Islandsbanki hf · OMXICE:ISB
Islandsbanki hf — Íslandsbanki — Q4 2020 Earnings Presentation
46 slides from Islandsbanki hf's earnings presentation, Feb 10, 2021
Slide 1: 4Q20 Financial Results
Íslandsbanki 4Q20 Financial Results 10 February 2021 4Q20 Financial Results islandsbanki.is
Slide 2: Table of Contents
Íslandsbanki 4Q20 Financial Results 10 February 2021 Table of Contents 1. 4Q2020 highlights and key takeaways 2. Income statement 3. Balance sheet 4. Annex: Financial overview and about Íslandsbanki 5. Annex: Icelandic economy update 2
Slide 3: 4Q20 highlights and key takeaways
Íslandsbanki 4Q20 Financial Results 10 February 2021 1. 4Q20 highlights and key takeaways islandsbanki.is
Slide 4: A return to growth is likely in 2021 following deep recession
Íslandsbanki 4Q20 Financial Results A return to growth is likely in 2021 following deep recession Strong foundations facilitate a robust recovery when world-wide pandemic impact fades 10 February 2021 Following a deep recession in 2020, the economy is likely to return to growth.. ...supported by a l
Slide 5: Key takeaways
Íslandsbanki 4Q20 Financial Results Key takeaways A robust 4Q20 to end an extraordinary year 10 February 2021 1. Steady underlying operations 2. Enhanced business position ‒ Universal relationship banking strategy delivered a ‒ #1 in brokerage at NASDAQ OMX Iceland and strong quarter with ROE at 7.6
Slide 6: Financial targets
Íslandsbanki 4Q20 Financial Results Private and Confidential Financial targets ROE at 7.6% in the fourth quarter – all other targets met in 2020 10 February 2021 Target 2020 Guidance — Target of 4-6% on top of risk-free rate. Risk-free rate is currently 0.5% ROE in excess of risk-free rate 4-6% 2.6%
Slide 7: Operational highlights in 4Q2020
Íslandsbanki 4Q20 Financial Results Operational highlights in 4Q2020 First sustainable bond by an Icelandic bank issued in the quarter 10 February 2021 — Íslandsbanki was involved in large projects undertaken by the three listed real estate companies. Bonds were issued for Eik and Reginn and the Ban
Slide 8: Major progress on the digital front
Íslandsbanki 4Q20 Financial Results Major progress on the digital front Quick time to market for digital products supported all business units navigating through COVID-19 10 February 2021 App visits by age categories App users Branch visits Thousands Thousands 7,000,000 2019 6,000,000 2020 34% avera
Slide 9: Sustainable Financing Framework: Allocation and impact
Íslandsbanki 4Q20 Financial Results Sustainable Financing Framework: Allocation and impact 50% of proceeds from sustainable and green bonds issued in 2020 has been allocated to eligible projects 10 February 2021 Comments ‒ 49% of eligible assets are in the Use of proceeds as of 31.12.2020 Avoided gr
Slide 10: Income statement
Íslandsbanki 4Q20 Financial Results 10 February 2021 2. Income statement islandsbanki.is
Slide 11: A robust quarter with strong underlying operations
Íslandsbanki 4Q20 Financial Results A robust quarter with strong underlying operations1 Majority of net impairments in Q420 and FY20 are C-19 related 10 February 2021 ISKm 4Q20 4Q19 ∆ ∆% 2020 2019 ∆ ∆% Comments ‒ Universal relationship banking strategy Net interest income 8,258 8,291 (33) -0.4% 33,3
Slide 12: Net interest income rising despite lower rates environment
Íslandsbanki 4Q20 Financial Results Net interest income rising despite lower rates environment Rise due to increased lending – increase in lending margin compensates for drop in deposit margin 10 February 2021 Net interest income Net interest margin ISKm -0.4% 1.7% 8,291 32,822 33,371 2.7% 8,258 2.7
Slide 13: Robust net fee and commission income
Íslandsbanki 4Q20 Financial Results Robust net fee and commission income Growth in fees from loans and guarantees result of increase in new lending and refinancing 10 February 2021 Net fee and commission income Net fee and commission income ISKm ISKm, split by sector -2.7% -3.4% 2,945 2,865 10,899 1
Slide 14: Substantial decrease in administrative expenses
Íslandsbanki 4Q20 Financial Results Substantial decrease in administrative expenses Cost-to-income ratio for the year and quarter below the Bank´s 55% financial target 10 February 2021 Comments Administrative expenses1 Cost to income ratio2 Total assets / FTE ISKm ISKbn -5.8% -7.1% — The drop in adm
Slide 15: Balance sheet
Íslandsbanki 4Q20 Financial Results 10 February 2021 3. Balance sheet islandsbanki.is
Slide 16: Majority of lending funded with deposits
Íslandsbanki 4Q20 Financial Results Majority of lending funded with deposits Strong funding structure mainly comprises long-term funding and stable deposits 10 February 2021 Simplified balance sheet structure 31 December 2020, ISK 1,344bn 100% 100% Other Cash in Central Bank Deposits from credit ins
Slide 17: Growth in total assets
Íslandsbanki 4Q20 Financial Results Growth in total assets Loans to customers grew by 11.9% during the year, mainly from increase in mortgage lending 10 February 2021 Comments Assets, ISKm 31.12.20 30.09.20 Δ Δ% 31.12.19 Δ Δ% Liquid assets Cash and balances w ith Central Bank 78,948 95,022 (16,074)
Slide 18: Loans to customers grew by 11.9% in 2020
Íslandsbanki 4Q20 Financial Results Loans to customers grew by 11.9% in 2020 New lending amounted to ISK 309bn in 2020 compared with ISK 226bn in 2019 10 February 2021 Highlights Main sources of changes in net carrying amount ISKbn, consolidated — New lending amounted to ISK 160bn for individuals an
Slide 19: Diversified loan portfolio
Íslandsbanki 4Q20 Financial Results Diversified loan portfolio Strong growth in mortgage lending, loans to individuals 43% of the Bank´s loan book 10 February 2021 Loans to customers Loans to customers Loans to customers By business divisions, ISKbn, parent By sector, standard sectors By sector, car
Slide 20: COVID-19 moratoria taper off, forbearance increases
Íslandsbanki 4Q20 Financial Results COVID-19 moratoria taper off, forbearance increases Temporary moratorium uniformly executed and broadly applied during 2020 10 February 2021 Loans to individuals granted COVID-19 moratorium Loans to companies granted COVID-19 moratorium Performing loans with forbe
Slide 21: Loan portfolio with solid collateral coverage
Íslandsbanki 4Q20 Financial Results Loan portfolio with solid collateral coverage Majority of collateral in residential and commercial real estate 10 February 2021 LTV distribution by underlying asset class LTV distribution of mortgages to individuals ISKbn, by type of underlying asset, as of 31.12.
Slide 22: Loans to the tourism sector moved to Stage 2 in 2020
Íslandsbanki 4Q20 Financial Results Loans to the tourism sector moved to Stage 2 in 2020 Exposure in Stage 2 increases due to the COVID-19 pandemic, but Stage 3 has not yet increased 10 February 2021 Loans to customers & off-balance sheet items Loans to customers: Stage 2 and 3 Loans to customers: g
Slide 23: Additional impairment allowance due to COVID-19 in 2020
Íslandsbanki 4Q20 Financial Results Additional impairment allowance due to COVID-19 in 2020 Tourism sector hardest hit and fully in Stage 2, overlay factors to account for uncertainty 10 February 2021 Net impairment on financial assets Exposure to tourism by effect of COVID-19 crisis ISKbn, by perio
Slide 24: Total liabilities are 13.6% up from year-end 2019
Íslandsbanki 4Q20 Financial Results Total liabilities are 13.6% up from year-end 2019 Deposits from customers increased by 9.9% in 2020, mainly from retail customers and corporations 10 February 2021 Liabilities & Equity, ISKm 31.12.20 30.09.20 Δ Δ% 31.12.19 Δ Δ% Deposits from Central Bank and credi
Slide 25: Stable deposits remain the main source of funding
Íslandsbanki 4Q20 Financial Results Stable deposits remain the main source of funding Long term funding sources increased steadily during the year 10 February 2021 Comments Funding sources Deposit from customers and credit institutions by LCR category By type, % of total liabilities and equity Devel
Slide 26: Successful funding operations and good market access
Íslandsbanki 4Q20 Financial Results Successful funding operations and good market access The Bank´s sustainable and green funding journey started on a positive note in 2020 10 February 2021 Comments Sources of market borrowings Maturity profile of long-term debt Currency split of market borrowing so
Slide 27: Sound management of liquidity – all ratios above requirements
Íslandsbanki 4Q20 Financial Results Sound management of liquidity – all ratios above requirements Liquid assets of ISK 285bn are prudently managed, 21% of total assets 10 February 2021 Comments Total liquidity coverage ratio1 (LCR) and total net stable Liquid assets — The Icelandic Central Bank fund
Slide 28: Market risk well within appetite
Íslandsbanki 4Q20 Financial Results Market risk well within appetite The Bank has a modest market risk profile, despite an increase in interest rate risk 10 February 2021 Comments Market risk exposure and market risk appetite Currency imbalance, compared with regulatory limit Average positions per q
Slide 29: Sound capital position to navigate uncertain environment
Íslandsbanki 4Q20 Financial Results Sound capital position to navigate uncertain environment High REA density and low leverage in international comparison 10 February 2021 Comments Capital and leverage ratios Risk exposure amount (REA) Capital ratios ISKbn — The CET1 capital was ISK 188bn at year-en
Slide 30: Capital ratios well above target
Íslandsbanki 4Q20 Financial Results Íslandsbanki’s capital ratios well above target Countercyclical buffer reduced to 0% as a result of COVID-19 10 February 2021 Comments Current regulatory requirements and minimum capital target — The countercyclical capital buffer was 31.12.2020, by capital compos
Slide 31: Annex - Financial overview and about Íslandsbanki
Íslandsbanki 4Q20 Financial Results 10 February 2021 4. Annex - Financial overview and about Íslandsbanki islandsbanki.is
Slide 32: Financial overview
Íslandsbanki 4Q20 Financial Results Financial overview Key figures & ratios 10 February 2021 4Q20 4Q19 2020 2019 2018 PROFITABILITY After tax profit, ISKm 3,525 1,659 6,755 8,454 10,645 Return on equity (after tax) 7.6% 3.7% 3.7% 4.8% 6.1% ROE margin 7.1% 0.9% 2.6% 1.2% 2.1% Net interest margin (of
Slide 33: This is Íslandsbanki
Íslandsbanki 4Q20 Financial Results This is Íslandsbanki Moving Iceland forward by empowering our customers to succeed 10 February 2021 Vision and Values The Bank Market share1 Sustainability 4Q20 FTEs First Icelandic bank to Vision to be 745 32% retail customers develop Sustainable number of FTEs F
Slide 34: Annex – Icelandic economy update
Íslandsbanki 4Q20 Financial Results 10 February 2021 5. Annex – Icelandic economy update islandsbanki.is
Slide 35: Economy likely to gain a foothold this year after COVID-19
Íslandsbanki 4Q20 Financial Results Economy likely to gain a foothold this year after COVID-19 GDP growth to gain pace in H2/2021; robust growth expected in 2022 10 February 2021 Highlights GDP and the contribution of major subitems 1 GDP forecast comparison YoY change (%) YoY change (%) — The COVID
Slide 36: Tourism sector hit hard by COVID pandemic
Íslandsbanki 4Q20 Financial Results Tourism sector hit hard by COVID pandemic Number of tourists visiting Iceland shrinks by 75% in 2020 10 February 2021 Highlights Foreign visitors GDP growth assuming different scenarios for tourism — As the recovery of the tourist sector is Departures through KEF
Slide 37: Current account resilient to export shock
Íslandsbanki 4Q20 Financial Results Current account resilient to export shock Dramatic fall in exports causes a temporary deficit but medium-term outlook benign 10 February 2021 Highlights Export volume Current account balance * — In the baseline forecast, this year’s YoY change % of GDP number of t
Slide 38: Domestic balance sheets healthy before COVID
Íslandsbanki 4Q20 Financial Results Domestic balance sheets healthy before COVID Economy-wide leverage moderate in comparison with peers and historical levels 10 February 2021 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 2004 200
Slide 39: Businesses braving headwinds
Íslandsbanki 4Q20 Financial Results Businesses braving headwinds Business investment has contracted and lending growth to businesses is minimal 10 February 2021 Highlights Business sentiment, 400 largest companies Credit system net lending — Gross capital formation sagged in 2019 Index YoY % change
Slide 40: Protracted unemployment wave in the offing?
Íslandsbanki 4Q20 Financial Results Protracted unemployment wave in the offing? The recovery of tourism plays a key role in determining how fast unemployment subsides 10 February 2021 Highlights Unemployment — The Corona crisis has laid bare % of workforce Iceland’s vulnerability to shocks in labour
Slide 41: Private consumption a countercyclical force
Íslandsbanki 4Q20 Financial Results Private consumption a countercyclical force High unemployment will make its mark on private consumption, but the financial strength of most households will help 10 February 2021 Highlights Private consumption and related indicators Private consumption, unemploymen
Slide 42: Real estate market resilient despite recession
Íslandsbanki 4Q20 Financial Results Real estate market resilient despite recession Residential housing market turnover has been brisk and prices have risen steadily Commercial property prices closer to historical trend after price decline in H1 of 2020 10 February 2021 Capital area house prices rela
Slide 43: ISK likely to strengthen with rising tourist numbers
Íslandsbanki 4Q20 Financial Results ISK likely to strengthen with rising tourist numbers The CBI has significantly mitigated exchange rate volatility but could pull back this year 10 February 2021 Highlights ISK exchange rate and Central Bank FX interventions Real exchange rate indices and current a
Slide 44: Inflation spike to retreat quickly in coming quarters
Íslandsbanki 4Q20 Financial Results Inflation spike to retreat quickly in coming quarters Policy rate to remain low into 2022 10 February 2021 Highlights Inflation and contribution of main subitems Inflation, policy rate and real policy rate — Inflation rose steadily in 2020, from % % 2.0% at the be
Slide 45: Iceland's credit rating has remained at A
Íslandsbanki 4Q20 Financial Results Iceland’s credit rating has remained at A Setbacks in the tourist sector has not affected the sovereign ratings 10 February 2021 Moody´s in Nov-19: Development of sovereign credit rating Fitch in Dec-17: AAA/Aaa Upgrade to A2 on sustained Rating upgrade to A on ec
Slide 46: Disclaimer
Íslandsbanki 4Q20 Financial Results 10 February 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 forecas