Iceland’s Landsbankinn FY Profit Improves on Reduced Loan Losses

Landsbankinn hf, Iceland’s biggest bank by assets, said profit rose on foreign-exchange gains and reduced losses on loans and advances.

Net income at the Reykjavik-based lender rose 50 percent to 25.5 billion kronur ($203 million) from 17 billion kronur a year earlier, the company said in a statement on its website today.

“The bank’s performance in 2012 was good and the bank’s strong equity and liquidity positions provide possibilities for growth,” Steinthor Palsson, chief executive officer, said in the statement.

Landsbankinn was created in 2008 from the domestic operations of Landsbanki Islands hf after that bank was unable to secure short-term funding and failed in October the same year. Landsbanki’s collapse left 350,000 depositors in the lender’s Icesave Internet accounts in the U.K. and Netherlands in fear of losing their life savings. The liquidated assets from Landsbanki’s estate are now expected to cover all deposits in full.

After Landsbankinn’s creation, Iceland’s government handed over an 18.7 percent stake in the lender to Landsbanki’s creditors and issued a bond worth 260 billion kronur as compensation for its domestic assets. Iceland’s Treasury retains a 81.3 percent stake.

Net interest income rose 9 percent to 35.6 billion kronur, operating income climbed 60 percent to 49.1 billion kronur and assets fell 4.5 percent to 1.08 trillion kronur. The bank’s capital adequacy ratio rose to 25.1% at yearend from 14.9% at the start of 2010.

Gains on foreign exchange reached 4.6 billion kronur after a loss of 759 million kronur a year earlier.

“We still have work to do,” Palsson said. “We must secure solid, long-term funding no later than 2015, finalize restructuring customer debt, await the finalization of legal proceedings on the recalculation of exchange rate indexed loans and finally increase cost-efficiency.”

To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik valdimarsson@bloomberg.net.

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net.

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