Landsbankinn H1 financial results
- The Bank’s profit in the first half of 2022 amounted to ISK 5.6 billion, including ISK 2.3 billion in the second quarter.
- Return on equity (ROE) was 4.1%, below the Bank’s 10% target, mainly due to fluctuations in the Bank’s equity holdings.
- Net commission income increased 24% year-on-year, mainly due to increased activity in asset management and market operations.
- Net interest income increased by 13%, mainly due to a growing loan portfolio and higher interest rates.
- Market share in the retail market has grown steadily over the past few years and currently stands at 39.3%.
- Operating expenses continue to decline and the ratio of operating expenses to average total assets is now below 1.4%.
- Corporate loans increased by ISK 33 billion in the first half of 2022, excluding the impact of the exchange rate, mainly in the travel and fishing sectors.
- A significant number of clients have recently fixed the rates on their non-indexed loans. At the end of 2021, 29% of non-indexed loans to individuals were at a fixed rate; the percentage was 42% as of June 30, 2022.
In the first half of the year, net interest income amounted to ISK 21.4 billion, compared to ISK 19.0 billion in the same period of the previous year, an increase 13% between periods. Landsbankinn’s net income from fees and commissions amounted to ISK 5.4 billion, compared to ISK 4.4 billion for the same period of the previous year. Other operating income was negative ISK 4 billion; was positive at ISK 6.9 billion in the same period of 2021. The net reversal of credit impairment was ISK 43 million year-to-date, compared to ISK 2.8 billion ISK for the same period of 2021.
The interest margin on average total assets was 2.5% in the first half of 2022, compared to 2.4% in the same period a year earlier.
The Bank’s operating expenses in the first half of 2022 amounted to ISK 12.9 billion, compared to ISK 13 billion for the same period of the previous year. Salaries and related expenses amounted to ISK 7.3 billion, compared to ISK 7.5 billion in the same period of the previous year. Other operating expenses amounted to ISK 4.5 billion, unchanged from the same period in 2021.
The cost/income ratio for the first half of 2022 is 52% compared to 43.7% over the same period in 2021.
Landsbankinn’s total assets decreased by ISK 1.7 billion during the period, amounting to ISK 1.728 billion at the end of the first half of 2022. Customer loans increased by ISK 57.9 billion of ISK during the first half of 2022. Client deposits stood at 935 billion ISK at the end of the first half of 2022, compared to 900 billion ISK at the end of 2021, an increase of 35 billion ISK.
Landsbankinn’s equity amounted to ISK 267.7 billion as of June 30 this year and its total capital ratio was 24.9%.
The Bank’s Annual General Meeting, held on March 23, 2022, approved a motion by the Board of Directors to pay a dividend to shareholders for the financial year 2021 in the amount of ISK 14,409 million. The AGM also approved the Board’s motion to pay a special dividend of ISK 6,141 million. The Bank’s dividend payouts since 2013 total ISK 166.7 billion.
Lilja Björk Einarsdóttir, CEO of Landsbankinn:
“The Bank is doing well and has recently introduced several new solutions. The application is constantly being improved, the securities in the application have been a real success, and the electronic registration of mortgage documents has been a milestone. The Bank’s market share continues to grow. Surveys show that our customers are very satisfied with our services and that loyalty is increasing.
As these results show, the Bank’s operations are healthy and stable, with fluctuating elements related to stock markets reducing profits so far this year. Interest income is increasing alongside the growth in business, as is commission income, mainly thanks to successful asset management and capital markets activity based on the Bank’s clear strategy. Operating expenses are down slightly compared to the same period in 2021 and have been stable for several years.
Our credit business is robust. Corporate loans increased by ISK 33 billion in the first half, excluding the impact of exchange rates. This increase was led by lending to the export sector, both the travel sector and fishing businesses – a clear sign of the strength of these sectors. Residential construction loans continue to represent a significant portion of the Bank’s lending activity. The loan/repayment cycle is shorter in the construction sector, leading to a balanced loan portfolio. We have increased provisions for loan losses in anticipation of possible impairments mainly caused by the increasing risk linked to rising inflation and interest rates. In general, the situation of borrowers is good and late payments low. We are ready with various solutions for customers experiencing financial difficulties and encourage our customers to contact the Bank for advice and assistance.
The Bank has long been a proponent of sustainability and a new assessment from international ratings firm Sustainalytics confirms for the second consecutive year that the Bank is at extremely low risk of incurring financial losses due to environmental, social and governance factors. (ESG). The Bank is one of the leading European banks in this field. This is an important result, which strengthens the reputation of Landsbankinn. It’s also great to see how many companies are incorporating sustainability concerns to ensure long-term operational success and contribute to responsible use of resources. We continue to issue the Landsbankinn sustainable finance label to companies that meet the criteria for sustainable finance.
The Bank’s success is built on solid foundations and fantastic staff. We want to foster an active and enjoyable workplace while allowing the flexibility to work remotely on a short or long term basis when it suits both parties. Last quarter we introduced new guidelines on remote working and flexibility which have been very well received. We have also decided to ensure that employees receive 80% of their salary during parental leave to support the youngest.
I am satisfied with our results. We intend to reach our target of 10% ROE and to offer our customers advantageous and competitive conditions. We focus on making life easier for our clients by offering smart solutions, easy access to advice and good support for trading and investing activities. We are Landsbankinn, an ever smarter bank – a modern bank with a personal approach. This translates into strong customer relationships and makes Landsbankinn an exceptional partner.
For more information, contact:
Rúnar Palmason, Public Relations, [email protected]
Hanna Kristín Thoroddsen, Investor Relations, [email protected]