Islandsbanki Hf · OMXICE:ISB
Islandsbanki Hf — Íslandsbanki — Q1 2023 Earnings Presentation
47 slides from Islandsbanki Hf's earnings presentation, May 4, 2023
Slide 1: 1Q23 Financial Results
1Q23 Financial Results 4 May 2023 Birna Einarsdóttir Chief Executive Officer Jón Guðni Ómarsson Chief Financial Officer islandsbanki.is
Slide 2: Solid financial results in challenging market conditions
Íslandsbanki 1Q23 Financial Results Solid financial results in challenging market conditions ROE of 11.4% in 1Q23 led by growth in core income Solid top line growth in 1Q23 Low C/I ratio supported by strong revenues 4 May 2023 NII and NFCI, ISKbn C/I ratio +34.9% 47.6% 42.7% 42.5% C/I 42.1% 12.3 12.
Slide 3: Delivering on financial targets in the first quarter
Íslandsbanki 1Q23 Financial Results Delivering on financial targets in the first quarter Cost increases offset by strong revenue generation 4 May 2023 Target 1Q23 CET1 target updated — CET1 capital target updated to a buffer of 100-300bp on top of regulatory requirements Return on equity1 > 10% 11.4
Slide 4: Icelandic economy adjustment in the offing
Íslandsbanki 1Q23 Financial Results Icelandic economy adjustment in the offing Moderate GDP growth on the cards after an impressive surge 4 May 2023 Steadier, export led growth to take over from the strong recovery… ..and housing market is leveling off after steep price increases up to 2Q 2022 Real
Slide 5: First quarter of 2023 produced solid results
Íslandsbanki 1Q23 Financial Results First quarter of 2023 produced solid results Strong ROE across all business units Corporate & 4 May 2023 Personal Banking Business Banking Investment Banking Iceland Funds 14.2% ROE 29.3% ROE 15.4% ROE 11.9% ROE 49.4% Cost-to-income ratio1 52.2% Cost-to-income rat
Slide 6: Digital services continue to soar in Personal Banking
Íslandsbanki 1Q23 Financial Results Digital services continue to soar in Personal Banking Íslandsbanki’s website awarded the best in its category 4 May 2023 92% 85% Íslandsbanki’s website awarded of new savings accounts in increase in new customers in Personal corporate website of the year in the Pe
Slide 7: New strategy – direction of strategic priorities 2023-2025
Íslandsbanki 1Q23 Financial Results New strategy – direction of strategic priorities 2023-2025 Empowering our customers to succeed by increasing the effective implementation of data in our services 4 May 2023 – With continued focus on the purpose to be a force for good our vision is to create value
Slide 8: Financial overview
Íslandsbanki 1Q23 Financial Results 4 May 2023 Financial overview islandsbanki.is
Slide 9: Solid results driven by increase in core income
Íslandsbanki 1Q23 Financial Results Solid results driven by increase in core income Increased revenues offset surge in costs 4 May 2023 Profit for the period – 1Q22 vs 1Q23 ISKm 489 405 (1,075) Other net Net fee & operating Operating (1,158) commission income income expenses 3,214 (872) 21 Net impai
Slide 10: Strong NII increase due to a higher rates environment
Íslandsbanki 1Q23 Financial Results Strong NII increase due to a higher rates environment Central bank rates likely near its peak, although inflation remains high 4 May 2023 Highlights Net interest income Net interest income – YoY comparison By business segments, ISKm ISKm – Lending margin was 1.8%
Slide 11: Increased fee income from cards and payment processing
Íslandsbanki 1Q23 Financial Results Increased fee income from cards and payment processing Allianz Ísland hf., a subsidiary of the Bank, continues to contribute to NFCI growth 4 May 2023 Highlights Net fee and commission income Net fee and commission income – YoY comparison Business segments, ISKm I
Slide 12: NFI affected by volatile market environment
Íslandsbanki 1Q23 Financial Results NFI affected by volatile market environment Losses in liqudity book more than offset from gains from derivative hedges 4 May 2023 Highlights Net financial income (expense) Shares and equity instruments 1 ISKm ISKbn – Rise in NFI in the quarter is largely due to ra
Slide 13: C/I ratio in 1Q23 remains under target due to higher revenue
Íslandsbanki 1Q23 Financial Results C/I ratio in 1Q23 remains under target due to higher revenue High costs in 1Q23, which will partly even out through the year Highlights Administrative expenses Cost-to-income ratio1 4 May 2023 – Substantial increase in ISKm costs between years, 6,818 7,042 47.6% l
Slide 14: Steady lending growth with a modest credit risk profile
Íslandsbanki 1Q23 Financial Results Steady lending growth with a modest credit risk profile Diversified and highly collateralised loan portfolio 4 May 2023 Highlights Loans to customers Loans to customers By business division, ISKbn By sector, with tourism as a separate sector – The Bank’s credit qu
Slide 15: Credit quality remains strong
Íslandsbanki 1Q23 Financial Results Credit quality remains strong Increase in stage 2 loans due to specific credit cases Highlights 4 May 2023 – The 1Q23 impairment is Net impairment on financial assets Loans to customers: Stage 2 and 3 (NPL) mostly due to growth in the By period, ISKbn loan portfol
Slide 16: Mortgage portfolio resistant to rising rates
Íslandsbanki 1Q23 Financial Results Mortgage portfolio resistant to rising rates Origination process has built-in buffers for expected rate increases, resulting in healthy coverage ratios Highlights Interest rate reset profile for NIL 3-5Y fixed rate mortgages1 4 May 2023 Mortgage portfolio – Conser
Slide 17: Real estate and construction sector in a good shape
Íslandsbanki 1Q23 Financial Results Real estate and construction sector in a good shape Exposures in the real estate sector mostly to companies with diverse portfolios Highlights – Loans to real estate companies and construction 4 May 2023 amount to 11% and 6% of Development of exposure to real esta
Slide 18: Deposits are the largest source of funding
Íslandsbanki 1Q23 Financial Results Deposits are the largest source of funding Retail deposits continue to increase Highlights – Term deposits are 20% of total deposits. Term deposits with 4 May 2023 maturity of more than 3 months Funding sources Customer loans to customer deposits ratio are 11% of
Slide 19: Seasoned and diversified long-term funding programme
Íslandsbanki 1Q23 Financial Results Seasoned and diversified long-term funding programme Continued focus on local issuance in 1Q23 4 May 2023 Highlights Sources of borrowings Contractual maturity profile of Currency split of borrowings Development, ISKbn borrowings 31.3.23 – The Bank continued its g
Slide 20: Sound liquidity management, ratios well above requirements
Íslandsbanki 1Q23 Financial Results Sound liquidity management, ratios well above requirements Liquid assets of ISK 283bn, representing 18% of total assets Highlights 4 May 2023 Total liquidity coverage ratio (LCR) Liquidity coverage ratio – foreign currencies and ISK – All liquidity measures above
Slide 21: Strong capital position
Íslandsbanki 1Q23 Financial Results Strong capital position Updated CET1 target 4 May 2023 Highlights Capital ratios and leverage ratio Updated CET1 target based on 100-300bp capital buffer – The financial stability board has % of REA (% of total exposure for leverage ratio) announced an increase in
Slide 22: Q&A
Íslandsbanki 1Q23 Financial Results 4 May 2023 Q&A islandsbanki.is
Slide 23: Appendix I – About Íslandsbanki and additional financial information
Íslandsbanki 1Q23 Financial Results 4 May 2023 Appendix I – About Íslandsbanki and additional financial information islandsbanki.is
Slide 24: This is Íslandsbanki
Íslandsbanki 1Q23 Financial Results This is Íslandsbanki Our purpose is to be a force for good by empowering our customers to succeed 4 May 2023 Vision and Values The Bank Market share1 Sustainability 1Q23 FTEs IS Haf fjárfestingar, a fund To create value 701 31% retail customers investing in sea re
Slide 25: Financial overview
Íslandsbanki 1Q23 Financial Results Financial overview Key figures & ratios 1Q23 4Q22 3Q22 2Q22 1Q22 PROFITABILITY Profit for the period, ISKm 6,211 5,982 7,486 5,880 5,187 4 May 2023 Return on equity 11.4% 11.1% 14.4% 11.7% 10.2% Net interest margin (of total assets) 3.2% 3.1% 3.0% 2.9% 2.6% Cost-t
Slide 26: Income Statement
Íslandsbanki 1Q23 Financial Results Income Statement Income growth continues and profitability is robust Income statement, ISKm 1Q23 1Q22 ∆% 4Q22 ∆% Net interest income 12,423 9,209 35% 12,348 1% 4 May 2023 Net fee and commission income 3,469 3,064 13% 4,038 (14%) Net financial income (expense) 538
Slide 27: Balance sheet reflects a balanced loan and funding profile
Íslandsbanki 1Q23 Financial Results Balance sheet reflects a balanced loan and funding profile Conservative mix of assets and stable funding 4 May 2023 Assets Simplified balance sheet structure 31.3.2023, ISK 1,552bn – Vast majority of assets consist of lending to both retail and corporates Cash in
Slide 28: Assets
Íslandsbanki 1Q23 Financial Results Assets Total assets in first quarter affected by market conditions Assets, ISKm 31.3.23 31.12.22 Δ Δ% 4 May 2023 Cash and balances with Central Bank 67,764 94,424 (26,660) (28%) Loans to credit institutions 81,331 110,364 (29,033) (26%) Bonds and debt instruments
Slide 29: Liabilities and equity
Íslandsbanki 1Q23 Financial Results Liabilities and equity Deposits continue to be the largest source of funding Liabilities & Equity, ISKm 31.3.23 31.12.22 Δ Δ% 4 May 2023 Deposits from Central Bank and credit institutions 13,694 15,269 (1,575) (10%) Deposits from customers 800,071 789,897 10,174 1
Slide 30: Appendix II – Icelandic economy update
Íslandsbanki 1Q23 Financial Results 4 May 2023 Appendix II – Icelandic economy update islandsbanki.is
Slide 31: Steadier growth to take over from the strong recovery
Íslandsbanki 1Q23 Financial Results Steadier growth to take over from the strong recovery Exports the main driver of GDP growth in 2023, but domestic demand will gain steam in coming years 4 May 2023 Highlights GDP and contribution of its subcomponents GDP, domestic demand, and external trade – GDP
Slide 32: Tourism rises to new heights
Íslandsbanki 1Q23 Financial Results Tourism rises to new heights Over 2.1 million tourists to visit Iceland in 2023, followed by record numbers in 2024 and 2025 4 May 2023 Highlights Number of foreign tourists, by month Number of foreign tourists, by year – The tourism industry bounced back thousand
Slide 33: Icelandic economy resilient to European energy crisis
Íslandsbanki 1Q23 Financial Results Icelandic economy resilient to European energy crisis Geothermal heating keeps energy costs at bay 4 May 2023 Highlights Share of primary energy from renewable sources Proportion of energy source in space heating – Being a small open economy, the % of total % econ
Slide 34: Current account deficit set to close during the forecast horizon
Íslandsbanki 1Q23 Financial Results Current account deficit set to close during the forecast horizon Growing exports, better terms of trade, and slower demand growth will help rebalance external trade 4 May 2023 Highlights Exports and contribution from subcomponents Current account balance – The tou
Slide 35: Domestic balance sheets remain healthy
Íslandsbanki 1Q23 Financial Results Domestic balance sheets remain healthy Economy-wide leverage remains moderate in comparison with peers and historical levels 4 May 2023 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 2005 2007 20
Slide 36: Investment keeps growing steadily in the wake of an upsurge
Íslandsbanki 1Q23 Financial Results Investment keeps growing steadily in the wake of an upsurge Residential investment the main driver of growth in 2023; corporate investment set to regain steam 4 May 2023 Highlights Investment, real change, and contribution of subcomponents Executives’ expectations
Slide 37: Unemployment set to remain flat in 2023
Íslandsbanki 1Q23 Financial Results Unemployment set to remain flat in 2023 Real wage growth expected throughout the forecast horizon 4 May 2023 Highlights Wages, year on year change Unemployment1 – The labour market has recovered % % of workforce, annual average remarkably quickly post-COVID, and j
Slide 38: Private consumption growth remains resilient
Íslandsbanki 1Q23 Financial Results Private consumption growth remains resilient Household saving ratio still above average 4 May 2023 Highlights Private consumption and related indicators* % change year-on-year (left) and index value (right) – Icelanders were willing spenders in 2022, as private co
Slide 39: The real estate market appears to be stabilising
Íslandsbanki 1Q23 Financial Results The real estate market appears to be stabilising Central Bank measures seem to be achieving the intended result 4 May 2023 Capital area house prices relative to macroeconomic fundamentals Residential house prices and turnover in greater Reykjavik Index, January 20
Slide 40: The Icelandic housing market is relatively resilient
Íslandsbanki 1Q23 Financial Results The Icelandic housing market is relatively resilient Supply, demand, mortgage market factors combine to make a large price correction less likely 4 May 2023 Households are not highly indebted compared to peers Mortgage market is flexible w.r.t. loan types with dif
Slide 41: Inflation will fall, but how fast?
Íslandsbanki 1Q23 Financial Results Inflation will fall, but how fast? The road back to the inflation target is rocky and circuitous 4 May 2023 Highlights Inflation and the CBI inflation target Inflation by contribution of main categories – Twelfe-month inflation peaked in % % February at 10.2% and
Slide 42: Interest rates relatively high near-term but will ultimately fall
Íslandsbanki 1Q23 Financial Results Interest rates relatively high near-term but will ultimately fall Gradual easing further ahead; equilibrium rate in sight by the end of the horizon 4 May 2023 Highlights Policy rate and inflation – The CBI began raising interest rates %, Real policy rate in terms
Slide 43: ISK likely to strengthen somewhat over time
Íslandsbanki 1Q23 Financial Results ISK likely to strengthen somewhat over time Less favourable net trade reduces the likelihood that the ISK will regain its previous strength 4 May 2023 Highlights ISK exchange rate and selected determinants Real exchange rate and current account balance – After str
Slide 44: Iceland's credit rating has been resilient in turbulent times
Íslandsbanki 1Q23 Financial Results Iceland’s credit rating has been resilient in turbulent times Rating companies acknowledge the flexibility of the economy and resilience to the pandemic shock 4 May 2023 Development of sovereign credit rating Fitch in Dec-17: Moody’s in Nov-19: AAA/Aaa Rating upgr
Slide 45: The Icelandic economy and society draw on many strengths
Íslandsbanki 1Q23 Financial Results The Icelandic economy and society draw on many strengths Icelanders enjoy high standards of living in a modern, open and egalitarian society 4 May 2023 Iceland ranks highly on a variety of global Income inequality is low compared to OECD peers Sustainable energy u
Slide 46: Disclaimer
Íslandsbanki 1Q23 Financial Results 4 May 2023 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
Slide 47: islandsbanki.is
Íslandsbanki 1Q23 Financial Results 4 May 2023 islandsbanki.is