Landsbankinn hf.: Financial results of Landsbankinn for the first three months of 2020In the first three months of 2020, Landsbankinn's after-tax results were negative by ISK 3.6 billion, compared with an ISK 6.8 billion profit for the same period in 2019. Loan impairment amounted to ISK 5.2 billion in the period, compared with impairment of ISK 1 billion in the same period last year. Return on equity (ROE) for the period was -5.9% on an annualised basis, compared with 11.2% during the same period of 2019.
Net interest income amounted to ISK 9.4 billion, compared with ISK 10.2 billion in the same period of 2019, which is an 8% decrease. Net commission income amounted to ISK 2.0 billion, decreasing by 5.6% from the same period the previous year. Impairment of loans in Q1 is equivalent to around 0.4% of the Bank’s credit portfolio. At the end of March 2020, the default rate was 0.7%, the same as at the end of Q1 2019. The Bank’s operating income in the first three months of 2020 was ISK 3.4 billion, compared with ISK 15.0 billion for the same period the previous year. Other operating income was negative by ISK 8 billion, compared with a profit of ISK 2.7 billion during the same period of 2019. The interest margin on assets and liabilities was 2.2% in the first three months of 2020, compared with 2.5% in the same period of the previous year. The Bank's operating cost decreased by ISK 488 million between periods and was ISK 6.7 billion in the first three months of the year, compared with ISK 7.2 billion for the same period in 2019, which is a decrease of 6.8%. Of this, wage expenses amounted to ISK 3.8 billion, compared with ISK 3.7 billion for the same period in 2019. Other operating expenses were ISK 2.4 billion, compared with ISK 2.5 billion for the same period last year. The cost-income ratio for the first three months of the year was 72.6%, compared with 38.7% for the same time last year. Lending to private customers and companies increased by 4.4% since the beginning of the year, or by just over ISK 50 billion, thereof ISK 33 billion due to exchange rate changes. Deposits with Landsbankinn grew by ISK 47 billion from the beginning of the year, representing a 6.7% increase. As at 31 March this year, Landsbankinn's equity amounted to ISK 244.1 billion and its capital adequacy ratio was 24.8%. Landsbankinn’s Annual General Meeting, held on 22 April 2020, approved the motion of the Board of Directors to refrain from paying a dividend for the operating year 2019 in light of economic uncertainty caused by COVID-19 and in line with directions from the Central Bank of Iceland. The Bank’s dividend policy is unchanged. It provides that Landsbankinn shall aim to pay the lion’s share of profit in dividend to shareholders. Since 2013, the Bank has paid ISK 142 billion in dividend. Lilja Björk Einarsdóttir, CEO of Landsbankinn: “The Bank’s results and radical changes from Q1 2019 clearly reflect the impact of COVID-19 on the country’s economy.
Landsbankinn was quick to respond to the challenges posed by COVID-19 and has offered customers various solutions to tackle temporary payment difficulties. To date, around 1,237 individuals and families have applied to postpone mortgage payments for six months, and these loans represent 7% of the Bank’s loans to retail customers. More than 600 companies have applied for a payment holiday on loans that account for 8% of the Bank’s corporate credit portfolio. Emphasis was placed on swift processing of customers’ payment holiday applications and other solutions, through among other things digitalisation of the entire application process. Our customers have also showed great willingness to take advantage of new solutions offered by the Bank after tighter restrictions on gatherings led to severely limited access to its branches and outlets. In April, ten times as many customers contacted the Bank through the online chat function than the same time last year. As of today, we are increasing branch services again. We envision that many of the new solutions, such as specialist appointments, will remain part of the Bank’s services as customers appreciate having the option to make appointments with the Bank’s experts to receive appropriate financial advice at a time of their choosing. Loan impairment amounted to ISK 5.2 billion, the result of the conditions caused by the COVID-19 pandemic. Impairment is assessed in line with international accounting standards and directions from the European Banking Authority and the Central Bank of Iceland. This precautionary entry, compounded by volatility in equities markets, is the main reason that the Bank recognises a loss of ISK 3.6 billion in Q1 2020, compared with a profit of ISK 6.8 billion in Q1 2019. Lending to the travel sector amounts to ISK 95.7 billion, or 8.7% of the Bank’s total credit portfolio, and has decreased by just over ISK 0.5 billion since year-end 2019. The final impact of the pandemic cannot be determined. It must be considered likely that lower customer income and increased indebtedness will negatively affect their credit ratings, which leads to further loan impairment. Landsbankinn is well placed to face these challenges. The Bank’s equity amounts to over ISK 244 billion, its capital and liquidity positions are strong and the success of a EUR 300 million bond issuance in February reflects confidence in the Bank on international financial markets. The Bank’s operation is otherwise stable and in line with current objectives. Satisfaction with services and trust in the Bank grows and Gallup’s surveys in Q1 show that its market share in the retail market has reached 38.0%, a historic high. Deposits have increased and favourable interest rates offered by the Bank have led to increased demand for new housing loans, beyond expectations. Despite the unexpected economic setback and negative results in Q1, the Bank’s team is raring to go and as ever focused on providing customers with reliable, quality service.”
On the 8th of May at 10:00 local time, the Bank will host an investor call in English covering the main results. Please register to the call by emailing ir@landsbankinn.is.
For further information contact: Rúnar Pálmason, Public Relations, pr@landsbankinn.is, tel: +354 410 6263 Hanna Kristín Thoroddsen, Investor Relations, ir@landsbankinn.is, tel: +354 410 7310
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