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Wednesday 28 July, 2021

Islandsbanki hf.

Islandsbanki hf.: Financial results for second quarter 2021

Islandsbanki hf.: Financial results for second quarter 2021

Second quarter 2021 (2Q21) financial highlights – prosperous quarter with positive net impairment

  • Íslandsbanki reported a net profit of ISK 5.4bn in the second quarter (2Q20: ISK 1.2bn) generating an annualised return on equity of 11.6% (2Q20: 2.8%) which is above the Bank’s financial targets.
  • Growth in loans to customers led an increase in net interest income YoY which totalled ISK 8.4bn in 2Q21 compared to ISK 8.2bn in 2Q20.
  • Net fee and commission income grew 26% YoY and amounted to ISK 2.9bn in 2Q21. Fees from asset management, investment banking and brokerage as well as from loans contributed to the increase.
  • Strong domestic equity market performance led to a net financial income of ISK 619m in 2Q21 compared to a loss of ISK 181m in 2Q20.
  • Administrative expenses rose by 10.5% YoY totalling ISK 6.5bn in the 2Q21. Administrative expenses include an ISK 588m one-off cost in relation to the Bank’s initial public offering (IPO), explaining the increase YoY.
  • Cost-to-income ratio (C/I ratio) was 49.9% in 2Q21, down from 57.5% in 2Q20.
  • The brighter outlook for the tourism industry contributed to a positive ISK 1.1bn net impairment on financial assets in 2Q21, in comparison to a net impairment charge, shaped by COVID-19, of ISK 2.4bn in 2Q20. The net impairment charge over loans to customers, the annualised cost of risk, was -0.42% in 2Q21 compared to 1.03% in 2Q20.
  • Loans to customers grew 5.9% from end of March to ISK 1,090bn, and 8.2% for 1H21, driven in most part by mortgage lending but also by growth in loans to companies.
  • At the end of the reporting period, the share of credit-impaired loans to customers was 2.1% (gross) down from 2.9% at year-end following full repayment of exposures in Stage 3.
  • Deposits from customers grew ISK 67bn in the second quarter, and ISK 86bn for 1H21, large part of the increase is related to settlement of the Bank’s IPO and thus temporary.
  • The liquidity position remains strong with all ratios well above regulatory requirements and internal thresholds.
  • Total equity amounted to ISK 190bn at the end of June and the Bank’s capital ratio was 22.9%, up from 21.9% at 1Q21, considerably higher than the total capital ratio target which is currently at 18.3-19.8%. The leverage ratio was 12.4% at the end of June compared to 12.6% for 1Q21, indicating low leverage.

First half 2021 (1H21) financial highlights – net profit turnaround

  • The Bank’s net profit for the first half of year 2021 was ISK 9.0bn (1H20: ISK -131m) with annualised return on equity for 1H21 of 9.7% compared to a -0.1% in 1H20.
  • Net interest income totalled ISK 16.6bn in 1H21, a fall of 1.2% YoY which is explained by lower interest rate environment between periods.
  • Several factors contributed to a 20.2% increase in net fee and commission between years including fees from asset management, investment banking and brokerage as well as fees from loans. Net fee and commission income totalled ISK 5.8bn for the first half of the year.
  • Net financial income was ISK 912m compared to a loss of ISK 1.9bn for 1H20.
  • Administrative expenses rose between years, mostly explained by a one-off cost in relation to the Bank’s IPO.
  • Cost-to-income ratio dropped significantly YoY from 60.1% in 1H20 to 50.6% in 1H21.
  • Net impairment on financial assets was a positive ISK 622m in the first half of 2021, due to brighter outlook for the tourism industry, compared to a charge of ISK 5.9bn in 1H20 which reflected the economic situation following the start of COVID-19.

Key figures and ratios

    2Q21 2Q20 1H21 1H20 2020
PROFITABILITY After tax profit (loss), ISKm 5,431 1,245 9,046 (131) 6,755
  Return on equity 11.6% 2.8% 9.7% (0.1%) 3.7%
  Net interest margin (of total assets) 2.4% 2.6% 2.4% 2.7% 2.6%
  Cost-to-income ratio¹ 49.9% 57.5% 50.6% 60.1% 54.3%
  Cost of risk (0.42%) 1.03% (0.12%) 1.28% 0.91%
    30.6.21 31.3.21 31.12.20 30.9.20 30.6.20
BALANCE SHEET Loans to customers, ISKm 1,089,723 1,029,415 1,006,717 970,309 933,320
  Total assets, ISKm 1,446,860 1,385,235 1,344,191 1,328,724 1,303,256
  Risk exposure amount, ISKm 924,375 954,712 933,521 942,339 923,133
  Deposits from customers, ISKm 765,614 698,575 679,455 698,610 681,223
  Customer loans to customer deposits ratio 142% 147% 148% 139% 137%
  Non-performing loans (NPL) ratio² 2.1% 2.4% 2.9% 3.3% 3.6%
LIQUIDITY Liquidity coverage ratio (LCR), for all currencies 187% 172% 196% 136% 179%
  Net stable funding ratio (NSFR), for all currencies 122% 119% 123% 113% 117%
CAPITAL Total equity, ISKm 190,355 185,471 186,204 182,509 179,722
  Total capital ratio 22.9% 21.9% 23.0% 22.2% 22.2%
  Tier 1 capital ratio 20.1% 19.2% 20.1% 19.4% 19.4%
  Leverage ratio 12.4% 12.6% 13.6% 13.4% 13.4%

1. Calculated as (Administrative expenses + Contribution to the Depositors' and Investors' Guarantee Fund – One-off items) / (Total operating income – One-off items)

2. Stage 3, loans to customers, gross carrying amount                        

Birna Einarsdóttir, CEO of Íslandsbanki

We are pleased to report that Íslandsbanki’s profit in the second quarter was ISK 5.4bn, with an annualised return on equity of 11.6% which is above the Bank’s target. Net impairment on financial assets was positive, amounting to ISK 1.1bn, a turnaround from a net impairment charge for the second quarter last year which was heavily impacted by COVID-19. Net fee and commission income is a good deal stronger compared to same period last year and the cost to income ratio is just under 50%. The loan book growth continues with 8% increase from year-end. The real estate market is robust, and we see an increase in mortgages but also in loans to both SMEs and large corporates.

The second quarter was an eventful one as the Bank’s shares were listed on Nasdaq Iceland Main Market on 22 June - the largest initial public offering in Iceland. The Bank’s flotation saw record participation from investors with a huge oversubscription resulting in the largest shareholder base of any listed company in Iceland.

Investor relations

An earnings conference call and webcast will take place on Wednesday 28 July

The Bank will host a virtual meeting in English for investors and market participants on Wednesday 28 July at 16.00 Reykjavík/GMT, 1700hrs London/BST, 1800hrs CET. Birna Einarsdóttir, CEO, and Jón Guðni Ómarsson, CFO, will give an overview of the second quarter financial results and operational highlights.

Participant registration is accessible here. A recording will be available after the meeting on the Investor Relations website. To participate in the webcast via telephone and in order to be able to ask questions please use the following dial-in details:

Iceland: +354 800 74 37

Denmark: +45 354 45 577

Sweden: +46 8 566 42 651

Norway: +47 235 00 243

United Kingdom: +44 33 330 00 804

United States: +1 631 913 1422

Confirmation Code: 67974052#

All materials relating to the Bank’s operating results, together with information on the financial calendar and silent periods, can be found here:

For further information:

Íslandsbanki IR releases
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About Íslandsbanki
With a history that dates from 1875, Íslandsbanki is an Icelandic universal bank with a strong customer focus. The Bank believes in moving Iceland forward by empowering its customers to succeed - reflecting a commitment to run a solid business that is a force for good in society. Driven by the ambition to be #1 for service, Íslandsbanki’s banking model is led by three business divisions that build and manage relationships with its customers. Íslandsbanki maintains a strong market share with the most efficient branch network in the country, supporting at the same time its customers’ move to more digital services. The Bank operates in a highly attractive market and, with its technically strong foundations and robust balance sheet, is well positioned for the opportunities that lie ahead. Íslandsbanki has a BBB/A-2 rating from S&P Global Ratings. The Bank’s shares are listed on Nasdaq Iceland Main Market.


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