Landsbankinn

Investor Presentation

November 2019

LANDSBANKINN

LANDSBANKINN AT A GLANCE

▪ Landsbankinn is the largest financial institution in Iceland

▪ Universal banking services for households, corporates and institutional investors

▪ Market leader in the domestic financial sector

▪ 35-40% market share

▪ Extensive branch network across the country

▪ Solid financial position and income generation

▪ Total capital ratio 23.6%

▪ ROE 7.9% (ROE, excluding special bank tax, 9.6%)

▪ Cost-income ratio 41.4%

▪ Well balanced funding profile

▪ Deposits from customers 50% of the funding mix

▪ Frontrunner in digital banking

▪ Award winning mobile banking solutions

Numbers based on financial results for 9M 2019

S&P GLOBAL RATINGS:

with negative outlook

Since July 2019

CYBER SECURITY:

Nordic cooperation on cyber security

CORPORATE GOVERNANCE AWARDS:

Awards granted in 2014-2018

PRINCIPLES FOR RESPONSIBLE BANKING:

Endorser of PRB since 2018

EQUAL PAY CERTIFICATION:

April 2019

PRINCIPLES FOR RESPONSIBLE

INVESTMENTS:

ICELANDIC CENTER FOR CSR:

Awards for best CSR report in 2018

2

BEST BANK IN ICELAND:

Euromoney 2019

LANDSBANKINN

FINANCIAL OBJECTIVES

Objective 9M 2019 Guidelines

Return on equity

(ROE)≥ 10%

9.6%

[7.9%]- Expected ROE, excluding special bank tax, in 2019 is 9.0-9.5%

Cost / income ratio

(C/I ratio)≤ 45% 41.4% - Expected C/I ratio in 2019 is 41-43%

Total Capital Ratio

(TCR)≥ 23% 23.6%

Common Equity Tier 1 Capital

(CET1)≥ 18% 22.3%

Dividend Payout Ratio ≥ 50% 52%- The aim is also to make special dividend payments to further

optimise the bank's capital structure

- The bank's aim is to maintain capital ratios above the FME's

capital requirements at any given time, plus a 1.5-2.5%

management buffer

- 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

- The bank intends to raise subordinated market funding, if suitable

and favourable for the bank's capital structure

3

LANDSBANKINN

BEST IN CLASS AMONGST ICELANDIC PEERS

THE LARGEST BANK IN ICELAND WITH THE MOST COST-EFFICIENT OPERATIONS

HIGHEST RETURN ON EQUITY DESPITE HIGHEST CET1 RATIO

1Calculated as: net interest income / average total assets for the periodSource: Public company information

Amounts in bn. ISK

Landsbanki

nn

Arion

Isla

ndsbanki

0%

20%

40%

60%

80%

COST-INCOME RATIO 9M 2019

Landsbanki

nn

Arion

Isla

ndsbanki

0%

1%

2%

3%

4%

NET INTEREST MARGIN1 9M 2019

Landsbanki

nn

Arion

Isla

ndsbanki

0%

5%

10%

15%

20%

25%

TOTAL CAPITAL RATIO EOQ3 2019

Landsbanki

nn

Arion

Isla

ndsbanki

0%

2%

4%

6%

8%

10%

RETURN ON EQUITY 9M 2019

Landsbanki

nn

Arion

Isla

ndsbanki

0%

5%

10%

15%

20%

LEVERAGE RATIO EOQ3 2019

4

Landsbanki

nn

Arion

Isla

ndsbanki

0

500

1,000

1,500

TOTAL ASSETS EOQ3 2019

LANDSBANKINN

COMPARISON WITH NORDIC BANKS

FAVOURABLE COMPARISON WITH THE BIG SIX NORDIC BANKS

Source: Public company information

Landsbanki

nn

Danske

Bank

DN

B

Handels

banke

n

Nord

ea

SEB

Sw

edbank

0%

5%

10%

15%

20%

25%

TOTAL CAPITAL RATIO EOQ3 2019

Landsbanki

nn

Danske

Bank

DN

B

Handels

banke

n

Nord

ea

SEB

Sw

edbank

0%

5%

10%

15%

20%

LEVERAGE RATIO EOQ3 2019

Landsbanki

nn

Danske

Bank

DN

B

Handels

banke

n

Nord

ea

SEB

Sw

edbank

0%

20%

40%

60%

80%

COST/INCOME RATIO 9M 2019

Landsbanki

nn

Danske

Bank

DN

B

Handels

banke

n

Nord

ea

SEB

Sw

edbank

0%

50%

100%

150%

200%

LIQUIDITY COVERAGE RATIO EOQ3 2019

5

LANDSBANKINN

OWNERSHIP STRUCTURE

▪ The Ministry of Finance and Economic Affairs published

an ownership policy in July 2017 in regards to equity

holdings in undertakings 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 favourable market conditions

▪ Shares in Landsbankinn will be listed on a stock

exchange

▪ In December 2018 a white paper on a future vision for the financial system in Iceland was published

▪ A group of professionals in the financial industry, chaired by the chairman of ISFI, was formed to make suggestions to act as a

basis for further discussions and decision making

▪ Regarding ownership of Landsbankinn, the report concludes that the government should retain at least 34% stake in Landsbankinn as

outlined in the ownership policy

Source: https://www.government.is/media/fjarmalaraduneyti-media/media/frettatengt2016/The-icelandic-state_s-ownership.pdfhttps://www.government.is/library/01-Ministries/Main%20Emphases%20and%20Conclusions%20(002).pdf/

OWNERSHIP POLICY

WHITE PAPER ON A FUTURE VISION FOR THE FINANCIAL SYSTEM

Icelandic State Treasury

~900 other shareholders

0.2%

The Icelandic State Financial Investments (ISFI)

98.2%

Landsbankinn- own shares

1.6%

6

LANDSBANKINN

MANAGEMENT STRUCTURE

EXECUTIVE BOARD

Lilja Björk Einarsdóttir CEO

Hreiðar Bjarnason CFO

Perla Ösp Ásgeirsdóttir CRO

Arinbjörn Ólafsson MD IT

Árni Þór Þorbjörnsson MD Corporate banking

Helgi Teitur Helgason MD Personal banking

Hrefna Ösp Sigfinnsdóttir MD Markets

7

LANDSBANKINN

EMPHASIS ON DIGITAL SOLUTIONS

8

LANDSBANKINN

STRONG MARKET PRESENCE

MARKET LEADER IN BOTH RETAIL AND CORPORATE MARKETS

Source: Gallup

CUSTOMER SATISFACTION SURVEY

33% 32% 34% 35% 37% 38% 38%

37%

29%

31%

0%

10%

20%

30%

40%

50%

2012 2013 2014 2016 2017 2019 2020

RETAIL MARKET SHARE

Landsbankinn Bank A Bank B

37% 35%32% 33% 33% 35% 34%

32%

36%

27%

3%2%0%

10%

20%

30%

40%

50%

2012 2013 2014 2016 2017 2019 2020

CORPORATE MARKET SHARE

Landsbankinn Bank A Bank B

Bank C Bank D

76%

18%

6%

GENERAL - RETAIL

72%

18%

10%

GENERAL - CORPORATE

98%

2%

360° FINANCIAL ADVICE - RETAIL

9

82%

15%

3%

INTERNET BANKING - CORPORATE

LANDSBANKINN

CORPORATE SOCIAL RESPONSIBILITY

POLICY ON SOCIAL RESPONSIBILITY

“Landsbankinn wants to be a positive and dynamic force in society, contribute to a

sustainability in Iceland and operate in accordance with the principles of good corporate

governance.”

Responsible investment

Landsbankinn’s policy on responsible investment has regard for UN PRI and rules on risk

appetite, large exposures and maximum aggregate risk, operational risk, reputational risk,

liquidity risk and guidelines on good corporate governance.

Responsible lending

Sector policies in place for corporate lending which includes guidelines on social

responsibility.

Equality

Landsbankinn makes a point of ensuring equal pay and job opportunities for all employees.

10

Environmental issues

Emphasis on environmental issues in all the bank’s operations including limiting the

use of paper and using eco-friendly transportation.

Support for the local community

Landsbankinn provides varied support for diverse community initiatives.

Governance

Landsbankinn complies with recognised guidelines on corporate governance and

publishes a corporate governance statement annually.

LANDSBANKINN‘S ESG RATING: 17.5 / 100

“The company is at low risk of experiencing material

financial impacts from ESG factors, due to its medium

exposure and strong management of material ESG issues.

The company is not publicly held, which reduces its

corporate governance risk compared to its peers.

Furthermore, the company has not experienced significant

controversies.”

LANDSBANKINN

CREDIT RATING

CREDIT RATING AFFIRMED IN JULY 2019, OUTLOOK REVISED TO NEGATIVE

RATIONALE FOR CURRENT CREDIT RATING

▪ Very strong capital and earnings

▪ Adequate liquidity position

▪ Average funding profile

▪ Adequate business position

▪ Moderate risk position

Issuer credit rating Iceland sovereign Landsbankinn

Senior unsecured debt A BBB+

Short-term debt A-1 A-2

Subordinated debt BBB-

Outlook Stable Negative

Last rating action March 2017 July 2019

AAAAA+AA

AA-A+A

A-BBB+BBB

BBB-BB+BB

BB-B+B

B-

21.7.201525.10.2016

25.10.2017

6.9.2018

1.1.2014 1.1.2015 1.1.2016 31.12.2016 31.12.2017 31.12.2018

S&P GLOBAL RATINGS

Senior unsecured debt Subordinated debt Icelandic government

11

LANDSBANKINN

FINANCIAL ACTION TASK FORCE

12

ICELAND GRAY-LISTED BY FATF

▪ In October 2019, FATF identified Iceland as a jurisdiction that has a strategic AML/CFT deficiencies for which an action plan with the

FATF has been developed

▪ Of the 51 recommendations made by FATF in April 2018, the following are outstanding but in progress:

1. Ensure access to accurate basic and beneficial ownership information in a timely manner

2. Introduce automated system for suspicious transaction reporting and enhancing the capacity of the financial intelligence unit

3. Effective supervision of targeted financial sanctions compliance and monitoring of non-profit organisations

▪ FATF noted that Iceland had already pro-actively taken steps to address the issues but were not fully reviewed due to their recent

nature

▪ None of the outstanding issues identified by FATF concern the banking sector

FATFs COMMENTARY ON ICELAND

PRESS RELEASE BY THE GOVERNMENT OF ICELAND

▪ https://www.fatf-gafi.org/publications/high-risk-and-other-monitored-jurisdictions/documents/fatf-compliance-october-2019.html

▪ https://www.government.is/news/article/2019/10/18/Iceland-Calls-Financial-Action-Task-Force-Grey-List-Decision-Unwarranted-and-

Disproportionate-/

S&P GLOBAL RATINGS RESPONSE*

▪ “Banking industry country risk assessment for Iceland unaffected by the country’s FATF gray listing”

*Bulletin published by S&P Global Ratings on 23 October 2019

LANDSBANKINN

Risk Assessment

Customer Due Diligence (CDD)

- Know your customer (KYC)

- Enchanced Due Diligence (EDD)

- Ongoing customer Due Diligence (OCDD)

Monitoring - Transaction monitoring

- Sanctions and politically exposed person (PEP) list

Training - On site and online

Reporting - Suspicious activities

and transactions report (SAR)

- Management report - Compliance

dashboard

AML WITHIN LANDSBANKINN

13

▪ Emphasis on keeping level of defences in line with best international practices

▪ Advanced surveillance systems and transactions’ monitoring procedures

▪ SAS transaction monitoring system implemented in 2017

▪ New customer due diligence system implemented in 2018

▪ Regular internal risk assessment as well as regular audits by the regulator, FME

▪ Sophisticated onboarding procedures and ongoing customer due diligence

▪ Increased number of employees in compliance and international payments

▪ Increased focus on training

▪ Clear reporting responsibilities of suspicious behaviour or transactions by customers

▪ Emphasis on minimising high risk operations

▪ Discontinuation of business operations

▪ Money service providers

▪ Exclusion of business operations

▪ Cryptocurrencies, Payday Loans, Casinos

LANDSBANKINN‘S PROCEDURES

FINANCIAL RESULTS FOR 9M 2019

LANDSBANKINN

HIGHLIGHTS FROM 9M 2019 RESULTS

SOLID INCOME IN LINE WITH BUSINESS TARGETS

STRONG FINANCIAL POSITION IN LINE WITH LONG-TERM TARGETS

PROFIT AFTER TAXES

equivalent to EUR 106m

ISK 14,360m

RETURN ON EQUITY

after taxes

7.9%

COST / INCOME RATIO

41.4%

NET INTEREST MARGIN

as a ratio of assets and liabilities

2.4%

TOTAL ASSETS

equivalent to EUR 10.5bn

ISK 1,415bn

TOTAL CAPITAL RATIO

total capital requirement of 20.4%

23.6%

LIQUIDITY COVERAGE RATIO

for all currencies

186%

PROBLEM LOANS

stage 3 loans, in line with IFRS 9

2.1%

15

LANDSBANKINN

SUMMARY OF FINANCIAL STATEMENTS

INCOME STATEMENT

▪ After tax profit in 9M 2019 was ISK 14.4 bn compared to ISK 15.4 bn for

the same period in 2018

▪ Net interest income was ISK 30.1 bn in 9M 2019 compared to ISK 29.8

bn for the first nine months of 2018

▪ Net valuation adjustments in the loan book were negative by ISK 3.4 bn

compared to a positive change in the amount of ISK 1.6 bn in 9M 2018

▪ Net fee and commission income in 9M 2019 amounted to ISK 6.1 bn

compared to ISK 5.8 bn in 9M 2018

▪ Other operating income amounted to ISK 6.5 bn compared to ISK 3.8

bn in 9M 2018

▪ Operating expenses amounted to ISK 17.7 bn, relatively unchanged

from 9M 2018

▪ Net interest margin on assets and liabilities was 2.4% in 9M 2019 as

compared to 2.7% in 9M 2018

▪ Return on equity after taxes was 7.9% for the first nine months

compared to 8.8% for the same period in 2018

▪ The cost/income ratio was 41.4% in 9M 2019 compared to 45.0% in 9M

2018

▪ Effective income tax rate was 22.1% in 9M 2019

BALANCE SHEET

▪ Total assets amounted to ISK 1,415 bn at the end of 9M 2019

▪ The loan book increased by ISK 72 bn in 9M 2019. Corporate lending

increased by ISK 30 bn and to households by ISK 42 bn

▪ Total equity amounted to ISK 243.9 bn at the end of 9M 2019, up from

ISK 239.6 since end of year 2018

▪ Total capital ratio was 23.6% at the end of H1 2019 taking into account

the approved dividend payment and the expected dividend payment on

the basis of 9M 2019 profit, well above the capital requirement of 20.4%

▪ The bank’s AGM approved a proposal in April of a dividend payment of

ISK 9,922m that were paid in two equal instalments, in April and in

October

▪ The liquidity position remains strong, overall and in foreign currencies,

and well above regulatory requirements

STRONG FINANCIAL POSITION AND STABLE INCOME FROM CORE BUSINESS LINES

Numbers based on financial results for 9M 201916

LANDSBANKINN

KEY PERFORMANCE INDICATORS

ROE AND COST-INCOME RATIO IN LINE WITH TARGETS

TOTAL CAPITAL RATIO AND LCR WELL ABOVE REGULATORY REQUIREMENTS

43.8%48.4%

46.1% 45.5%41.4%

0%

10%

20%

30%

40%

50%

60%

2015 2016 2017 2018 9M 2019

COST / INCOME RATIO

14.8%

6.6%8.2% 8.2% 7.9%

1.2%

1.1%

1.3% 1.6% 1.7%

16.0%

7.7%

9.5% 9.8% 9.6%

0%

3%

6%

9%

12%

15%

18%

2015 2016 2017 2018 9M 2019

RETURN ON EQUITY

Return on equity after taxes Impact of special bank tax

30.4% 30.2%

26.7%24.9% 23.6%

21.8% 22.1% 21.4% 20.5% 20.4%

0%

5%

10%

15%

20%

25%

30%

35%

2015 2016 2017 2018 9M 2019

TOTAL CAPITAL RATIO

Capital requirement

113%128%

157% 158%

186%

70%80%

90%100% 100%

0%

50%

100%

150%

200%

2015 2016 2017 2018 2019

LCR TOTAL*

Regulatory requirement

*2019 is from the 9M results

17

LANDSBANKINN

CHANGE IN NET PROFIT

Amounts in m. ISK 18

9M

2018

Net

inte

rest i

ncom

e

Net

adju

stm

ents

in v

alu

atio

n

Net

fee a

nd c

om

mis

sio

n in

com

e

Oth

er

incom

e

FX

gain

(lo

ss)

Sala

ries a

nd r

ela

ted e

xpenses

Oth

er

opera

ting e

xpenses

Taxes

9M

2019

15,393 244 -5,066

292

2,177537 101 -54

736 14,360

NET PROFIT BRIDGE FROM 9M 2018 to 9M 2019

LANDSBANKINN

OPERATING INCOME

NET INTEREST INCOME A LARGER COMPONENT OF OPERATING INCOME OVER THE LAST FEW YEARS

Amounts in m. ISK

0

10,000

20,000

30,000

40,000

50,000

2015 2016 2017 2018 2019

NET INTEREST INCOME Q1 Q2 Q3 Q4

-5,000

0

5,000

10,000

15,000

20,000

2015 2016 2017 2018 9M 2019

NET VALUATION ADJUSTMENTS IN LOAN BOOK

0

2,000

4,000

6,000

8,000

10,000

2015 2016 2017 2018 2019

NET FEE AND COMMISSION INCOME Q1 Q2 Q3 Q4

NET VALUATION ADJUSTMENTS STABILISING IN LINE WITH EXPECTATIONS

30,090

6,094

5,867

631

COMPONENTS OF OPERATING INCOME*

Net interest income

Net fee andcommission income

Net gain on bonds andequities

Other income

9M 2019

*Excluding net valuation adjustments

19

LANDSBANKINN

OPERATING EXPENSES AND TAXES

ECONOMIC BENEFITS FROM EMPHASIS ON DIGITAL BANKING

INVESTMENT IN INFORMATION TECHNOLOGY SYSTEMS RESULTING IN LOWER OPERATING EXPENSES

Amounts in m. ISK

10,653

1,703

687

4,639

COMPONENTS OF OPERATING EXPENSES

Salaries and relatedexpenses

Information technology

Real estate

Other expenses

9M 2019

0

2,000

4,000

6,000

8,000

10,000

12,000

2015 2016 2017 2018 9M 2019

OTHER OPERATING EXPENSES

0

200

400

600

800

1,000

1,200

1,400

0

5,000

10,000

15,000

20,000

2015 2016 2017 2018 2019

SALARIES AND RELATED EXPENSES

Q1 Q2 Q3 Q4 FTEs

0

5,000

10,000

15,000

2015 2016 2017 2018 9M 2019

TAXES

Income tax Specific financial activity tax

Special bank tax Financial activity tax on salaries

20

LANDSBANKINN

LOAN BOOK

STEADY GROWTH IN THE LOAN BOOK WHILE PROBLEM LOANS REMAIN AT LOW LEVELS

OVER 80% OF THE LOAN BOOK IN DOMESTIC CURRENCY WITH HOUSEHOLDS BEING THE LARGEST SECTOR

Amounts in bn. ISK

3.8%

2.4%2.0% 2.0% 2.1%

0%

2%

4%

6%

8%

2015 2016 2017 2018 9M 2019

PROBLEM LOANS

> 90d arrears Other loans in stage 3

0

200

400

600

800

1,000

1,200

2015 2016 2017 2018 9M 2019

LOANS TO CUSTOMERS

ISK ISK CPI-linked FX

40%

13%12%

12%

8%

6%

3% 3%2%1%

0%

LOANS BY INDUSTRY SECTORS

Households

Fisheries

Real estate

Services

Construction

Retail

Holding companies

ITC

Manufacturing

Agriculture

Public entities and other

EOQ3 2019

47%

35%

13%

4% 1%

LOANS BY CURRENCY

ISK

ISK CPI-linked

EUR

USD

Other

EOQ3 2019

21

LANDSBANKINN

LOANS TO CORPORATES

WELL BALANCED CORPORATE LOAN BOOK IN TERMS OF CURRENCY AND INDUSTRY SECTOR DISTRIBUTION

DECREASING CONCENTRATION RISK AND MODERATE OVERALL RISK

Amounts in bn. ISK

23%

48%

29%

LOANS TO CORPORATES BY CURRENCY

ISK CPI-linked

ISK

FX

EOQ3 2019

0

50

100

150

200

2015 2016 2017 2018 9M 2019

DEVELOPMENT OF SECTOR DISTRIBUTION

Fisheries Real estate ServicesConstruction Retail Holding companiesOther

22

22%

21%

20%

14%

10%

4%

4% 3% 1%1%

LOANS TO CORPORATES BY INDUSTRY SECTOR

Fisheries

Real estate

Services

Construction

Retail

Holding companies

ITC

Manufacturing

Agriculture

Public entities and other

EOQ3 2019

87%

8%

3% 2%

LOANS TO CORPORATES BY RISK STAGE

Stage 1

Stage 2

Stage 3

Fair value

EOQ3 2019

LANDSBANKINN

LOANS TO HOUSEHOLDS

LOANS TO HOUSEHOLDS SOLELY IN ISK WITH OVER 80% IN THE FORM OF MORTGAGES

STRONG CREDIT QUALITY WITH WEIGHTED AVERAGE LTV OF MORTGAGES AT 56.7%

Amounts in bn. ISK 23

54%

46%

0%

LOANS TO HOUSEHOLDS BY CURRENCY

ISK CPI-linked

ISK

FX

EOQ3 2019

49%

34%

6%

4%7%

LOANS TO HOUSEHOLDS BY LOAN TYPE

Mortgage loans - CPI-linked

Mortgage loans - non-indexed

Overdrafts and creditcards

Vehicle financing

Other

EOQ3 2019

0

100

200

300

400

500

2015 2016 2017 2018 9M 2019

LOANS TO HOUSEHOLDS BY LOAN TYPE

Mortgage loans - non-indexed Mortgage loans - CPI-linked

Overdrafts and credit cards Vehicle financing

Other

0

100

200

300

400

2016 2017 2018 9M 2019

LTV DISTRIBUTION OF MORTGAGES

0-30% 30-50% 50-80% 80-100% > 100%

CAPITAL, FUNDING AND LIQUIDITY

LANDSBANKINN

CAPITAL REQUIREMENTS

CAPITAL RATIOS WELL ABOVE REGULATORY REQUIREMENTS

PILLAR II-R REQUIREMENTS LOWERING IN LINE WITH REDUCED RISK

BUFFER REQUIREMENTS

▪ The countercyclical capital buffer

on domestic exposures increased

by 50bp on 15 May 2019

▪ In accordance with FME’s decision

the countercyclical capital buffer

will increase by 25bp on 1

February 2020

CET1 Tier 1 Total

Pillar I 4.5% 6.0% 8.0%

Pillar II-R 1.9% 2.6% 3.4%

Minimum requirements under Pillar I and Pillar II-R 6.4% 8.6% 11.4%

Systemic risk buffer 2.9% 2.9% 2.9%

Capital buffer for systematically important institutions 2.0% 2.0% 2.0%

Countercyclical capital buffer 1.7% 1.7% 1.7%

Capital conservation buffer 2.5% 2.5% 2.5%

Combined buffer requirements under Pillar II-G 9.0% 9.0% 9.0%

Capital requirement 15.4% 17.6% 20.4%

Capital ratios at EOQ3 2019 22.3% 22.3% 23.6%

RISK EXPOSURE AMOUNT CALCULATIONS

▪ Standardised approach

▪ Landsbankinn uses the standardised approach to

calculate the risk exposure amount for credit risk and

market risk

▪ Basic indicator approach

▪ Landsbankinn uses the basic indicator approach to

calculated the risk exposure amount for operational risk

21.8% 22.1% 21.4% 20.5% 20.4%

30.4% 30.2%26.7%

24.9% 23.6%

0%

10%

20%

30%

40%

2015 2016 2017 2018 9M 2019

CAPITAL REQUIREMENTS

Pillar I Pillar II-R CBR Total capital ratio

25

LANDSBANKINN

CAPITAL POSITION

OPTIMISING CAPITAL RATIOS TOWARDS LONG TERM TARGETS

*RAC ratio as of EOY 2018

CAPITAL POLICY

▪ Maintain capital ratios above the capital requirements at any

given time plus a 1.5-2.5% management buffer

▪ Aim for highest category for risk-adjusted capital ratio as

determined by the relevant credit rating agencies (15% or

higher for S&P RAC ratio)

DIVIDEND PAYMENT 2019

▪ The bank’s AGM approved a proposal in April of a dividend

payment of ISK 9,922m, paid in two equal instalments, in

April and in October

0%

5%

10%

15%

20%

25%

30%

35%

2015 2016 2017 2018 9M 2019*

CAPITAL RATIOS

CET1 ratio Tier 1 capital ratio Total capital ratio S&P RAC ratio

EO

Y 2

018

Pro

fit 9

M 2

01

9

Appro

ved d

ivid

end

pa

ym

en

t

Ch

an

ge

in

RE

A

Ex

pe

cte

d d

ivid

en

d

pa

ym

en

t d

ue

to

9M

2019 p

rofi

t

EO

Q3

20

19

24.9%1.4% -1.0%

-1.0%-0.7% 23.6%

0%

5%

10%

15%

20%

25%

30%

TOTAL CAPITAL RATIO BRIDGE

26

77.4% 75.3% 77.5% 75.5% 73.6%

0%

20%

40%

60%

80%

100%

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2015 2016 2017 2018 9M 2019

RISK EXPOSURE AMOUNT

REA REA / Total assets

LANDSBANKINN

MREL IN ICELAND

MINIMUM REQUIREMENT FOR OWN FUNDS AND ELIGIBLE LIABILITIES (MREL) TO BE INTRODUCED IN ICELAND

CALIBRATION OF MREL REQUIREMENTS UNDER BRRD 2*

27

ASSUMPTIONS

▪ MREL requirement in line with proposal under

BRRD 2 applicable to systemically important

financial institutions

▪ Unsecured bonds and loan agreements with

remaining maturity over 1 year are deemed

eligible in terms of bail-inable debt

▪ The first bill in the process of implementing BRRD into Icelandic law was approved in parliament in 2018, proposing amendments on

Act on financial undertakings implementing the content of a recovery plan, early intervention and intra-group financial support

▪ The Minister of Finance and Economic Affairs has put forth a bill acting as the second phase in implementing BRRD

▪ MREL requirement for financial institutions in Iceland introduced

▪ A resolution authority (part of the Central Bank of Iceland / FME) will determine the minimum requirement

▪ The bill is expected to be approved by the parliament before year-end 2019

P1

P2-R

P1

P2-R

MCC

CBR

Common equity tier 1

Loss absorption amount

Recapitalisation amount

Combined buffer requirement

Tier 2

Eligible liabilities

45.0%

39.2%

0

10%

20%

30%

40%

50%

9M 2019

MREL CALIBRATION

Subordinationrequirement, 13.5%

*Landsbankinn‘s own interpretation and assumptions

LANDSBANKINN

FUNDING OVERVIEW

DEPOSITS REMAIN THE MAIN SOURCE OF FUNDING

WELL DISTRIBUTED MATURITY PROFILE

Amounts in m. ISK

RECENT FUNDING

▪ Funding base diversified with inaugural Tier 2 issuance in

September 2018

▪ Issuances in NOK and SEK in February and May 2019

0

20,000

40,000

60,000

80,000

100,000

2020 2021 2022 2023 2024 2025 2026 2027 2028

MATURITY PROFILE

FX ISK FX-CALL

EOQ3 2019

3%

50%

26%

1%

17%

3%

FUNDING MIX

Due to financial institutionsand central bank

Deposits from customers

Borrowings

T2 capital

CET1 capital

Other liabilities

EOQ3 2019

207,605134,629

3,563

20,540 13,433

BORROWINGS

Senior unsecured

Covered bonds

Commercial paper

Other unsecured

Tier 2

EOQ3 2019

28

LANDSBANKINN

LIQUIDITY AND FUNDING RATIOS

STRONG LCR AND NSFR RATIOS WELL ABOVE REGULATORY REQUIREMENTS

113%128%

157% 158%

186%

70%80%

90%100% 100%

0%

50%

100%

150%

200%

2015 2016 2017 2018 2019

LCR TOTAL*

Regulatory requirement

*2019 is the 9M results

360%

743%

931%

534%577%

100% 100% 100% 100% 100%0%

200%

400%

600%

800%

1000%

2015 2016 2017 2018 9M 2019

LCR FX

Regulatory requirement

124% 119% 120% 120% 119%

0%

20%

40%

60%

80%

100%

120%

140%

2015 2016 2017 2018 9M 2019

NSFR TOTAL

136%154%

179%166%

158%

100% 100% 100% 100% 100%

0%

50%

100%

150%

200%

2015 2016 2017 2018 9M 2019

NSFR FX

Regulatory requirement

29

LANDSBANKINN

OUTSTANDING EUR ISSUANCE

Rank: Senior unsecured Senior unsecured Senior unsecured Tier 2

Issue date: September 2016 March 2017 November 2017 September 2018

Size: EUR 500m EUR 300m EUR 300m EUR 100m

Issue rating (S&P): BBB- BBB BBB+ BBB-

(positive outlook) (positive outlook) (stable outlook) (stable outlook)

Tenor: 4.5Y 5Y 5.5Y 10NC5

Maturity / call date March 2021 March 2022 May 2023 September 2028 / 2023

Issue spread: MS + 190bp MS + 130bp MS + 85bp MS + 285bp

Joint lead managers: Barclays, Citi, DB Barclays, BAML, Citi, JPM Citi, DB, MS, Nomura Citi, JPM

Roadshow locations:Copenhagen, Helsinki,

London, Paris, AmsterdamLondon, Paris, Amsterdam Investor call

Helsinki, Copenhagen,

London

Investor analysis:

Investor type / Geography

57%31%

5%4% 3%

60%13%

7%

6%

5%9%

35%

20%18%

14%

9%4%

41%

58%

1%

72%

13%

10%2% 3%

58%26%

8%

4% 4%

34%

31%

8%

10%

13%

4% 3%

71%

7%

2%

12%

5%

30

LANDSBANKINN

SECONDARY TRADING IN EUR-MARKET

TURNAROUND IN CREDIT SPREADS POST RELEASE OF FY 2018 RESULTS AND NOK/SEK BOND ISSUANCE

0

50

100

150

200

250

01.08.2016 17.02.2017 05.09.2017 24.03.2018 10.10.2018 28.04.2019 14.11.2019

HISTORICAL Z-SPREADS

LBANK 1.625 3/21 LBANK 1.375 3/22 LBANK 1 05/23 ITRX EUR IG FIN 5Y

AS OF 24 OCTOBER 2019

mid z-sprd

57

73

113

0

50

100

150

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

CURRENT EUR SPREAD CURVE

LBANK ICELND ARION ISB

AS OF 24 OCTOBER 2019

mid z-sprd / dur (y)

31

LANDSBANKINN

KEY TAKE-AWAYS

STRONG CAPITAL RATIOS AND WELL

BALANCED FUNDING PROFILE

RESILIENT ECONOMY

CLEAN BALANCE SHEET

BBB+ RATING FROM S&P GLOBAL

RATINGS

32

ECONOMIC ENVIRONMENT IN ICELAND

LANDSBANKINN

MACRO DASHBOARD FOR ICELAND

Source: Bloomberg, Central Bank of Iceland, Statistics Iceland

UNEMPLOYMENT RATE

in September 2019

3.5%

GDP GROWTH

in 2018

4.8%

CENTRAL BANK INTEREST RATE

Key policy interest rate

3.25%

INFLATION RATE

YoY change in October 2019

2.8%

CHANGE IN HOUSING PRICES

YoY change in August 2019

+3.1%

ICELANDIC POPULATION

in January 2019

348,450

GOVERNMENT BOND YIELD

12 year bond

3.4%

OFFICIAL RESERVE ASSETS

in September 2019

ISK 826bn

EXCHANGE RATE

YoY change in October 2019

1.0%

NET GOVERNMENT DEBT

in April 2019 (30% of GDP)

ISK 832bn

YIELD ON EQUITIES

YoY change in October in OMX ICE

18.8%

MORTGAGE RATE - NON-INDEXED

5Y fixed (LTV 50-70%)

5.75%

CORPORATE TAX RATE

For 2019

20-26%

EXTERNAL POSITION (IIP)

of GDP in Q2 2019

22%

PRIVATE SECTOR DEBT

YoY growth in 2018

5.6%

CURRENT ACCOUNT BALANCE

of GDP as of EOQ2 2019

4.4%

34

LANDSBANKINN

POSITIVE ECONOMIC FUNDAMENTALS

2019-2021 Central Bank of Iceland projectionsSource: Monetary Bulletin 2019/3, Central Bank of Iceland, Statistics Iceland

*Secondary income is included in the primary income**Excluding the calculated income and expenses of banks in winding-up proceedings but including the estimated effect of the settlement of their estates and excluding the effect of Actavis on the primary income until 2012. Also adjusted for the failed banks financial intermediation services indirectly measured (FISIM)

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

GDP AND CONTRIBUTION TO GROWTH

Private consumption Public consumption Fixed capital formation Exports Imports Gross domestic product

-30%

-20%

-10%

0%

10%

20%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

CURRENT ACCOUNT BALANCE (GDP%)*

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

35

LANDSBANKINN

POSITIVE ECONOMIC FUNDAMENTALS

Source: Statistics Iceland, Directorate of Labour

0%

2%

4%

6%

8%

10%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

UNEMPLOYMENT RATE

-5%

0%

5%

10%

15%

20%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

INFLATION

Imported goods Petrol Housing Domestic goods Services Other components CPI

36

LANDSBANKINN

TOURISM HAS BEEN A PRIMARY DRIVER

*First seven months of the yearSource: Central Bank of Iceland, Icelandic Tourist Board

Number of tourists in thousands

JAN-AUG 2019

-20%

-10%

0%

10%

20%

30%

40%

50%

0

500

1,000

1,500

2,000

2,500

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

VISITORS TO ICELAND

YoY change (RHS) Number of visitors per year

100

120

140

160

180

200

220

240

2600

20

40

60

80

100

120

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

EXCHANGE RATE

Real exchange rate (jan 2000 = 100) Nominal exchange rate index (inverted scale) (RHS)

37

LANDSBANKINN

EXTERNAL POSITION

Amounts in bn. ISKSource: Central Bank of Iceland, Statistics Iceland

*Central Bank of Iceland estimate of the underlying net external position at the time the domestic and foreign assets of the failed banks in winding-up proceedings were sold and the proceeds distributed to creditors

0

200

400

600

800

1000

-20

0

20

40

60

80

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

CBI INTERVENTION IN FX MARKET

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

-200

-150

-100

-50

0

50

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

INTERNATIONAL INVESTMENT POSITION (GDP%)

IIP IIP excluding banks undergoing winding up Estimated underlying IIP*

38

LANDSBANKINN

STRONG ECONOMIC RECOVERY

2018-2023 IMF projectionsSource: IMF World Economic Outlook, October 2019

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

GOVERNMENT DEBT (GDP%)

Net debt Gross debt

0%

50%

100%

150%

200%

250%

300%

JP GR IT PT US BE FR UK IE DE SE IS DK

GOVERNMENT DEBT - INTERNATIONAL COMPARISON (GDP%)

39

LANDSBANKINN

HOUSEHOLDS AND CORPORATES HAVE FOLLOWED SUIT

Source: Financial Stability 2019/1, Central Bank of Iceland

0%

10%

20%

30%

40%

50%

60%

0%

20%

40%

60%

80%

100%

120%

140%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

HOUSEHOLD DEBT (GDP%)

Household mortgage debt Other household debt LTV (RHS)

0%

20%

40%

60%

80%

100%

120%

140%

160%

2012 2013 2014 2015 2016 2017 2018

CORPORATE DEBT (GDP%)

CPI-linked Non-indexed FX loans Vehicle financing Domestic bonds issued Foreign bonds issued

40

LANDSBANKINN

CORPORATE DEBT LEVELS IN INTERNATIONAL COMPARISON

CORPORATE DEBT LEVELS IN ICELAND AMONGST THE BEST OF THE NORDIC COUNTRIES

Source: Financial Stability 2018/1, Central Bank of Iceland

0%

50%

100%

150%

200%

250%

300%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

CORPORATE DEBT LEVELS (GDP%)

Iceland Denmark Sweden Finland Ireland Norway

41

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 contained in this presentation has not been independently verified. Landsbankinn is not under any obligation to update or keep current the information contained herein. Accordingly, no

representation or warranty or undertaking, express or implied, is given by or on behalf of Landsbankinn or any of their members, directors, officers, agents or employees or any other person as to, and no

reliance should be placed on, the accuracy, completeness or fairness of the information or opinions contained herein. Neither Landsbankinn nor any of their respective members, directors, officers or

employees nor any other person accepts any liability whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the 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 otherwise lawfully be distributed (such

persons being referred to as "relevant persons").

This presentation includes forward-looking statements. These forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying

assumptions and other statements, which are other than statements of historical facts. The words "believe," "expect," "anticipate," "intends," "estimate," "forecast," "project," "will," "may," "should" and

similar expressions identify forward-looking statements. Forward-looking statements include statements regarding: strategies, outlook and growth prospects; future plans and potential for future growth;

liquidity, capital resources and capital expenditures; growth in demand for products; economic outlook and industry trends; developments of markets; the impact of regulatory initiatives; and the strength of

competitors.

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 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.

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