Islandsbanki Hf · OMXICE:ISB
Islandsbanki Hf — Íslandsbanki — H1 2019 Earnings Presentation
43 slides from Islandsbanki Hf's earnings presentation, Jul 31, 2019
Slide 1: Íslandsbanki 1H 2019 Financial Results
Íslandsbanki 1H 2019 Financial Results 31 July 2019 31July 2019 1H 2019 Financial Results islandsbanki.is
Slide 2: Table of Contents
Íslandsbanki 1H 2019 Financial Results 31 July 2019 Table of Contents 1. 1H 2019 highlights 2. Income statement 3. Balance sheet 4. Financial targets and next steps 5. Annex – Icelandic economy update 2
Slide 3: 1. 1H 2019 highlights
Íslandsbanki 1H 2019 Financial Results 31 July 2019 1. 1H 2019 highlights islandsbanki.is
Slide 4: Economic highlights
Íslandsbanki 1H 2019 Financial Results Economic highlights A year of consolidation after a long and prosperous upswing 31 July 2019 A short-lived recession expected in 2019 as export sector faces setbacks1... …a cooling economy will lead to decreasing inflationary pressures1... 7 15 10 6 5 5 % 0 % 4
Slide 5: Financial highlights
Íslandsbanki 1H 2019 Financial Results Financial highlights Key figures & ratios 1H19 1H18 2Q19 2Q18 2018 31 July 2019 PROFITABILITY ROE 16% CET1 (regular operations)¹ 7.2% 9.4% 7.8% 11.1% 8.0% ROE (after tax) 5.4% 8.2% 4.9% 11.6% 6.1% Net interest margin (of total assets) 2.8% 2.8% 2.8% 2.8% 2.9% C
Slide 6: This is Íslandsbanki
Íslandsbanki 1H 2019 Financial Results This is Íslandsbanki A leader in financial services in Iceland, with a clear vision to be #1 for service 31 July 2019 Universal banking Awards Credit ratings Moving Iceland forward by empowering our customers to succeed articulates the Bank’s role in Leading th
Slide 7: Íslandsbanki's digital offering continues to grow
Íslandsbanki 1H 2019 Financial Results Íslandsbanki’s digital offering continues to grow Now offering Apple Pay and a fully automated online mortgage application and evaluation process Digital innovation enhancing the customer experience 31 July 2019 All credit scoring for individuals now made digit
Slide 8: Íslandsbanki Reykjavík Marathon
Íslandsbanki 1H 2019 Financial Results 31 July 2019 Íslandsbanki Reykjavík Marathon — 24 August 2019 • The largest charity event of the year • Around 14.000 runners every year • The largest charity fundraising event in Iceland • ISK 820 millions raised since 2016 • ISK 156 millions raised in 2018 al
Slide 9: 2. Income statement
Íslandsbanki 1H 2019 Financial Results 31 July 2019 2. Income statement islandsbanki.is
Slide 10: Income statement
Íslandsbanki 1H 2019 Financial Results Income statement Negative net impairments main cause for lower profits ISKm 1H19 1H18 ∆ 2Q19 2Q18 ∆ Highlights 31 July 2019 16,778 15,342 1,436 8,626 7,602 1,024 Net interest income — Total income amounted to ISK 25bn in Net fee and commission income 6,623 5,81
Slide 11: Operating income
Íslandsbanki 1H 2019 Financial Results Operating income Net fee and commission up by 14% and net interest income up by 9.4% compared to 1H18 31 July 2019 Total operating income1 Net interest income Net fee and commission income ISK m ISK m ISK m 8,301 8,294 8,626 3,478 3,406 8,152 3,217 7,602 3,032
Slide 12: Net interest income and net fee and commission income
Íslandsbanki 1H 2019 Financial Results Net interest income and net fee and commission income Breakdown by segments Net interest income Net fee and commission income 31 July 2019 Highlights % % — Net interest income was ISK 16.8bn, an increase of 9.4% between years and Subsidiaries & Treasury & elimi
Slide 13: Earnings from regular operations
Íslandsbanki 1H 2019 Financial Results Earnings from regular operations Excludes one-off items and ROE calculation is adjusted to normalised CET1 of 16% Resilient ROE from regular operations Earnings from regular operations ISK m 31 July 2019 ISKm 1H19 1H18 ∆ 2Q19 2Q18 ∆ Reported after tax profit 4,
Slide 14: Cost structure improving overall
Íslandsbanki 1H 2019 Financial Results Cost structure improving overall Cost to income ratio on the decline with parent company at 55% target 31 July 2019 Efficiency – Cost to income ratio1 Administrative expenses Branch network Group ISK m 68.5% 65.0% 7,465 7,273 6,872 7,090 6,463 17 62.1% 62.6% 61
Slide 15: 3. Balance sheet
Íslandsbanki 1H 2019 Financial Results 31 July 2019 3. Balance sheet islandsbanki.is
Slide 16: Assets
Íslandsbanki 1H 2019 Financial Results Assets Total assets are 8.8% up from year-end 2018 Assets, ISK m 30.06.2019 31.12.2018 Δ 31 July 2019 Highlights Cash and balances with Central Bank 122,794 135,056 (12,262) Liquid assets Bonds and debt instruments 77,033 69,415 7,618 — The Bank lowered its cas
Slide 17: Diversified loan portfolio
Íslandsbanki 1H 2019 Financial Results Diversified loan portfolio Loans to customers grew by 5.7% in 1H 2019, growth rate not expected to continue in 2H 2019 31 July 2019 Loan portfolio broken down by business divisions Loans to customers Loans to customers Consolidated By sector, consolidated % of
Slide 18: LTV distribution of loan portfolio
Íslandsbanki 1H 2019 Financial Results LTV distribution of loan portfolio Loans generally well covered by stable collateral, majority in residential and commercial real estate 31 July 2019 LTV distribution by underlying asset class LTV distribution of mortgages to individuals ISK bn, by type of unde
Slide 19: Asset quality
Íslandsbanki 1H 2019 Financial Results Asset quality Asset quality stable with increased impairment allowance due to economic environment 31 July 2019 Highlights Loans to customers & off-balance sheet items: Loans to customers: gross carrying amount — In 1H2019, the impairment allowance impairment a
Slide 20: Liabilities
Íslandsbanki 1H 2019 Financial Results Liabilities Diversified funding strategy Highlights Deposits Δ — Customer deposits increased by 31 July 2019 Liabilities & Equity, ISK m 30.06.2019 31.12.2018 6.4% in the period Deposits from Central Bank and credit institutions 19,830 15,619 4,211 – The increa
Slide 21: Deposits remain the main source of funding
Íslandsbanki 1H 2019 Financial Results Deposits remain the main source of funding Core deposits continue to be stable 31 July 2019 Highlights Customer and credit institutions deposits by LCR category Breakdown of deposits from customers by divisions 30.06.2019 compared with year end-2018, ISK bn, co
Slide 22: Borrowings
Íslandsbanki 1H 2019 Financial Results Borrowings Successful international and domestic market transactions 31 July 2019 Highlights Borrowing sources Maturity profile of long-term debt and Currency split of GMTN borrowing Book value, ISK bn repayment of long term debt as percentage sources of balanc
Slide 23: Sound management of liquidity
Íslandsbanki 1H 2019 Financial Results Sound management of liquidity Liquid assets of ISK 235bn are prudently managed 31 July 2019 Net stable funding ratio (NSFR) Liquidity coverage ratio (LCR) Liquidity coverage ratio – foreign currencies and Icelandic króna 200% 179% 250% 600% 180% 185% 456% 200%
Slide 24: Sound capital position
Íslandsbanki 1H 2019 Financial Results Sound capital position The capital ratio in line with target 31 July 2019 Highlights Capital and leverage ratios Risk exposure amount (REA) ISK bn Capital ratios — The capital base was ISK 195bn at end 1H19 compared to ISK 188bn 75% 74% at year-end 2018 74% 74%
Slide 25: Íslandsbanki's capital target
Íslandsbanki 1H 2019 Financial Results Íslandsbanki’s capital target Based on the regulatory requirement and 50 – 200bp management buffer 31 July 2019 Íslandsbanki’s capital target Íslandsbanki’s capital target Capital requirement composition — The sum of Pillar 1, Pillar 2-R and the combined capita
Slide 26: Íslandsbanki credit ratings
Íslandsbanki 1H 2019 Financial Results Íslandsbanki S&P Long-term BBB+ Íslandsbanki credit ratings Ratings affirmed from S&P in July 2019 31 July 2019 Short-term A-2 S&P Outlook Negative BBB+/A-2 Negative Outlook Press Release 23 July 2019 Rating action Jul 19 In July, S&P Global Ratings affirmed Ís
Slide 27: 4. Financial targets and next steps
Íslandsbanki 1H 2019 Financial Results 31 July 2019 4. Financial targets and next steps islandsbanki.is
Slide 28: Financial targets
Íslandsbanki 1H 2019 Financial Results Financial targets Medium and long term strategies structured around achieving key financial targets 31 July 2019 Target 1H19 2018 2017 Guidance — Based on risk free rate + 4-6% which is considered to be CBI current account rate, currently at 3.5% (average in 20
Slide 29: Key takeaways
Íslandsbanki 1H 2019 Financial Results Key takeaways Íslandsbanki is well positioned to succeed in a slowing but stabilising Icelandic economy 31 July 2019 1 Stabilising economy 2 Strong credit quality 3 Digitalisation in full force ‒ GDP set to contract in 2019 with outlook for ‒ Stable asset quali
Slide 30: 5. Annex – Icelandic economy update
Íslandsbanki 1H 2019 Financial Results 31 July 2019 5. Annex – Icelandic economy update islandsbanki.is
Slide 31: A short-lived recession in 2019
Íslandsbanki 1H 2019 Financial Results A short-lived recession in 2019 Investment and exports will contract this year — 31 July 2019 A long period of continuous upswing in the Icelandic economy appears to be at GDP and the contribution of major subitems 1 an end YoY change (%) — An identical 4.6% gr
Slide 32: Tourism sector faces headwinds after rapid growth
Íslandsbanki 1H 2019 Financial Results Tourism sector faces headwinds after rapid growth Largest export sector likely to contract significantly in 2019 — 31 July 2019 Following rapid expansion throughout most of the decade, the tourism sector Foreign visitors and overnight hotel stays Services expor
Slide 33: Current account moving from surplus to balance
Íslandsbanki 1H 2019 Financial Results Current account moving from surplus to balance Strong net external position increases resilience — 31 July 2019 The outlook is for a significant contraction in both imports and exports Export revenues Current account balance1 in 2019 ISK bn % of GDP* — On the i
Slide 34: Domestic balance sheets well placed to weather setbacks
Íslandsbanki 1H 2019 Financial Results Domestic balance sheets well placed to weather setbacks Economy-wide leverage moderate in comparison with peers and historical levels 31 July 2019 Household debt Corporate debt % % of GDP 140 300 300 120 250 250 100 200 200 80 150 150 60 100 100 40 20 50 50 0 0
Slide 35: Businesses brace for leaner times
Íslandsbanki 1H 2019 Financial Results Businesses brace for leaner times Slowdown in lending growth to tourist sector — 31 July 2019 Business investment contracted by 5.4% in 2018 following four years of Business sentiment, 400 largest companies Deposit money banks’ lending to tourist sector robust
Slide 36: Household consumption growth tapers off
Íslandsbanki 1H 2019 Financial Results Household consumption growth tapers off Labour market cooling and real wage growth moderating — 31 July 2019 In recent quarters, private consumption growth has levelled off following rapid Unemployment and wage growth1 Real wages, population and private consump
Slide 37: Real estate market balancing
Íslandsbanki 1H 2019 Financial Results Real estate market balancing Supply is increasing, demand has been easing and the pace of residential price rises is moderating 31 July 2019 Residential capital region house prices and determinants New apartments and population increase in the capital region1 I
Slide 38: Inflation set to ease in coming quarters
Íslandsbanki 1H 2019 Financial Results Inflation set to ease in coming quarters Further policy rate cuts in the offing — 31 July 2019 Inflation measured 3.1% in July Inflation and contribution of main subitems Inflation, policy rate and real policy rate1 — The composition of inflation has % % change
Slide 39: Is the ISK at equilibrium?
Íslandsbanki 1H 2019 Financial Results Is the ISK at equilibrium? Real exchange rate likely to remain relatively high through this decade — 31 July 2019 Following 7% depreciation in H2 of 2018, the ISK has been broadly ISK exchange rate, daily values and volatility Real exchange rate indices1 rangeb
Slide 40: Iceland's credit rating has improved markedly
Íslandsbanki 1H 2019 Financial Results Iceland’s credit rating has improved markedly Upgrades from S&P and Fitch following lifting of capital controls have been affirmed in 2019 31 July 2019 Moody's in July 18: Development of sovereign credit rating Fitch in Dec-17: Outlook changed to positive AAA/A
Slide 41: More about Íslandsbanki
Íslandsbanki 1H 2019 Financial Results More about Íslandsbanki Learn more about the Bank on the Investor Relations website and through our contacts 31 July 2019 Investor relations Media relations Gunnar S. Magnússon Edda Hermannsdóttir Head of Investor Relations Executive Director and Head of Commun
Slide 42: Forward looking statements
Íslandsbanki 1H 2019 Financial Results 31 July 2019 Forward looking statements All information contained in this presentation should be regarded as The forward-looking statements represent Íslandsbanki’s current preliminary and based on company data available. Due care and expectations, plans or for
Slide 43: Takk fyrir!
Íslandsbanki 1H 2019 Financial Results 31 July 2019 Takk fyrir! islandsbanki.is