Islandsbanki Hf · OMXICE:ISB
Islandsbanki Hf — Debt Investor Presentation (June 2022)
62 slides from Islandsbanki Hf's debt investor presentation, Jun 8, 2022
Slide 1: Íslandsbanki: Investor Presentation
Íslandsbanki: Investor Presentation 8 June 2022 islandsbanki.is
Slide 2: This is Íslandsbanki
This is Íslandsbanki Moving Iceland forward by empowering our customers to succeed 8 June 2022 Vision and Values The Bank Market share1 Sustainability 1Q22 FTEs Íslandsbanki regarded as Vision to be 706 31% retail customers most sustainable bank in Iceland according to a Gallup number of FTEs at #1
Slide 3: Financial overview of the issuer
8 June 2022 Financial overview of the issuer islandsbanki.is
Slide 4: The Bank’s strategy is key for the achievement of significant milestones
The Bank’s strategy is key for the achievement of significant milestones from 2008 and onwards Proven track record in delivering future goals 8 June 2022 1875 2008 2013 – 2016 2019 – Future History stretching back to 1875 Back to Building a Moving Iceland when the Savings Bank Sparisjóður Álftaneshr
Slide 5: Strong and diversified shareholder group
Strong and diversified shareholder group Icelandic government sold a 22.5% stake at the end of March 8 June 2022 Íslandsbanki’s share price development since IPO Largest shareholders Closing price 31.3.2022 135 125 Largest shareholders Capital 115 The Icelandic Government 42.5% 105 LSR Pension Fund
Slide 6: Delivering on financial targets and guidance
Delivering on financial targets and guidance Operating income increased by 8.7% in 1Q22 (YoY) and costs were flat despite high inflation 8 June 2022 Growth in line ROE in upper range Excess capital optimised with guidance of guidance in the next 12-24 months NII and NFCI, ISKbn ROE CET1 ratio1 +12.4
Slide 7: Economic recovery continues
Economic recovery continues Strong foundations facilitate a robust recovery as world-wide pandemic impact fades 8 June 2022 Exports replace domestic demand as the key catalyst of healthy GDP growth... ...as tourism rebounds due to fading pandemic impact Real GDP and main subitems, YoY change, % Numb
Slide 8: An eventful first quarter of 2022
An eventful first quarter of 2022 Strong ROE in all business units Corporate & 8 June 2022 Personal Banking Business Banking Investment Banking Iceland Funds 10.3% ROE 20.2% ROE 11.0% ROE 27.5% ROE 60.3% Cost-to-income ratio 44.6% Cost-to-income ratio 40.7% Cost-to-income ratio 49.0% Cost-to-income
Slide 9: Good performance in 1Q22 supported by an increase in NII
Good performance in 1Q22 supported by an increase in NII Flat expenses and reversed impairments further enhance a positive result 8 June 2022 Profit for the period – 1Q21 vs 1Q22 ISKm 1,001 (427) (29) 202 (210) 1,019 16 5,187 3,615 1Q21 Net interest Net fee &Corporate Other netsector & public Operat
Slide 10: NII growing strongly in the quarter and between years
NII growing strongly in the quarter and between years NIM rises to 2.6% due to a higher interest rate environment 8 June 2022 Highlights NII – comparison 1Q YoY Net interest income – Rise in NII in 1Q22 is a By business segments, ISKm ISKm result of rise in the Bank´s loan book and higher YoY intere
Slide 11: NFCI continues an upwards trend with a 7.1% rise YoY
NFCI continues an upwards trend with a 7.1% rise YoY Broad-based fee generation across the business units 8 June 2022 Highlights NFCI – comparison 1Q YoY Net fee and commission income – Revenue from Cards and Business segments, ISKm ISKm 3,653 payment processing increased 3,427 in 1Q22 YoY due to in
Slide 12: Unfavourable credit markets affect NFI in 1Q22
Unfavourable credit markets affect NFI in 1Q22 Rising benchmark interest rates do however support financial income in other derivatives 8 June 2022 Net financial income Shares and equity instruments1 ISKm ISKbn 941 7.8 7.6 7.2 7.0 7.2 619 646 3.2 3.4 3.8 4.0 4.1 293 4.6 3.8 3.2 3.2 3.5 31.3.21 30.6.
Slide 13: Administrative expenses stable in 1Q22
Administrative expenses stable in 1Q22 6.1% reduction in real terms driven by lower salary cost 8 June 2022 Administrative expenses1 Cost-to-income ratio2 ISKm 5,776 5,900 5,768 5,834 51.3% 49.9% 45.3% 47.6% 363 413 5,088 532 358 327 39.4% 1,456 1,466 1,457 1,506 1,273 1,549 1,598 1,500 1,601 1,307
Slide 14: Positive net impairment in 1Q22 as the economy recovers
Positive net impairment in 1Q22 as the economy recovers Majority of forbearance borrowers have resumed payments 8 June 2022 Highlights Net impairment on financial assets1 Loans to customers: Stage 2 and 3 (NPLs) – Reserve coverage ratio (RCR) By period, ISKbn Development of gross carrying amount as
Slide 15: Diversified and highly collateralised loan portfolio
Diversified and highly collateralised loan portfolio Loans to individuals are 48% of loans to customers, mainly residential mortgages 8 June 2022 Loans to customers Loans to customers LTV distribution by underlying asset class By business division, ISKbn By sector, with tourism as a separate sector
Slide 16: Strong growth in mortgages and increased market share
Strong growth in mortgages and increased market share Average LTV’s stable and built-in buffers for rate increases 8 June 2022 Highlights Mortgage loans LTV distribution of mortgages to individuals – Conservative payment Gross carrying amount, ISKbn Gross carrying amount, ISKbn assessment for non-in
Slide 17: Deposits are the largest source of funding
Deposits are the largest source of funding Deposits from individuals continue to increase 8 June 2022 Highlights Funding sources Customer loans to customer deposits ratio – Term deposits are 19% of total By type, % of total liabilities and equity Development, % deposits 148% 146% – Deposit concentra
Slide 18: Seasoned and diversified long-term funding programme
Seasoned and diversified long-term funding programme Majority of 2022 maturities already funded through a recent €300m sustainable bond issue 8 June 2022 Highlights Sources of borrowings Contractual maturity profile of Currency split of borrowings – S&P Global ratings BBB/A-2 with Development, ISKbn
Slide 19: Strong capital position and dividend capacity
Strong capital position and dividend capacity Opportunity exist to optimise capital composition and to continue consistent dividends 8 June 2022 Highlights Capital ratios and leverage ratio1 Capital distribution plans – Current and long term expected % of REA (% of total exposure for leverage ratio)
Slide 20: Mortgage origination and underwriting
8 June 2022 Mortgage origination and underwriting islandsbanki.is
Slide 21: Mortgage portfolio – a broad offering
Mortgage portfolio – a broad offering Direct origination and competitive interest rates 8 June 2022 Characteristics Type of . product offerings – Íslandsbanki originates mortgage loans directly, without collaborating 1 Variable non-indexed mortgage with any brokers – The pricing strategy is to offer
Slide 22: Different features for different needs
Different features for different needs Borrowers can choose from an array of solutions 8 June 2022 Non-indexed loans Indexed loans Equal payments Equal instalments — Higher debt burden to — Lower debt burden to — Borrower pays the — Borrower pays the begin with begin with same total amount same amou
Slide 23: Conservative lending criteria
Conservative lending criteria Applicants must meet a stringent set of requirements 8 June 2022 – Individuals intending to buy or refinance a home for own use can apply for a mortgage with Íslandsbanki – Borrowers can renew their interest rates due to lower LTVs through refinancing, which is common i
Slide 24: Higher interest rates for higher LTVs
Higher interest rates for higher LTVs Generally the loan part that exceeds the 70% limit is subject to a higher rate 8 June 2022 Loan period Mortgage book breakdown as at 31 Mortgage product type Current interest rate LTV (years) March 2022 (ISKbn) Variable non-indexed mortgage 5.65% 70% 40 Variable
Slide 25: A granular and diversified mortgage book
A granular and diversified mortgage book Snapshot of the main features 8 June 2022 Loans switching from fixed to floating interest rate LTV splitting of mortgages to individuals Indexed vs. non-indexed loans By loan balance, ISKbn, 31 December 2021 Loan splitting approach, ISKbn By loan balance, 31
Slide 26: Property valuations are regularly updated
Property valuations are regularly updated LTVs are generally determined based on the tax valuation 8 June 2022 Highlights Example An individual buys an apartment for the first time. The price is ISK – Property valuations are updated at least once a year by 50.000.000 and the tax evaluation of the pr
Slide 27: Application process is streamlined
Application process is streamlined Response is normally delivered within 1 to 5 days 8 June 2022 The application process for a mortgage is fully digital, with 99% of applications being made digitally Information required: All necessary data is retrieved digitally through a third party, such as credi
Slide 28: Loans past due are monitored closely
Loans past due are monitored closely Foreclosure procedures are not expected to take more than 18 months 8 June 2022 Highlights Foreclosure procedure – Íslandsbanki takes out a list once a month of all debts that are in arrears – If the debt is secured, letter number two is a payment challenge 15 da
Slide 29: Covered bond programme and cover pool
8 June 2022 Covered bond programme and cover pool islandsbanki.is
Slide 30: Íslandsbanki’s covered bond programme
Íslandsbanki’s covered bond programme Assets are ring-fenced on the issuer’s balance sheet 8 June 2022 Transaction Structure Key features – Íslandsbanki’s covered bond programme reflects the Icelandic ring fencing on balance sheet structure: the assets inlcuded in the cover pool are segregated from
Slide 31: Íslandsbanki’s covered bond programme – cont’d
Íslandsbanki’s covered bond programme – cont’d 8 June 2022 Monitoring / Representation of Bondholders / Oversight Issuer bankruptcy does not entitle covered bondholders to accelerate the programme – The Independent Inspector is appointed by the issuer and approved by the Icelandic – The programme do
Slide 32: Matching rules are there to protect the investor
Matching rules are there to protect the investor The Icelandic Covered Bond Act requires issuers to satisfy a set of requirements, known as matching rules, to ensure that the covered bond programme is able to mitigate asset-liability mismatches 8 June 2022 Breach of matching rules Nominal Value Test
Slide 33: Cover Pool – main features
Cover Pool – main features Cover pool made of entirely residential mortgage loans 8 June 2022 Composition of the cover pool Cover pool has expanded over years ISKm – The cover pool currently consists of mortgage loans secured against residential properties located in Iceland – going forward, the int
Slide 34: Cover Pool – main features – cont’d
Cover Pool – main features – cont’d Nearly ISK 300bn of collateral backing the loans Cover pool composition as at 31 March Current balance range 8 June 2022 2022 ISKm, 31 March 2022 35% 32.31% Cut-off Date 31/03/2022 30% 24.70% 25% Current Balance (ISKm) 292,591 20% 18.56% Cover Pool Balance (ISKm)
Slide 35: Cover Pool – main features – cont’d
Cover Pool – main features – cont’d Loan features are aligned with market standards Seasoning profile, months Interest rate range (% of current principal balance), 31 March 2022 (% of current principal balance), 31 March 2022 8 June 2022 60% 51.90% 70% 65.52% 50% 60% 40% 50% 30% 40% 33.72% 30% 20% 1
Slide 36: Appendix I – About Íslandsbanki and additional financial information
8 June 2022 Appendix I – About Íslandsbanki and additional financial information islandsbanki.is
Slide 37: Financial targets on track
Financial targets on track Clear path to ROE expansion, attractive capital return and optimisation 8 June 2022 Targets Revised 2022 Guidance 1Q22 4Q21 2021 Return on equity >10% 8-10% by 2023 10.2% 14.2% 12.3% Cost-to-income ratio1 <45% 45-50% 47.6% 45.3% 46.2% CET1 capital ratio2 Normalise before ~
Slide 38: Financial overview – Key figures & ratios
Financial overview Key figures & ratios 1Q22 4Q21 3Q21 2Q21 1Q21 PROFITABILITY Profit for the period, ISKm 5,187 7,092 7,587 5,431 3,615 8 June 2022 Return on equity 10.2% 14.2% 15.7% 11.6% 7.7% Net interest margin (of total assets) 2.6% 2.4% 2.4% 2.4% 2.4% Cost-to-income ratio¹ 47.6% 45.3% 39.4% 49
Slide 39: Income growth of 9% YoY driven by NII and NFCI
Income growth of 9% YoY driven by NII and NFCI Robust profitability in 1Q22 a result of strong business foundations Income statement, ISKm 1Q22 1Q21 ∆% 4Q21 ∆% 2021 8 June 2022 Net interest income 9,209 8,190 12% 8,644 7% 34,043 Net fee and commission income 3,064 2,862 7% 3,653 (16%) 12,849 Net fin
Slide 40: Balance sheet reflects balanced loan and funding profile
Balance sheet reflects balanced loan and funding profile Broad product offering, strong liquidity portfolio and stable funding 8 June 2022 Assets Simplified balance sheet structure – Vast majority of assets consist of 31.3.2022, ISK 1,446bn lending to individuals and corporates – Strong liquidity po
Slide 41: Growth in loans to customers continues
Growth in loans to customers continues Steady mortgage growth supported by a strong capital base Assets, ISKm 31.3.22 31.12.21 Δ Δ% 8 June 2022 Cash and balances with Central Bank 77,799 113,667 (35,868) (32%) Loans to credit institutions 73,220 43,988 29,232 66% Bonds and debt instruments 130,700 1
Slide 42: Diversified funding base
Diversified funding base Deposits are largest source of funding Liabilities & Equity, ISKm 31.3.22 31.12.21 Δ Δ% 8 June 2022 Deposits from Central Bank and credit institutions 10,949 13,384 (2,435) (18%) Deposits from customers 761,471 744,036 17,435 2% Derivative instruments and short positions 11,
Slide 43: Appendix II – Icelandic economy update
8 June 2022 Appendix II – Icelandic economy update islandsbanki.is
Slide 44: Economic recovery likely to accelerate as pandemic recedes
Economic recovery likely to accelerate as pandemic recedes Exports replace domestic demand as the key catalyst of growth 8 June 2022 Highlights GDP and contribution of its subcomponents GDP, domestic demand, and external trade – After a deep contraction in 2020, the Volume change from prior year, %
Slide 45: Tourism reloaded
Tourism reloaded At least 1.1 million tourists are projected to visit Iceland in 2022, rising to 1.5 million in 2023 8 June 2022 Highlights Number of foreign tourists, by year – Nearly 700,000 tourists visited Iceland in 2021, an increase of nearly 45% relative Thousands to 2020 but still only a thi
Slide 46: Current account likely revert to surplus following a deficit in 2021
Current account likely revert to surplus following a deficit in 2021 The short-lived deficit is due to domestic demand, which is a few steps ahead of the recovery of exports 8 June 2022 Highlights Exports and contribution from subcomponents Current account balance and GDP growth – A surge in tourist
Slide 47: Domestic balance sheets still healthy despite COVID-19
Domestic balance sheets still healthy despite COVID-19 Economy-wide leverage remains moderate in comparison with peers and historical levels 8 June 2022 Private sector debt Corporate debt % of GDP % of GDP 400 300 350 250 300 250 200 200 150 150 100 100 50 50 0 0 2003 2004 2005 2006 2007 2008 2009 2
Slide 48: Moderate investment growth following a spike in 2021
Moderate investment growth following a spike in 2021 Residential investment to gain steam, while public investment will contract further ahead 8 June 2022 Highlights Investment, real change, and contribution of subcomponents Executives’ expectations and business investment – After a two-year contrac
Slide 49: Unemployment converging to a new equilibrium
Unemployment converging to a new equilibrium The relatively swift economic recovery has caused a rapid decline in unemployment 8 June 2022 Highlights Labour supply according to corporate executives Unemployment* – Unemployment fell rapidly in 2021, % % of workforce, annual average from 11.6% of the
Slide 50: Further private consumption growth ahead after robust 2021
Further private consumption growth ahead after robust 2021 Household consumption supported by strong labour market, demographics and sound asset position 8 June 2022 Highlights Private consumption and related indicators – Following 3.0% contraction in 2020, % change year-on-year (left) and index val
Slide 51: Real estate markets lively despite pandemic
Real estate markets lively despite pandemic Commercial property prices rising again while residential house price rises have gained steam 8 June 2022 Capital area house prices relative to macroeconomic fundamentals Residential house prices and turnover in greater Reykjavik Index, January 2011=100 %
Slide 52: Inflation to spike in 2022 and decline gradually thereafter
Inflation to spike in 2022 and decline gradually thereafter House prices and import costs the main drivers short-term but wage costs also matter 8 June 2022 Highlights Inflation and the CBI inflation target Inflation by contribution of main categories – Inflation started rising in mid-2020, % % in t
Slide 53: Policy rate on the rise
Policy rate on the rise Long-term interest rates approaching equilibrium within the forecast horizon 8 June 2022 Highlights Policy rate and inflation Interest rates – The Central Bank of Iceland has % % hiked its policy by 3 percentage points since May 2021, after reaching an all-time low of 0.75% i
Slide 54: ISK set to appreciate further with growth in export revenues
ISK set to appreciate further with growth in export revenues The ISK was relatively stable in 2H 2021 but has been more volatile in 2022 so far Highlights 8 June 2022 ISK exchange rate and CBI FX market intervention Real exchange rate and current account balance – The ISK appreciated by nearly 3% in
Slide 55: The Ukraine war increases uncertainty to the downside
The Ukraine war increases uncertainty to the downside Impact likely to be moderate compared to peers with closer ties to Ukraine and Russia 8 June 2022 Highlights Trade in goods and services with selected countries Price of main export commodities – Russia’s invasion of Ukraine and the % of total ex
Slide 56: Iceland’s credit rating has remained at A
Iceland’s credit rating has remained at A Setbacks in the tourist sector have not affected the sovereign ratings 8 June 2022 Development of sovereign credit rating Fitch in Dec-17: Moody’s in Nov-19: AAA/Aaa Rating upgrade to A on economic Upgrade to A2 on sustained AA+/Aa1 stability, reduced extern
Slide 57: Appendix III – Covered bond frameworks
8 June 2022 Appendix III – Covered bond frameworks islandsbanki.is
Slide 58: The Icelandic covered bond framework
The Icelandic covered bond framework Regular oversight performed by the CBI - FSA Governed by the Icelandic Covered Bond Act (ICBA), which came into force on March 2008, complemented by the Rules of the Financial Supervisory Authority no. 528/2008 Legal framework (“ICBR”) 8 June 2022 Direct on-balan
Slide 59: Covered bond framework comparison
Covered bond framework comparison The Iceland framework is largely aligned with the main European jurisdictions Iceland Germany Norway Sweden Hypothekenpfandbriefe, Öffentliche Pfandbriefe, 8 June 2022 Name of instrument Sértryggð skuldabréf Schiffspfandbriefe, Flugzeugpfandbriefe Obligasjoner med f
Slide 60: Covered bond framework comparison – cont’d
Covered bond framework comparison – cont’d Iceland Finland Denmark Særligt Dækkede 8 June 2022 Name of instrument Sértryggð skuldabréf Finnish Covered Bonds Særligt Dækkede Obligationer Realkreditobligationer Realkreditobligationer Supervision Icelandic Financial Supervisory Authority (FME) Finnish
Slide 61: Disclaimer
8 June 2022 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 forecasts of its future results and revenues and
Slide 62: islandsbanki.is
islandsbanki.is
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