Islandsbanki Hf · OMXICE:ISB
Islandsbanki Hf — Q1 2025 Earnings Presentation
50 slides from Islandsbanki Hf's earnings presentation, May 8, 2025
Slide 1: 1Q25 Financial Results
1Q25 Financial Results 8 May 2025 Jón Guðni Ómarsson Chief Executive Officer Ellert Hlöðversson Chief Financial Officer
Slide 2: Core operating income grew by 5.8% year-on-year
8 May 2025 2 Core operating income grew by 5.8% year-on-year ROE and cost-to-income ratio expected to be in line with targets for the year as a whole ROE in excess of analyst consensus Considerable excess capital in place ROE Total capital ratio 35% 13.2% 9.8% 9.7% 11.2% 9.4% 30% 23.6% 23.1% 23.4% 2
Slide 3: Capital optimisation still a priority for the Bank
8 May 2025 3 Capital optimisation still a priority for the Bank Month-by-month fluctuations expected as the economy reaches an equilibrium 2025 Guidance Target 1Q25 Loans to customers and revenue, in general to grow in line with nominal GDP through the business cycle Return on equity >10% 9.4% ROE i
Slide 4: Economic tailwinds picking up speed
8 May 2025 4 Economic tailwinds picking up speed A new business cycle is underway as GDP growth accelerates following adjustment phase in 2024 A fairly smooth upward path for the economy following minimal growth in 2024… Direct exposure to USA tariffs is modest, concentrated in seafood and medical p
Slide 5: Solid start to the year across all business segments
8 May 2025 5 Solid start to the year across all business segments Personal Banking1 Business Banking1 Corporate & Investment Banking1 13.1% ROE 3.0% NIM 17.6% ROE 5.9% NIM 14.3% ROE 3.8% NIM Loans grew by ISK 4.6 Empowering SME customers Market-leading role billion in first quarter 2025 across the c
Slide 6: Digital innovation continues
8 May 2025 6 Digital innovation continues New app and new online bank promote customer personalisation and financial health New app features include New home screen Overdraft Tracking of the Renaming of that includes "Safe applications for status of mortgage accounts to Spend" feature SMEs & Corpora
Slide 7: Partnership with VÍS launched
8 May 2025 7 Partnership with VÍS launched Important part of enhancing customer loyalty and retention • Íslandsbanki customers can now have an overview of VÍS insurances in the Íslandsbanki app • Mutual customers of both companies enjoy special benefits • VÍS insurance advisors in Íslandsbanki branc
Slide 8: We create value for the future with our customers
8 May 2025 8 We create value for the future with our customers Meaningful participation in projects nurturing long-time relationships and building new ones Samherji Salmon Garden - Total funding of EUR 235 million • Íslandsbanki Corporate Finance is proud to have been entrusted with leading the fina
Slide 9: EUR million inaugural Green Senior Preferred issuance
8 May 2025 9 EUR 300 million inaugural Green Senior Preferred issuance Successful March issuance satisfies the Bank's senior issuance need throughout 2025 Summary terms Transaction Highlights Issuer Íslandsbanki Green Share 35% from Issuer's Ratings A3 (stable)(Moody’s)/BBB+ #45 73% Advanced ESG inv
Slide 10: Shareholding and share price development
8 May 2025 10 Shareholding and share price development Government clear on intention to continue sell-down of stake in 2025 Íslandsbanki's share price development since IPO Íslandsbanki's shareholders Dividend adjusted price1 Shareholders of ≥ 1% of the Bank's shares, 31.3.252 160 The Government of
Slide 11: Financial Overview
8 May 2025 11 Financial Overview Íslandsbanki 1Q25 Financial Results
Slide 12: Positive momentum in net interest income offset by financial expenses
8 May 2025 12 Positive momentum in net interest income offset by financial expenses Core income lines growing healthily year-on-year Profit for the period – 1Q24 vs 1Q25 ISKm 817 57 (1,530) 701 45 (5) (293) 5,209 5,417 1Q24 Net interest Net fee & Other operating Operating Impairments Income tax Loss
Slide 13: Growing margins year-on-year
8 May 2025 13 Growing margins year-on-year Fluctuations assumed for the short term while the economy re-stabilises Net interest income Net interest income – YoY comparison Highlights Business segments, ISKm ISKm • Net interest margin was 3.2% in 12,122 12,491 11,777 12,939 1Q25 (3.0% in 1Q24), while
Slide 14: Net fee and commission income increases by 1.9% year-on-year
8 May 2025 14 Net fee and commission income increases by 1.9% year-on-year Turmoil affects fees from capital markets after a strong start to the year Net fee and commission income Net fee and commission income – YoY comparison Highlights Business segments, ISKm ISKm • Alllianz Ísland hf., a subsidia
Slide 15: Loss on NFI primarily due to volatility and pressure on capital markets
8 May 2025 15 Loss on NFI primarily due to volatility and pressure on capital markets Other operating income mainly due to fair value adjustment of Kirkjusandur 2 Net financial income (expense) Shares and equity instruments1 Highlights ISKm ISKbn • Net financial expense of ISK 986m in 228 169 8.9 th
Slide 16: Cost-to-income ratio affected by losses on non-core income lines
8 May 2025 16 Cost-to-income ratio affected by losses on non-core income lines The Bank remains committed to its financial target of being below 45% cost-to-income ratio for the year as a whole Administrative expenses Cost-to-income ratio1,2 Highlights ISKm 7,516 7,396 • Salaries and related expense
Slide 17: LTVs improve from previous quarter as growth moderates
8 May 2025 17 LTVs improve from previous quarter as growth moderates Loan portfolio focused on lower risk customers and over 93% covered by collateral Loans to customers Loans to customers Highlights By business division, ISKbn By sector, with tourism as a separate sector • Credit exposure fully cov
Slide 18: Asset quality remains both stable and strong
8 May 2025 18 Asset quality remains both stable and strong Minimal changes to net impairment during first quarter Net impairment on financial assets Loans to customers: Stage 2 and 3 (NPL) Highlights By period, ISKbn Development of gross carrying amount as ratio of total loans • The Group no longer
Slide 19: Shift between mortgage products has started to normalise
8 May 2025 19 Shift between mortgage products has started to normalise Fixed rate imbalance continues to run off in line with projections Mortgage portfolio Interest rate reset profile for NIL 3-5y fixed rate Highlights By interest rate type, gross carrying amount, ISKbn mortgages • Conservative pay
Slide 20: Commercial Real Estate portfolio well diversified and of good quality
8 May 2025 20 Commercial Real Estate portfolio well diversified and of good quality Occupancy ratios high for domestic commercial real estate companies Development of exposure to real estate companies Development of construction exposure Highlights Gross carrying amount by period, ISKbn Gross carryi
Slide 21: Deposits are the largest source of funding
8 May 2025 21 Deposits are the largest source of funding Strong deposit growth makes the Bank more flexible with regards to wholesale funding Funding sources Customer loans to customer deposits ratio Highlights By type, % of total liabilities and equity Development, % • Deposits grew by 1.3% in 1Q25
Slide 22: Light maturity profile allows for opportunistic approach to funding
8 May 2025 22 Light maturity profile allows for opportunistic approach to funding Issuances during the quarter have prefunded the Bank to a large degree limiting exposure to current market volatility Sources of borrowings Contractual maturity profile of borrowings ISKbn 503 31.03.25, ISKbn Highlight
Slide 23: Strong liquidity position, ratios well above requirements
8 May 2025 23 Strong liquidity position, ratios well above requirements Liquid assets 19% of the total balance sheet and fully marked-to-market Total liquidity coverage ratio (LCR) Liquidity coverage ratio for ISK Highlights 300% 200% • All liquidity measures well above regulatory requirements 202%
Slide 24: Íslandsbanki's capital ratios well above target
8 May 2025 24 Íslandsbanki's capital ratios well above target Capital optimisation remains a focus point for the Bank, subject to market conditions Current regulatory requirements and minimum capital target Capital and leverage ratios Highlights 31.3.2025, by capital composition % of REA (% of total
Slide 25: Q&A
8 May 2025 25 Q&A Íslandsbanki 1Q25 Financial Results
Slide 26: Appendix I
8 May 2025 26 Appendix I About Íslandsbanki and additional financial information Íslandsbanki 1Q25 Financial Results
Slide 27: This is Íslandsbanki
8 May 2025 27 This is Íslandsbanki We empower our customers to be a force for good Values The Bank Market share1 Sustainability in 1Q25 To create value 731 FTEs: Number of FTEs at Íslandsbanki at period-end 30% Retail customers Successful issuance of a EUR 300 million green senior preferred notes fo
Slide 28: Financial overview
8 May 2025 28 Financial overview Key figures & ratios 1Q25 4Q24 3Q24 2Q24 1Q24 PROFITABILITY Profit for the period, ISKm 5,209 6,283 7,280 5,266 5,417 Return on equity 9.4% 11.2% 13.2% 9.7% 9.8% Net interest margin (of total assets) 3.2% 2.7% 2.9% 3.1% 3.0% Cost-to-income ratio1,2 47.6% 45.7% 40.4%
Slide 29: Income statement
8 May 2025 29 Income statement Income statement, ISKm 1Q25 1Q24 ∆% 4Q24 ∆% Net interest income 12,939 12,122 7% 10,875 19% Net fee and commission income 3,067 3,010 2% 3,607 (15%) Net financial income (expense) (986) (236) 318% 169 - Net foreign exchange gain 47 196 (76%) 113 (58%) Other operating i
Slide 30: Balance sheet reflects a balanced loan and funding profile
8 May 2025 30 Balance sheet reflects a balanced loan and funding profile Conservative mix of assets and stable funding Simplified balance sheet structure Assets 31.3.25, ISK 1,667bn • Vast majority of assets Cash in Central bank Deposits from credit inst. consist of lending to both Liquid assets and
Slide 31: Íslandsbanki's MREL requirement
8 May 2025 31 Íslandsbanki's MREL requirement Minimum Requirement for Own Funds and Eligible MREL Development, % • Íslandsbanki’s MREL requirement is Liabilities (MREL), 31.3.2025 the sum of the Loss absorption amount (LAA) and Recapitalisation amount (RCA), both equal to the total SREP capital requ
Slide 32: Assets
8 May 2025 32 Assets Asset base mainly consists of loans and liquid assets Assets, ISKm 31.3.25 31.12.24 Δ Δ% Cash and balances with Central Bank 69,944 65,716 4,228 6% Loans to credit institutions 92,259 50,486 41,773 83% Bonds and debt instruments 142,937 142,618 319 0% Derivatives 9,092 5,324 3,7
Slide 33: Liabilities and equity
8 May 2025 33 Liabilities and equity Deposits continue to be the largest source of funding Liabilities & Equity, ISKm 31.3.25 31.12.24 Δ Δ% Deposits from Central Bank and credit institutions 14,374 12,535 1,839 15% Deposits from customers 936,779 926,846 9,933 1% Derivative instruments and short pos
Slide 34: Appendix II
8 May 2025 34 Appendix II Icelandic economy update Íslandsbanki 1Q25 Financial Results
Slide 35: The Icelandic economy and society draw on many strengths
8 May 2025 35 The Icelandic economy and society draw on many strengths Icelanders enjoy high standards of living in a modern, open and egalitarian society Iceland ranks highly on a variety of global Income inequality is low compared to OECD peers Sustainable energy usage is prevalent development ben
Slide 36: Economic tailwinds picking up speed
8 May 2025 36 Economic tailwinds picking up speed A fairly smooth upward path for the economy, driven equally by exports and domestic demand GDP and contribution of its subcomponents GDP and contribution of its subcomponents Highlights Volume change from prior year (%), annual data Volume change fro
Slide 37: New sources of export growth come to the fore
8 May 2025 37 New sources of export growth come to the fore Export growth resumes following a modest decline in 2024 IP-based sector export revenues Exports and contribution from subcomponents % change Highlights ISKbn • Visitor numbers rebounded in the second half of 2024, with a total of 2.26 350
Slide 38: New sources of export growth come to the fore
8 May 2025 38 New sources of export growth come to the fore Export growth resumes following a modest decline in 2024 Imports and contribution from subcomponents Current account balance Highlights % change % of GDP • Export growth is projected at nearly 3% in 2025 and nearly 4% annually in 2026 25 15
Slide 39: ISK set to be relatively stable over the forecast horizon
8 May 2025 39 ISK set to be relatively stable over the forecast horizon Wages and prices to rise faster than abroad, pushing the real exchange rate markedly upwards ISK exchange rate and selected determinants ISK exchange rate and real exchange rate Highlights ISKbn (left) and EURISK (right) EURISK
Slide 40: Domestic balance sheets staying robust
8 May 2025 40 Domestic balance sheets staying robust Private sector debt ratios are stable and public debt remains moderate in global context Private sector debt Corporate debt % of GDP % of GDP 400 300 350 250 300 200 250 200 150 150 100 100 77 50 50 73 0 0 2003 2005 2007 2009 2011 2013 2015 2017 2
Slide 41: Investment set to grow in coming years after a brief hiatus
8 May 2025 41 Investment set to grow in coming years after a brief hiatus High interest rates and a more ambiguous outlook for exports will impede investment temporarily, but growth will pick up again later Investment, real change, and contribution of subcomponents Business investment and related in
Slide 42: Investment set to grow in coming years after a brief hiatus
8 May 2025 42 Investment set to grow in coming years after a brief hiatus Real wages set to grow steadily during the forecast horizon Wages, YoY change Unemployment1 Highlights % % of workforce, annual average • Unemployment rose to an average of 3.5% in 2024, up 0.3 percentage points 15 9 year-on-y
Slide 43: Icelanders put their wallets to work
8 May 2025 43 Icelanders put their wallets to work Private consumption growth to rebound during the forecast horizon Net household wealth Private consumption and related indicators Highlights Selected ratios % change YoY (left) and index value (right) • Private consumption grew by 0.6% in 8 15 160 2
Slide 44: The real estate market shows continued resilience
8 May 2025 44 The real estate market shows continued resilience Central Bank monetary tightening has impact, but underlying demand supports prices and turnover Capital area house prices relative to macroeconomic fundamentals Residential house prices and turnover Index, January 2011=100 % change (r.
Slide 45: The Icelandic housing market is resilient
8 May 2025 45 The Icelandic housing market is resilient Supply, demand, mortgage market factors combine to make a large price correction less likely Households are not highly indebted compared to peers Mortgage market is flexible w.r.t. loan types with different payment burden Household debt, % of G
Slide 46: Disinflation set to continue
8 May 2025 46 Disinflation set to continue Inflation rapidly approaching the target but will not reach it during the forecast horizon Inflation and the CBI inflation target* Month-on-month and year-on-year CPI change* Highlights % *Forecast as of April 2025 % *Forecast as of April 2025 • Inflation c
Slide 47: Interest rates on a downward path in the coming term
8 May 2025 47 Interest rates on a downward path in the coming term The Central Bank's monetary easing phase will probably continue until mid-2026, with long-term interest rates following suit Policy rate and inflation* *Forecast as of April 2025 Key interest rates Highlights %, Real policy rate base
Slide 48: Iceland's credit rating rising apace
8 May 2025 48 Iceland's credit rating rising apace Rating companies acknowledge the flexibility of the economy and improving public debt metrics Development of sovereign credit rating Fitch in Dec-17: Moody’s in Nov-19: Moody’s in Sep-24: AAA/Aaa Rating upgrade to A on economic Upgrade to A2 on sust
Slide 49: Disclaimer
8 May 2025 49 Disclaimer This presentation is for information purposes only and shall not be construed as an The forward-looking statements represent Íslandsbanki's current expectations, plans offer or solicitation for the subscription or purchase or sale of any financial or forecasts of its future
Slide 50: 8 May 2025 Íslandsbanki 1Q25 Financial Results
8 May 2025 50 Íslandsbanki 1Q25 Financial Results