Bankinn er alveg við hliðina á apótekinu.

Bankinn means the bank. Icelandic usually puts the definite article at the end of the noun instead of using a separate word like English the.

• banki = bank
• bankinn = the bank

So Bankinn er... means The bank is...

Er means is. It is the present tense of vera (to be).

So:

• Bankinn er... = The bank is...

Here alveg adds emphasis. In this sentence it means something like:

• right
• really
• completely

So alveg við hliðina á means right next to rather than just next to.

Yes. Við hliðina á is a very common expression meaning:

• next to
• beside

It is best learned as a whole phrase. Word-for-word, it is roughly something like by the side of, but in normal English the natural translation is next to.

Because við hliðina á is an idiomatic structure. Icelandic often uses prepositions in combinations that do not match English one-for-one.

So even though English just says next to the pharmacy, Icelandic says við hliðina á apótekinu. The whole expression works together.

Because apótekinu is the form needed after á in this expression.

The base noun is:

• apótek = pharmacy

Then:

• apótekið = the pharmacy
• apótekinu = a different case form of the pharmacy

In við hliðina á apótekinu, the noun after á takes the dative case, so you get apótekinu.

In this phrase, hliðina is the form used in the fixed expression við hliðina á.

It is helpful to think of the whole chunk as one unit:

• við hliðina á = next to / beside

A learner does not need to build this from scratch every time. Memorizing the full phrase is the easiest approach.

No, not here.

Við can appear in different meanings depending on the context, but in við hliðina á it is part of the expression meaning next to or beside.

So you should not translate this sentence word-for-word as if við meant with.

Yes.

• Bankinn er við hliðina á apótekinu. = The bank is next to the pharmacy.
• Bankinn er alveg við hliðina á apótekinu. = The bank is right next to the pharmacy.

Without alveg, the sentence is still completely natural.

This is normal Icelandic word order for a simple statement:

• Bankinn = subject
• er = verb
• alveg við hliðina á apótekinu = description of location

So it follows the common pattern:

• subject + verb + rest

That is why the sentence begins with Bankinn er...

No. It is capitalized only because it is the first word of the sentence.

If it appeared in the middle of a sentence, it would normally be bankinn, not Bankinn, unless it were actually part of a proper name.

A good way is to learn it in chunks:

• Bankinn er... = The bank is...
• við hliðina á... = next to...
• apótekinu = the pharmacy in the form needed here

So a very useful pattern is:

• X er (alveg) við hliðina á Y

meaning:

• X is (right) next to Y