Islandsbanki Hf · OMXICE:ISB
Islandsbanki Hf — Íslandsbanki — FY2022 Earnings Presentation
48 slides from Islandsbanki Hf's earnings presentation, Feb 9, 2023
Slide 1: 4Q22 & FY2022 Financial Results
4Q22 & FY2022 Financial Results 9 February 2023 Birna Einarsdóttir Chief Executive Officer Jón Guðni Ómarsson Chief Financial Officer islandsbanki.is
Slide 2: Strong financial results in a volatile market environment
Íslandsbanki 4Q22 & FY2022 Financial Results Strong financial results in a volatile market environment ROE of 11.1% in 4Q22 and 11.8% in 2022 mainly driven by growth in core income 9 February 2023 Solid top line growth in 4Q22 and 2022 Low C/I ratio supported by strong revenues NII and NFCI, ISKbn C
Slide 3: Financial targets reached in 2022
Íslandsbanki 4Q22 & FY2022 Financial Results Financial targets reached in 2022 Resulting from strong revenue generation and strict cost control 9 February 2023 Targets 4Q22 2022 Return on equity >10% 11.1% 11.8% Cost-to-income ratio1 <45% 42.5% 42.1% CET1 capital ratio2 ~16.5% 18.8% 18.8% Dividend-p
Slide 4: Attractive capital return and growth opportunity
Íslandsbanki 4Q22 & FY2022 Financial Results Attractive capital return and growth opportunity Strong underlying economic momentum 9 February 2023 8 6 – Loans to customers and revenues, in general, to grow in line with nominal GDP Current growth through the business cycle policy rate 4 at 6.5% Growth
Slide 5: Adjustment phase ahead for the Icelandic economy
Íslandsbanki 4Q22 & FY2022 Financial Results Adjustment phase ahead for the Icelandic economy Moderate GDP growth on the cards after an impressive surge 9 February 2023 Steadier, export led growth to take over from the strong recovery… ..and housing market remains resilient, partly due to flexible m
Slide 6: The Icelandic economy and society draw on many strengths
Íslandsbanki 4Q22 & FY2022 Financial Results The Icelandic economy and society draw on many strengths Heating and electricity generation based on sustainable energy sources 9 February 2023 Iceland ranks highly on a variety of global Income inequality is low compared to OECD peers Sustainable energy
Slide 7: Strong results across business units
Íslandsbanki 4Q22 & FY2022 Financial Results Strong results across business units Increased personalised digitalisation results in higher service levels 9 February 2023 Corporate & Personal Banking Business Banking Investment Banking Iceland Funds 16.1% ROE 21.0% ROE 12.6% ROE 28.5% ROE 49.2% Cost-t
Slide 8: Enhanced digital services in 2022
Íslandsbanki 4Q22 & FY2022 Financial Results Enhanced digital services in 2022 Íslandsbanki’s digital solutions in the forefront 99% 50% of mortgage applications of retail equity trading is 9 February 2023 now digital conducted via app 80% 95% of credit card limit changes of new private pension savi
Slide 9: Sustainability priorities ahead in 2023
Íslandsbanki 4Q22 & FY2022 Financial Results Sustainability priorities ahead in 2023 Significant sustainability milestones met in 2022 9 February 2023 Sustainable lending rose by 36% in 2022 Sustainability goals for 2023 include1 ISKbn +36% +134% 79 Increase the portion of sustainable corporate 10 S
Slide 10: Financial overview
Íslandsbanki 4Q22 & FY2022 Financial Results 9 February 2023 Financial overview islandsbanki.is
Slide 11: Growth in core income the key driver in strong results
Íslandsbanki 4Q22 & FY2022 Financial Results Growth in core income the key driver in strong results Interest income continues to rise as loan portfolio grows and interest rates rise 9 February 2023 Profit for the period – 4Q21 vs 4Q22 Profit for the period – 2021 vs 2022 ISKm ISKm 385 (1,145) 3,704
Slide 12: NII increases from larger loan portfolio and higher margins
Íslandsbanki 4Q22 & FY2022 Financial Results NII increases from larger loan portfolio and higher margins Central bank rates likely near its peak, although inflation remains high 9 February 2023 Highlights Net interest income Net interest margin By business segments, ISKm On total assets – Lending ma
Slide 13: Rise in income from cards and payment processing continues
Íslandsbanki 4Q22 & FY2022 Financial Results Rise in income from cards and payment processing continues Allianz Ísland hf., a subsidiary, had a strong year contributing to rising NFCI 9 February 2023 Highlights Net fee and commission income Net fee and commission income Business segments, ISKm By ty
Slide 14: NFI affected by volatile market environment
Íslandsbanki 4Q22 & FY2022 Financial Results NFI affected by volatile market environment Losses in bonds and related derivatives due to rising rates environment 9 February 2023 Highlights Net financial income (expense) Shares and equity instruments1 ISKm ISKbn – The loss in NFI is largely due to mov
Slide 15: C/I ratio in 4Q22 below target due to strong income generation
Íslandsbanki 4Q22 & FY2022 Financial Results C/I ratio in 4Q22 below target due to strong income generation High costs in 4Q22 and ongoing cost pressure in 2023 due to high inflation 9 February 2023 Highlights Administrative expenses Cost-to-income ratio1 – The increase in other ISKm operating expen
Slide 16: Asset quality continues to improve
Íslandsbanki 4Q22 & FY2022 Financial Results Asset quality continues to improve Stage 2 loans continue downward trend and have likely reached normalized levels 9 February 2023 Highlights – Uncertainty regarding the impact Net impairment on financial assets Loans to customers: Stage 2 and 3 (NPL) of
Slide 17: Solid lending growth during the year
Íslandsbanki 4Q22 & FY2022 Financial Results Solid lending growth during the year Credit quality remains strong, and the loan portfolio is highly collateralised 9 February 2023 Highlights Loans to customers Loans to customers By business division, ISKbn By sector, with tourism as a separate sector –
Slide 18: Mortgage portfolio resistant to rising rates
Íslandsbanki 4Q22 & FY2022 Financial Results Mortgage portfolio resistant to rising rates Average LTV improves, origination process had built-in buffers for expected rate increases 9 February 2023 Highlights Mortgage portfolio LTV distribution of mortgages – Conservative payment By interest rate typ
Slide 19: Real estate and construction sector in a good shape
Íslandsbanki 4Q22 & FY2022 Financial Results Real estate and construction sector in a good shape Exposures in the real estate sector mostly to companies with diverse portfolios 9 February 2023 Highlights Development of exposures to real estate companies Development of construction exposures – Loans
Slide 20: Deposits are the largest source of funding
Íslandsbanki 4Q22 & FY2022 Financial Results Deposits are the largest source of funding Retail deposits continue to increase 9 February 2023 Highlights Funding sources Customer loans to customer deposits ratio – Term deposits are 19% of total By type, % of total liabilities and equity Development, %
Slide 21: Seasoned and diversified long-term funding programme
Íslandsbanki 4Q22 & FY2022 Financial Results Seasoned and diversified long-term funding programme Issuance of EUR covered bonds and Tier 2 in ISK further diversifies the funding mix 9 February 2023 Highlights Sources of borrowings Contractual maturity profile of Currency split of borrowings Developm
Slide 22: Sound liquidity management, ratios well above requirements
Íslandsbanki 4Q22 & FY2022 Financial Results Sound liquidity management, ratios well above requirements Liquid assets of ISK 312bn, representing 20% of total assets 9 February 2023 Highlights Total liquidity coverage ratio (LCR) Liquidity coverage ratio – foreign currencies and ISK – All liquidity m
Slide 23: Strong capital position
Íslandsbanki 4Q22 & FY2022 Financial Results Strong capital position Capital position to be optimised before year-end 2024 9 February 2023 Highlights Capital ratios and leverage ratio Capital distribution plans – At the end of September, the % of REA (% of total exposure for leverage ratio) 30.0% –
Slide 24: Q&A
Íslandsbanki 4Q22 & FY2022 Financial Results 9 February 2023 Q&A Íslandsbanki.is
Slide 25: Appendix I – About Íslandsbanki and additional financial information
Íslandsbanki 4Q22 & FY2022 Financial Results 9 February 2023 Appendix I – About Íslandsbanki and additional financial information islandsbanki.is
Slide 26: This is Íslandsbanki
Íslandsbanki 4Q22 & FY2022 Financial Results This is Íslandsbanki Moving Iceland forward by empowering our customers to succeed 9 February 2023 Vision and Values The Bank Market share1 Sustainability 4Q22 FTEs The ratio of ESG risk-assessed Vision to be 700 31% retail customers credit risk has incre
Slide 27: Financial overview: Key figures & ratios
Íslandsbanki 4Q22 & FY2022 Financial Results Financial overview Key figures & ratios 4Q22 4Q21 2022 2021 2020 9 February 2023 PROFITABILITY Profit for the period, ISKm 5,982 7,092 24,535 23,725 6,755 Return on equity 11.1% 14.2% 11.8% 12.3% 3.7% Net interest margin (of total assets) 3.1% 2.4% 2.9% 2
Slide 28: Income Statement
Íslandsbanki 4Q22 & FY2022 Financial Results Income Statement Strong income growth and robust profitability 9 February 2023 Income statement, ISKm 4Q22 4Q21 ∆% 3Q22 ∆% 2022 2021 ∆% Net interest income 12,348 8,644 43% 11,315 9% 43,126 34,043 27% Net fee and commission income 4,038 3,653 11% 3,517 15
Slide 29: Balance sheet reflects a balanced loan and funding profile
Íslandsbanki 4Q22 & FY2022 Financial Results Balance sheet reflects a balanced loan and funding profile Conservative mix of assets and stable funding 9 February 2023 Assets Simplified balance sheet structure – Vast majority of assets consist of 31.12.2022, ISK 1,566bn lending to both retail and corp
Slide 30: Assets
Íslandsbanki 4Q22 & FY2022 Financial Results Assets Strong loan growth in 2022 9 February 2023 Assets, ISKm 31.12.22 30.9.22 Δ Δ% 31.12.21 Δ Δ% Cash and balances with Central Bank 94,424 73,566 20,858 28% 113,667 (19,243) (17%) Loans to credit institutions 110,364 137,169 (26,805) (20%) 43,988 66,37
Slide 31: Liabilities and equity
Íslandsbanki 4Q22 & FY2022 Financial Results Liabilities and equity Deposits are the largest source of funding 9 February 2023 Liabilities & Equity, ISKm 31.12.22 30.9.22 Δ Δ% 31.12.21 Δ Δ% Deposits from Central Bank and credit institutions 15,269 19,912 (4,643) (23%) 13,384 1,885 14% Deposits from
Slide 32: Appendix II – Icelandic economy update
Íslandsbanki 4Q22 & FY2022 Financial Results 9 February 2023 Appendix II – Icelandic economy update Forecasts as of 1 February 2023 islandsbanki.is
Slide 33: Steadier growth to take over from the strong recovery
Íslandsbanki 4Q22 & FY2022 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 9 February 2023 Highlights GDP and contribution of its subcomponents GDP, domestic demand, and externa
Slide 34: Tourism rises to new heights
Íslandsbanki 4Q22 & FY2022 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 9 February 2023 Highlights Number of foreign tourists, by month Number of foreign tourists, by year – The tourism industry bounced
Slide 35: Icelandic economy resilient to European energy crisis
Íslandsbanki 4Q22 & FY2022 Financial Results Icelandic economy resilient to European energy crisis Geothermal heating keeps energy costs at bay 9 February 2023 Highlights Share of primary energy from renewable sources Proportion of energy source in space heating – Being a small open economy, the % o
Slide 36: Current account deficit set to close during the forecast horizon
Íslandsbanki 4Q22 & FY2022 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 9 February 2023 Highlights Exports and contribution from subcomponents Current account bal
Slide 37: Domestic balance sheets remain healthy
Íslandsbanki 4Q22 & FY2022 Financial Results Domestic balance sheets remain healthy Economy-wide leverage remains moderate in comparison with peers and historical levels 9 February 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 0 200
Slide 38: Investment keeps growing steadily in the wake of an upsurge
Íslandsbanki 4Q22 & FY2022 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 9 February 2023 Highlights Investment, real change, and contribution of subcomponents Executives
Slide 39: Unemployment set to remain flat in 2023
Íslandsbanki 4Q22 & FY2022 Financial Results Unemployment set to remain flat in 2023 Real wage growth expected throughout the forecast horizon 9 February 2023 Highlights Labour supply according to corporate executives Unemployment1 – The labour market has recovered % % of workforce, annual average r
Slide 40: Private consumption growth remains resilient
Íslandsbanki 4Q22 & FY2022 Financial Results Private consumption growth remains resilient Household saving ratio still above average 9 February 2023 Highlights Private consumption and related indicators* % change year-on-year (left) and index value (right) – Icelanders were willing spenders in 2022.
Slide 41: The housing market has begun to turn around
Íslandsbanki 4Q22 & FY2022 Financial Results The housing market has begun to turn around Central Bank measures appear to be achieving the intended result 9 February 2023 Capital area house prices relative to macroeconomic fundamentals Residential house prices and turnover in greater Reykjavik Index,
Slide 42: The Icelandic housing market is relatively resilient
Íslandsbanki 4Q22 & FY2022 Financial Results The Icelandic housing market is relatively resilient Supply, demand, mortgage market factors combine to make a large price correction less likely 9 February 2023 Households are not highly indebted compared to peers Mortgage market is flexible w.r.t. loan
Slide 43: Inflation will fall, but how fast?
Íslandsbanki 4Q22 & FY2022 Financial Results Inflation will fall, but how fast? The road back to the inflation target is rocky and circuitous 9 February 2023 Highlights Inflation and the CBI inflation target Inflation by contribution of main categories – Twelfe-month inflation rose in % % January an
Slide 44: Interest rates relatively high near-term but will ultimately fall
Íslandsbanki 4Q22 & FY2022 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 9 February 2023 Highlights Policy rate and inflation Interest rates – The CBI began raising interest rates
Slide 45: ISK likely to strengthen somewhat over time
Íslandsbanki 4Q22 & FY2022 Financial Results ISK likely to strengthen somewhat over time Less favourable net trade reduces the likelihood that the ISK will regain its previous strength 9 February 2023 Highlights ISK exchange rate and selected determinants Real exchange rate and current account balan
Slide 46: Iceland's credit rating has been resilient in turbulent times
Íslandsbanki 4Q22 & FY2022 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 9 February 2023 Development of sovereign credit rating Fitch in Dec-17: Moody’s in Nov-19: AAA/A
Slide 47: Disclaimer
Íslandsbanki 4Q22 & FY2022 Financial Results 9 February 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
Slide 48: islandsbanki.is
Íslandsbanki 4Q22 & FY2022 Financial Results 9 February 2023 islandsbanki.is