Building on a unique culture of business

The Icelandic headquarters of Landsbanki are located in one of the most stately buildings in Reykjavík, a city of low rise houses. The bank, Iceland's oldest, has historically been closely intertwined with the Icelandic economy and its development and functioned as Iceland central bank for a period of over thirty years during the middle of the twentieth century

It was a cornerstone of Iceland’s economy during last century which saw the country catapulted from relative poverty to a place among the world’s richest societies. Since the bank was fully privatised in 2002 new management has taken over and transformed the bank and turned its sights on outward expansion.

Landsbanki now operates in seventeen countries across three continents, offering corporate and investment banking services with a focus on medium sized international companies. In recent years the bank has grown by acquiring well run brokerage houses and investment banks that have since served as platforms for offering the services of an integrated corporate and investment bank. "Our method is to add core banking operations on top of the investment banking and stock broking activities that we have acquired. Our growth has therefore mostly been organic," says Sigurjón Th. Árnason, CEO of Landsbanki. Landsbanki has also made inroads into retail banking, especially in the UK, and has stated that increased emphasis will be placed on international retail banking.

Flurry of activity
The past few years have been an extraordinary time of upheaval on world markets. A flurry of M&A activity has provided financial institutions with a steady stream of projects to finance and advise on. Now, when there are signs of a slowdown in this area, a return to more traditional banking operations is likely. "The core business of a bank is deposit taking and lending. In the past few years this has been eroded in some ways since banks have been able to count on a great deal of revenue from cyclical activities. Even while Landsbanki has benefited greatly from this activity, we have been very careful not to give the impression to investors and the market that this situation is permanent. Therefore, we have for the past few years published and emphasised our core income when announcing financial results," says Árnason. Landsbanki profit has skyrocketed in the past few years. In 2003 the bank’s pre-tax profit was 3.5 billion Icelandic krónur. In 2006, pre-tax profit amounted to 44.7 billion. Landsbanki’s balance sheet has grown from 448 to 2,173 billion during the same period.

"The significant development in the bank’s history for the past few years have been its growth outside Iceland. Only a few years ago Landsbanki was almost exclusively an Icelandic bank, albeit the largest in its market, whereas now about half its revenues originate from non-Icelandic operations," he says. And with the banks expansion the culture of Landsbanki has also been carried into new markets.

"Much of the success of the bank can be attributed to traits that are deeply rooted in the Icelandic culture. There is general disdain of hereditary status in Iceland so everybody believes, and rightly so, that he or she can make of themselves whatever they set their minds to. This is a very strong motivator for the individual but it also breeds a culture of entrepreneurialism within the company," he adds.

"The overwhelming attitude within Landsbanki is that we exist to solve problems for our clients. We are supposed to make things happen so that our clients can get on with their businesses. When faced with a difficult situation we want our people to be confident in their abilities to spot the right approach, and to have the judgement to decide when a project or a business case should not be pursued," says Árnason. He contends that keeping lines of communications short is both a very important part of the way Landsbanki does business but also indicative of the Icelandic culture in general. "We are used to a flat structure where people are judged on their merit rather than their position. Sometimes this looks confusing to outsiders who are used to a strict hierarchy. But our approach is to have the tool fit the task at hand and therefore it is not unusual at Landsbanki to have an unorthodox mix of people working together on various projects in our organization," he says.

Árnson sees Landsbanki continuing to grow despite the changed conditions in international markets. "Our business model has proven to be resilient in face of changed circumstances and organic growth will continue to be the main focus while we are also in a position to explore feasible acquisition targets if opportunities present themselves. This applies to opportunities in retail as well as corporate banking," he concludes.