The international rating agency Standard and Poor’s (S&P) has today, 14 October 2014, revised the outlook for Landsbankinn to positive from stable, and affirmed the long- and short-term ratings at ‘BB+/B’.
In its press release, S&P states that the agency foresees solid GDP growth for Iceland for the next two years and expects economic imbalances to decline further. S&P has revised its economic risk trend for Iceland to positive from stable, and expect a continued improvement in the banking system's asset quality.
S&P also states that the agency’s positive outlook on Landsbankinn largely reflects the view that the banking sector is improving and S&P’s positive outlook on the Icelandic sovereign. On July 18, 2014, S&P revised the outlook on the sovereign to positive due to strong growth and declining government debt. The long-term rating of ‘BBB-’ is one notch higher than the ratings on the banks. In S&P’s opinion, the ratings on the sovereign, and as well as S&P’s view of the banking sector, continue to be constrained by the risks associated with the government’s eventual removal of capital controls. However, S&P’s assumes that the authorities would approach the removal prudently to minimize the impact on the economy and exchange rate.
S&P further states that Landsbankinn, due to its larger capital base, could benefit more if the sovereign would be upgraded and S&P’s assessment of risks related economic imbalances in the banking sector is revised to intermediate from high.
S&P’s positive outlook on Landsbankinn reflects the agency’s view that the Bank’s stand-alone credit profile (SACP) will likely improve alongside improvements in the Icelandic economy. S&P states that they see a positive trend for economic risk in the Icelandic banking sector and would expect to upgrade the bank if its view on the sector continued to improve.
S&P also anticipates that the preliminary agreement between Landsbankinn and LBI hf. (formerly Landsbanki Íslands hf.) will extend the repayment profile of legacy bonds due to the estate of LBI hf.
For further information, please contact
Kristján Kristjánsson, pr@landsbankinn, 00 354 410 4011/00 354 899 9352