Islandsbanki Hf · OMXICE:ISB
Islandsbanki Hf — Q3 2021 Earnings Presentation
51 slides from Islandsbanki Hf's earnings presentation, Oct 28, 2021
Slide 1: 3Q21 Financial Results
3Q21 Financial Results 28 October 2021 Birna Einarsdóttir Chief Executive Officer Jón Guðni Ómarsson Chief Financial Officer islandsbanki.is
Slide 2: Agenda
Íslandsbanki 3Q21 Financial Results 28 October 2021 Agenda 1. Financial and operational highlights 2. Income statement 3. Balance sheet 4. Q&A 5. Annex: About Íslandsbanki and financial overview 6. Annex: Icelandic economy update 2
Slide 3: 1. Financial and operational highlights
Íslandsbanki 3Q21 Financial Results 28 October 2021 1. Financial and operational highlights islandsbanki.is
Slide 4: 3Q21 Financial highlights – above market expectations
Íslandsbanki 3Q21 Financial Results 3Q21 Financial highlights – above market expectations ROE above financial targets supported by economic recovery and resilience of borrowers 28 October 2021 1. Exceptionally strong third quarter earnings 2. for growing income generation Strong customer relationshi
Slide 5: Economic recovery underway following COVID-19 recession
Íslandsbanki 3Q21 Financial Results Economic recovery underway following COVID-19 recession Strong foundations facilitate a robust recovery as world-wide pandemic impact fades 28 October 2021 Corona Crisis takes its leave, strong GDP growth takes the stage.. ...as economic activity is increasingly r
Slide 6: 3Q21 operational highlights
Íslandsbanki 3Q21 Financial Results 3Q21 operational highlights The app is now the primary channel for active retail customers as digital journey continues 28 October 2021 Corporate activity Sustainability #1 for service Strong business activity in Social bond issue for Grunnstoð, Assets in funds ma
Slide 7: Íslandsbanki's shares have performed better than any other Nordic bank since IPO
Íslandsbanki 3Q21 Financial Results Íslandsbanki‘s shares have performed better than any other Nordic bank since IPO Both compared to large, mid and small cap banks 28 October 2021 Íslandsbanki´s share price development since IPO Íslandsbanki‘s shareholders Closing price1 Ten largest shareholders, 3
Slide 8: Strategic projects for autumn 2021 on track
Íslandsbanki 3Q21 Financial Results Strategic projects for autumn 2021 on track Íslandsbanki‘s strategy house, introduced in 2019, remains a guiding light in the Bank‘s actions 28 October 2021 Íslandsbanki‘s strategy house Strategic projects for autumn 2021 1 Normalisation of credit losses 2 NFCI gr
Slide 9: Clear path to a long term double-digit ROE
Íslandsbanki 3Q21 Financial Results Clear path to a long term double-digit ROE Strong revenue generation and reversed impairments main drivers in a vigorous quarter 28 October 2021 Real cost AT1 issue of SEK decrease YoY excluding one-offs 750m in 3Q21 4% Base rate NFCI growth YoY Target ROE 1.5% vs
Slide 10: 2. Income statement
Íslandsbanki 3Q21 Financial Results 28 October 2021 2. Income statement islandsbanki.is
Slide 11: Substantial increase in total operating income YoY
Íslandsbanki 3Q21 Financial Results Substantial increase in total operating income YoY Economic recovery yields positive net impairment 28 October 2021 Highlights Income statement, ISKm 3Q21 3Q20 ∆% 2Q21 ∆% 9M21 9M20 ∆% 2020 – The Bank focuses on core banking Net interest income 8,792 8,305 6% 8,417
Slide 12: Best quarter in years
Íslandsbanki 3Q21 Financial Results Best quarter in 5 years Core revenue growth from robust underlying business and reversed impairments drive good result 28 October 2021 Profit for the period – 3Q20 vs 3Q21 ISKm 2,815 (548) (203) 1,196 (6) 38 (118) 565 487 7,587 3,361 Corporate & public sector lend
Slide 13: Net interest income rises following increased lending
Íslandsbanki 3Q21 Financial Results Net interest income rises following increased lending NIM likely to be supported by rising policy rates 28 October 2021 Highlights Net interest income NII – 3Q20 vs 3Q21 – Greater lending volumes drive By business segments, ISKm ISKm the higher NII YoY 8,792 8,305
Slide 14: Diversified sources of NFCI
Íslandsbanki 3Q21 Financial Results Diversified sources of NFCI 20% increase YoY distributed across business segments 28 October 2021 Highlights Net fee and commission income NFCI – 3Q20 vs 3Q21 – Asset management and Business segments, ISKm ISKm Investment banking and 3,427 brokerage are primary dr
Slide 15: Strong NFI due to favourable market conditions
Íslandsbanki 3Q21 Financial Results Strong NFI due to favourable market conditions Positive value changes of unlisted shares and a strong equity market are the main factors 28 October 2021 Highlights Net financial income Bonds and debt instruments1 – The increase in net financial ISKm ISKbn income i
Slide 16: Cost/income ratio at an all-time low level and beats target
Íslandsbanki 3Q21 Financial Results Cost/income ratio at an all-time low level and beats target Supported by strong revenue generation, cost reduction efforts and cyclicality in expenses 28 October 2021 Highlights Administrative expenses1 Cost-to-income ratio2 – Cost-to-income ratio was 39.4% ISKm i
Slide 17: 3. Balance sheet
Íslandsbanki 3Q21 Financial Results 28 October 2021 3. Balance sheet islandsbanki.is
Slide 18: Balance sheet reflects balanced loan and funding profile
Íslandsbanki 3Q21 Financial Results Balance sheet reflects balanced loan and funding profile Broad product offering, strong liquidity portfolio and stable funding 28 October 2021 Assets Simplified balance sheet structure – Vast majority of assets consist of 30.9.2021, ISK 1,456bn lending to both ind
Slide 19: Robust growth in total assets in 9M21
Íslandsbanki 3Q21 Financial Results Robust growth in total assets in 9M21 Steady mortgage growth supported by an even stronger capital base 28 October 2021 Assets, ISKm 30.9.2021 30.6.21 Δ Δ% 31.12.20 Δ Δ% Highlights Cash and balances with Central Bank 110,233 130,968 (20,735) (15.8%) 78,948 31,285
Slide 20: Diversified and highly collateralised loan portfolio
Íslandsbanki 3Q21 Financial Results Diversified and highly collateralised loan portfolio Loans to individuals are 48% of loans to customers, mainly residential mortgages 28 October 2021 Loans to customers Loans to customers By business division, ISKbn 1,081 By sector, standard sectors (left graph) a
Slide 21: LTV distributions point to healthy coverage ratios
Íslandsbanki 3Q21 Financial Results LTV distributions point to healthy coverage ratios Majority of collateral is in residential and commercial real estate 28 October 2021 Highlights LTV distribution by underlying asset class LTV distribution of mortgages to individuals – The weighted average LTV for
Slide 22: COVID-19 moratoria over, more clarity on forbearance
Íslandsbanki 3Q21 Financial Results COVID-19 moratoria over, more clarity on forbearance Temporary moratorium uniformly executed and broadly applied during 2020 providing shelter for customers as they weathered the storm. Payments have resumed for 59% of loans in forbearance 28 October 2021 Performi
Slide 23: Majority of net impairments are COVID-19 related
Íslandsbanki 3Q21 Financial Results Majority of net impairments are COVID-19 related Tourism sector hit hard and fully in Stage 2, overlay factors to account for uncertainty 28 October 2021 Net impairment on financial assets Exposure to tourism by effect of COVID-19 By period, ISKbn A proportion of
Slide 24: Impairment allowance sufficient, uncertainty accounted for
Íslandsbanki 3Q21 Financial Results Impairment allowance sufficient, uncertainty accounted for Exposures in Stage 2 continue to lower as COVID-19 pandemic recedes and Stage 3 has decreased 28 October 2021 Highlights Loans to customers & off-balance sheet items Loans to customers: gross carrying amou
Slide 25: Diversified funding base
Íslandsbanki 3Q21 Financial Results Diversified funding base Deposits are largest source of funding 28 October 2021 Liabilities & Equity, ISKm 30.9.2021 30.6.21 Δ Δ% 31.12.20 Δ Δ% Highlights Deposits from Central Bank and credit institutions 20,409 32,240 (11,831) (36.7%) 39,758 (19,349) (48.7%) – D
Slide 26: Deposits are largest source of funding
Íslandsbanki 3Q21 Financial Results Deposits are largest source of funding Steady deposit growth of 11% since year-end 2020 provides a solid funding base 28 October 2021 Highlights Funding sources Deposits from customers and credit institutions – Total reduction in deposits By type, % of total liabi
Slide 27: Seasoned and diversified long-term funding programme
Íslandsbanki 3Q21 Financial Results Seasoned and diversified long-term funding programme Limited wholesale funding activity in 3Q21 28 October 2021 Highlights Sources of market borrowings Contractual maturity profile of Currency split of borrowings – The Bank’s funding model is Book value, ISKbn bor
Slide 28: Sound liquidity management, meeting all requirements
Íslandsbanki 3Q21 Financial Results Sound liquidity management, meeting all requirements Liquid assets of ISK 314bn are prudently managed, representing 22% of total assets 28 October 2021 Highlights Liquidity Coverage Ratio1 and Net Stable Funding Ratio2 Liquid assets – The Icelandic Central Bank %
Slide 29: Market risk well within appetite
Íslandsbanki 3Q21 Financial Results Market risk well within appetite The Bank has a modest market risk profile 28 October 2021 Highlights Market risk exposure and market risk appetite Currency imbalance, compared with regulatory limit – The Bank's market risk mainly Average positions per quarter, %
Slide 30: Sound capital position
Íslandsbanki 3Q21 Financial Results Sound capital position Highlights High REA density and high leverage driven by CRD IV standardised approach – A dividend payment in March and 28 October 2021 changes in IFRS 9 transitional rules in January lowered the CET1 capital by ISK 4.7bn. These two changes a
Slide 31: Íslandsbanki's capital ratios well above target
Íslandsbanki 3Q21 Financial Results Íslandsbanki’s capital ratios well above target Excess capital of ISK >35bn including capital structure optimisation 28 October 2021 Highlights Current regulatory requirements and minimum capital target – The Pillar 2-R capital requirement has been revised, leadin
Slide 32: 4. Q&A
Íslandsbanki 3Q21 Financial Results 28 October 2021 4. Q&A Íslandsbanki.is
Slide 33: 5. Annex – About Íslandsbanki and financial overview
Íslandsbanki 3Q21 Financial Results 28 October 2021 5. Annex – About Íslandsbanki and financial overview islandsbanki.is
Slide 34: This is Íslandsbanki
Íslandsbanki 3Q21 Financial Results This is Íslandsbanki Moving Iceland forward by empowering our customers to succeed 28 October 2021 Vision and Values The Bank Market share1 Sustainability 3Q21 Íslandsbanki became a FTEs supporter of Grænvangur, a Vision to be 730 32% retail customers collaboratio
Slide 35: Financial overview
Íslandsbanki 3Q21 Financial Results Financial overview Key figures & ratios 3Q21 3Q20 9M21 9M20 2020 28 October 2021 PROFITABILITY Profit for the period, ISKm 7,587 3,361 16,633 3,230 6,755 Return on equity 15.7% 7.4% 11.7% 2.4% 3.7% Net interest margin (on total assets) 2.4% 2.5% 2.4% 2.6% 2.6% Cos
Slide 36: Attractive and achievable financial targets
Íslandsbanki 3Q21 Financial Results Attractive and achievable financial targets Clear path to ROE expansion, attractive capital return and optimisation 28 October 2021 Financial 3Q21 2Q21 2020 Guidance targets — Based on average expected risk-free rates through the business cycle 8-10% by 2023 — The
Slide 37: 6. Annex – Icelandic economy update
Íslandsbanki 3Q21 Financial Results 28 October 2021 6. Annex – Icelandic economy update islandsbanki.is
Slide 38: Corona Crisis takes its leave, strong GDP growth takes the stage
Íslandsbanki 3Q21 Financial Results Corona Crisis takes its leave, strong GDP growth takes the stage Domestic demand will rebound strongly this year, with export growth following in its wake 28 October 2021 Highlights GDP and contribution of its subcomponents GDP, domestic demand, and external trade
Slide 39: Temporary hitch in tourist numbers, but the future is bright
Íslandsbanki 3Q21 Financial Results Temporary hitch in tourist numbers, but the future is bright We project that tourist arrivals will total 600,000 this year and then more than double in 2022 28 October 2021 Highlights Number of foreign tourists, by year GDP growth – After a promising surge this su
Slide 40: Current account set to show a deficit in 2021, then revert to surplus
Íslandsbanki 3Q21 Financial Results Current account set to show a deficit in 2021, then revert to surplus The short-lived deficit is due to domestic demand, which is a few steps ahead of the recovery of exports 28 October 2021 Highlights Exports and contribution from subcomponents Current account ba
Slide 41: Domestic balance sheets remain healthy despite COVID-19
Íslandsbanki 3Q21 Financial Results Domestic balance sheets remain healthy despite COVID-19 Economy-wide leverage remains moderate in comparison with peers and historical levels 28 October 2021 Private sector debt Corporate debt % of GDP % of GDP 400 300 350 250 300 250 200 200 150 150 100 100 50 50
Slide 42: Investment growth stronger than expected in 2021
Íslandsbanki 3Q21 Financial Results Investment growth stronger than expected in 2021 Reduced uncertainty and favourable financing conditions provide an incentive for increased corporate investment 28 October 2021 Highlights Investment, real change, and contribution of subcomponents Executives’ expec
Slide 43: Unemployment falling rapidly
Íslandsbanki 3Q21 Financial Results Unemployment falling rapidly Jobless rate to return to the pre-pandemic level by 2023 28 October 2021 Highlights Unemployment Unemployment* – Unemployment soared in the wake % of workforce, monthly average % of workforce, annual average of the pandemic, peaking at
Slide 44: Private consumption growth ahead
Íslandsbanki 3Q21 Financial Results Private consumption growth ahead Consumers eager to spend after a bleak COVID year 28 October 2021 Highlights Private consumption and related indicators – Private consumption contracted by 3.3% % change year-on-year (left) and index value (right) in 2020. Consumpt
Slide 45: Housing markets lively despite pandemic
Íslandsbanki 3Q21 Financial Results Housing markets lively despite pandemic Commercial property prices are stable while residential house price rises have gained steam 28 October 2021 Capital area house prices relative to macroeconomic fundamentals Residential house prices and turnover in greater Re
Slide 46: ISK likely to strengthen when tourism rebounds
Íslandsbanki 3Q21 Financial Results ISK likely to strengthen when tourism rebounds The Central Bank has mitigated exchange rate volatility via intervention since WOW Air collapsed 28 October 2021 Highlights ISK exchange rate and CBI FX market intervention Real exchange rate and current account balan
Slide 47: Inflation at target by late 2022
Íslandsbanki 3Q21 Financial Results Inflation at target by late 2022 Inflation spiking in other countries as well 28 October 2021 Highlights Inflation and the CBI inflation target Headline inflation, by country – Inflation started rising in mid-2020, in the wake of the Corona Crisis and the % % depr
Slide 48: Policy rate on the rise
Íslandsbanki 3Q21 Financial Results Policy rate on the rise Long-term interest rates approaching equilibrium within the forecast horizon 28 October 2021 Highlights Policy rate and inflation Interest rates – The Central Bank of Iceland has hiked its policy rate 3 times in 2021, after reaching % % an
Slide 49: Iceland's credit rating has remained at A
Íslandsbanki 3Q21 Financial Results Iceland’s credit rating has remained at A Setbacks in the tourist sector have not affected the sovereign ratings 28 October 2021 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 sus
Slide 50: Disclaimer
Íslandsbanki 3Q21 Financial Results 28 October 2021 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 forecast
Slide 51: islandsbanki.is
Íslandsbanki 3Q21 Financial Results 28 October 2021 islandsbanki.is