Close partnership with business and industry

We supported growth and development of industry by financing interesting projects and supporting the development and operation of corporates. The Bank’s loan portfolio grew considerably and several new companies joined our customer group.

In 2022, Landsbankinn’s lending to businesses grew by ISK 92 billion, or by just over 14%. The increase was ISK 80 billion not having regard for the exchange rate impact, which is equivalent to 10% lending growth. There was considerable growth in vehicle and equipment financing for corporates. We remain active in the financing of residential housing, contributing to the supply of new housing in a growing community.

The Bank’s market share in corporates who submit annual financial statements was 33.1% at year-end 2022, similar to 2021. Landsbankinn's share in corporate lending is around 40%. The number of corporate customers increased by just under 2,000 in 2022, an increase we attribute mainly to our improved services for small and medium-sized enterprises.

Despite rising interest levels, we remain a strong lender in the construction market and activity in the sector is still high. We see that the export sectors are going strong, including the travel industry, yet managers are treading carefully when it comes to large investment decisions.

We support the travel sector

Economic growth in Iceland depends to a large degree on the travel sector and the impact of it regaining its footing post-pandemic in 2022 was felt by the entire economy.

The pandemic put the travel sector in a defensive position in 2020 and 2021 and we worked closely with customers who were experiencing a substantial drop in income. The solutions we offered were mainly support loans, additional loans and temporary moratoria on loan payments. Once the pandemic receded, the travel sector quickly regained its footing and as of spring 2022, international tourist numbers in Iceland attained similar levels as in 2019, the last year before the pandemic. Occupancy rates were high and use of rental cars good over the summer, with many places sold out. Most businesses were faced with having to respond to higher demand and increased tourist numbers. This called for new investments in hotels, rental cars, tour buses, entertainment, etc. We were in a position to support this new growth with loans and other services, contributing to further development in the sector.

It appears that the importance of the travel sector will grow in the coming years and that the sector will remain one of the main pillars of the Icelandic economy. We will continue to offer reliable and favourable financing to a growing sector.

Tourist numbers from 2019 and forecast development leading up to 2025
2019 2,013,200
2020 486,308
2021 687,789
2022 1,696,785
2023 1,900,000*
2025 2,500,000*
2030 3,500,000**
*Forecast by Landsbankinn Economic Research
**Forecast by the Icelandic Tourist Board

Housing construction shows no sign of abating

Landsbankinn has been leading in construction financing in recent years. We have placed emphasis on maintaining frequent and open communication with our customers in order to understand and identify their needs.

We maintained a high level of activity in this field in 2022, providing funding for new residential housing both for the general market and the rental market. The projects are tied to various parts of the country, though most are in the capital region. We finance both residential housing for sale on the general market and rental housing. Project financing of non-profit activities has increased significantly alongside high activity in rental housing construction and development of affordable housing for first-time buyers.

Considerable production of residential housing has characterised the sector in recent years, borne out by the figure below. A great number of new apartments has entered the market in the past years, on average 3,000 per annum in the period 2019-2022. Our lending to construction projects has increased alongside this growth, with Landsbankinn’s share in the financing of new residential housing projects approximating 50% in the period.

Despite this considerable increase, there is still deemed to be demand for more. A newly published analysis by the Housing and Construction Authority found that there is need for a supply of no fewer than 3,500 new apartments per annum over the next five years. According to the master agreement between the State and municipalities, signed in July 2022, the aim is to build 35,000 new apartments in the next 10 years, 20,000 thereof in the next 5 years. We expect to increase our lending to new construction projects in line with these plans.

In 2022, we financed the building of considerably more apartments than in 2021 and the increase falls mainly under the early construction stages and land purchase. Rental apartments financed by us are rather fewer. This is because many of these apartments were delivered in 2022, without a concomitant increase in apartments under construction

Large construction projects
Smaller construction projects
Financed residential housing
General rental housing

Fisheries and seafood

Fisheries companies had a successful 2022. Fishing and processing generally went well and demand was good in main markets. Aquaculture saw good results as well and productivity was record high. As has been the case before, the fisheries and seafood sector is facing some challenges. The war in Ukraine and economic crisis in Europe affect supply chains and reduce purchasing power. As a result, both demand and prices can be expected to decrease. The Icelandic fisheries and seafood sector is very adaptable and flexible, and will find ways to meet new challenges, now as in the past.

Investment activity has declined slightly in response to increased uncertainty and the rising cost of capital. These conditions are transitory and the hope is that investment will pick up already in 2023. Landsbankinn’s loan book develops in line with investment in the sector and the Bank remains a large lender to fisheries and seafood, with an approximate market share of 40%. The loan book was unchanged in 2022 but we expect to see growth again this year. We are, as before, open to new opportunities and ready to grow with our customers.

Numerous new customers in trade and services

In 2022, the Bank welcomed several new customers and maintained its leading position in this sector. This sector has faced many challenges in recent years, such as rising commodities prices internationally and growing wage cost. Icelandic consumer patterns have been changing, with traditional shopping practices migrating to online trade. The sector has had to adapt to a new reality, showing adaptability and resilience, and has generally been successful.

Trade & services a strong sector

In December, Landsbankinn Economic Research published a detailed analysis of the status of the trade and service sector in Icelandic. Its conclusions were that the growth in trade and services is largely contingent on tourist arrivals to Iceland, the length of their stay and their spending habits while here.

Becoming a customer is a quick and easy process

The number of small and medium-sized enterprises who bank with Landsbankinn grew considerably in the year, with a total of around 1,800 such companies joining our group of satisfied customers. It has a lot to say that on-boarding is a convenient, electronic process. We have also responded to the demand by companies for more self-service options and met new needs with new digital solutions quickly and professionally.

Landsbankinn topped the Icelandic Satisfaction Index in the banking market in 2022, as in the three previous years, results that are reflected in good market share in the corporate banking market in the year. 

We are well equipped to meet future needs with the Bank’s app and online banking platform, both adaptable and efficient customer-oriented solutions. But it’s not just about systems - it’s also about human resources. Landsbankinn is well placed in that regard and has extensive knowledge resources as well as strong branches around the country.

In 2022, the highest growth in lending was to small and medium-sized enterprises in the construction sector and real estate. The year saw record growth in lending to companies in these sectors. The highest individual loans are also to these sectors.

Considerable increase in corporate investment

Following a contraction in business activity during the pandemic, an upswing began, most notably in the travel sector, and this required investment. This was not least true for car rentals who had sold a great deal of their fleets and now faced the need for renewal. Lending to companies in the travel sector grew quickly over the year and played a large part in the record year Landsbankinn has had in new loans to corporates.

The credit portfolio of Landsbankinn Vehicle & Equipment Financing grew by around 30% during the period, from ISK 28.8 billion to ISK 37.4 billion.

The travel sector accounts in part for the proportional increase in lending to corporates, with the growth in new lending by Vehicle & Equipment Finance to that sector growing by 45% between years.

Contractors also invested heavily in 2022, with the increase of loans to contractors within Vehicle & Equipment Financing growing by 39% between years.

Lending growth in Vehicle & Equipment Financing

Travel sector

Corporate Finance achieved good results

The Bank’s Corporate Finance department concluded several successful projects in 2022. Corporate Finance coordinated the equity increase and listing of biosimilars company Alvotech on the market. Alvotech became the only company that is double-listed in Iceland and the US, where it is listed on Nasdaq New York. Corporate Finance also coordinated the sale and issuance of Alvotech’s bonds in the amount of USD 70 million in December. Towards the end of the year, Alvotech had become the largest company on the Icelandic stock exchange and its future is exciting.

Landsbankinn Corporate Finance acted as advisor to the buyer in the single largest foreign investment in Iceland in recent years, when international fund manager Ardian purchased Míla from Síminn. The total sale price was just under ISK 70 billion.

Corporate Finance also coordinated several other successful sale processes in the year. Eldum rétt was sold to Hagar, expanding the service offering of Hagar with popular home cooking kits. Iceland’s oldest candy producer, Freyja, was sold to Langisjór after having been in the ownership of the same family for 40 years.

A fruitful collaboration with Síldarvinnslan continued in that Corporate Finance assisted in the company’s purchase of vessel operator Vísir in Grindavík, in a transaction valued at ISK 31 billion.

In October, Corporate Finance coordinated the share increase of Amaroq Minerals, a natural resource company seeking gold and other valuable minerals in Greenland. The share increase is key to further development of the company’s asset portfolio in Greenland.

Corporate Finance also managed the admittance to trade of bonds on the Icelandic stock exchange, including classes issued by Ljósleiðarinn, Árborg municipality and Municipality Credit Iceland.

High-quality universal service from start to finish

"The competition is fairly hard in this market. The banks, auditing firms and smaller financial undertakings offer corporate finance and there are also several independent advisors in play.

It is important to create a distinction from the rest of the field by delivering quality results in a professional manner for our customers. The projects don’t simply fall into our laps either and part of our work is to network and maintain good connections into the market. Our customers appreciate that the Bank delivers high-quality universal service, throughout the project lifetime, and we often work successfully with other divisions and departments to get the best results.

Eco-friendly operation

Continued development of the Bank’s technological solutions contributes to a smaller carbon footprint of both parties as our customers are in most cases able to finalise signatures digitally, increasing efficiency for both customers and the Bank’s employees.

An ever-growing percentage of loans issued by Landsbankinn Vehicle & Equipment Financing to companies is for eco-friendly vehicles and equipment. In 2022, over 45% of total financing to corporates was to fund the purchase of such vehicles and equipment. Eco-friendly passenger cars were 74% of all newly registers cars in 2022. This development is reflected in an ever-larger part of the loan portfolio being comprised of financing for electric or hybrid vehicles, both inventory financing for car dealerships and car purchases by customers.

Eighteen companies have received our Sustainable Financing Label to date

We are strongly focused on sustainable development and wish to support our customers to achieve success in that arena. We do so by financing sustainable projects and issuing Landsbankinn’s Sustainable Financing Label, to name a few examples. The Sustainable Financing Label is awarded to corporates who meet the sustainability criteria set out in the Bank’s Sustainable Finance Framework and fulfil strict ESG requirements.

More details about sustainability in the Bank’s operations are provided in the chapter on sustainability.


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