the European Economic Area in 1994 ISK - Icelandic króna 1 EUR ≈ 115 ISK Currency Landsbankinn‘s branches GDP Total $16.7 billion Per Capita $50,277 (2015) S&P: A/Stable (March 2017) Sovereign Moody’s : A3/Stable (Sept 2016) long term Fitch: BBB+/Positive (Jan 2017) credit ratings Source: www.statice.is, www.imf.org 3 Landsbankinn
Investor Presentation A leading Icelandic universal bank ■ Landsbankinn hf. is the largest financial institution in Iceland offering universal banking services for households, corporates and institutional investors ■ The market leader in the Icelandic financial services sector ■ Market share ≈ 30-40 % in the domestic retail segment and corporate sector ■ Award winning mobile banking solutions for retail and corporates ■ The most extensive branch network in Iceland, 24 branches and 13 service points ■ Total number of staff 1,000 (Q1 2017) 4 Landsbankinn
Investor Presentation Strategy Vision: Landsbankinn is to be exemplary Mission: The trusted financial partner Our relationship with customers is based on mutual benefit. We are a trusted financial partner that supports customers towards success. We aim to tailor our services to fit their needs and to operate in harmony with our environment and society. We want our customers to be able to say… “This is how a bank should be” 5 Landsbankinn
Investor Presentation Ownership Icelandic State Treasury ≈ 900 other shareholders Landsbankinn The Icelandic State - Own shares Financial Investments (ISFI) 0.3% 1.5% 98.2% ISFI’s Selection Committee nominates members The government has announced its plans to sell ■ ■ to the Board of Directors of Landsbankinn 28.2% stake in Landsbankinn. based on an assessment of qualifications, education and experience of individuals being considered for membership 6 Landsbankinn
Investor Presentation Organisational chart Lilja Björk Einarsdóttir Helgi Teitur Helgason Árni Thór Thorbjörnsson Hrefna Ösp Sigfinnsdóttir Perla Ösp Ásgeirsdóttir Ragnhildur Geirsdóttir Hreidar Bjarnason 7 Landsbankinn
Investor Presentation S&P credit rating 1 3 5 Fundamental factors for Landsbankinn: 7 9 Very strong capital and earnings ■ 11 20.01.2014 21.07.2015 25.10.2016 Strong liquidity position ■ 13 15 Average funding profile ■ 17 Adequate risk and business position 19 ■ 07.10.2008 07.10.2009 07.10.2010 07.10.2011 07.10.2012 07.10.2013 07.10.2014 07.10.2015 07.10.2016 Landsbankinn hf. Republic of Iceland - Foreign Currency Icelandic sovereign Landsbankinn hf. Long-term rating A BBB Short-term rating A-1 A-2 Outlook Stable Positive Last rating action March 2017 October 2016 8 Landsbankinn
Investor Presentation Strong overall credit profile Leverage ratio Year-end 2015 Year-end 2016 Year-end 2016 CET 1 ratio 25% 35% 29.7% 20.3% 30% 20% 25% 15% 18.4% 20% 16.3% 16.3% 15% 12.3% 10% 7.3% 7.3% 10% 5.0% 4.6% 5% 5% 0% 0% Landsbankinn Nordea Danske Bank DNB Bank of Ireland Landsbankinn Nordea Danske Bank DNB Bank of Ireland S&P RAC ratio year-end 2015 20% 18.6%** Landsbankinn is among the global leaders in terms of its ■ leverage and CET 1 ratio 15% Landsbankinn’s pro -forma RAC ratio as of mid-year 2016 ■ 11.7% is at 18.6% 11.2% 10.4% 10% 10.0% 10% Landsbankinn aims to be in the highest category for RAC 7.3% ■ ratio, as determined and measured by the relevant credit rating agency 5% 0% Landsbankinn Swedbank AB Jyske Bank AS Nordea Bank AB DNB Bank AS Danske Bank AS Bank of Ireland Source: Standard&Poors – RatingsDirect 9 Landsbankinn **Mid-year 2016 RAC ratio
Investor Presentation Banking system in Iceland – three main players Assets (ISKbn) Equity (ISKbn) Tier 1 ratio 234 1250 250 35% 215 1182 1200 200 171 30% 1150 1120 27.3% 27.0% 150 1100 25% 22.8% 1029 1050 100 1000 20% 50 950 900 0 15% Landsbankinn Íslandsbanki Arion banki Landsbankinn Íslandsbanki Arion banki Landsbankinn Íslandsbanki Arion banki Leverage ratio Cost to Income ratio Loans to Deposit ratio 80% 200% 25% 64.2% 60.1% 180% 20% 17.7% 17.0% 60% 15.5% 42.5% 160% 151.4% 15% 146.7% 40% 140% 10% 124.0% 20% 120% 5% 0% 100% 0% Landsbankinn Íslandsbanki Arion banki Landsbankinn Íslandsbanki Arion banki Landsbankinn Íslandsbanki Arion banki Source: Financial Statements Q1 2017 10 Landsbankinn
Investor Presentation Strong market position Retail banking Corporate banking Source: Gallup 11 Landsbankinn
2017 Q1 Results
Investor Presentation Financial highlights Operations Balance Sheet Profit after taxes Total Assets ISK 7.6bn ISK 1,182bn EUR 65m EUR 10bn Equity ISK 234bn Return on equity after 12.5% EUR 2bn taxes Tier 1 Capital 27.0% Interest spread as a ratio 2.2% of assets and liabilities LCR Total 158% Cost-income ratio 42.5% Arrears (>90 days) 1.3% Exchange rate: EUR/ISK 116 13 Landsbankinn
Investor Presentation Development of KPIs Return on equity after taxes Total capital ratio 16% 35% 14% 30% 14.8% 30.4% 30.2% 29.5% 12% 25% 12.5% 27.4% 12.4% 12.5% 26.7% 10% 20% 8% 15% 6% 6.6% 10% 4% 5% 2% 0% 0% 2013 2014 2015 2016 Q1 2017 31.12.13 31.12.14 31.12.15 31.12.16 31.03.17 Special dividend Cost-income ratio excluding valuation adjustments Dividend yield 60% 56.0% 50% 12% 48.4% 10% 40% 43.8% 10.8% 42.9% 42.5% 9.4% 8% 4.7% 30% 8.2% 6% 20% 4% 5.2% 4.4% 10% 2% 0% 0% 2013 2014 2015 2016 Q1 2017 2012 2013 2014 2015 2016 14 Landsbankinn
Investor Presentation Income Statement Q1 2017 Q1 2016 Change Net interest income 8,018 7,466 552 7% Value changes in the credit ■ portfolio in Q1 were positive Net adjustments in valuation 1,779 311 1,468 471% by ISK 1.8 bn as compared Net interest income after adjustments in with a positive change in the 9,797 7,777 2,020 26% valuation amount of ISK 311 m in Q1 of 2016 Net fee and commission income 2,116 1,980 136 7% Net commission income ■ Other net operating income 3,800 1,764 2,036 115% increased by 7% as compared to the same Total operating income 15,713 11,521 4,192 36% period last year, first and foremost due to increased Salaries and related expenses 3,491 3,754 -263 -7% activity in capital markets Other operating expenses 2,426 2,499 -73 -3% Other operating income ■ increased substantially Total operating expenses 5,917 6,253 -336 -5% between years, accounted for mostly by positive Profit before tax 9,796 5,268 4,528 86% changes in the fair value of unlisted equities Income tax expense and tax on liabilities of 2,220 1,953 267 14% Effective tax rate is 15.6% ■ financial institutions Profit for the period 7,576 3,315 4,261 129% Amounts in ISKm 15 Landsbankinn
Investor Presentation Net operating income Income mix Q1 Q2 Q3 Q4 Net interest income 2% 2% 7% 40,000 Net interest income 35,000 11% Equities 8,443 30,000 9,977 7,292 25,000 5,776 Net commission and fees 49% 8,596 7,340 8,834 20,000 7,057 Net adjustments in valuation 13% 15,000 7,118 10,145 Other net operating income 7,385 8,929 10,000 Bonds 5,000 9,879 7,855 8,018 7,269 7,466 16% 0 FX gain 2013 2014 2015 2016 2017 Q1 Q2 Q3 Q4 Q1 Q2 - Q4 Net adjustments in valuation Net fee and commission income 25,000 9,000 8,000 20,000 7,000 1,900 15,000 6,000 1,702 15,958 5,000 1,640 2,015 10,000 1,180 16,620 1,745 4,000 1,151 1,275 3,000 5,000 1,914 8,800 1,753 1,403 1,597 4,170 2,000 311 1,779 1,596 0 2,116 1,000 1,980 -438 1,641 -629 1,518 1,363 0 -5,000 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Amounts in ISKm 16 Landsbankinn
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