Highlights of the Annual Financial Statement

The profit of Landsbankinn in 2022 was ISK 17.0 billion after taxes, compared with ISK 28.9 billion in 2021. After-tax return on equity for 2022 was 6.3%, compared with 10.8% the previous year.

Höfuðstöðvar Landsbankans Austurbakka
Key figures and ratios31.12.202231.12.2021
Profit for the year16,99728,919
Total net operating income53,25362,330
Net interest income46,46438,953
Return on equity before taxes10.1%13.6%
Return on equity after taxes6.3%10.8%
Total capital ratio24.7%26.6%
Minimum Requirement for Own Funds and Eligible Liabilities (MREL)40.4% -
Interest spread as ratio of average total assets2.7%2.3%
Cost-income ratio46.8%43.2%
Liquidity coverage ratio (LCR)134%179%
Liquidity coverage ratio (LCR FX)351%556%
Total assets1,787,0241,729,798
Loans / deposits159.6%154.1%
Average number of full-time equivalent positions during the year843890
Number of full-time positions at year-end813816
All amounts in ISKm

The Bank's total capital ratio at year-end 2022 was 24.7% as compared with 26.6% at the end of 2021. The Bank’s capital requirement increased from 18.9% to 20.7% from year-end 2021 to year-end 2022.

At the end of September 2022, the Resolution Authority of the Central Bank of Iceland announced its decision on minimum requirements for own funds and eligible liabilities (MREL) for Landsbankinn. The decision requires that the Bank of the maintain an 22.8% MREL of its risk-weighted asset base.

The cost/income ratio in 2022 was 46.8% in 2021, down from 43.2% in 2021.

In 2022, the interest margin as a ratio of average total assets was 2.7% (2020: 2.3%).

The Bank’s net interest income was ISK 46.5 billion (2021: ISK 39.0 billion).

Landsbankinn's net fee and commission income was ISK 10.6 billion in 2022 (2021: ISK 9.5 billion). Other operating income amounted to ISK 3.8 billion, compared with ISK 13.9 billion in 2021.

Income statement

Landsbankinn's after-tax profit in 2022 was ISK 17.0 billion.

Net interest income amounted to ISK 46.5 billion in 2022, compared with ISK 39.0 billion in 2021. The net interest margin on average total asset position was 2.7% (2020: 2.3%).

Landsbankinn's net fee and commission income was ISK 10.6 billion in 2022, as compared with ISK 9.5 billion in 2021.

Net impairment of financial assets was ISK 2.5 billion (2021: ISK 7,0 billion). Uncertainty about the final impact of Covid-19 on the Bank’s loan book continued to decrease in 2022 and the Bank concluded that there was no longer need for a special collective provision, neither for impairment to loans to the travel sector nor loans to other corporates.

Other operating income was negative by ISK 6,3 billion in 2022, compared with ISK 6,9 billion in 2021. The decreased fair value of an unlisted shareholding in Eyrir Invest hf., in the amount of ISK 10.5 billion in 2022 weights heaviest (2021: 2.1 billion gain).

Income Statement (ISKm)20222021Change%
Net interest income46,46438,9537,51119%
Net fee and commission income10,6239,4831,140 12%
Net impairment changes2,473 7,037 -4,564 -65%
Other income and expenses-6,307 6,857 -13,164 -192%
Total net operating income53,253 62,330 -9,077 -15%
Salaries and related expenses-14,474 -14,759 285 -2%
Other operating expenses-9,289 -9,105 -184 2%
Tax on liabilities of financial institutions-2,097 -2,013 -84 4%
Total operating expenses-25,860 -25,877 17 0%
Profit before tax27,393 36,453 -9,060 -25%
Income tax-10,396 -7,534 -2,862 38%
Profit for the year16,997 28,919 -11,922 -41%

Operating expenses amounted to ISK 25.9 billion in 2022, unchanged from the previous year. Increased efficiency and reduction in full-time equivalent positions in recent years results in stable operating expenses. The cost/income ratio for 2022 is 46.8%. The cost/income ratio is the ratio between the Bank's operating expenses and net operating revenue less value changes of financial assets. Full-time equivalent positions with the Bank decreased by 3 in 2022, from 816 to 813.

Balance sheet

Landsbankinn's total assets grew by ISK 57.2 billion between years and amounted to ISK 1,787 billion at year-end 2022.

Assets (ISKm)31.12.202231.12.2021Change%
Cash and balances with Central Bank42,216 82,425 -40,209 -49%
Bonds and debt instruments125,265 150,435 -25,170 -17%
Equities and equity instruments19,106 33,347 -14,241 -43%
Loans and advances to financial institutions28,621 47,231 -18,610 -39%
Loans and advances to customers1,544,868 1,387,463 157,405 11%
Other assets26,948 28,897 -1,949 -7%
Total assets 1.787.024 1.729.798 57.226 3%

Main changes to the asset side of Landsbankinn’s balance sheet in 2022 include a 11.3% increase in loans to customers, or by ISK 156.9 billion. There was an ISK 92.0 billion increase in lending to corporates in 2022, or the equivalent of 10%, having regard for exchange rate impact. While housing mortgages grew by ISK 59,0 billion, demand slowed down in the fourth quarter.

Total loans in arrears by both corporates and households showed positive development in 2022. Loans past due are at a historic low and the default rate was 0.2% at year-end 2022.

Cash and balances with the Central Bank decreased by ISK 40.2 billion between years and amounted to ISK 42.2 billion at year-end 2022.

The Bank's market bond assets decreased by ISK 25.2 billion during the year. Loans and receivables to credit institutions decreased by ISK 18.6 billion during the year to stand at ISK 28.6 billion at year-end.

Liabilities and equity (ISKm)31.12.202231.12.2021Change%
Due to financial institutions and Central Bank6,634 10,425 -3,791 -36%
Deposits from customers967,863 900,098 67,765 8%
Borrowings476,864 486,042 -9,178 -2%
Other liabilities34,819 29,803 5,016 17%
Subordinated liabilities21,753 20,785 968 5%
Equity279,091 282,645 -3,554 -1%
Total liabilities and equity1,787,024 1,729,798 57,226 3%

Deposits from customers are the Bank’s primary source of funding. Total deposits amounted to ISK 967.9 billion at year-end 2022, an increase of ISK 67.8 billion or 7.5% between years. Deposits are mainly non-indexed and unrestricted. Deposits from financial institutions decreased slightly in 2022, or by ISK 3.8 billion, to stand at ISK 6.6 billion at year end.

EMTN-issuance in international markets and issuance of domestic covered bonds have been the Bank’s main source of market funding. The carrying value of such funding decreased in total by ISK 9 million in 2022. Issuance of covered bonds has increased in line with the Bank’s growing share in housing mortgages and is currently 44% of the Bank’s borrowing.

Landsbankinn’s equity at year-end 2022 was ISK 279.1 billion (year-end 2021: 282.6 billion). Total assets amounted to ISK 1,787 billion at year-end 2022, with the balance sheet increasing by 3.3%, or ISK 57 billion, during the year.

The Bank's Annual General Meeting in 2022, held on 23 March, approved a motion from the Board of Directors to pay a dividend to shareholders for the operating year 2021 corresponding to ISK 0.61 per share in two tranches. The former dividend payment of ISK 0.31 per share was paid to shareholders on 30 March 2022 and the latter, of ISK 0.30 per share, was paid out on 21 September 2022. These dividend payments total ISK 14.4 billion. The AGM also approved the Board’s motion to pay a special dividend of ISK 0.26 per share. It was paid to shareholders on 28 April 2022 and amounted to ISK 6.1 billion.

The Board of Directors of Landsbankinn will propose to the AGM on 23 March 2023 that shareholders be paid a dividend amounting to ISK 0.36 per share for the year 2022, a total amount of ISK 8.5 billion. The dividend is equivalent to 50% of the Group’s 2022 profit. Should this proposal be approved, dividend paid by Landsbankinn in 2013-2023 will amount to ISK 175.2 billion.

Liquidity position

The Bank's liquidity position, in total, in foreign currencies and in individual currencies remains both well above regulatory requirements and the Bank’s internal risk limits. The total liquidity coverage ratio (LCR) was 134% at year end, 99% in ISK and 351% in foreign currencies. Liquid assets amounted to ISK 185.8 billion at year-end 2022.

Liquidity reserves (ISKm)31.12.202231.12.2021Change%
Cash and balances with the Central Bank41,838 79,271 -37,433 -47.2%
Domestic bonds and debt instruments eligible as collateral with the Central Bank75,180 74,228 952 1.3%
Foreign government bonds with 0% risk weight40,063 69,219 -29,156 -42.1%
High quality liquidity assets157,081 222,718 -65,637 -29.5%
Loans and advances to financial institutions28,704 57,566 -28,862 -50.1%
Total liquidity reserves185,785 280,284 -94,499 -33.7%

The primary measurement of short-term liquidity risk is the LCR, which measures the ratio of high quality liquid assets to net outflow over a 30-day period under specific stressed conditions.

Landsbankinn's LCR was 134% at year-end 2022 and the Central Bank requires a 100% minimum LCR. The foreign currency LCR for the same period was 351%; the Central Bank requires a 100% minimum. The LCR for ISK was 99% at year-end 2022 and the Central Bank requires a 40% minimum.


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