Investor Presentation Landsbankinn November 2017 Investor - - PowerPoint PPT Presentation

Investor Presentation Landsbankinn

November 2017

Landsbankinn

DISCLAIMER

This presentation is for information purposes only and shall not be construed as an offer or solicitation for the subscription or purchase or sale of any financial instrument. This presentation may not be reproduced, retransmitted or further distributed to the press or any other person or published, in whole or in part, for any purpose. Failure to comply with this restriction may constitute a violation of applicable securities laws. This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of Landsbankinn in any jurisdiction or an inducement to enter into investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. The information set out in this presentation has not been independently verified. No representation or warranty is made by Landsbankinn as to the accuracy, completeness or fairness of the information or opinions contained in this presentation. This presentation is intended only for persons having professional experience in matters relating to investments being relevant persons (as defined below). Solicitations resulting from this presentation will only be responded to if the person concerned is a relevant person. Neither this presentation nor any copy of it may be taken or transmitted into the United States of America, its territories or possessions, or distributed, directly or indirectly, in the United States of America, its territories or possessions. Any failure to comply with this restriction may constitute a violation of U.S. securities laws. This presentation is not an offer of securities for sale in the United States. Landsbankinn has not registered and does not intend to register any securities in the United States or to conduct a public offering of any securities in the United States. This presentation is made to and is directed only at persons in the United Kingdom having professional experience in matters relating to investments who fall within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the "Order"), and to those persons to whom it can

• therwise lawfully be distributed (such persons being referred to as "relevant persons").

The forward-looking statements in this presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions, including, without limitation, management's examination of historical operating trends, data contained in Landsbankinn’s records and other data available from third parties. Although Landsbankinn believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, and Landsbankinn may not achieve or accomplish these expectations, beliefs or projections. Neither Landsbankinn, nor any of its members, directors, officers, agents, employees or advisers intend or have any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this presentation. Landsbankinn accepts no liability whatsoever for any direct or indirect loss, howsoever arising, from use of this presentation. Landsbankinn assumes no obligation to update this presentation, provide any additional information or correct any errors, which may eventually become apparent.

2 Investor Presentation

Landsbankinn

The Big Picture – Iceland at a glance

Investor Presentation

Capital city Reykjavík Population 343,960 (Q2 2017) Size 102,775 km2 Government Parliamentary Constitutional Republic Elections held 28 October 2017 Legislature Althingi 63 members elected for term every four years Political milestones Full independence in 1944 Member of UN in 1946, OECD 1948, NATO

• 1949. Joined EFTA in 1970 and accessed the

European Economic Area in 1994 Currency ISK - Icelandic króna 1 EUR ≈ 122 ISK GDP Total $19.4 billion Per Capita $57,889 (2016) Sovereign long term credit ratings S&P: A/Stable (June 2017) Moody’s: A3/Stable (Sept 2016) Fitch: A-/Positive (July 2017)

3

Landsbankinn‘s branches

Source: www.statice.is, www.imf.org

Landsbankinn

A leading Icelandic universal bank

■ Landsbankinn hf. is the largest financial institution in Iceland offering universal banking services for

households, corporates and institutional investors

■ The market leader in the Icelandic financial services sector

■ Market share ≈ 35-40 % in the domestic retail segment and corporate sector ■ Award winning mobile banking solutions for retail and corporates ■ The most extensive branch network in Iceland, 24 branches and 13 service points

■ Total number of staff 998 (9M 2017)

4 Investor Presentation

Landsbankinn

Strategy

Investor Presentation 5

Landsbankinn

Ownership

6

Icelandic State Treasury

≈ 900 other shareholders

0.3%

The Icelandic State Financial Investments (ISFI)

98.2%

Landsbankinn

• Own shares

1.5%

■

The Finance Ministry published an ownership policy in July 2017 in regards to equity holdings in financial companies that are supervised by the Icelandic State Financial Investments (ISFI)

■

In regards to Landsbankinn the policy states,

■

The government will retain a significant equity stake in the bank (34-40%) to ensure stability in the domestic financial sector

■

The remaining equity stake will be sold in the next few years given favorable market conditions

■

Equity in Landsbankinn will be listed on a stock exchange

Investor Presentation

Landsbankinn

Organisational chart

7

Perla Ösp Ásgeirsdóttir Hreiðar Bjarnason Hrefna Ösp Sigfinnsdóttir Arinbjörn Ólafsson Helgi Teitur Helgason Árni Þór Þorbjörnsson Lilja B. Einarsdóttir

Investor Presentation

Landsbankinn

8

S&P credit rating

Fundamental factors for Landsbankinn:

■

Very strong capital and earnings

■

Strong liquidity position

■

Average funding profile

■

Adequate business position

■

Moderate risk position Icelandic sovereign Landsbankinn hf. Long-term rating A BBB+ Short-term rating A-1 A-2 Outlook Stable Stable Last rating action March 2017 October 2017

Investor Presentation 1 3 5 7 9 11 13 15 17 19

07.10.2008 07.10.2009 07.10.2010 07.10.2011 07.10.2012 07.10.2013 07.10.2014 07.10.2015 07.10.2016 07.10.2017 Landsbankinn hf. Republic of Iceland - Foreign currency 20.01.2014 25.10.2017 25.10.2016 21.07.2015

Landsbankinn

9

Strong overall credit profile

■

Landsbankinn is among the global leaders in terms of its leverage and CET 1 ratio

■

Landsbankinn’s pro-forma RAC ratio as of mid-year 2017 is at 19.9%

■

Landsbankinn aims to be in the highest category for RAC ratio, as determined and measured by the relevant credit rating agency

Source: Standard&Poors – RatingsDirect *Mid-year 2017 RAC ratio

Investor Presentation

29.7% 18.4% 16.3% 16.3% 12.3% 0% 5% 10% 15% 20% 25% 30% 35% Landsbankinn Nordea Danske Bank DNB Bank of Ireland

CET 1 ratio

Year-end 2016

20.3% 5.0% 4.6% 7.3% 7.3% 0% 5% 10% 15% 20% 25% Landsbankinn Nordea Danske Bank DNB Bank of Ireland

Leverage ratio

Year-end 2016

19.9%* 11.6% 10.3% 10.9% 12.3% 10.2% 10.1% 0% 5% 10% 15% 20% 25%

Landsbankinn Swedbank AB Jyske Bank AS Nordea Bank AB DNB Bank AS Danske Bank AS Bank of Ireland

S&P RAC ratio year-end 2016

Landsbankinn

Banking System in Iceland – Three Main Players

Investor Presentation 10

1199 1078 1144 900 950 1000 1050 1100 1150 1200 1250 Landsbankinn Íslandsbanki Arion banki Assets (ISKbn) 243 178 222 50 100 150 200 250 300 Landsbankinn Íslandsbanki Arion banki Equity (ISKbn) 26.3% 22.5% 26.6% 15% 20% 25% 30% 35% Landsbankinn Íslandsbanki Arion banki Tier 1 ratio 44.7% 60.2% 55.3% 0% 20% 40% 60% 80% Landsbankinn Íslandsbanki Arion banki Cost to Income ratio 141.8% 130.0% 168.4% 100% 120% 140% 160% 180% 200% Landsbankinn Íslandsbanki Arion banki Loans to Deposit ratio 18.1% 15.3% 16.8% 0% 5% 10% 15% 20% 25% Landsbankinn Íslandsbanki Arion banki Leverage ratio Source: 9M 2017 Financial Statements

Landsbankinn

Strong market position

11

Retail banking Corporate banking

Investor Presentation

Source: Gallup

“Deild” and “TRÚNAÐARMÁL”:

9M 2017 Results

Landsbankinn

Financial highlights Operations Balance Sheet

Profit after taxes

ISK 16.84bn

Return on equity after taxes

9.4%

Interest spread as a ratio

• f assets and liabilities

2.5%

Cost-income ratio

44.7%

Total Assets

ISK 1,199bn 26.3% 158% 1.0% ISK 243bn

Equity Tier 1 Capital LCR Total Arrears (>90 days)

EUR 134.3m EUR 9.6bn EUR 1.9bn

Exchange rate: EUR/ISK as at 30 September 2017 125.4

13 Investor Presentation

Landsbankinn

Investor Presentation 14

Development of KPIs

12.4% 12.5% 14.8% 6.6% 9.4%

0% 2% 4% 6% 8% 10% 12% 14% 16% 2013 2014 2015 2016 9M 2017

Return on equity after taxes

26.7% 29.5% 30.4% 30.2% 26.8%

0% 5% 10% 15% 20% 25% 30% 35% 31.12.13 31.12.14 31.12.15 31.12.16 30.09.17

Total capital ratio

42.9% 56.0% 43.8% 48.4% 44.7%

0% 10% 20% 30% 40% 50% 60% 2013 2014 2015 2016 9M 2017

Cost-income ratio excluding valuation adjustments

4.4% 8.2% 9.4% 10.8% 5.2%

4.7% 0% 2% 4% 6% 8% 10% 12% 2012 2013 2014 2015 2016

Dividend yield

Special dividend

Landsbankinn

Investor Presentation 15

Income Statement

Amounts in ISKm

9M 2017 9M 2016 Change Q3 2017 Q3 2016 Change Net interest income 27,070 26,207 3% 8,894 8,596 3% Net adjustments in valuation 2,067 4,419

• 53%

766 2,144

• 64%

Net interest income after adjustments in valuation 29,137 30,626

• 5%

9,660 10,740

• 10%

Net fee and commission income 6,591 5,909 12% 2,159 2,015 7% Other net operating income 5,914 5,157 15% 535 355 51% Total operating income 41,642 41,692 0% 12,354 13,110

• 6%

Salaries and related expenses 10,308 10,409

• 1%

3,163 3,096 2% Other operating expenses 7,378 7,173 3% 2,475 2,230 11% Total operating expenses 17,686 17,582 1% 5,638 5,326 6% Profit before tax 23,956 24,110 1% 6,716 7,784

• 14%

Income tax expense and tax on liabilities of financial institutions 7,115 7,710

• 8%

2,528 2,682

• 6%

Profit for the period 16,841 16,400 3% 4,188 5,102

• 18%

Landsbankinn

Investor Presentation 16

Net operating income

Amounts in ISKm

62% 15% 9% 5% 4% 3% 2%

Income mix

Net interest income Net commission and fees Equities Other net operating income Net adjustments in valuation Bonds FX gain (loss)

9,879 7,855 7,269 7,466 8,018 7,118 7,385 8,929 10,145 10,158 7,340 7,057 8,834 8,596 8,894 9,977 5,776 7,292 8,443 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 2013 2014 2015 2016 2017

Net interest income

Q1 Q2 Q3 Q4 4,430 14,027 12,334 4,419 2,067 3,932 6,101 5,882

• 4,737
• 10,000
• 5,000

5,000 10,000 15,000 20,000 25,000 2013 2014 2015 2016 2017

Net adjustments in valuation

9M Q4 1,363 1,518 1,641 1,980 2,116 1,597 1,403 1,753 1,914 2,316 1,151 1,275 1,745 2,015 2,159 1,180 1,640 1,702 1,900 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 2013 2014 2015 2016 2017

Net fee and commission income

Q1 Q2 Q3 Q4

Landsbankinn

Investor Presentation 17

Net operating income

Amounts in ISKm

4,631 2,491 7,947

• 100

3,975 2,372 3,572 1,724 555

• 2,000

2,000 4,000 6,000 8,000 10,000 12,000 2013 2014 2015 2016 2017

Equities

9M Q4 3,438 614 2,186 1,225 1,251 637 2 592 315 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 2013 2014 2015 2016 2017

Bonds

9M Q4 1,350

• 40
• 1,219

33

• 893
• 203

107

• 58
• 212
• 1,500
• 1,000
• 500

500 1,000 1,500 2013 2014 2015 2016 2017

FX gain (loss)

9M Q4 2,660 1,473

• 238

3,999 1,581 750 1,358 4,296 744

• 1,000

1,000 2,000 3,000 4,000 5,000 2013 2014 2015 2016 2017

Other operating income

9M Q4

Landsbankinn

Investor Presentation 18

Operating expenses

*2013, less expensed equity-based wages

Amounts in ISKm

■

In 2010 the government imposed a special tax on financial institutions

■

The tax of 0.376% is levied on the carrying amount of total liabilities in excess of ISK 50bn

3,173 3,455 3,702 3,754 3,491 3,122 3,288 3,179 3,559 3,654 2,810 3,019 3,466 3,096 3,163 3,508 3,805 3,407 3,640 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 2013 2014 2015 2016 2017

Salaries and related expenses*

Q1 Q2 Q3 Q4 1,183 1,126 1,063 1,012 998 200 400 600 800 1,000 1,200 1,400 31.12.13 31.12.14 31.12.15 31.12.16 30.09.17

Full time employees

2,611 2,649 2,580 2,499 2,426 2,593 2,395 2,597 2,444 2,477 2,371 2,164 2,127 2,230 2,475 2,372 3,313 2,674 2,292 2,000 4,000 6,000 8,000 10,000 12,000 2013 2014 2015 2016 2017

Other operating expenses

Q1 Q2 Q3 Q4

Landsbankinn

Investor Presentation 19

Assets

Amounts in ISKm

5% 4% 2% 2% 2% 59% 65% 73% 77% 76% 6% 5% 2% 2% 3% 3% 3% 3% 2% 3% 25% 22% 18% 14% 13% 2% 1% 2% 3% 3% 0% 20% 40% 60% 80% 100% 31.12.13 31.12.14 31.12.15 31.12.16 30.09.17

Assets

Cash and balances with CB Bonds and debt instruments Equities and equity instruments Loans and advances to financial institutions Loans and advances to customers Other assets

30.09.17 31.12.16 Change Cash and balances with CB 33,157 30,662 2,495 8% Bonds and debt instruments 160,223 154,892 5,331 3% Equities and equity instruments 31,049 26,688 4,361 16% Loans and advances to financial institutions 41,485 20,408 21,077 103% Loans and advances to customers 905,927 853,417 52,510 6% Other assets 22,740 17,641 5,099 29% Assets classified as held for sale 4,377 7,449

• 3,072
• 41%

Total 1,198,958 1,111,157 87,801 8%

Landsbankinn

Investor Presentation 20

Balance sheet - loans

Amounts in ISKbn

* Problem loans are defined as loans and advances with individual allowance and / or more than 90 days in arrears 250 240 274 319 357 244 279 327 360 389 187 199 211 174 160 680 718 812 853 100 200 300 400 500 600 700 800 900 31.12.13 31.12.14 31.12.15 31.12.16 30.09.17

Loans to customers

ISK-CPI loans ISK loans FX loans 138 110 111 121 132 151 171 200 239 267 185 198 210 173 160 474 480 521 533 559 100 200 300 400 500 600 31.12.13 31.12.14 31.12.15 31.12.16 30.09.17

Loans to corporates

ISK-CPI loans ISK loans FX loans 5.3% 2.3% 1.8% 1.5% 1.0% 5.5% 4.0% 2.0% 0.9% 1.2% 10.8% 6.3% 3.8% 2.4% 2.2% 0% 2% 4% 6% 8% 10% 12% 31.12.13 31.12.14 31.12.15 31.12.16 30.09.17

Problem loans

Arrears > 90 days Loans and advances with individual allowance 112 129 163 198 225 93 108 127 121 122 1 1 1 1 206 239 291 320 347 50 100 150 200 250 300 350 400 31.12.13 31.12.14 31.12.15 31.12.16 30.09.17

Loans to individuals

ISK-CPI loans ISK loans FX loans

Landsbankinn

Investor Presentation 21

Balance sheet - Loans

Amounts in ISKbn

30.09.2017 31.12.2016 Change ISK 394 361 33 9% ISK CPI 357 319 38 12% EUR 102 93 9 10% USD 40 61

• 21
• 34%

Other currencies 13 19

• 6
• 32%

Total loans 906 853 53 6%

New lending FX change CPI changes Changes in impairment & Write offs Installments 853 203

• -8

5 1

• 113

906 400 500 600 700 800 900 1,000 1,100

Loans change 9M 2017

Loans 31.12.16 Loans 30.09.17

43% 39% 11% 5% 2%

Loans by currencies

ISK ISK CPI EUR USD Other currencies

Landsbankinn

Investor Presentation 22

Balance sheet - Loans

Amounts in ISKm

50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000

Public entities Individuals Fisheries Construction companies Real estates companies Holding companies Retail Services ITC Manifacturing Agriculture Other

Loans by industry sectors

31.12.15 31.12.16 30.09.17 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000 Indexed mortgage loans Non-indexed mortgage loans Overdrafts and credit cards Vehicle financing Other

Loans to individuals by loan types

31.12.13 31.12.14 31.12.15 31.12.16 30.09.17 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000

Continous LTV distribution of mortages to individuals

31.12.2015 31.12.2016 30.9.2017

Weighted average LTV 30.09.17 60.1% (62.3% 31.12.16 ; 63.4% 31.12.2015)

Funding and Liquidity

23

Landsbankinn

Investor Presentation 24

Balance sheet – liabilities and equity

Amounts in ISKm

167,218 53,827 56,731 20,093 21,946 456,662 551,435 559,051 589,725 638,781 100,000 200,000 300,000 400,000 500,000 600,000 700,000 31.12.13 31.12.14 31.12.15 31.12.16 30.09.17

Deposits

Due to financial institutions and CB Deposits from customers 21% 23% 23% 23% 20% 4% 3% 3% 2% 2% 21% 19% 19% 20% 23% 40% 50% 50% 53% 53% 14% 5% 5% 2% 2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 31.12.13 31.12.14 31.12.15 31.12.16 30.09.17

Liabilities and equity

Due to financial institutions and CB Deposits from customers Borrowings & subordinated liabilities Other liabilities Equity

30.09.17 31.12.16 Change Due to financial institutions and CB 21,946 20,093 1,853 9% Deposits from customers 638,781 589,725 49,056 8% Borrowings 267,853 223,944 43,909 20% Other liabilities 27,017 25,776 1,243 5% Subordinated liabilities 229 388

• 159
• 41%

Equity 243,132 251,231

• 8,099
• 3%

Total 1,198,958 1,111,157 87,801 8%

Landsbankinn

Investor Presentation 25

Borrowings

Amounts in ISKm

50,000 100,000 150,000 200,000 250,000 Issued bonds to LBI Covered bonds EMTN issuance Other unsecured loans Subordinated liabilities

Borrowings

31.12.2013 31.12.2014 31.12.2015 31.12.2016 30.9.2017 7,775 6,740 16,240 3,720 19,540 5,640 16,140 941 40,246 12,160 26,976 62,700 40,274 2,736 2,654

• 100

200 300 400 500 600 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Q4 2017 2018 2019 2020 2021 2022 2023 2024 > 10 years

Maturity profile

ISK FX

ISKm EURm 66% 25% 9%

Borrowings 30.09.2017

EMTN issuance Covered bonds Other Unsecured loans Subordinated liabilities

Landsbankinn

26

Landsbankinn’s EUR senior unsecured issuance

54% 41% 3% 2% 58% 26% 8% 4% 4% 57% 31% 5% 4% 3% 32% 47% 12% 6% 3% 34% 31% 8% 10% 13% 4% 60% 13% 7% 6% 5% 9% Type

Geography

Investor Presentation

• UK / Ireland
• Nordics
• France
• Ger / Aus / Swiss
• BeNeLux
• Asia / Other

Issue date: October 2015 September 2016 March 2017 Size: € 300 m € 500 m € 300 m

Issue rating (S&P): BBB- (positive outlook) BBB- (positive outlook) BBB (positive outlook) Tenor: 3-year 4.5-year 5-year Maturity date: October 2018 March 2021 March 2022

Launch spread: + 295 bp + 190 bp + 130 bp

Joint lead managers: Citi, DB, JP Morgan Barclays, Citi, DB Barclays, BAML, Citi, JP Morgan Roadshow locations: Copenhagen, Oslo, Helsinki, Stockholm, London Copenhagen, Helsinki, London, Paris, Holland London, Paris, Holland

Investors

• Asset Managers
• Insureres / Pensions
• Banks
• Official Institutions
• Other

Landsbankinn

Investor Presentation 27

Liquidity

*according to the liquidity and funding rules set by the Central Bank of Iceland, No. 266/2017

Amounts in ISKm

102% 131% 113% 128% 158% 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 31.12.13 31.12.14 31.12.15 31.12.16 30.09.17

Liquidity coverage ratio total

LCR total Regulatory requirements 208% 614% 360% 743% 873% 0% 100% 200% 300% 400% 500% 600% 700% 800% 900% 1000% 31.12.13 31.12.14 31.12.15 31.12.16 30.09.17

Liquidity coverage ratio FX

LCR FX Regulatory requirements

Total* FX* 30.09.2017 Unweighted Weighted Unweighted Weighted Level 1 liquid assets 128,927 128,927 49,299 49,299 Level 2 liquid assets information items 28,806 10,375

• A. Total liquid assets

157,733 128,927 59,674 49,299 Deposits 428,579 113,894 46,714 17,859 Borrowing 2,089 2,089 1,129 1,129 Other outflows 139,651 21,406 33,276 3,610

• B. Total outflows (0-30 days)

570,319 137,389 81,119 22,598 Loans and advances to financial institutions 47,413 35,848 37,152 35,787 Other inflows 42,193 20,145 10,891 5,701 Limit on inflows

• 24,540
• C. Total inflows (0-30 days)

89,606 55,993 48,043 16,948 Liquidity coverage A/(B-C) 158% 873%

Landsbankinn

Investor Presentation 28

Capital requirements

■

Total capital ratio was 26.8% end of September 2017, as compared with 30.2% at year-end 2016

■

The Bank's target is to maintain a capital ratio above the FME's total capital requirement at any given time, plus an administration buffer specified in the Bank's risk appetite. The Bank also aims to be in the highest category for risk-adjusted capital ratio, as determined and measured by the relevant credit rating agencies

CET1 Tier 1 Total Pillar I 4.5% 6.0% 8.0% Pillar II A 2.8% 3.7% 4.9% Minimum requirements under Pillar I and Pillar II A 7.3% 9.7% 12.9% Systemic risk buffer 2.8% 2.8% 2.8% Capital buffer for systematically important institutions 2.0% 2.0% 2.0% Countercyclical capital buffer 1.0% 1.0% 1.0% Capital conservation buffer 2.5% 2.5% 2.5% Combined buffer requirements under Pillar II B 8.3% 8.3% 8.3% Total capital requirements 15.5% 17.9% 21.2%

8.0% 8.0% 8.0% 6.3% 6.0% 4.9% 3.0% 2.7% 2.8% 2.0% 2.0% 2.0% 0.9% 1.0% 2.5% 2.5% 2.5% 21.8% 22.1% 21.2% 29.5% 30.4% 30.2% 0% 5% 10% 15% 20% 25% 30% 31.12.14 31.12.15 31.12.16

Total capital requirements as defined by FME

Capital conservation buffer Countercyclical capital buffer Capital buffer for systematically important institutuions Systemic risk buffer Pillar II A Pillar I Total capital ratio 888,918 845,604 865,482 836,758 911,779 77.2% 77.0% 77.4% 75.3% 76.0% 50% 60% 70% 80% 90% 100% 200,000 400,000 600,000 800,000 1,000,000 31.12.13 31.12.14 31.12.15 31.12.16 30.09.17

Risk weighted assets

Risk weighted assets RWA / total assets

Amounts in ISKm

Landsbankinn

Landsbankinn key take-aways

29

Exceptionally strong capital ratio’s Positive credit rating trajectory

» Currently BBB+/A-2,

stable outlook

Largest financial institution in Iceland Favorable economic

• utlook in Iceland

Investor Presentation

Economic Outlook

Positive economic fundamentals

2017-2019 Landsbankinn Economic Research projections Source: Statistics Iceland, Landsbanki Economic Research

• 20.0
• 15.0
• 10.0
• 5.0

0.0 5.0 10.0 15.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

GDP growth and contribution to growth

Private final consumption Government final consumption Gross fixed capital formation Changes in inventories Net exports Gross Domestic Product %

Investor Presentation

• 25.0
• 20.0
• 15.0
• 10.0
• 5.0

0.0 5.0 10.0 15.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Current account balance*

Trade balance Underlying balance on primary income ** Underlying current account balance ** Headline current account balance

* Secondary income is included in the primary income.

** Excluding the calculated income and expenses of DMBs in winding-up proceedings but including the estimated effects of the settlement of their estates, and excluding the effects of pharmaceuticals company Actavis on the primary income until 2012. Also adjusted for the failed DMBs' financial intermediation services indirectly measured (FISIM).

% of GDP

Positive economic fundamentals

32

Source: Statistics Iceland

• 5

5 10 15 20 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17

Components of CPI inflation

Other components Services Domestic goods Housing Petrol Imported goods CPI %

Investor Presentation

1 2 3 4 5 6 7 8 9 10 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Unemployment rate

%

Tourism has been a primary driver

33

Source: Icelandic Tourist Board

• 10%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 9M 2017

Number of foreign visitors

YoY change (right) Total number (left)

thousand visitors

Investor Presentation

100 120 140 160 180 200 220 240 260 20 40 60 80 100 120

Exchange rate

Real exchange rate Nominal exchange rate (trade weighted average)

• Jan. 2000 = 100

Index (inverted scale)

The Central Bank has been active on the buy side on the local FX market

34

Source: Central Bank of Iceland

100 200 300 400 500 600 700 800 900 1000

• 20
• 10

10 20 30 40 50 60 70 80 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 Feb-17 Jul-17

Central Bank intervention in foreign exchange market

FX purchase, spot market FX sale, spot market FX purchase, forward contracts FX sale, forward contracts Net accumulated purchase (right)

ISKbn ISKbn

Investor Presentation

• 200
• 180
• 160
• 140
• 120
• 100
• 80
• 60
• 40
• 20

20 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Iceland International Investment Position is now close to zero

IIP IIP excluding DMBs undergoing winding up Estimated underlying IIP * % GDP

* Central Bank of Iceland estimate of the underlying net external position that will result when the domestic and foreign assets of the deposit money banks in winding-up proceedings have been sold and the proceeds distributed to creditors

35

Strong economic recovery – government deleveraging

10 20 30 40 50 60 70 80 90 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

General government debt

Net debt Gross debt

2016-2021 IMF staff estimations / projections Source: IMF World Economic Outlook, April 2017

% GDP 50 100 150 200 250 Denmark Sweden Iceland Germany Ireland United Kingdom France Belgium United States Portugal Italy Greece Japan

General Government Gross Debt

• International comparison (2016)

% of GDP

IMF Staff estimations Source: IMF World Economic Outlook, Oktober 2017

Investor Presentation

Households and corporates have followed suit

36

Source: Financial Stability 2017/2, Central Bank of Iceland

• 1. Debt owed to domestic and foreign financial undertakings and market bonds issued.

Source: Financial Stability 2017/2, Central Bank of Iceland

20 40 60 80 100 120 140 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Household debt

Indexed Foreign currency Non-indexed Overdraft Asset financing % GDP

Investor Presentation

20 40 60 80 100 120 140 160 180 2012 2013 2014 2015 2016 2017

Corporate debt¹

Indexed Non-indexed FX loans Asset financing agreements Domestic bonds issued Foreign bonds issued % GDP

Corporate debt as percentage of GDP in international comparison

37

1. Debt owed to domestic and foreign financial undertakings and market bonds issued. Source: Financial Stability 2017/1, Central Bank of Iceland

0.0 50.0 100.0 150.0 200.0 250.0 300.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Corporate debt –international comparison¹

Iceland Denmark Ireland Greece Spain Italy Cyprus Finland Sweden Norway % GDP

Investor Presentation