Landsbankinn hf. : Financial Results 2016

Thursday, 09. February 2017 17:23

Landsbankinn profits by ISK 16.6 bn in 2016 

  • Landsbankinn's after-tax profit in 2016 was ISK 16.6 billion.
  • Landsbankinn held a 37.1% market share in the retail market according to a Gallup survey. This is a record high.
  • Return on equity (ROE) was 6.6% in 2016, as compared to 14.8% in 2015.
  • Landsbankinn's cost-income ratio increased between years and was 48.4% in 2016.
  • Value changes in the credit portfolio were negative by ISK 318 m as compared with positive value changes in the amount of ISK 18.2 bn in 2015. Landsbankinn expensed a total of ISK 5.4 bn in Q4 of 2016 to meet four Supreme Court rulings.
  • Landsbankinn's equity amounted to ISK 251.2 bn at year-end 2016 and its CAR was 30.2% of risk-weighted assets.
  • A proposal will be made to the AGM on 22 March to pay ISK 13 bn in dividend to shareholders for the year 2016. In addition, the Board of Directors intends to propose that the AGM approve payment of a special dividend.
  • Landsbankinn's annual report and risk report for 2016 are now published alongside the annual financial statements. The reports are available on the Bank's website.

The profit of Landsbankinn hf. in 2016 was ISK 16.6 bn after taxes, as compared with ISK 36.5 bn in 2015. Return on equity (ROE) after-taxes was 6.6% for the year 2016 as compared with a ROE of 14.8% in 2015. Net interest income amounted to ISK 34.7 bn and net commission income was ISK 7.8 bn. Other operating income amounted to ISK 6.1 bn. Value changes to the credit portfolio were negative by 318 m. Operating costs were ISK 23.5 bn.

Lending increased by 5% between years while the balance sheet contracted by 1%. A proportionately larger share of Landsbankinn's assets is now interest-bearing, which leads to increased interest revenue, and net interest income grew by over ISK 2.3 bn between years. Landsbankinn's net commission income is up by 14% between years. This is due mostly to increased activity on capital markets and in asset management, and changes in the payment card market which return increased commission income. At the same time, the Bank's financing cost for payment cards also increases.

As a result of market developments, other operating income dropped by just under ISK 9 bn between years.

Negative value changes to loans amounted to ISK 318 m. This is a turnaround from 2015 when value changes to loans were positive by ISK 18.2 bn. The recalculation of foreign currency indexed loans has had a large impact on the Bank's financial statements. In 2015, the Bank capitalised ISK 13.8 bn as a result of the precedent set by rulings of the Supreme Court in cases No. 34/2015 and 35/2015 and rulings of the District Court of Reykjavík in November 2015 and January 2016. The main reason for the negative value changes in lending in 2016 is that in December of 2016 and January of 2017, the Supreme Court ruled against the Bank in four cases disputing the right of the Bank to an additional claim as a result of recalculations of foreign currency indexed loans in accordance with Central Bank interest rates instead of contractual interest rates in accordance with final receipts. In these cases, the Supreme Court found the impact of the additional claim to be so severe for the companies involved that the Bank should absorb the disputed interest margin. These rulings may set a precedent for cases involving other foreign currency indexed loans to corporates, where circumstances are similar, yet further rulings are necessary to clarify the precedent. As a result, the assessment of the financial impact of the rulings might change to reflect future rulings. Expenses in the amount of ISK 5,435 million were recognised in Landsbankinn's consolidated income statement as a result of these rulings towards the end of Q4 2016.

Salaries and other operating expenses decreased by 1.0% between years. Salaries and related expenses increased by 2% while general operating expenses decreased by 5%.

Pre-tax profit in 2016 amounted to ISK 25.2 bn, as compared to ISK 48.9 bn in 2015. Imputed taxes, including a special financial management tax on salaries, amount to ISK 9.2 bn in 2016 as compared with ISK 13.1 bn in 2015.

Landsbankinn's total assets decreased by ISK 7.5 bn between years and at year-end 2016, the Bank's assets amounted to a total of ISK 1,111 bn. Lending increased by ISK 42 bn, due mostly to an increase in housing loans to private individuals and increased lending to corporates. The default ratio continues to decrease and stood at 1.5% at year-end 2016 as compared with 1.8% at year-end 2015.

At the end of 2016, deposits from customers amounted to ISK 590 bn as compared with ISK 559 bn at year-end 2015.

Landsbankinn's equity at year-end 2016 was ISK 251.2 bn, as compared with ISK 264.5 bn at year-end 2015. In 2016, Landsbankinn paid ISK 28.5 bn in dividend to shareholders.

Landsbankinn's total capital ratio at year-end 2016 was 30.2%, down by 0.2 percentage points from the previous year. The Financial Supervisory Authority, Iceland (FME), sets the minimum requirement for total capital at 22.1%. 

A proposal will be made to the AGM on 22 March 2017 that shareholders be paid a dividend amounting to ISK 0.55 per share for the year 2016, a total amount of ISK 13 bn. The dividend payment represents 78% of the year's profit. In addition, the Board of Directors intends to propose that the AGM approve payment of a special dividend, the amount of which will be disclosed in motions to the AGM.

Hreiðar Bjarnason, interim CEO of Landsbankinn:

"Landsbankinn continues to be the largest financial undertaking in Iceland and its financial position is very sound. The Bank's core operations yielded positive results in 2016, net interest and commission income increased considerably between years while operating expenses decreased.

Our market share in the retail market has never been higher and the Bank's position in the corporate market and on financial markets remains strong. Surveys show that customer satisfaction increased considerably during the year, a fact we consider tremendously important, as the Bank emphasises providing customers throughout Iceland with exemplary service at competitive terms.

For the second year running, Standard & Poor's raised the Bank's credit rating. The Bank's current rating is BBB with a continued positive outlook. This is a welcome recognition of the great work that has been done at the Bank in previous years. Landsbankinn has emphasised ensuring profitability from core operations, discounting large, irregular items. This strategy has yielded positive results and the Bank will continue along this path."

Landsbankinn's financial calendar

22 March 2017 - Annual General Meeting

4 May 2017 - Q1 2017 results

27 July 2017 - H1 2017 results

26 October 2017 - Q3 2017 results

8 February 2018 - Annual Financial Statements 2017

For further information contact:

Rúnar Pálmason, Public Relations, pr@landsbankinn.is, tel: +354  410 6263 / 899 3745

Hanna Kristín Thoroddsen, Investor Relations, ir@landsbankinn.is, tel: +354  4107310




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Source: Landsbankinn hf. via Globenewswire

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