Landsbanki Islands hf

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Landsbanki Islands hf

Austurstraeti 11
Telephone: +354 440 4000
Fax: +354 440 4001
Web site:

Public Company
Employees: 1,725
Total Assets: ISK 1.4 trillion ($21.06 billion) (2006)
Stock Exchanges: Iceland
Ticker Symbol: LAIS
NAIC: 522110 Commercial Banking

Landsbanki Islands hf (the name means National Bank of Iceland) is that country's oldest and largest commercial bank. Established in 1885, Landsbanki operates 48 branches throughout the island country, including 13 branches in Reykjavik. Landsbanki provides a full range of commercial banking services to the private, corporate, and institutional sectors. Formerly a state-owned bank, and at one time the country's central bank, Landsbanki was privatized in the late 1990s. Since then, the bank has more than tripled its assets, topping ISK 1.4 trillion ($21 billion) in total assets at the beginning of 2006.

Landsbanki is one of the world's fastest growing banks. From its base in tiny Iceland, with a population of less than 300,000, Landsbanki has engaged on an international expansion drive. Since the early 2000s, the bank has acquired or established operations in the United Kingdom, Luxembourg, France, and Ireland. Subsidiaries include the United Kingdom's Heritable Bank Ltd., a specialist lender based in London; French equities broker Kepler Equities S.A.; Landsbanki Luxembourg S.A.; and, since 2005, 50 percent of Merrion Group, a securities firm based in Ireland. Landsbanki is itself in turn controlled by Samson eignarhaldsfelag ehf, which owns more than 40 percent of the group's stock. Samson is an investment holding vehicle of Iceland's wealthiest family, led by Björgólfur Gudmundssons, who also serves as Landsbanki chairman. Sigurjón Th. Árnason and Halldór J. Kristjánsson share the bank's managing directory and CEO positions. Landsbanki Island is listed on the Iceland Stock Exchange, and since 2005 has been listed on the OMX exchanges in Copenhagen, Stockholm, and Helsinki.


Throughout much of its historythe first human settlements date only to the eighth centuryIceland had been dominated politically and financially by the Danish crown. The country remained poor, with a population below 50,000 through the 19th century. An independent Icelandic state began to emerge toward the end of the 1800s, starting in 1874 with the drafting of a constitution under which the country claimed dominion over its domestic affairs. The new Icelandic government soon recognized the importance of developing the country's financial independence as well, and especially the need to stimulate the new country's moribund economy. An important component of the government's economic policy was the development of an industrial infrastructure, supplementing the country's traditional reliance on fishing and shipping.

In order to provide cash for industrial investments, the government's treasury began issuing Iceland's first bank notes, in the form of treasury notes that could be freely exchanged for Danish Krøner. The first treasury notes were then turned over to the newly established Landsbanki Islands, or the National Bank of Iceland, created by an act of legislation in 1885. The bank's origins were quite modest, housed in a bookseller's shop in Reykjavik. The bank was nonetheless a state-owned entity, and was charged with providing loans and other funding to help modernize the country's economy. Landsbanki formally began operations in July 1886.

At the same time, the Icelandic government continued to encourage the further development of the country's banking industry. This led to the creation soon after of the country's first savings bank, Sparisjó'ur ReykjavÍkur (Reykjavik Savings Bank). Shortly after, that bank was merged into Landsbanki, allowing the state-owned bank to extend itself as a deposit-taking bank in 1887.

Landsbanki remained Iceland's most prominent bank into the next century; in 1899, the bank established its permanent location at the intersection of Reykjavik's Asuturstraeti and Posthusstraeti. The following year, Landsbanki was granted a mandate from the Icelandic government to launch mortgage lending services. Landsbanki also grew to meet the needs of the island's growing population, establishing its first branch office in Akureyri, in the north, in 1902. This was followed by a second branch in 1904, in Isafjordur. The company opened two more branches in the following decade, in Eskifjör'ur and Selfoss. Reykjavik's place as Iceland's largest city led the bank to open its first branch office in that city in 1931.

Iceland took the next step toward independence in 1904, when it established its system of Home Rule and named its first prime minister. The country remained closely linked with Denmark, however, as evidenced by the founding of Islandsbanki (Bank of Iceland) that same year. That bank, a privately held entity owned by a consortium of Danish investors, was granted the right to issue gold-backed bank notes. Islandsbanki retained this right exclusively through the end of World War I.

In 1918, Iceland and Denmark signed the Act of Crown Union, establishing Iceland as an independent, sovereign state under the Danish crown. Political pressure then began to build to transfer the new country's note-issuing authority from the now officially foreign-controlled Islandsbanki to Landsbanki. This transition was completed in 1927, when a new act of the Althingi, Iceland's parliament, established Landsbanki as Iceland's central bank, with the sole authority to issue bank notes. Landsbanki issued its first note, a 100 Krøner bill, in that year. By 1928, the bank has issued bills for 5, 10, and 50 Krøner as well.


Following World War II, the Althingi passed legislation creating a new loan department within the Landsbanki in order to stimulate the country's fishing industry. In this way, Landsbanki helped back the emergence of the country's industrial fishing and fish processing industry, as well as its shipping industry, which dominated the country's economy into the 1990s.

Despite its status as Iceland's central bank, Lands-banki's position as the country's dominant commercial bank created a conflict of interest in terms of the setting of monetary policy. The Iceland government began taking steps to correct this situation in 1957, when Landsbanki was split into its central banking and commercial banking components. The two divisions remained linked, although operating independently, until the creation of Se'labanki Íslands (Central Bank of Iceland) in 1961. The new Central Bank then took over as the sole bank note issuer for the country.


Landsbanki is Iceland's oldest full-service commercial bank and has played a leading role in the successful economic progress of Iceland since its inception in 1885. Through its extensive domestic branch system and a wide-ranging network of international correspondent banks, coupled with a broad range of financial products and services, the Bank has positioned itself as Iceland's primary source of general and specialised financial services to individuals, corporate entities and institutions.

Through the rest of the century, Landsbanki continued to build out its network of branch offices. By the end of the 1990s, the bank operated 46 branches and sub-branches, completing its national coverage. The bank remained the country's leading commercial bank, holding more than half of all savings deposits and mortgages. The company's main rival during this time was another state-owned bank, Búna'arbanki Íslands.

In Reykjavik alone, the bank operated 13 offices. Landsbanki also began preparing for its coming privatization, as Iceland itself prepared to enter the European Monetary Union in the first half of the 1990s. As part of this process, Landsbanki sought to expand its range of banking services. In 1989, for example, the bank launched a new subsidiary, Landsbref hf, which began offering securities investment and other private banking and asset management services.

Iceland's government launched the privatization of its banking sector in September 1997, when legislation by the Althingi directed that both Landsbanki and Búna'arbanki Íslands be re-incorporated as limited liability companies. The new bank corporation, Landsbanki Islands hf, became operational at the beginning of January 1998, with the Icelandic government holding 100 percent of its shares.

By the end of 1998, however, Landsbanki had completed its initial public offering, listing 15 percent of its stock on the Iceland Stock Exchange. The government progressively exited its shareholding in Landsbanki. In 1999, a secondary offering of another 15 percent was placed on the stock exchange; in June 2002, the National Treasury sold its 20 percent share of Landsbanki as well. By October of that year, the Icelandic government had agreed to sell a further 45.8 percent of Landsbanki to Samson eignarhaldsfelag ehf, the investment holding company owned by Iceland's wealthiest family, then led by Björgólfur Gudmundssons and son Björgólfur Thor Björgólfursson. The government sold its remaining 2.5 percent share block in February 2003, completing the bank's privatization.


By then, Landsbanki had launched an ambitious expansion program. The company served as a major motor in the modernization and expansion of Iceland's financial sector, helping to found a number of financial bodies, including VISA's Iceland operation, Grei'slumi'lun hf, and the country's Eurocard service, Kreditkort hf. Landsbanki also joined Búna'arbanki Íslands in the creation of the leasing companies Lysing and SP Finance. At the same time, Landsbanki targeted the insurance sector for expansion, which led it to acquire a 44 percent stake in Vátryggingafélag Íslands hf (VÍS, or Iceland Insurance Company).

The major thrust of the bank's expansion effort, however, quickly turned to the international market. In 2000, Landsbanki acquired a 70 percent stake in the United Kingdom's Heritable Bank held by First Union Bank (later Wachovia) in the United States. The London-based firm, originally founded in Scotland in 1877 before transferring to London in the 1950s, operated as a specialist lender targeting the property development, small- to mid-sized business, and residential mortgage markets. Under Landsbanki, Heritable grew quickly, both through the expansion of its range of services and the acquisition of Key Business Finance in 2005. By then, Landsbanki had taken 100 percent control of Heritable.


Landsbanki Islands, the first commercial bank in Iceland, is created.
Landsbanki takes over Sparisjó'ur ReykjavÍkur (Reykjavik Savings Bank) and adds deposit taking services.
Landsbanki opens its first branch office.
Landsbanki becomes Iceland's central bank and takes over as issuer of bank notes.
Landsbanki establishes a loan division for the fishing industry.
Landsbanki operations are divided into Central Banking and Commercial Banking units.
The Central Banking division is spun off and Landsbanki becomes a purely commercial bank.
Securities operations are established.
Landsbanki reincorporates as a limited liability company.
The Icelandic government places the first block of Landsbanki shares on the Iceland Stock Exchange.
Landsbanki acquires 70 percent of Heritable Bank in England.
Privatization of Landsbanki is completed; operations in Luxembourg are acquired.
Landsbanki acquires Kepler Equities in France; Teather & Greenwood in England; and Merrion in Ireland.

Landsbanki also entered the Luxembourg market, acquiring Búna'arbanki International in 2003. The Luxembourg operation, established in 2001 as a private banking and asset management services provider for Icelandic and Scandinavian customers, then changed its name to Landsbanki Luxembourg S.A. That deal came as part of a larger shuffling of assets between Iceland's two leading banks. In 2001, Landsbanki exchanged its shareholding in Lysing for a stake in Búna'arbanki, which then absorbed the leasing operation. Landsbanki in its turn acquired the majority of SP Finance in 2002, which then became its leasing subsidiary.

Landsbanki continued to seek out acquisition opportunities as well. The year 2005 proved to be a transformational one for the company as it completed several significant acquisitions. In February of that year, Landsbanki returned to England to acquire brokerage Teather & Greenwood, in a deal worth nearly £43 million.

In August 2005, the company joined with Straumur Investment Bank to divide up the assets of investment group Buretharas hf. Through that deal, Landsbanki added assets including a stake in D. Carnegie & Co. AB, subsequently sold for ISK 10 billion ($150 million), as well as stakes in Intrum Justitia AB, Carrera Global Investments, and Marel hf.

That acquisition was followed in September 2005 with the acquisition of 81.6 percent of Kepler Equities, based in France, for EUR 76.1 million. That purchase gave the bank access to the European securities market. Landsbanki continued to fill out its European profile that year with the December 2005 acquisition of a 50 percent stake in Merrion Capital Group. Based in Ireland, Merrion operated as a stockbrokerage and asset management firm targeting the high-net-worth bracket. As part of the acquisition agreement, Landsbanki was to acquire the remaining 50 percent of Merrion by 2008.

Landsbanki had achieved impressive growth into the middle of the 2000s, more than tripling its total assets, placing it as number nine among the top ten Nordic market banks. Landsbanki was also one of the world's fastest growing banksa position Iceland's oldest and largest bank expected to maintain in the years to come.


Heritable Bank Ltd. (U.K.); Hömlur hf; Kepler Equities S.A. (France; 84%); Landsbanki Holdings (Europe) PLC (Luxembourg); Landsbanki Holdings (UK) PLC; Landsbanki Luxembourg S.A.; LandsbankinnFjárfesting hf; Landsbankinn eignarhaldsfélag ehf.; Landsbankinn fasteignafélag ehf.; Landsvaki hf; LI Asset Management (U.K.); LI Investments Ltd. (U.K.); Merrion Capital Group Ltd. (Ireland; 50%); SP-Fjármögnun hf; StofnlÁnadeild Samvinnufélaga; Teather & Greenwood Holdings PLC; Ver'bréfun hf.


Kaupthing Bank hf; Glitnir hf; Nordea Bank AB; Skandinaviska Enskilda Banken; Svenska Handelsbanken; Kommuninvest Ek foereningen; Danske Bank A/S; Danmarks Nationalbank Kobenhavn; Jyske Bank (A/S); Nordea Bank Finland PLC; OP Bank Group; Aktia Saeaestoepankki Oyj.


Daley, James, "Landsbanki Buys Teathers for £42.8m," Independent, February 2, 2005, p. 37.

"Icelandic Government to Divest Bank Stakes," Nordic Business Report, February 14, 2003.

"Icelandics Scramble for Funds," Euromoney, April 2006, p. 20.

"Landsbanki Completes the Initial Acquisition in Merrion Capital," Hugin, December 21, 2005.

"Landsbanki Has Sold Its Entire Stake in Carnegie and Realises ISK 10 Billion (EUR 110 Million) in Capital Gain," Hugin, April 27, 2006.

"Landsbanki Islands Acquires Key Business Finance Corporation Plc," Nordic Business Report, April 18, 2005.

"Landsbanki Islands hf to Acquire Kepler Equities SA," Nordic Business Report, September 5, 2005.

Lee, Peter, "Landsbanki Islands hf to Establish UK Branch Office," Nordic Business Report, January 20, 2005.

"Merger of Buretharas hf. with Straumur Investment Bank Ltd. and Landsbanki Islands hf.," Hugin, August 2, 2005.

Pretzlik, Charles, "Landsbanki Targets UK for Its £50m-£100m Acquisition Plans," Financial Times, October 30, 2002, p. 26.

Romaniello, Sophie, "Icelandic Finance Market Matures," International Financial Law Review, October 2004, p. S41.

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