Landsbankinn Secures ISK 16 Billion in AT1 Bonds Amidst Strong Domestic Demand
Event summary
- Landsbankinn successfully auctioned ISK 16 billion (approximately $115 million USD) in Additional Tier 1 (AT1) securities, despite receiving bids totaling ISK 89.32 billion.
- The AT1 securities, LBANK AT1 PNC31, carry a fixed interest rate of 10.00% and have a call option after 5.5 years.
- The issuance follows a similar, albeit USD-denominated, AT1 offering from Landsbankinn last year.
- S&P Global Ratings expects to assign a BB credit rating to the securities, with listing on Nasdaq Iceland and Euronext Dublin planned for February 18, 2026.
The big picture
Landsbankinn's move to issue AT1 securities in its local currency demonstrates a strategic effort to diversify its funding base and reduce reliance on USD markets. This follows a trend of Icelandic banks seeking to bolster domestic investor relationships after periods of international volatility. The strong demand indicates a degree of confidence in the Icelandic economy and Landsbankinn's financial health, but also highlights the potential for future funding costs to be sensitive to domestic market conditions.
What we're watching
- Investor Appetite
- The significant oversubscription suggests strong domestic investor confidence, but the bank will need to manage expectations for future issuances and pricing.
- Rating Stability
- Landsbankinn's ability to maintain the anticipated BB rating from S&P will be crucial for attracting similar investment in the future and reflects broader creditworthiness.
- Currency Risk
- While diversifying funding sources away from USD is positive, the bank's exposure to Icelandic króna volatility warrants monitoring, particularly given the potential for future FX-denominated offerings.
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