Islandsbanki Hf · OMXICE:ISB
Islandsbanki Hf — FY2024 Earnings Presentation
54 slides from Islandsbanki Hf's earnings presentation, Feb 13, 2025
Slide 1: 4Q24 & FY2024 Financial Results
4Q24 & FY2024 Financial Results 13 February 2025 Jón Guðni Ómarsson Chief Executive Officer Ellert Hlöðversson Chief Financial Officer
Slide 2: ROE in excess of financial targets
13 February 2025 2 ROE in excess of financial targets Inflation and high policy rates continue to adversely affect NII ROE in excess of analyst consensus Considerable excess capital in place ROE Total capital ratio 25.3% 23.6% 11.2% 13.2% 11.2% 11.3% 10.9% 23.1% 23.4% 23.2% 9.8% 9.7% 21.4% 19.9% 19.
Slide 3: Capital optimisation still a priority for the Bank
13 February 2025 3 Capital optimisation still a priority for the Bank Month by month volatility expected as inflation subsides 2025 Guidance Loans to customers and revenue, in general to Target 4Q24 2024 grow in line with nominal GDP through the business cycle Return on ROE in 2025 expected to be >1
Slide 4: Strong performance across business units
13 February 2025 4 Strong performance across business units Corporate & Personal Banking Business Banking Investment Banking Iceland Funds AUM ~ ISK 364 billion at Loans grew by ISK 34 Largest investment 10% deposit growth year end 2024 billion in 2024, almost 6% bank in Iceland Iceland Funds and Po
Slide 5: Companies and investors choose Íslandsbanki
13 February 2025 5 Companies and investors choose Íslandsbanki Further rate cuts and declining inflation likely to fuel increased activities in 2025 ISK 163 billion Largest investment bank in Iceland New lending to corporates Highest turnover in equities 8% increase in Asset 10 out of 12 months Mana
Slide 6: Íslandsbanki focuses on financial health
13 February 2025 6 Íslandsbanki focuses on financial health Financial health implemented in 2023 and became part of new strategy in 2024 Better financial health with personal and digital service Better financial overview with digital channels • Financial health strategy was influenced by increase in
Slide 7: Positive momentum
13 February 2025 7 Positive momentum Enhancing financial health relates to customers of the Bank 3x sales of saving 8x sales of credit cards products through digital with use of data in touchpoints combined automatic digital with personal service journeys 52points 15% 39points Net Promoter Customers
Slide 8: Major digital wins in 2024
13 February 2025 8 Major digital wins in 2024 80% improvement in processing time of car loan applications 79% of employees through new digital solution communicate with SAM, our internal chatbot 1400 digital cards 80% of notarisation requests for mortgage refinancing are digital Fróði won an 89% of
Slide 9: Offering best financial service in class
13 February 2025 9 Offering best financial service in class • Wider product offering and Data-driven automatic enhanced services to our service customers • Personalized • Special benefits through customers journeys loyalty programs • Personal follow-up • Enhances financial health • Íslandsbanki's di
Slide 10: New strategy – progressive thinking and financial health
13 February 2025 10 New strategy – progressive thinking and financial health 4Q24 & FY2024 Financial Results
Slide 11: Financial Overview
13 February 2025 11 Financial Overview 4Q24 & FY2024 Financial Results
Slide 12: Economic tailwinds picking up speed
13 February 2025 12 Economic tailwinds picking up speed A new business cycle following mild GDP contraction likely to bring healthy growth A fairly smooth upward path for the economy following mild contraction.. ..and housing market remains resilient in the face of tight monetary policy Real GDP and
Slide 13: Profit in line with expectations in 2024 as a whole
13 February 2025 13 Profit in line with expectations in 2024 as a whole Key drivers of this quarter's results: Interaction between subsiding inflation and reducing policy rates, in junction with impairment reversals Profit for the period – 4Q23 vs 4Q24 ISKm 1,354 (321) (13) (855) 238 (461) 113 6,228
Slide 14: Margins pressured due to pressure from imbalances
13 February 2025 14 Margins pressured due to pressure from imbalances Volatility may be experienced for the short term while the economy re-stabilizes Net interest income Net interest income – YoY comparison Highlights Business segments, ISKm ISKm • Net interest margin was 2.7% in 11,730 12,122 12,4
Slide 15: Growth in asset management following pickup in capital markets
13 February 2025 15 Growth in asset management following pickup in capital markets Further reducing rate environment expected to funnel growth across all fee income types and segments Net fee and commission income Net fee and commission income – YoY comparison Highlights Business segments, ISKm ISKm
Slide 16: Positive turnaround in NFI in the second half of the year
13 February 2025 16 Positive turnaround in NFI in the second half of the year Considerable income related to fair value adjustment of assets Net financial income (expense) Shares and equity instruments1 Highlights ISKm ISKbn • The equity market had a strong gain 455 in October following a rate cut a
Slide 17: Cost-to-income ratio within target for 2024
13 February 2025 17 Cost-to-income ratio within target for 2024 Higher expenses mainly driven by investments in IT, wage increases and emphasis on governance and service Administrative expenses Cost-to-income ratio1,2 Highlights 7,516 ISKm 6,691 7,110 7,100 • The cost-to income ratio, adjusted 355 7
Slide 18: Lending growth moderates while LTVs remain stable
13 February 2025 18 Lending growth moderates while LTVs remain stable Loan portfolio over 94% covered by collateral and focused on lower risk customers Loans to customers Loans to customers Highlights By business division, ISKbn By sector, with tourism as a separate sector • The credit quality of as
Slide 19: Asset quality remains strong across the board
13 February 2025 19 Asset quality remains strong across the board Impairment reversals throughout the year on the back of model recalibration Net impairment on financial assets Loans to customers: Stage 2 and 3 (NPL) Highlights By period, ISKbn Development of gross carrying amount as ratio of total
Slide 20: Well collateralised mortgage book with stable NPLs
13 February 2025 20 Well collateralised mortgage book with stable NPLs Continued shift to CPI-linked loans while fixed rate imbalance subsides in the banking book Mortgage portfolio Interest rate reset profile for NIL 3-5y fixed rate Highlights By interest rate type, gross carrying amount, ISKbn mor
Slide 21: CRE portfolio well diversified and of good quality
13 February 2025 21 CRE portfolio well diversified and of good quality Occupancy ratios high for domestic commercial real estate companies Development of exposure to real estate companies Development of construction exposure Highlights Gross carrying amount by period, ISKbn Gross carrying amount by
Slide 22: Deposits are the largest source of funding
13 February 2025 22 Deposits are the largest source of funding Strong deposit growth in 2024 makes the Bank less reliant on wholesale funding Funding sources Customer loans to customer deposits ratio Highlights By type, % of total liabilities and equity Development, % • Deposits from individuals gre
Slide 23: Light maturity profile allows for opportunistic approach to funding
13 February 2025 23 Light maturity profile allows for opportunistic approach to funding Continuous and considerable spread compression across markets during the year Sources of borrowings Contractual maturity profile of borrowings ISKbn 31.12.24, ISKbn Highlights 503 456 111 104 438 49 • 2024 saw co
Slide 24: Strong liquidity position, ratios well above requirements
13 February 2025 24 Strong liquidity position, ratios well above requirements Liquidity management hand in hand with liability management throughout 2024 Total liquidity coverage ratio (LCR) Liquidity coverage ratio for ISK Highlights 300% 200% • Reduction in FX liquid assets related to buyback of F
Slide 25: Capital position considerably in excess of targets
13 February 2025 25 Capital position considerably in excess of targets Capital optimization a priority for the Bank, subject to market conditions Current regulatory requirements and minimum capital target Capital and leverage ratios Highlights 31.12.2024, by capital composition % of REA (% of total
Slide 26: CRR3 expected to be implemented later this year
13 February 2025 26 CRR3 expected to be implemented later this year Capital relief is expected as REA is forecasted to reduce by approx. 4.5% throughout 2025 REA and REA ratio Highlights Capital Ratios • Implementation of CRR3 in 2025 expected to reduce REA by 4-5% at implementation and grow slightl
Slide 27: Capital optimization still a priority for the Bank
13 February 2025 27 Capital optimization still a priority for the Bank Month by month volatility expected as inflation subsides 2025 Guidance Loans to customers and revenue, in general to Target 4Q24 2024 grow in line with nominal GDP through the business cycle Return on ROE in 2025 expected to be >
Slide 28: Q&A
13 February 2025 28 Q&A 4Q24 & FY2024 Financial Results
Slide 29: Appendix I
13 February 2025 29 Appendix I About Íslandsbanki and additional financial information 4Q24 & FY2024 Financial Results
Slide 30: This is Íslandsbanki
13 February 2025 30 This is Íslandsbanki We empower our customers to be a force for good Values The Bank Market share1 Sustainability in 2024 To create value 733 FTEs: Number of FTEs at Íslandsbanki at period end 31% Retail customers 23% growth in sustainable lending in 2024 for the future In a sust
Slide 31: Financial overview
13 February 2025 31 Financial overview Key figures & ratios 4Q24 3Q24 2Q24 1Q24 4Q23 PROFITABILITY Profit for the period, ISKm 6,283 7,280 5,266 5,417 6,228 Return on equity 11.2% 13.2% 9.7% 9.8% 11.2% Net interest margin (of total assets) 2.7% 2.9% 3.1% 3.0% 2.9% Cost-to-income ratio1,2 45.7% 40.4%
Slide 32: Income statement
13 February 2025 32 Income statement Income statement, ISKm 4Q24 4Q23 ∆% 2024 2023 ∆% Net interest income 10,875 11,730 (7%) 47,265 48,611 (3%) Net fee and commission income 3,607 3,494 3% 13,122 13,283 (1%) Net financial income (expense) 169 455 (63%) (338) 241 (240%) Net foreign exchange gain 113
Slide 33: Balance sheet reflects a balanced loan and funding profile
13 February 2025 33 Balance sheet reflects a balanced loan and funding profile Conservative mix of assets and stable funding Simplified balance sheet structure Assets 31.12.24, ISK 1,608bn • Vast majority of assets Cash in Central bank Deposits from credit inst. consist of lending to both and pensio
Slide 34: Íslandsbanki's MREL requirement
13 February 2025 35 Íslandsbanki's MREL requirement Minimum Requirement for Own Funds and Eligible MREL Development, % • Íslandsbanki's MREL requirement is Liabilities (MREL), 31.12.2024 the sum of the Loss absorption amount (LAA) and Recapitalisation amount (RCA), both equal to the total SREP capit
Slide 35: Assets
13 February 2025 36 Assets Asset base mainly consists of loans and liquid assets Assets, ISKm 31.12.24 30.9.24 Δ Δ% 31.12.23 Δ Δ% Cash and balances with Central Bank 65,716 104,777 (39,061) (37%) 87,504 (21,788) (25%) Loans to credit institutions 50,486 58,177 (7,691) (13%) 73,475 (22,989) (31%) Bon
Slide 36: Liabilities and equity
13 February 2025 37 Liabilities and equity Deposits continue to be the largest source of funding Liabilities & Equity, ISKm 31.12.24 30.9.24 Δ Δ% 31.12.23 Δ Δ% Deposits from Central Bank and credit institutions 12,535 11,525 1,010 9% 16,149 (3,614) (22%) Deposits from customers 926,846 927,011 (165)
Slide 37: Appendix II
13 February 2025 38 Appendix II Icelandic economy update 4Q24 & FY2024 Financial Results
Slide 38: The Icelandic economy and society draw on many strengths
13 February 2025 39 The Icelandic economy and society draw on many strengths Icelanders enjoy high standards of living in a modern, open and egalitarian society Iceland ranks highly on a variety of global Income inequality is low compared to OECD peers Sustainable energy usage is prevalent developme
Slide 39: Economic tailwinds picking up speed
13 February 2025 40 Economic tailwinds picking up speed A new business cycle following mild GDP contraction likely to bring healthy growth A fairly smooth upward path for the economy following mild contraction.. ..and housing market remains resilient in the face of tight monetary policy Real GDP and
Slide 40: Economic tailwinds picking up speed
13 February 2025 41 Economic tailwinds picking up speed A fairly smooth upward path for the economy, driven equally by exports and domestic demand GDP and contribution of its subcomponents GDP and contribution of its subcomponents Volume change from prior year (%), annual data Volume change from pri
Slide 41: New sources of export growth come to the fore
13 February 2025 42 New sources of export growth come to the fore Export growth resumes following a modest decline in 2024 IP-based sector export revenues Exports and contribution from subcomponents Bn.ISK. 2024: Federation of Icelandic Industries est. % change Highlights • Visitor numbers rebounded
Slide 42: Current account deficit set to close
13 February 2025 43 Current account deficit set to close Exports to catch up with imports in 2025, and growth in imports and exports will be in balance later on Imports and contribution from subcomponents Current account balance % change % of GDP Highlights • Export growth is projected at nearly 3%
Slide 43: ISK set to be relatively stable over the forecast horizon
13 February 2025 44 ISK set to be relatively stable over the forecast horizon Wages and prices to rise faster than abroad, pushing the real exchange rate markedly upwards ISK exchange rate and selected determinants ISK exchange rate and real exchange rate Highlights ISK bn (left) and EURISK (right)
Slide 44: Domestic balance sheets staying robust
13 February 2025 45 Domestic balance sheets staying robust Private sector debt ratios are stable and public debt remains moderate in global context Private sector debt Corporate debt % of GDP % of GDP 400 300 250 300 200 200 150 77 100 100 50 73 0 0 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
Slide 45: Investment set to grow in coming years after a brief hiatus
13 February 2025 46 Investment set to grow in coming years after a brief hiatus High interest rates and a more ambiguous outlook for exports will impede investment temporarily, but growth will pick up again later Investment, real change, and contribution of subcomponents Business investment and rela
Slide 46: Labour market healthy, albeit calmer
13 February 2025 47 Labour market healthy, albeit calmer Real wages set to grow steadily during the forecast horizon Wages, year on year change Unemployment1 Highlights % % of workforce, annual average • Unemployment rose to an average of 3.5% in 2024, up 0.3 percentage points year-on-year, though s
Slide 47: Icelanders put their wallets to work
13 February 2025 48 Icelanders put their wallets to work Private consumption growth to rebound during the forecast horizon Net household wealth Private consumption and related indicators Selected ratios % change YoY (left) and index value (right) Highlights • Private consumption grew by 0.9% in 2024
Slide 48: The real estate market shows continued resilience
13 February 2025 49 The real estate market shows continued resilience Central Bank monetary tightening has impact but underlying demand supports prices and turnover Capital area house prices relative to macroeconomic fundamentals Residential house prices and turnover Index, January 2011=100 % change
Slide 49: The Icelandic housing market is relatively resilient
13 February 2025 50 The Icelandic housing market is relatively resilient Supply, demand, mortgage market factors combine to make a large price correction less likely Households are not highly indebted compared to peers Mortgage market is flexible w.r.t. loan types with different payment burden House
Slide 50: Disinflation set to continue
13 February 2025 51 Disinflation set to continue Inflation rapidly approaching the target but will not reach it during the forecast horizon Inflation and the CBI inflation target * Month-on-month and year-on-year CPI change * % *Forecast as of Jan-2025 % *Forecast as of Jan-2025 Highlights 11 8 1.6
Slide 51: Interest rates on a downward path in the coming term
13 February 2025 52 Interest rates on a downward path in the coming term The Central Bank's monetary easing phase will probably continue until mid-2026, with long-term interest rates following suit Policy rate and inflation * Key interest rates Highlights %, Real policy rate based on 12m forward for
Slide 52: Iceland's credit rating rising apace
13 February 2025 53 Iceland's credit rating rising apace Rating companies acknowledge the flexibility of the economy and improving public debt metrics Development of sovereign credit rating Fitch in Dec-17: Moody's in Nov-19: Moody's in Sep-24: Rating upgrade to A on economic Upgrade to A2 on sustai
Slide 53: Disclaimer
13 February 2025 54 Disclaimer This presentation is for information purposes only and shall not be construed as an The forward-looking statements represent Íslandsbanki's current expectations, plans offer or solicitation for the subscription or purchase or sale of any financial or forecasts of its f
Slide 54: 13 February 2025 4Q24 & FY2024 Financial Results
13 February 2025 55 4Q24 & FY2024 Financial Results