Landsbankinn Investor Presentation November 2019
LANDSBANKINN AT A GLANCE S&P GLOBAL RATINGS: ▪ Landsbankinn is the largest financial institution in Iceland ▪ Universal banking services for households, corporates and institutional investors with negative outlook ▪ Market leader in the domestic financial sector Since July 2019 ▪ 35-40% market share ▪ Extensive branch network across the country CYBER SECURITY: ▪ Solid financial position and income generation ▪ Total capital ratio 23.6% ▪ ROE 7.9% (ROE, excluding special bank tax, 9.6%) ▪ Cost-income ratio 41.4% Nordic cooperation on cyber security ▪ Well balanced funding profile BEST BANK IN ICELAND: CORPORATE GOVERNANCE AWARDS: ▪ Deposits from customers 50% of the funding mix ▪ Frontrunner in digital banking ▪ Award winning mobile banking solutions Euromoney 2019 Awards granted in 2014-2018 ICELANDIC CENTER FOR CSR: PRINCIPLES FOR RESPONSIBLE BANKING: PRINCIPLES FOR RESPONSIBLE EQUAL PAY CERTIFICATION: INVESTMENTS: Endorser of PRB since 2018 Awards for best CSR report in 2018 April 2019 Numbers based on financial results for 9M 2019 LANDSBANKINN 2
FINANCIAL OBJECTIVES Objective 9M 2019 Guidelines Return on equity 9.6% ≥ 10% - Expected ROE, excluding special bank tax, in 2019 is 9.0-9.5% (ROE) [7.9%] Cost / income ratio ≤ 45% 41.4% - Expected C/I ratio in 2019 is 41-43% (C/I ratio) - The bank's aim is to maintain capital ratios above the FME's Total Capital Ratio capital requirements at any given time, plus a 1.5-2.5% ≥ 23% 23.6% (TCR) management buffer - 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 ≥ 18% 22.3% - The bank intends to raise subordinated market funding, if suitable (CET1) and favourable for the bank's capital structure - The aim is also to make special dividend payments to further ≥ 50% Dividend Payout Ratio 52% optimise the bank's capital structure LANDSBANKINN 3
BEST IN CLASS AMONGST ICELANDIC PEERS THE LARGEST BANK IN ICELAND WITH THE MOST COST-EFFICIENT OPERATIONS NET INTEREST MARGIN 1 9M 2019 TOTAL ASSETS EOQ3 2019 COST-INCOME RATIO 9M 2019 4% 1,500 80% 3% 60% 1,000 2% Landsbankinn 40% Landsbankinn Landsbankinn Islandsbanki Islandsbanki Islandsbanki 500 20% 1% Arion Arion Arion 0 0% 0% HIGHEST RETURN ON EQUITY DESPITE HIGHEST CET1 RATIO TOTAL CAPITAL RATIO EOQ3 2019 RETURN ON EQUITY 9M 2019 LEVERAGE RATIO EOQ3 2019 25% 10% 20% 20% 8% 15% 15% 6% Landsbankinn Landsbankinn 10% Landsbankinn Islandsbanki Islandsbanki Islandsbanki 10% 4% 5% 5% Arion 2% Arion Arion 0% 0% 0% 1 Calculated as: net interest income / average total assets for the period LANDSBANKINN 4 Source: Public company information Amounts in bn. ISK
COMPARISON WITH NORDIC BANKS FAVOURABLE COMPARISON WITH THE BIG SIX NORDIC BANKS EOQ3 2019 EOQ3 2019 TOTAL CAPITAL RATIO LEVERAGE RATIO 25% 20% 20% 15% 15% 10% Handelsbanken Handelsbanken Landsbankinn Landsbankinn Danske Bank Danske Bank 10% Sw edbank Sw edbank 5% Nordea Nordea 5% DNB SEB DNB SEB 0% 0% EOQ3 2019 COST/INCOME RATIO 9M 2019 LIQUIDITY COVERAGE RATIO 200% 80% 60% 150% 40% 100% Handelsbanken Handelsbanken Landsbankinn Landsbankinn Danske Bank Danske Bank Sw edbank Sw edbank 20% 50% Nordea Nordea DNB DNB SEB SEB 0% 0% LANDSBANKINN Source: Public company information 5
OWNERSHIP STRUCTURE OWNERSHIP POLICY ▪ The Ministry of Finance and Economic Affairs published Icelandic State Treasury an ownership policy in July 2017 in regards to equity holdings in undertakings that are supervised by the Icelandic State Financial Investments (ISFI) Landsbankinn The Icelandic State ~900 other shareholders ▪ In regards to Landsbankinn, the policy states, - own shares Financial Investments (ISFI) ▪ The government will retain a significant equity stake 1.6% 98.2% 0.2% in the bank (34-40%) to ensure stability in the domestic financial sector ▪ The remaining equity stake will be sold in the next few years given favourable market conditions ▪ Shares in Landsbankinn will be listed on a stock exchange WHITE PAPER ON A FUTURE VISION FOR THE FINANCIAL SYSTEM ▪ In December 2018 a white paper on a future vision for the financial system in Iceland was published ▪ A group of professionals in the financial industry, chaired by the chairman of ISFI, was formed to make suggestions to act as a basis for further discussions and decision making ▪ Regarding ownership of Landsbankinn, the report concludes that the government should retain at least 34% stake in Landsbankinn as outlined in the ownership policy LANDSBANKINN Source: https://www.government.is/media/fjarmalaraduneyti-media/media/frettatengt2016/The-icelandic-state_s-ownership.pdf 6 https://www.government.is/library/01-Ministries/Main%20Emphases%20and%20Conclusions%20(002).pdf/
MANAGEMENT STRUCTURE EXECUTIVE BOARD Lilja Björk Einarsdóttir CEO Arinbjörn Ólafsson MD IT Hreiðar Bjarnason CFO Árni Þór Þorbjörnsson MD Corporate banking Perla Ösp Ásgeirsdóttir CRO Helgi Teitur Helgason MD Personal banking Hrefna Ösp Sigfinnsdóttir MD Markets LANDSBANKINN 7
EMPHASIS ON DIGITAL SOLUTIONS LANDSBANKINN 8
STRONG MARKET PRESENCE MARKET LEADER IN BOTH RETAIL AND CORPORATE MARKETS CORPORATE MARKET SHARE RETAIL MARKET SHARE 50% 50% 37% 38% 35% 38% 35% 36% 37% 33% 34% 33% 40% 35% 32% 33% 34% 40% 32% 32% 37% 30% 31% 27% 30% 20% 29% 20% 10% 3% 10% 2% 0% 0% 2012 2013 2014 2016 2017 2019 2020 2012 2013 2014 2016 2017 2019 2020 Landsbankinn Bank A Bank B Landsbankinn Bank A Bank B Bank C Bank D CUSTOMER SATISFACTION SURVEY GENERAL - RETAIL 360° FINANCIAL ADVICE - RETAIL GENERAL - CORPORATE INTERNET BANKING - CORPORATE 2% 3% 6% 10% 15% 18% 18% 72% 76% 82% 98% LANDSBANKINN Source: Gallup 9
CORPORATE SOCIAL RESPONSIBILITY LANDSBANKINN‘S ESG RATING: 17.5 / 100 POLICY ON SOCIAL RESPONSIBILITY “The company is at low risk of experiencing material “Landsbankinn wants to be a positive and dynamic force in society, contribute to a financial impacts from ESG factors, due to its medium sustainability in Iceland and operate in accordance with the principles of good corporate exposure and strong management of material ESG issues. governance.” The company is not publicly held, which reduces its Responsible investment corporate governance risk compared to its peers. Landsbankinn’s policy on responsible investment has regard for UN PRI and rules on risk Furthermore, the company has not experienced significant controversies.” appetite, large exposures and maximum aggregate risk, operational risk, reputational risk, liquidity risk and guidelines on good corporate governance. Responsible lending Sector policies in place for corporate lending which includes guidelines on social responsibility. Equality Landsbankinn makes a point of ensuring equal pay and job opportunities for all employees. Environmental issues Emphasis on environmental issues in all the bank’s operations including limiting the use of paper and using eco-friendly transportation. Support for the local community Landsbankinn provides varied support for diverse community initiatives. Governance Landsbankinn complies with recognised guidelines on corporate governance and publishes a corporate governance statement annually. LANDSBANKINN 10
CREDIT RATING CREDIT RATING AFFIRMED IN JULY 2019, OUTLOOK REVISED TO NEGATIVE S&P GLOBAL RATINGS AAA AA+ AA AA- A+ A A- BBB+ BBB 25.10.2017 BBB- 25.10.2016 BB+ 21.7.2015 6.9.2018 BB BB- B+ B B- 1.1.2014 1.1.2015 1.1.2016 31.12.2016 31.12.2017 31.12.2018 Senior unsecured debt Subordinated debt Icelandic government RATIONALE FOR CURRENT CREDIT RATING Iceland sovereign Landsbankinn Issuer credit rating Senior unsecured debt A BBB+ ▪ Very strong capital and earnings Short-term debt A-1 A-2 ▪ Adequate liquidity position Subordinated debt BBB- ▪ Outlook Stable Negative Average funding profile Last rating action March 2017 July 2019 ▪ Adequate business position ▪ Moderate risk position LANDSBANKINN 11
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