Strategy and Governance
In 2017, the Bank re-focused its strategy and now places greater emphasis on advancement in digital services.
Emphasis on advancement in digital services
Towards the end of 2017, the Bank presented new focus points for its strategy leading up to 2020, whereby priority is given to developing digital service solutions for customers. The new strategic focus points are 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.
- We put the customer first.
- We build on strong partnerships and continuous progress.
- At Landsbankinn, every single individual is responsible for achieving success.
The five key goals
- Customer satisfaction and loyalty
- Return on equity (ROE) around 10%
- A cost-income ratio of around 45%
- Job satisfaction among employees
- Ensuring that risk appetite remains within set limits
Full-time equiv. positions
Landsbankinn's goals for the years 2018-2020
In 2015, Landsbankinn developed a 5-year strategy and created a comprehensive list of projects to be completed by 2020. In 2017, most of these projects had either been completed or were well advanced. At the same time, new challenges had presented themselves, such as new legislation on data protection and open data platforms, and changes in digital technology. As a result, the strategy was re-focused towards the end of 2017.
Digitalised and personal service
Landsbankinn will focus on creating solutions that allow it to provide services tailored to the customer's needs and in line with demands and developments in the financial market.
The Bank's knowledge and experience of providing personal service will translate to digital solutions. Landsbankinn will emphasise personal customer relationships and leverage data analysis and digital solutions to provide appropriate financial advice.
Security and solid foundations
Landsbankinn is focused on security in business transactions and ensuring that the storage and utilisation of personal information is in accordance with best practices. Landsbankinn emphasises being a leader in information security in Iceland.
The modernisation of branches and outlets continues with an eye to maintaining the Bank's strong market position and solid ties to customers throughout Iceland.
Efforts to economise in operation will continue, as will efforts to make service provision more efficient to allow the Bank to offer its customers competitive terms while simultaneously generating a healthy profit for shareholders.
Robust corporate culture
Landsbankinn is focused on security in business transactions and ensuring that the storage and utilisation of personal information is in accordance with best practices. Landsbankinn emphasises being a leader in information security in Iceland.
Key to achieving these objectives is support for the Bank's employees, its human resources. In recent years, concerted efforts have been made to strengthen the employee group and implement a corporate culture based on initiative, trust and transparency. Increased use of digital technology and automation will reduce repetitiousness which will lead to increased job satisfaction.
Further details on the Bank's human resources policy are provided in the chapter on Human Resources.
Landsbankinn 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. Each year, Landsbankinn reviews compliance with recognised guidelines on corporate governance to determine whether the Bank complies with such guidelines at each time.
In March 2017, the Centre of Corporate Governance renewed its recognition of Landsbankinn as a model of corporate governance for the period 2016-2017 based on a review undertaken by Deloitte ehf. of the Bank's governance practices in January 2017. The review has regard for the Guidelines on Corporate Governance published by the Iceland Chamber of Commerce, the Confederation of Icelandic Employers and Nasdaq Iceland. The aim 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.
| Categories of assets for sale at year-end 2017: | |
|---|---|
| Residential apartments | 26 |
| Commercial housing | 21 |
| Building sites for residential apartments and commercial housing | 49 |
| Building sites for cottages | 264 |
| Cottages | 3 |
| Other real estate | 7 |
| Land | 7 |
| Vessels | 5 |
| Vehicles and equipment | 20 |
| Inventories | 1 |
| 403 | |
Sale of assets by Landsbankinn in 2017
In March 2016, Landsbankinn approved a new policy that applies to all asset sales by the Bank. The objective of the policy is to enhance the quality and strengthen still further the Bank's internal procedures as regards the sale of assets and mitigate the operational and reputational risk asset 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. The policy is further intended to maximise recovery on appropriated assets.
The policy provides that the Bank shall publish an annual report on its website, disclosing a summary of information on assets held for sale, assets sold in the previous 12 months and a summary of information about any departures from the main rule of employing an open sale process in the previous 12 months. This report is now part of the Bank's Annual Report and is published below.
Assets for sale at year-end 2017
A total of 403 assets appropriated by the Bank were held for sale as at 31 December 2017. Their book value was ISK 3.4 bn. An additional three properties owned by Landsbankinn, previously used to house the Bank's operation, were held for sale on 31 December 2017, as was one vehicle.
At year-end 2017, 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 has been disclosed, inter alia, on the Bank's website.
Assets sold in 2017
In 2017, Landsbankinn sold 278 appropriated assets, 8 real estate assets, 11 vehicles and holdings in two companies. The total sales value of these assets amounted to ISK 6.2 bn
| Assets sold in 2017 fell into the following categories:* | Number | Total sales value |
|---|---|---|
| Residential apartments | 62 | 1,935,443,000 |
| Commercial housing | 14 | 1,574,390,000 |
| Building sites for residential apartments and commercial housing | 82 | 1,273,945,000 |
| Land | 9 | 424,885,000 |
| Building sites for cottages | 30 | 44,130,000 |
| Cottages | 10 | 136,950,000 |
| Vessels | 3 | 10,400,000 |
| Inventoties | 1 | 7,005,495 |
| Vehicles and equipments | 81 | 66,976,255 |
| Other | 5 | 67,400,000 |
| Shareholdings in companies | 2 | 684,520,115 |
| Total | 299 | 6,226,044,865 |
*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.
Disclosure about departure from the main rule of employing an open sale process
The Bank's policy on the sale of assets provides that the main rule of employing an open sale process can be deviated from if an open sale process is deemed to violate the lawful interest of the Bank or business reasons prevent the utilisation of an open sale process. Business reasons may refer to patents or agreements with suppliers or brand owners, provisions of shareholder agreements or articles of association on pre-emptive rights, the views of other owners, creditors or owners of business licenses and finally, the value of a company may not support the cost of an open sale process.
The policy stipulates that departure from the main rule of employing an open sale process shall be substantiated and documented. Such departures are contingent on the approval of the Board of Directors.
There were three departures from the main rule of employing an open sale process in 2017 and they were all approved by the Board of Directors. The combined sales value of these three assets was ISK 94 million.
The State's net profit from Landsbankinn amounts to ISK 153.3 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 2017, the Bank has paid ISK 107 bn in dividend to the State, or what amounts to 87% 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 91.3 bn whereas the holding* was valued at ISK 244.6 bn at year-end 2017. The State's net profit thus amounts to ISK 153.3 bn.
The National Treasury also holds shares in Landsbankinn through its ownership of shares in savings banks Sparisjóður Vestmannaeyja and Sparisjóður Norðurlands. These holdings have not been taken into account in the above summary. The State held 99.7% of outstanding shares in Landsbankinn at year-end 2017.
| The State's profit from shares in Landsbankinn | |
|---|---|
| Profit | |
| Net financing cost | -91,649 |
| Interest in equity | 244,600 |
| State's net profit | 153,343 |
*Based on book value of equity as of 31.12.2017.
All amounts in ISK m.