Sound business relationships

When the business activities, plans and goals of thousands of customers were upset in the beginning of 2020, we needed to act quickly to adapt our operation and service to changed circumstances. We worked with customers to mitigate the economic impact of Covid-19, making various changes in order to be able to continue to provide all necessary service despite restrictions on gatherings, work from home, and other challenges.

Gallup’s survey of the corporate market supports our experience that we managed to uphold a high service level under challenging conditions. According to Gallup, our customers are the most satisfied customers on the banking market. Customer satisfaction is also reflected in Landsbankinn holding the highest customer loyalty among the banks, as measured by Gallup. Landsbankinn’s self-service solutions received top marks from its customers, which is gratifying, as they have never been more important than now.

The chapter on smarter banking provides more information about digital solutions.

Sound business relationships never more important

“When it became clear that many of our customers would experience liquidity issues following the spread of Covid-19, we focused on a speedy response. All companies in need received a six-month moratorium on instalments on principal and interest payments and the Bank was actively involved in shaping the final presentation and implementation of the government’s solutions in the form of support and supplemental loans to corporates. Almost three hundred companies who bank with us, mainly in the travel sector, have now received support or supplemental loans. The difficulties are not behind us yet and it is uncertain when real economic recovery will begin. In times such as these, solid business relationships are of great importance.

We intend to support companies, many of whom have experience unprecedented income loss, to the best of our ability, and work with them to rebuild robust operations as soon as the pandemic has been overcome.

In recent years, we have improved digital services to companies in various ways and we sharpened our focus on that work even further when the pandemic became a reality. In a very short time, we managed to develop solutions to enable customers to sign almost all documents electronically, introduced numerous new solutions to corporate online banking and, towards the end of the year, added corporate account access to Landsbankinn’s app. Surveys carried out in 2020 show increased satisfaction with the Bank’s services, both through digital channels and in person. Our policy is clear - we intend to continue providing exceptional service and strengthen and reaffirm our relationships with customers.”

Major digital advances

The option to use electronic signatures was added for around 70 document types

Landsbankinn’s app now includes access to corporate accounts

Companies can create accounts any time they like

Becoming a customer is a matter of minutes

The chapter on smarter banking service provides a more in-depth review of digital services

Robust service suited to various companies

Companies who bank with Landsbankinn are of various sizes and types, in different sectors and located all around the country. We endeavour to build solid long-term relationships, provide exceptional service and support value-creation to help companies succeed. Landsbankinn Corporate Banking and the Corporate Banking Service Centre in Borgartún boast of a highly effective team of experts. Knowledgeable experts with strong ties to local industry work out of our branches in rural Iceland. The Bank’s market share in corporates was 30.8% at year-end 2020, according to the Bank’s data. This is based on companies with four or more employees who primarily bank with Landsbankinn. The percentage is based on information about company numbers from the Register of Enterprises of Iceland Revenue and Customs.

Our usual customer service changes in various ways in 2020. When face-to-face meetings and visits to our customers were not allowed, we solved matters over the phone or video conferences. In some cases, we spoke through doorways, in the hallway or met outside in the parking lot. Various services our customers have enjoyed in the past, such as the 360° financial review and service interviews, have largely been put on hold.

Self-service at 98%

In all main bank transactions for corporate customers, i.e. domestic and international payments, and claim collection, self-service levels are at 98%. Companies manage access rights for their employees independently, create users in online banking, establish B2B connections, change access rights and user roles and add features to online banking and the app. They also create bank accounts, and apply for debit and credit cards independently.

Conservative lending growth

In light of the conditions that arose early in the year, many companies postponed or cancelled their investment plans. This resulted in fewer loan applications from companies than usual. Numerous companies, especially in the travel sector, experienced severe difficulties and income loss.
We were able to provide various solutions, in addition to measures introduced by the government, to assist companies in trouble, such as amending terms and postponing payments. The Bank was nevertheless involved in the financing of several projects across all sectors, resulting in conservative growth of its credit portfolio. The growth is mostly due to an increased market share in lending to the fisheries and seafood industry.

As might be expected, car rentals purchased far fewer cars in 2020 and the contraction was just under 60%, according to data from the Icelandic Transport Authority. This was evident in lower lending yet we maintained our market position and did well.

Well placed to support customers

"In banking, it is important to build on sound financial foundations, not least in times of uncertainty. Landsbankinn is well placed, with adequate equity and liquidity to withstand stressed conditions caused by current uncertainties. Our strong position enables us to continue to support or customers.

The greatest risk in the Bank’s operation is the risk of credit loss. To manage and mitigate that risk, we have implemented a robust internal control framework that aims to diversify risk and ensure that lending complies with the Bank’s risk appetite. It is the nature of lending that some borrowers are unable to repay their loans. We assess this risk and price it into lending decisions, i.e. in determining interest rates and managing our interest rate margin. Credit losses may fluctuate between years and are generally higher during recessions. When risk increases, we allocate more funds to loan provisioning intended to meet expected credit loss or impairment. In 2020, the Bank increased provisions for impairment considerably, which was to be expected under deteriorating economic conditions and the negative impact of Covid-19. Provisions for loan impairment were for the most part driven by the growing likelihood and expectation of credit loss.

In 2020, all risks in the Bank’s operation were tested. The financial position of many borrowers worsened, primarily for corporate customers in the travel sector and individuals who became unemployed. Equity prices fluctuated considerably, as did the exchange rates of the Icelandic króna and other currencies, and increased work from home called for significant changes to the Bank’s operation.

In recent years, we have worked systematically towards utilising the Bank’s data to take credit decisions and automate other processes. The framework for such decisions has also been strengthened. The results of these changes stood us in good stead and were instrumental in allowing us to maintain relatively unchanged service levels under unprecedented conditions."

Strong in construction financing

Landsbankinn has over the course of many years been a leader in construction financing. We have been active in financing new residential housing and supported many contractors involved in the construction of apartment buildings. The Bank has financed construction of new housing with guaranteed sale or rental contracts.

Early in the year, there was some uncertainty about developments in the real estate market. At that time, contractors could meet supply with already constructed apartments and were careful about initiating new projects.

As the year progressed, the market developed to show increased demand despite the pandemic, and sales were up between years. Handsome rate cuts facilitated housing purchase, with so-called participating loans assisting market entry for first-time buyers. New construction projects already in the works or initiated in the year could not meet demand. In 2020, Landsbankinn continued its high activity in financing of residential housing projects, both apartments on the public market and rental housing. The Bank’s share in this market has grown in recent years.

Large construction projects

projects

Residential apartments

2,360

apartments

General residential apartments

550

apartments

At the end of 2020, larger construction projects financed by the Bank numbered 75. These projects involve the construction of 2,360 apartments, most of which will enter the real estate market in 2021 and 2022. 550 of these apartments are rental apartments such as student housing and for the general market, i.e. owned by non-profits. The lion's share of these apartments is located in the capital area, with some larger projects also in Selfoss, Akranes and Reykjanesbær.

Collaborating with the travel sector to find solutions

The Covid-19 pandemic has hit hotels, guest houses, restaurants and other undertakings in the travel industry hardest. We were able to offer various solutions, such as freezing loans and postponing payments, but there was also high demand for advice. Over three hundred companies, mainly in the travel sector, took advantage of government-backed support loans granted by the Bank.

Following high activity and development in the travel sector ever since 2010, the industry faced a near complete income loss. New investment in the sector was naturally low in 2020, even though some projects backed by Landsbankinn, already fairly advanced when the pandemic hit, were continued.

We expect the travel industry to gain its feet in 2021 alongside advancement of the vaccination programme, and to slowly gain its former strength. It is important to ensure that businesses in the travel sector are in a position to rebuild - the Bank’s actions and services aim to ensure that.

Almost 300 customers, mainly in the travel sector, availed themselves of support and supplementary loans granted by the Bank and government-guaranteed.

Support and supplementary loans are part of the government’s relief programme and are intended for SMEs suffering income loss through Covid-19. These loans are guaranteed by the State and granted by the banks. The maximum loan amount available to each company is ISK 40 million, which is divided into two loan forms: a support loan of up to ISK 10 million, 100% government-backed, and a supplementary loan of up to ISK 30 million, 85% government-backed, intended for larger companies. The process was immediately automated and of the 328 support and supplementary loans granted by Landsbankinn, 167 were fully automated, from application to disbursement, through the service portal island.is.

Robust service to the seafood and fisheries sector

Landsbankinn is a leading provider of financial service to the Icelandic seafood and fisheries sector, both in terms of the number of corporate customers and total lending to the sector. The Bank’s market share among companies in the seafood and fisheries sector increased in 2020 with the addition of several new customers. Results were generally good in the seafood and fisheries sector - a good defensive victory under difficult conditions. Covid-19 caused companies to concentrate on operation and marketing, putting investment plans on ice in most cases. Our service was mostly focused on helping customers remain afloat and provide any support needed.

Leading in financial services to trade and service

Following considerable growth in business with trade and service enterprises in recent years, the Bank maintained its leading position in these sectors in 2020. As in preceding years, new customers joined Landsbankinn and we continued to work on numerous exciting ventures with existing customers.

Trade and service

The trade and service sectors include a wide range of customers in retail, transport, IT and other services.

There are several indications that these sectors have not suffered as much as expected under Covid-19, with payment card turnover numbers from December showing increased domestic turnover between years.

Emphasis on improving operation in agriculture

Icelandic agriculture also faced considerable challenges in 2020. Performance was generally good nevertheless and we consider the outlook in the sector good. Following a good deal of development in recent years, we noticed that farmers were now focused on improving operation rather than new investment. Agriculture has long been an important part of Landsbankinn’s customer profile and we intend to enhance our reslationships with farmers and their companies in the next couple of years and for the future.

By clicking "Allow All", you agree to the use of cookies to enhance website functionality, analyse website usage and assist with marketing.