This is a correction of the announcement from 19:17:34 on 15.05.2014 GMT. Reason for correction:
In the Q1 2014 Press Release it was stated that a new agreement between Landsbankinn hf. and LBI hf. had been signed on March 8, 2014 but the correct date is May 8, 2014. Same corrections were made on slide number 22 in the Q1 2014 Reults Presentation. Furthermore, a text adjustment was made on slide number 12 the English version of the Q1 2014 Reults Presentation.
An updated Press Release can be obtained here below. Also an updateded presentation can be found as an attachment.
Landsbankinn: Financial results for Q1 2014
Landsbankinn reports an ISK 4.3bn profit in the first three months of 2014.
In the first three months of 2014, Landsbankinn’s net after-tax profit was ISK 4.3bn. Landsbankinn’s after-tax profit for the same period in 2013 was just under ISK 8bn. Landsbankinn paid just under ISK 20bn in dividends to its owners in the first quarter; despite that payment, the Bank's equity and capital adequacy ratio remain far above regulatory requirements.
The YoY lower net profits are due for the most part to a decreasing interest spread and decreasing market value of financial assets and higher taxes. However, the increase in net commission income offsets these lower profits. The main reason for the decreasing interest spread is the YoY drop in inflation.
Falling income leads to a higher cost-income ratio between these periods. General operating expenses increase slightly on the back of collective bargaining agreements concluded in the first quarter. Disregarding fluctuations in income from marketable bonds, operating expenses are on track and a decrease, in real terms, is expected during the course of the year.
Steinthór Pálsson, CEO of Landsbankinn: "Landsbankinn's performance in the first quarter of the year is acceptable in light of a considerable fall in the interest spread and unfavourable price developments in the market. The Bank paid a high dividend to its shareholders in March while maintaining its strong equity and liquidity positions. Defaults continue to decrease parallel to recovery in the local economy. The Bank's market share among individuals has never been as high and, as evidenced by the opening of a new Corporate Service Centre in April, we continuously seek new ways to provide better services to our customers in the most efficient manner. We remain optimistic about the outlook for the Bank's performance for the remainder of the year and will continue to streamline our operations.”
In May Landsbankinn and the Winding up Board of LBI reached an agreement on amendments to the bonds of December 2009. Initially, the bonds were issued on the basis of decisions of the Icelandic Financial Supervisory Authority in accordance with provisions of the Emergency Act from 2008. The Principal amount of the bonds was compensation for the net assets and liabilities transferred to Landsbankinn. The final maturity of the bonds is to be extended from October 2018 to October 2026.
Steinthor Palsson says that this is an important step for Landsbankinn: “This agreement strengthens the bank's present position and its future opportunities and puts the bank in a good position and facilitates access to international debt capital markets. Specific restrictions on dividend payments have also been removed, enhancing shareholder value. The agreement is conditional upon the Winding up Board of LBI obtaining certain exemptions from the capital controls."
Key figures from the profit and loss account and balance sheet for Q1 2014
Key aspects of operations in the first three months of 2014
New agreement with LBI hf.
A new agreement between Landsbankinn hf. and LBI hf. was signed on May 8, 2014 amending the 2009 bond agreement. The final maturity of the bonds will be extended from October 2018 to October 2026. According to the agreement Landsbankinn has an option to make aluable and flexible prepayments of the bonds without any additional costs which is highly important for the bank.
Interest rate terms will remain unchanged until October 2018, i.e. LIBOR + 2.90% but in October 2018 the margin will be stepped up and will be 3.50–4.05% for individual instalments due in 2020 – 2026. Each of the maturities between 2020 and 2026 will be equivalent to approximately 30 billion ISK.
This change will see considerable lowering of the debt burden of Landsbankinn and it strengthens the banks overall financial position. Furthermore, this change will lower the minimum coverage ratio reduced from 124.8% to 115% which in itself will help facilitate financing on international markets. Also it will be possible to pay dividend to owners without paying an equal amount to LBI hf.
The agreement is conditional upon LBI receiving certain exemptions, in accordance with the Foreign Exchange Act.
Outlook and principal tasks ahead
For further information:
Kristjan Kristjansson, Public Relations, firstname.lastname@example.org, tel: +354 410 4011
Kolbrun Gudlaugsdottir, Investor Relations, email@example.com , tel: +354 410 4014
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