Good performance despite difficult conditions

Asset Management & Capital Markets continued to attract new customers and the securities transaction solution in the app was well received, as were other new solutions introduced by the Bank along with new FX trading opportunities. Despite difficult conditions on markets, we achieved acceptable returns on fund investments.

The year was characterised by considerable market fluctuations. One of the noteworthy occurrences is the great difference between individual companies on the domestic stock market. The fluctuation could be by as much as a 25% increase in capitalisation to a 55% decrease within the year. Another anomaly was that the market price of equities and bonds dropped at the same time in 2022, a phenomenon not often observed. On the other hand, turnover volume in the equity market was the same in 2022 and 2021, which is extremely interesting, as turnover in 2021 increased by 90% from the previous year. Landsbankinn’s share in the bond market grew by 28% in 2022 while total turnover in the bond market grew by 12%, following a 34% decrease in 2021.

Customer numbers continue to grow

As was the case for other fund management firms, the market cap of the funds of Landsbréf hf., the Bank’s subsidiary, decreased alongside falling prices of equities and bonds, yet returns were nevertheless reasonably good compared to main competitors. Under the unusual market conditions in 2022, i.e. a drop on both equity and bond markets, investment activity was difficult. Despite these challenges, it was pleasing and a testament to the high level of trust the Bank enjoys, that new asset management business relationships were still formed and Landsbankinn Asset Management continued to attract more customers.

Changed market practice

A turning point was reached in fall 2022 when the Icelandic stock market was reclassified by FTSE Russell. Once 15 domestic companies were included in the FRSE Russell index, a number of international investors began considering Iceland an investment option, and international actors gained direct access to the Icelandic Stock Exchange. At the same time, there has been a clear change in market practices. We see that following changes to the Foreign Exchange Act in 2021, removing most restrictions on FX and derivatives transactions, there has been a change to the composition of investors and of flow in the market. Landsbankinn’s customers have been very pleased with a new type of FX agreements, so-called non-deliverable forwards (NDF), that greatly simplify management and overview at any given time. Landsbankinn runs the largest FX desk in Iceland and growing FX trade has led to increased commission income.

Important to stay on top of a dynamic market

“Work in Landsbankinn's Capital Markets department is extremely varied, exciting and demanding. We work with equities, bonds, foreign currency, interest and related derivatives in both domestic and international markets. Each day differs from the next - the market is dynamic and responds to numerous factors.

Our team of eleven is divided into two groups, securities and currency. Both have in common that the work involves adhering to best business practices, cultivating business relationships, attracting new customers, monitoring market developments and keeping an eye out for any new solutions to offer customers. Product development is an important part of our work and has resulted in good growth and several new customers. Towards the end of 2022, we launched a self-service system for foreign exchange trading. Customers can get price offers immediately and are able to conclude transactions in a quick and easy manner. Customers who have tried the system are very happy with the solution and make full use of it. In the past 1-2 years, Landsbankinn has introduced several new solutions for FX derivatives and in securities trading. These solutions have also attracted several new customers, proving the importance of on-going product development.

A large part of the job involves attention to and monitoring amendments to the legal and regulatory environment and adapting activities and processes to such changes. It is important to us to meet all requirements made of our operation, from the beginning of each business relationship. We perform due diligence, review customers’ knowledge and experience, their categorisation and determine appropriate products. The same applies to order execution to which strict rules apply at all times.

Most new customers are on-boarded by our personnel who leverage their business relationships and market experience to attract them. We also build on the fact that the entire Bank is part of our team. Asset Management, Corporate Banking and Corporate Finance, the Corporate Banking Service Centre and branch network are powerful allies when it comes to attracting new customers.

Despite the challenges on the market last year, things have been ticking over nicely. During times like these, it is vital that the team monitor the market and maintain up-to-date knowledge. The market is dynamic and it's all about expectations and the needs of our customers. We host regular information and status meetings with parties both in and outside of the department, and with customers. Our employees need to be able to stay on top of a great deal of information and be able to read the situation at each time in order to provide the best service to customers, inform them about the current status and what to expect.”

Simplify life for customers

We continue to simplify life for our customers. We offer varied securities trading services which are easy to use in the app and online banking or by contacting one of our experienced specialists.

The updates we made to the securities functions of the app and online banking in 2022 were very well received and customer satisfaction is reflected in increased use of these solutions. In 2022, there was a 15% increase in new fund subscriptions using self-service channels and, towards the end of the year, customers took out new subscriptions through self-service channels in over 90% of all cases. The same applies to new securities agreements - 90% are created in self service.

Sophisticated information on securities trading

We place a great deal of emphasis on providing and sharing sophisticated and reliable financial information. In fall 2022, we published three articles (in Icelandic) on securities trading, all of which were well received. The articles discussed first steps in securities investment. We followed up on the articles with several informative videos.

Good performance at Landsbréf

Landsbréf's operation was good in 2022 despite the challenging conditions on most of the markets the company’s funds are on. Fund return was generally acceptable considering market conditions and relatively good compared with competitors. The war in Ukraine, rising inflation around the world and supply chain hiccups linked to Covid-19, and other factors, have resulted in negative returns on most bond and equity markets. During such times, patience and active management of well diversified asset portfolios is key.

Landsbréf is leading in the domestic fund management market and its employees have striven to be worthy of the trust thousands of fund members show them. Despite the difficult market conditions, new unit share holders continue to join our group of satisfied customers.

A selection of 40 funds

Landsbréf managed 40 funds at year-end 2022, both UCITS and AIFs. Landsbréf’s fund selections has grown to show great breadth and now includes investment options for most investors. One new fund was created in 2022, Landsbréf - Einkabréf E hs., an AIF intended for customers of Landsbankinn Private Banking. The fund invests solely in non-domestic financial instruments and focuses on equities and equity funds. Several initiatives are in the works and new products can be expected from Landsbréf over the coming couple of years.

New venture capital fund began investing

Landsbréf has in recent years created several venture capital funds which have invested successfully as conversion and strategic investors in domestic companies. A good example is Horn II slhf., which was wound up in 2022. Fund performance was excellent, achieving a 25% internal rate of return per annum during its lifetime. Landsbréf’s new venture capital fund, Horn IV slhf., began its investment period in 2022. The investment period horizon is the end of July 2025 and scheduled lifetime is year-end 2031.

Conditions on asset markets can be expected to continue to be challenging. The value of reliable asset management becomes apparent under such conditions and Landsbréf intends to continue to lead the field.

Chat about the global economy with Goldman Sachs

In August, we hosted a luncheon seminar for our customers with James Ashley, Head of International Market Strategy & Head of Strategic Advisory Solutions EMEA + Asia with Goldman Sachs. Following his presentation, Ashley appeared on Umræðan, Landsbankinn’s podcast, where he reviewed the position in more detail.

4% increase in pension savings between years

We offer a varied selection of pension savings plans, both for mandatory pension savings and private pension. We also offer extensive service on all aspects on this vital part of our finances. Customers can monitor the development of their pension savings in Landsbankinn’s app and view information about their balance, movements and accumulated rights. On the fund member site, customers can take advantage of several self-service avenues, such as applying for pension savings, changing their savings plans, applying for disbursement and viewing statements.

In 2022, we improved the service even more by updating the pension calculator in the Bank's website with the aim of making it easier for our customers to estimate their pension payments upon retirement. The calculator shows the pension based on customer input.

First pension fund to publish detailed sustainability data

In 2022, pension fund Íslenski lífeyrissjóðurinn, which is managed by the Bank, published information on the sustainability platforms of companies and funds the fund invests in. The pension fund also published information about GHG emissions from its domestic investment portfolio. This is the first time an Icelandic pension fund releases such detailed information about the sustainability of its investments.

The purpose of the pension fund’s new sustainability policy is to put forth an effective and credible approach to points of contention in sustainability and responsible investment. ESG factors are key to the fund's evaluation of investments and we consider companies who take these issues especially into account in their operation more likely to reap long-term benefits.

By analysing and publishing this information, we, fund members and other parties can monitor developments. In so doing, we are better placed to provide restraint and support companies that we invest in in their efforts to reduce GHG emissions.

Four SDGs prioritised

The strategy of Íslenski lífeyrissjóðurinn has regard for the UN Sustainable Development Goals. The pension fund has decided to focus especially on gender equality, climate issues, innovation, and responsible consumption and production. As a result, the pension fund looks primarily to SDG no. 5 (gender equality), no. 9 (industry, innovation and infrastructure), no. 12 (responsible production and consumption) and no. 13 (climate action) in its assessment and analysis of investment objectives.

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