Strategy and Governance

Landsbankinn places strong emphasis on ensuring that innovation and development of banking service runs parallel to robust and strong operation. 

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It is Landsbankinn's policy that customers should be able to tend to all main banking business when and wherever.

Successful development and cost efficiency

In recent years, Landsbankinn has introduced several innovative digital service solutions, both for corporate and retail customers. These new solutions have been very well received and customer satisfaction with the Bank’s services has grown steadily. Development of digital solutions is investment-heavy yet by prioritising and maintaining vigilant cost-efficiency measures, the Bank has managed to keep cost at a minimum. The Bank compares favourably to international banks. Data published by the European Banking Authority (EBA) last fall showed that Landsbankinn has the 11th lowest cost-income ratio of banks in Europe. EBA’s comparison showed information about the operation and balance sheets of 131 banks in 27 countries in the EEA, with the most recent information dated 30 June 2019.

Universal financial service that meets customers’ needs

The aim of Landsbankinn's strategy is to ensure that customers feel they achieve success with the Bank and that the Bank and its customers enjoy mutual benefits from the relationship; that the Bank is a dynamic force that provides universal financial service tailored to fit the customer's needs in harmony with the community and the environment.

Landsbankinn was ranked highest by banking customers in the Icelandic Performance Satisfaction Index 2019.

New focus areas and new strategy for the future

In 2017, the Bank introduced new focus points in its strategy, putting development of digital technology and customer service front and centre. These focus points were fourfold:

Accessibility: Customers can easily tend to all main banking business where and whenever they like. They have easy access to information and a good overview of their finances.

Efficiency: Customers save time and effort through use of the Bank's solutions. Their business is tended to expediently and securely using the service method of the customer's choosing.

Value-adding: Customers receive personal service tailored to meet their needs. They experience their relationship with the Bank as valuable and see that their business history is taken into account.

Initiative: We are attentive to customers and they are listened to. Customers see that the Bank's employees conduct their work in a professional manner and show initiative.

Work has now begun on developing a new strategy for the coming years to set goals in line with changing projects and challenges. This work is projected to end around mid-year and a new strategy is expected to be introduced this fall.

Landsbankinn is a domestic leader in CSR, focused on integrating social responsibility in its core operation.

Chapter about social responsibility

Leader in banking services in Iceland

Landsbankinn provides universal banking services and places key emphasis on ensuring that services meet customer needs and that the Bank’s operation is sound in both the short and long term. Strong systemic foundations, market share and size, service channels, personal business relationships and exemplary employees are the core pillars the Bank builds on for the future. Product development, changes and innovation are a constant and necessary aspect of growth and operation and support the Bank as a leading provider of banking services in Iceland.

Digital technology and personal business relationships

Personal service is important and experience has shown that digital technology and personal business relationships are a good fit. Landsbankinn considers successful digital technology to be a product of numerous factors, such as user experience, accessibility, developing employee competencies, security, dependability, price, simplicity, image and marketing. The key point is to ensure that customers always receive the same quality service no matter the channel he or she chooses each time.

Several new solutions introduced in 2019

In 2019, Landsbankinn introduced several innovations in digital services to both retail and corporate customers. Special emphasis was placed on digital payment methods and automation of applications for short-term loans for private persons. Apple Pay was extremely well received and use of all the Bank’s self-service solutions is increasing. Landsbankinn’s app was selected App of the Year at the Icelandic Web Awards.

More information about new digital service solutions is provided in the chapter on better banking.

Sale of assets by Landsbankinn in 2019

The objective of Landsbankinn’s Policy on the Sale of Assets is to form a foundation on which to build quality internal governance procedures for the sale of assets and to limit the operational and reputational risk such sale may entail. The policy is intended to promote transparency and credibility in the sale of assets and in so doing build confidence in the Bank. Sale of assets is to be made on commercial grounds, so that a fair price is obtained for the assets.

Assets for sale at year-end 2019

A total of 273 assets appropriated by the Bank were held for sale as at 31 December 2019. Their book value was ISK 727 m. In addition, three real estate properties, previously Bank premises, were for sale at year-end 2019.

At year-end 2019, sale processes for holdings in 12 unlisted companies were on-going. These holdings are variously owned by Landsbankinn or Hömlur fyrirtæki ehf., a subsidiary of the Bank. Information about these holdings have been disclosed, inter alia, on the Bank's website.

Assets sold in 2019*

In 2019, Landsbankinn sold 93 appropriated assets, one real estate property that had previously been used to house the&Bank's operation,two vehicles and 67 pieces of art.** The total sales value of these assets amounted to ISK 843 m.***

Categories of assets for sale at year-end 2019:
Residential apartments 3
Building sites for residential apartments and commercial housing 28
Building sites for cottages 234
Other real estate 1
Land 3
Vehicles and equipment 3
Inventories 1

Assets sold in 2019 fell into the following categories: Number Total sales value
Residential apartments 14 407,300,000
Building sites 3 62,000,000
Commercial housing 5 223,300,000
Land 1 61,500,000
Building sites for cottages 16 24,310,000
Vessels 6 14,900,000
Other 69 13,279,000
Vehicles and equipment, appropriated assets 49 35,973,305
Total 163 842,562,305

*Securities and other financial instruments listed for trade on a registered market are sold on the market and that process is considered an open sale process. Such transactions are not included in the table above.

**The Bank owns around 2300 pieces of art, mainly paintings, but also ceramic art, reproductions, photographs and more. In 2009, the Ministry of Education, Science and Culture commissioned a professional valuation of the Bank’s collection. It was suggested that pieces in category I would become public property, that category II pieces should not be sold without consulting with the National Gallery of Iceland and that category III pieces would be offered on loan to cultural institutions. Other pieces were marked as uncategorised and the Bank was made free to dispose of them without any conditions. Since the valuation, pieces owned by savings bank that merged with Landsbankinn have been added to the collection and undergone a similar appraisal. Around 1600 pieces are valued as uncategorised and only such pieces have been or will be sold. The sale value of artwork sold in 2019 totalled ISK 2.2 million, less a sale fee. Sale took place via open sale process (online auction).

*** The Board of Directors approved one exception from the main rule on employing an open sale process for the sale of one real estate asset in 2019. The sale value was ISK 61.5 million.

The State's net profit from Landsbankinn amounts to ISK 184.1 bn

Upon the establishment of Landsbankinn hf. in fall of 2008, the Icelandic State provided the Bank with equity in the amount of ISK 122 bn. In so doing, the State gained an 81.33% share in the Bank. Ownership of the Bank changed as at 11 April 2013, when an 18.67% share, held by Landskil on behalf of the Winding-up Board of LBI hf., was transferred to the Icelandic State and Landsbankinn in accordance with an agreement between the parties from December 2009.

Since the establishment of Landsbankinn and up to and including the year 2019, the Bank has paid ISK 140.5 bn in dividend to the State, or what amounts to 115% of the initial purchase price. Having regard for the State's interest expenses, dividends and the initial purchase price, costs incurred by the State for purchasing shares in the Bank amount to ISK 62.3 bn whereas the holding* was valued at ISK 246.4 bn at year-end 2019. The State's net profit thus amounts to ISK 184.1 bn.

The National Treasury also holds shares in Landsbankinn through its holdings in savings banks Sparisjóður Vestmannaeyja and Sparisjóður Norðurlands. These holdings have not been taken into account in the above summary. The State held 99.8% of outstanding shares in Landsbankinn at year-end 2019.

State's profit from Landsbankinn holding
Initial capital contribution -122,000
Interest on initial capital contribution -76,347
Extrapolated interest impact** -4,473
Dividend payments 140,530
Interest in equity 246,428
State's net profit 184,428

* Based on the book value of equity as at 31.12.2019

** Extrapolated interest on interest payments and dividends

All amounts in ISKm

A model of good governance

The governance structure of Landsbankinn forms the foundation for solid relations between shareholders, the Board of Directors, executives, employees and other stakeholders and encourages objectivity, integrity, transparency and responsibility in the management of the Bank. Landsbankinn adheres to recognised guidelines on corporate governance and regularly reviews the Bank’s compliance with such guidelines.

In April 2019, the Centre of Corporate Governance renewed its recognition of Landsbankinn as a model of corporate governance. The award is organised by the Iceland Chamber of Commerce, Nasdaq OMX Iceland, the Confederation of Icelandic Employers and the CCG at the University of Iceland.

The award is based on a review of the Bank’s governance practices, carried out by Deloitte ehf. The review is based on the Guidelines on Corporate Governance published by the Iceland Chamber of Commerce, the Confederation of Icelandic Employers and Nasdaq OMX Iceland. The Centre of Corporate Governance at the University of Iceland coordinates the award process.

Landsbankinn first received the award in 2014 and has been an annual recipient since. The aim of the recognition is first and foremost to encourage debate and actions that promote good corporate governance.

Landsbankinn complies with recognised guidelines on corporate governance and publishes a Corporate Governance Statement annually. The Statement includes information on the Board of Directors and its sub-committees.

Read the Corporate Governance Statement

Customers’ rights and processing of personal data

Landsbankinn respects the legally protected rights of customers provided for in the Act on Personal Data Protection and in keeping with the Bank’s policy on data protection and the processing of personal information. Individuals can use the Bank’s data rights portal to request access to their own personal data that the Bank uses in its operation, and request correction or deletion of certain personal data from the Bank's systems.

In 2019, Landsbankinn processed 44 applications for access to information, 21 applications to delete data and one request to transfer data to another service provider. The Bank’s Data Protection Officer did not receive any complaints about the treatment of the personal data of customers or others in 2019.

Actions to combat money laundering and terrorist financing

A new Act on Measures against Money Laundering and Terrorist Financing entered into effect in January 2019. During the year, changes were made to the Bank’s processes and systems to reflect new requirements and the Bank’s increased emphasis on reducing even further the risk of its services being misused to launder money or finance terrorism. Landsbankinn has reinforced electronic surveillance of actions to counteract money laundering and terrorist financing. More employees were added to control functions to meet increased demand and reflect management’s heightened focus. A comprehensive risk assessment has been carried out on the Bank’s customers and its overall operation. In 2020, Landsbankinn will continue to develop its surveillance systems and work on making procedures related to ongoing monitoring of contractual relationships more efficient and user-friendly. Costs related to these issues are expected to increase alongside more stringent requirements. 

In 2019, the Financial Action Task Force (FATF), placed Iceland on a list of countries that have declared their willingness to implement an action plan for remedy of the situation. The impact on the operation and activities of Landsbankinn has been limited as the demand for reform is not aimed at financial institutions. That being said, there has been a delay in some international transfers and a handful of financial undertakings with limited connections with Landsbankinn and Iceland have rejected transfers from Icelandic financial institutions.