Islandsbanki Hf · OMXICE:ISB
Islandsbanki Hf — Íslandsbanki — Q3 2020 Earnings Presentation
46 slides from Islandsbanki Hf's earnings presentation, Oct 28, 2020
Slide 1: 3Q2020 Financial Results
Íslandsbanki 3Q2020 Financial Results 28 October 2020 3Q2020 Financial Results islandsbanki.is
Slide 2: Table of Contents
Íslandsbanki 3Q2020 Financial Results 28 October 2020 Table of Contents 1. 3Q2020 highlights 2. Income statement 3. Balance sheet 4. Financial targets and next steps 5. Annex – Icelandic economy update 2
Slide 3: 1. 3Q2020 highlights
Íslandsbanki 3Q2020 Financial Results 28 October 2020 1. 3Q2020 highlights islandsbanki.is
Slide 4: This is Íslandsbanki
Íslandsbanki 3Q2020 Financial Results This is Íslandsbanki Moving Iceland forward by empowering our customers to succeed 28 October 2020 Vision and Values The Bank Market share1 Sustainability FTEs Vision to be 1.62 CO2tn 744 30% Retail customers Environment Carbon emission per employee #1 for servi
Slide 5: Pandemic-induced recession deep but hopefully temporary
Íslandsbanki 3Q2020 Financial Results Pandemic-induced recession deep but hopefully temporary Strong foundations facilitate a robust recovery when world-wide pandemic impact fades 28 October 2020 The economic impact of COVID-19 will be deep in 2020... ...although a lower real exchange rate will aid
Slide 6: Operational highlights in 3Q2020
Íslandsbanki 3Q2020 Financial Results Operational highlights in 3Q2020 Increased digital focus in wake of COVID-19 28 October 2020 Íslandsbanki received the Icelandic knowledge award for the year 2020, awarded by the Association of Business and Economist graduates in Iceland (FVH). The Bank is said
Slide 7: First Icelandic bank to publish a Sustainable Financing Framework
Íslandsbanki 3Q2020 Financial Results Íslandsbanki becomes the first Icelandic bank to publish a Sustainable Financing Framework1 Project categories mapped against the Bank’s loan portfolio, paving way for new sustainable loans and sustainable bond issuances 28 October 2020 The Bank’s most important
Slide 8: Seven sustainability goals for 2025 approved
Íslandsbanki 3Q2020 Financial Results Seven sustainability goals for 2025 approved Measurable and timed targets will be set on an annual basis for each goal 28 October 2020 Íslandsbanki‘s goals for 2025 Relation to SDGs 1. Become carbon neutral in our operations 2. Offer our customers green and sust
Slide 9: Overview: Key figures & ratios
Íslandsbanki 3Q2020 Financial Results Overview Key figures & ratios 28 October 2020 3Q20 3Q19 9M20 9M19 2019 PROFITABILITY After tax profit, ISKm 3,361 2,086 3,230 6,795 8,454 Return on equity (after tax) 7.4% 4.7% 2.4% 5.1% 4.8% Net interest margin (of total assets) 2.5% 2.7% 2.6% 2.7% 2.8% Cost to
Slide 10: 2. Income statement
Íslandsbanki 3Q2020 Financial Results 28 October 2020 2. Income statement islandsbanki.is
Slide 11: Strong third quarter but profitability below target for 9M20
Íslandsbanki 3Q2020 Financial Results Strong third quarter but profitability below target for 9M201 Impairment charge related to COVID-19 affects profit 28 October 2020 ISKm 3Q20 3Q19 ∆ ∆% 9M20 9M19 ∆ ∆% Comments — Total operating income increased Net interest income 8,305 8,190 115 1.4% 25,113 24,5
Slide 12: Net interest income rising
Íslandsbanki 3Q2020 Financial Results Net interest income rising As a result of higher interest-bearing assets 28 October 2020 Net interest income Net interest margin ISKm 1.4% 2.4% 8,190 8,305 24,531 25,113 2.7% 2.5% 2.7% 2.6% 2,659 -2.4% 2,595 7,876 +1.8% 8,021 2,679 -2.1% 2,622 8,140 7,913 -2.8%
Slide 13: Net fee and commission income rising
Íslandsbanki 3Q2020 Financial Results Net fee and commission income rising Increase from asset management, investment banking and brokerage 28 October 2020 Comments Net fee and commission income Net fee and commission income ISKm ISKm, split by sector — Following the sale of Borgun hf., 12.3% -3.7%
Slide 14: Administrative expenses decrease
Íslandsbanki 3Q2020 Financial Results Administrative expenses decrease Fall in administrative expenses by 8.9% in 3Q20 YoY is driven by lower salary cost and operating expenses 28 October 2020 Comments Administrative expenses1 Efficiency – Cost to income ratio2 ISKm — The drop in administrative 63%
Slide 15: 3. Balance sheet
Íslandsbanki 3Q2020 Financial Results 28 October 2020 3. Balance sheet islandsbanki.is
Slide 16: Balance sheet overview
Íslandsbanki 3Q2020 Financial Results Balance sheet overview Strong balance sheet structure with deposits as primary source of funding 28 October 2020 Simplified balance sheet structure 30 September 2020, ISK 1,329bn Other Other Credit institutions Funding, remaining maturity <1y Liquid assets Cash
Slide 17: Total assets are 10.8% up from year-end 2019
Íslandsbanki 3Q2020 Financial Results Total assets are 10.8% up from year-end 2019 Loans to customers grew by 7.9% from YE19, mainly from increase in mortgage lending 28 October 2020 Comments Assets, ISKm 30.09.2020 30.06.2020 Δ Δ% 31.12.2019 Δ Δ% Liquid assets — Three line-items – cash and balances
Slide 18: Diversified loan portfolio in terms of sectors and collateral
Íslandsbanki 3Q2020 Financial Results Diversified loan portfolio in terms of sectors and collateral Exposure to tourism is 10% of loans to customers 28 October 2020 Loans to customers Loans to customers Loans to customers By business divisions, ISKbn, consolidated By sector, consolidated, standard s
Slide 19: COVID-19 moratorium tapers off
Íslandsbanki 3Q2020 Financial Results COVID-19 moratorium tapers off Temporary moratorium uniformly executed and broadly applied, support loans part of Government measures 28 October 2020 Loans to individuals granted COVID-19 moratorium Loans to companies granted COVID-19 moratorium COVID-19 support
Slide 20: Additional impairment charge due to COVID-19
Íslandsbanki 3Q2020 Financial Results Additional impairment charge due to COVID-19 Tourism sector hardest hit by COVID-19 and fully in Stage 2 28 October 2020 Temporary changes to the impairment model due to COVID-19 Exposure to tourism by effect of COVID-19 crisis Net carrying amount, a proportion
Slide 21: Increase in credit risk to the tourism sector
Íslandsbanki 3Q2020 Financial Results Increase in credit risk to the tourism sector Exposure in Stage 2 increases due to the COVID-19 pandemic, but Stage 3 has not yet increased 28 October 2020 Loans to customers & off-balance sheet items: Loans to customers: gross carrying amount Net impairment on
Slide 22: Loan portfolio with solid collateral coverage
Íslandsbanki 3Q2020 Financial Results Loan portfolio with solid collateral coverage Majority of collateral in residential and commercial real estate 28 October 2020 LTV distribution by underlying asset class LTV distribution of mortgages to individuals ISK bn, by type of underlying asset, as of 30.0
Slide 23: Total liabilities are 12.4% up from year-end 2019
Íslandsbanki 3Q2020 Financial Results Total liabilities are 12.4% up from year-end 2019 Deposits from customers increased by 13.0% from YE19, mainly from retail customers and pension funds 28 October 2020 Comments Deposits Liabilities & Equity, ISKm 30.9.2020 30.6.2020 Δ Δ% 31.12.2019 Δ Δ% — Increas
Slide 24: Deposits remain the main source of funding
Íslandsbanki 3Q2020 Financial Results Deposits remain the main source of funding Increase in deposits continued in 3Q20 28 October 2020 Comments Customer and credit institutions deposits by LCR category Deposits from customers 30.09.2020 compared with year end-2019, ISK bn, consolidated By business
Slide 25: Successful funding journey
Íslandsbanki 3Q2020 Financial Results Successful funding journey Modest funding requirement during 9M20 28 October 2020 Comments Sources of market borrowings Maturity profile of long-term debt Currency split of market borrowing Book value, ISKbn 30.09.2020, Nominal value, ISKbn sources 30.09.2020, N
Slide 26: Sound management of liquidity – all ratios above requirements
Íslandsbanki 3Q2020 Financial Results Sound management of liquidity – all ratios above requirements Liquid assets of ISK 267bn are prudently managed 28 October 2020 Comments Total liquidity coverage ratio (LCR) Liquidity coverage ratio – foreign currencies and ISK 600% — All liquidity measures above
Slide 27: Market risk well controlled
Íslandsbanki 3Q2020 Financial Results Market risk well controlled The Bank has a very modest market risk profile 28 October 2020 Market risk exposure and market risk appetite Development of the currency imbalance compared with regulatory limit Average positions per quarter, as percentage of total ca
Slide 28: Sound capital position to navigate uncertain environment
Íslandsbanki 3Q2020 Financial Results Sound capital position to navigate uncertain environment High REA density and low leverage in international comparison 28 October 2020 Comments Capital and leverage ratios Risk exposure amount (REA) Capital ratios ISKbn — The CET1 capital was ISK 183bn at the en
Slide 29: Íslandsbanki's capital ratios well above target
Íslandsbanki 3Q2020 Financial Results Íslandsbanki’s capital ratios well above target Countercyclical buffer reduced to 0% as a result of COVID-19 28 October 2020 Comments — The sum of Pillar 1, Pillar 2 and the Common Equity Tier 1 Additional Tier 1 Tier 2 Current capital combined capital buffers f
Slide 30: Íslandsbanki S&P credit rating
Íslandsbanki 3Q2020 Financial Results Íslandsbanki Íslandsbanki S&P credit rating S&P Rating lowered in April 2020 28 October 2020 Long-term BBB BBB/A-2 Stable Outlook Short-term A-2 Press Release 24 April 2020 Outlook Stable In late April 2020 S&P lowered Íslandsbanki’s rating to BBB/A-2 with a sta
Slide 31: 4. Financial targets and next steps
Íslandsbanki 3Q2020 Financial Results 28 October 2020 4. Financial targets and next steps islandsbanki.is
Slide 32: Financial targets
Íslandsbanki 3Q2020 Financial Results Private and Confidential Financial targets ROE at 7.4% in the quarter and capital ratios remain sound 28 October 2020 Target 9M2020 2019 2018 Guidance — Target of 4-6% on top of risk-free rate. Risk free-rate is currently 0.75% ROE in excess of risk-free rate 4-
Slide 33: Key takeaways
Íslandsbanki 3Q2020 Financial Results Key takeaways Strong 3Q20 result. Future economic uncertainty prevails but robust foundations ensure a vigorous rebound 28 October 2020 1 Strong recovery after a temporary deep 2 Íslandsbanki published a Sustainable 3 Strong ROE in 3Q20 shock Financing Framework
Slide 34: 5. Annex – Icelandic economy update
Íslandsbanki 3Q2020 Financial Results 28 October 2020 5. Annex – Icelandic economy update islandsbanki.is
Slide 35: COVID economic impact will be deep
Íslandsbanki 3Q2020 Financial Results COVID 19 economic impact will be deep Very sharp GDP contraction likely in 2020 but robust growth could resume in 2021 28 October 2020 Comments GDP and the contribution of major subitems 1 GDP forecast comparison YoY change (%) YoY change (%) — The COVID-19 pand
Slide 36: Tourism sector hit hard by COVID pandemic
Íslandsbanki 3Q2020 Financial Results Tourism sector hit hard by COVID pandemic Number of tourists visiting Iceland shrinks by 75% in 2020 28 October 2020 Comments Foreign visitors Services exports and foreign card turnover — In the first 9M of 2020, 460 thousand Departures through KEF airport (mill
Slide 37: Current account resilient to export shock
Íslandsbanki 3Q2020 Financial Results Current account resilient to export shock Dramatic fall in exports causes a temporary deficit but medium-term outlook benign 28 October 2020 Comments Export revenues Current account balance1 — Inevitably, services export revenues will ISK bn % of GDP decline con
Slide 38: Domestic balance sheets healthy before COVID
Íslandsbanki 3Q2020 Financial Results Domestic balance sheets healthy before COVID Economy-wide leverage moderate in comparison with peers and historical levels 28 October 2020 Private sector debt Corporate debt % of GDP % of GDP 400 250 350 300 200 250 150 200 150 100 100 50 50 0 0 2003 2004 2005 2
Slide 39: Businesses bracing for headwinds
Íslandsbanki 3Q2020 Financial Results Businesses bracing for headwinds Business investment is contracting and lending growth to businesses is minimal 28 October 2020 Comments Business sentiment, 400 largest companies Credit system net lending — Investment lost pace in 2019, after a Index YoY % chang
Slide 40: Chilly labour market ahead
Íslandsbanki 3Q2020 Financial Results Chilly labour market ahead Unemployment rate likely to rise throughout 2020 but decline gradually thereafter 28 October 2020 Comments Unemployment — Given the size of the impact of COVID- % of workforce 19 on the labour intensive tourism sector, it has been clea
Slide 41: Household consumption dips less than expected
Íslandsbanki 3Q2020 Financial Results Household consumption dips less than expected Consumption hit by rising unemployment but supported by sound household balance sheets 28 October 2020 Comments Private consumption and related indicators Private consumption, unemployment and real wages — Restrictio
Slide 42: Real estate market in balance
Íslandsbanki 3Q2020 Financial Results Real estate market in balance Residential housing market is weathering pandemic much better than expected Commercial property prices have declined as demand slumped 28 October 2020 Capital area house prices relative to macroeconomic fundamentals Residential hous
Slide 43: ISK has depreciated as pandemic impact has deepened
Íslandsbanki 3Q2020 Financial Results ISK has depreciated as pandemic impact has deepened ISK appreciation likely as the economy picks up 28 October 2020 Comments ISK exchange rate and Central Bank FX interventions Real exchange rate indices and current account balance — The ISK has depreciated by a
Slide 44: Inflation spike likely to subside in 1H 2021
Íslandsbanki 3Q2020 Financial Results Inflation spike likely to subside in 1H 2021 Policy rate historically low and likely to stay low in coming quarters 28 October 2020 Comments Inflation and contribution of main subitems Inflation, policy rate and real policy rate — Inflation measured 3.5% in Sept
Slide 45: Iceland's credit rating has remained at A
Íslandsbanki 3Q2020 Financial Results Iceland’s credit rating has remained at A Setbacks in the tourist sector has not affected the sovereign ratings 28 October 2020 Moody´s in Nov-19: Development of sovereign credit rating Fitch in Dec-17: Upgrade to A2 on sustained Rating upgrade to A on economic
Slide 46: Disclaimer
Íslandsbanki 3Q2020 Financial Results 28 October 2020 Disclaimer This presentation is for information purposes only and shall not be The forward-looking statements represent Íslandsbanki’s current construed as an offer or solicitation for the subscription or purchase or expectations. plans or foreca