Ársskýrsla Landsbankans - Landsbankinn

Endorsement and Statement by the Board of Directors and the CEO
The Consolidated Financial Statements of NBI hf. (hereafter “Landsbankinn” or the “Bank”) for the financial year 2010 include the Bank
and its subsidiaries (collectively referred to as the “Group").
Landsbankinn was founded by the Ministry of Finance on 7 October 2008 and had initial capital of ISK 775 million, paid in cash. The Bank
commenced operations on the basis of a decision by the Financial Supervisory Authority (FME) on 9 October 2008. Originally the Bank
was named New Landsbanki Íslands hf., but at a shareholders’ meeting held on 21 October 2008 a resolution was passed to change the
name to NBI hf. The Bank has nevertheless operated under the trade name of Landsbankinn. The Group's primary lines of business are
corporate and retail banking, investment banking, asset management and leasing services.
Landsbankinn is currently owned by two entities: Landsskil, which is owned by Landsbanki Íslands hf. and wields 18.7% of voting rights;
and Icelandic State Financial Investments (ISFI), which wields 81.3% of voting rights.
In February 2010, a new Board of Directors was elected. The new Board engaged Steinþór Pálsson to replace Ásmundur Stefánsson as CEO
of the Bank as of 1 June 2010.
All positions of managing directors of Landsbankinn were advertised for application and filled in October of 2010.
Operations in 2010
Consolidated profit amounted to ISK 27,231 million for the financial year 2010. The Board of Directors proposes that no dividend will be
paid. Consolidated total equity amounted to ISK 184,866 million at the end of the year, including share capital amounting to ISK 24,000
million. The capital adequacy ratio of the Group, calculated according to the Act on Financial Undertakings, was 19.5% at year-end 2010.
The year 2010 can rightly be described as a year of preparation and restructuring. Foundations in the form of revised and new processes
have been laid for the Bank to become a force for change in the Icelandic economy. Focus has been placed on internal rebuilding and
renewal and a new strategy implemented to guide powerful participation in the economic recovery of Iceland.
Landsbankinn announced its new strategy on 1 October 2010, setting out its goals and vision for 2010 through 2015. At the same time, a
new organisational chart entered into effect.
On 16 June 2010 the Supreme Court of Iceland ruled in two separate cases that foreign currency linked lease agreements constituted
obligations in ISK indexed to foreign currencies, which is not permitted under the law.
On 23 February 2011 the District Court of Reykjavik ruled in a case involving a foreign currency loan agreement of NBI hf. that the loan is
in fact denominated in Icelandic Krona bearing from inception the lowest interest rates on unindexed ISK denominated loans as published
by the Central Bank of Iceland.
Based on the rulings of the Icelandic Courts and on the guidelines from the Financial Supervisory Authority in Iceland (FME), the Group
has changed during the year 2010 the accounting for all types of foreign currency lease agreements which are within the scope of law no.
38/2001 and for certain types of foreign currency loan agreements. Accordingly, the Group accounts for these agreements as
denominated in Icelandic Krona (ISK) bearing from inception the lowest interest rates on unindexed ISK denominated loans as published
by the Central Bank of Iceland. Future legal processes and government actions may, however, lead to different outcomes, which could
necessitate material adjustments to the carrying amounts of assets and liabilities within the next financial year.
Outlook
According to the financial budget, the Bank's results will meet profitability targets for the period 2011 - 2013.
Due to restrictions on movement of capital between Iceland and other countries the Group has limited ability to mitigate the risk from
ISK related currency fluctuations. However, the Group has taken various measures to decrease its overall currency risk and expects future
currency risk levels to be within acceptable limits.
Restructuring of the finances of households and companies remains Landsbankinn's key task for the next year. Various remedies were put
in place in 2010 to ensure that goals will be met in this area.
As investment and economic growth still leave something to be desired the outlook for the Icelandic economy remains uncertain. Despite
this, many economic indicators show that a turnaround can be expected in 2011.
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