Islandsbanki Hf · OMXICE:ISB
Islandsbanki Hf — Q1 2020 Earnings Presentation
49 slides from Islandsbanki Hf's earnings presentation, May 6, 2020
Slide 1: 1Q2020 Financial Results
Íslandsbanki 1Q2020 Financial Results Er ekki komið vor ☺ Spurning að skipta út mynd þar sem þessi var notuð í FY19… en flott mynd engu að síður 6 May 2020 1Q2020 Financial Results islandsbanki.is
Slide 2: Table of Contents
Íslandsbanki 1Q2020 Financial Results 6 May 2020 Table of Contents 1. COVID-19 impact 2. 1Q2020 highlights 3. Income statement 4. Balance sheet 5. Financial targets and next steps 6. Annex – Icelandic economy update 2
Slide 3: This is Íslandsbanki
Íslandsbanki 1Q2020 Financial Results This is Íslandsbanki Moving Iceland forward by empowering our customers to succeed Vision and Values The Bank Market share1 Sustainability 6 May 2020 FTEs Vision to be 1.62 CO2tn 746 31% Personal banking Environment Carbon emission per employee #1 for service Pa
Slide 4: 1. COVID-19 impact
Íslandsbanki 1Q2020 Financial Results 6 May 2020 1. COVID-19 impact islandsbanki.is
Slide 5: Pandemic impact will cause a recession in 2020
Íslandsbanki 1Q2020 Financial Results Pandemic impact will cause a recession in 2020 But a V-shaped recovery is probable 6 May 2020 The economic impact of COVID-19 on GDP will be deep in 2020… ...although the trade balance could prove resilient in the medium term ISK bn 15 140 12 120 9 100 6 1.9 4.7
Slide 6: COVID pandemic in Iceland
Íslandsbanki 1Q2020 Financial Results COVID pandemic in Iceland Declining number of cases a result of extensive and early measures by authorities 6 May 2020 Main measures taken1 Number of active infections and number of recovered 2,000 — Quarantine requirements 1,800 – >19,000 people completed quara
Slide 7: Official actions to counteract COVID-19
Íslandsbanki 1Q2020 Financial Results Official actions to counteract COVID-19 The Government and the Central Bank have taken broad responses to counteract COVID-19 6 May 2020 Government actions - individuals Government actions - corporates Central Bank‘s actions — Wages ensured during quarantine — D
Slide 8: Íslandsbanki's actions to support customers
Íslandsbanki 1Q2020 Financial Results Íslandsbanki’s actions to support customers The Bank has acted extensively to support clients and employees through COVID-19 6 May 2020 Actions for private customers Actions for corporate customers — Improved digital solutions, e.g. electronic documents — Suspen
Slide 9: Impact on Íslandsbanki
Íslandsbanki 1Q2020 Financial Results Impact on Íslandsbanki Business continues via remote work but impact mostly through higher impairments Business continuity P&L Capital and funding 6 May 2020 — Branches have been closed except for — Profit is impacted by negative impairment — Capital ratios at s
Slide 10: 2. 1Q2020 highlights
Íslandsbanki 1Q2020 Financial Results 6 May 2020 2. 1Q2020 highlights islandsbanki.is
Slide 11: Operational highlights
Íslandsbanki 1Q2020 Financial Results Operational highlights High satisfaction for corporate customers, three new board members and Tesla agreement Agreement signed to sell 63.5% of share in Borgun hf. 6 May 2020 Borgun hf. is classified as disposal group held for sale in the interim financial state
Slide 12: Digital solutions in 1Q2020
Íslandsbanki 1Q2020 Financial Results Digital solutions in 1Q2020 Three new solutions released - make customers daily banking activities easier than ever Mortgages refinancing 2x 6 May 2020 Currency converter Customers can compare different loan Faster Electronic documents options, apply and track t
Slide 13: Overview
Íslandsbanki 1Q2020 Financial Results Overview Key figures & ratios 1Q20 4Q19 3Q19 2Q19 1Q19 PROFITABILITY Return on equity (after tax) -3.0% 3.7% 4.7% 4.9% 5.9% Net interest margin (of total assets) 2.8% 2.7% 2.7% 2.8% 2.7% 6 May 2020 Cost to income ratio¹ 62.9% 62.9% 56.3% 56.5% 59.6% After tax pr
Slide 14: 3. Income statement
Íslandsbanki 1Q2020 Financial Results 6 May 2020 3. Income statement islandsbanki.is
Slide 15: Strong growth in NII and admin expense decreases
Íslandsbanki 1Q2020 Financial Results Strong growth in NII and admin expense decreases1 Negative net impairments main cause for lower profits in the quarter ISKm 1Q20 1Q19 ∆ 4Q19 ∆ 2019 Highlights 6 May 2020 Net interest income 8,580 7,937 643 8,291 289 32,822 — Total income decreased by 21.9% betwe
Slide 16: Strong growth in interest income but decrease in total income
Íslandsbanki 1Q2020 Financial Results Strong growth in interest income but decrease in total income Decrease in total income mainly due to lower NFCI and considerable net financial loss. 6 May 2020 Total operating income1 Net interest income Net fee and commission income ISKm ISKm ISKm -14.0% 8.1% -
Slide 17: Administrative expenses decrease
Íslandsbanki 1Q2020 Financial Results Administrative expenses decrease Decrease in administrative expenses driven by lower salary cost and operating expenses fall 6 May 2020 Administrative expenses1 Efficiency – Cost to income ratio2 Branch network ISKm 63% 63% 60% 57% 56% 15 14 14 14 14 6,447 6,213
Slide 18: 4. Balance sheet
Íslandsbanki 1Q2020 Financial Results 6 May 2020 4. Balance sheet islandsbanki.is
Slide 19: Balance sheet overview
Íslandsbanki 1Q2020 Financial Results Balance sheet overview Strong balance sheet structure with deposits as primary source of funding 6 May 2020 Simplified balance sheet structure at March 31, ISK 1.256bn 100% Other 100% Other Credit institutions Funding, remaining maturity <1y Liquid assets Cash i
Slide 20: Assets
Íslandsbanki 1Q2020 Financial Results Assets Total assets are 4.7% up from year-end 2019 but lending growth impacted by ISK depreciation 6 May 2020 Assets, ISKm 31.3.2020 31.12.2019 Δ Highlights Cash and balances w ith Central Bank 123,062 146,638 (23,576) Liquid assets Loans to credit institutions
Slide 21: Diversified loan portfolio
Íslandsbanki 1Q2020 Financial Results Diversified loan portfolio Exposure to tourism is 10% of loans to customers 6 May 2020 Loans to customers by business divisions Loans to customers Loans to customers 31.03.2020, consolidated By sector, consolidated % of loans by currency type, consolidated Stand
Slide 22: COVID-19 and the loan portfolio
Íslandsbanki 1Q2020 Financial Results COVID-19 and the loan portfolio In Iceland, tourism is the sector that is most affected by the pandemic — The Bank carefully considered how the pandemic was likely to 6 May 2020 Exposure to tourism by effect of Covid-19 crisis affect its customers ability to ser
Slide 23: Macroeconomic scenario
Íslandsbanki 1Q2020 Financial Results Macroeconomic scenario Base case, uncertainty is high Change in econom ic indicators (%) 2019 2020 2021 2022 2023 2024 6 May 2020 Economic grow th 1.9 (5.0) 3.7 2.5 2.3 2.3 Housing prices in Iceland 3.4 1.6 0.8 3.0 3.5 3.5 Purchasing pow er 1.8 1.8 1.8 1.7 2.1 2
Slide 24: Significant increase in credit risk to the tourism sector
Íslandsbanki 1Q2020 Financial Results Significant 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 6 May 2020 Loans to customers & off-balance sheet items: Loans to customers: gross carrying amount Highlights i
Slide 25: Loan portfolio well covered with collateral
Íslandsbanki 1Q2020 Financial Results Loan portfolio well covered with collateral Majority of collateral in residential and commercial real estate 6 May 2020 LTV distribution by underlying asset class LTV distribution of mortgages to individuals ISK bn, by type of underlying asset, as of 31.03.2020
Slide 26: Liabilities
Íslandsbanki 1Q2020 Financial Results Liabilities Diversified funding strategy Δ 6 May 2020 Liabilities & Equity, ISKm 31.3.2020 31.12.2019 Highlights Deposits from Central Bank and credit institutions 33,773 30,925 2,848 Deposits Deposits from customers 647,795 618,313 29,482 — Customer deposits in
Slide 27: Deposits remain the main source of funding
Íslandsbanki 1Q2020 Financial Results Deposits remain the main source of funding Core deposits continue to be stable 6 May 2020 Highlights Customer and credit institutions deposits by LCR category Breakdown of deposits from customers by divisions 31.03.2020 compared with year end-2019, ISK bn, conso
Slide 28: Successful funding journey
Íslandsbanki 1Q2020 Financial Results Successful funding journey Minimal 2020 funding requirement in FX due to limited refinancing need in 2020 and 2021 6 May 2020 Highlights Sources of market borrowings Maturity profile of long-term debt and Currency split of market borrowing Book value, ISK bn rep
Slide 29: Sound management of liquidity – all ratios above requirements
Íslandsbanki 1Q2020 Financial Results Sound management of liquidity – all ratios above requirements Liquid assets of ISK 253bn are prudently managed 6 May 2020 Liquidity coverage ratio (LCR) Liquidity coverage ratio – foreign currencies and Icelandic króna 200% 177% 600% 500% 150% 169% 400% 324% 100
Slide 30: Market risk well within appetite
Íslandsbanki 1Q2020 Financial Results Market risk well within appetite The Bank has a very modest market risk profile 6 May 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 31: Sound capital position
Íslandsbanki 1Q2020 Financial Results Sound capital position The capital ratio exceeds target 6 May 2020 Highlights Capital and leverage ratios Risk exposure amount (REA) Capital ratios ISK bn — The CET1 capital was ISK 175bn at the end of March 2020 compared to 176bn at year-end 2019 74% 74% 74% 74
Slide 32: Íslandsbanki's capital target
Íslandsbanki 1Q2020 Financial Results Íslandsbanki’s capital target Based on the regulatory requirement and a 50 – 200bp management buffer 6 May 2020 Íslandsbanki’s capital target — The sum of Pillar 1, Pillar 2-R and the combined capital buffers form the overall regulatory capital requirement Commo
Slide 33: Íslandsbanki S&P credit rating
Íslandsbanki 1Q2020 Financial Results Íslandsbanki Íslandsbanki S&P credit rating S&P Rating lowered in April 2020 Long-term BBB BBB/A-2 Stable Outlook 6 May 2020 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 stable o
Slide 34: 5. Financial targets and next steps
Íslandsbanki 1Q2020 Financial Results 6 May 2020 5. Financial targets and next steps islandsbanki.is
Slide 35: Financial targets
Íslandsbanki 1Q2020 Financial Results Financial targets Negative ROE in the quarter has limited impact on capital ratios 6 May 2020 Target 1Q2020 2019 2018 Guidance — Target of 4-6% on top of risk free rate. Risk free-rate is currently 1.5% — 8-10% ROE is based on average expected risk free rates th
Slide 36: Key takeaways
Íslandsbanki 1Q2020 Financial Results Key takeaways Strong fundamentals should assist both Iceland and the Bank to weather conditions of economic slowdown following COVID-19 6 May 2020 1 Pandemic will cause a recession in 2020 2 Extensive COVID-19 actions by all 3 Íslandsbanki supports customers but
Slide 37: Annex – Icelandic economy update
Íslandsbanki 1Q2020 Financial Results 6 May 2020 5. Annex – Icelandic economy update islandsbanki.is
Slide 38: COVID economic impact will be deep
Íslandsbanki 1Q2020 Financial Results COVID 19 economic impact will be deep Sharp contraction likely in 2020 but robust growth could resume in 2021 — The COVID-19 pandemic has changed 6 May 2020 the near-term outlook for the Icelandic economy drastically GDP and the contribution of major subitems 1
Slide 39: Tourism sector hit by COVID pandemic
Íslandsbanki 1Q2020 Financial Results Tourism sector hit by COVID pandemic Number of tourists visiting Iceland likely to shrink by over 50% in 2020 — In Q1 2020, 334 thousand tourists 6 May 2020 visited Iceland, down by 27% YoY Foreign visitors and overnight hotel stays Services exports and foreign
Slide 40: Current account resilient to shock
Íslandsbanki 1Q2020 Financial Results Current account resilient to shock Dramatic fall in exports partially offset by a significant contraction in imports — Inevitably, services export revenues will 6 May 2020 decline considerably in 2020 as tourism Export revenues Trade balance sector generated ove
Slide 41: Domestic balance sheets strong before COVID-19
Íslandsbanki 1Q2020 Financial Results Domestic balance sheets strong before COVID-19 Economy-wide leverage moderate in comparison with peers and historical levels 6 May 2020 Private sector debt Corporate debt % of GDP % of GDP 400 300 350 300 250 250 200 200 150 150 100 100 50 50 0 0 2003 2004 2005
Slide 42: Businesses set for headwinds
Íslandsbanki 1Q2020 Financial Results Businesses set for headwinds Lending growth to businesses slowed sharply throughout 2019 as business investment stalled — Investment lost pace in 2019, after a 6 May 2020 five-year period of uninterrupted Business sentiment, 400 largest companies Credit system n
Slide 43: Labour market near-term prospects have deteriorated
Íslandsbanki 1Q2020 Financial Results Labour market near-term prospects have deteriorated The government is taking unprecedented measures in response — Partial benefits is a measure that the government is providing to enable 6 May 2020 companies experiencing operational Unemployment annual figures U
Slide 44: Household consumption contracts sharply
Íslandsbanki 1Q2020 Financial Results Household consumption contracts sharply Consumption will inevitably be hit hard by the pandemic 6 May 2020 — Restrictions on travel and gatherings Private consumption and related indicators Real wages and private consumption will have a major impact on comsumpti
Slide 45: Real estate market in balance
Íslandsbanki 1Q2020 Financial Results Real estate market in balance But COVID-19 pandemic likely to affect demand in coming term 6 May 2020 Capital area house prices relative to macroeconomic fundamentals New apartments and population increase Index, January 2011=100 180 4000 4.0 160 3.0 3000 140 2.
Slide 46: Inflation holds steady
Íslandsbanki 1Q2020 Financial Results Inflation holds steady Policy rate historically low and will get lower — ISK has depreciated by an average of 14% year-to-date against major 6 May 2020 currencies, owing to the COVID-19 pandemic Inflation and contribution of main subitems Inflation, policy rate
Slide 47: ISK has depreciated as pandemic impact has deepened
Íslandsbanki 1Q2020 Financial Results ISK has depreciated as pandemic impact has deepened Real exchange rate likely to facilitate recovery of export sector in due course — Following a period of relative stability 6 May 2020 throughout 2019 despite setbacks in ISK exchange rate and Central Bank FX in
Slide 48: Iceland's credit rating has remained stable
Íslandsbanki 1Q2020 Financial Results Iceland’s credit rating has remained stable Setbacks in the tourist sector has not affected the sovereign ratings 6 May 2020 Moody´s in Nov-19: Development of sovereign credit rating Fitch in Dec-17: Upgrade to A2 on sustained AAA/Aaa Rating upgrade to A on econ
Slide 49: Disclaimer
Íslandsbanki 1Q2020 Financial Results 6 May 2020 Disclaimer 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 forecasts of its futur