Islandsbanki hf · OMXICE:ISB
Islandsbanki hf — Íslandsbanki — 9M 2010 Earnings Presentation
39 slides from Islandsbanki hf's earnings presentation, 2010
Slide 1: Íslandsbanki 9M 2010 results
Íslandsbanki 9M 2010 results
Slide 2: Disclaimer
Disclaimer This material has been prepared for professional investors. Íslandsbanki hf. (ÍSB) when preparing this report has not taken into account any one customer’s particular investment objectives, financial resources or other relevant circumstances and the opinions and recommendations herein are
Slide 3: Overview
Overview 01. Economic update 02. Íslandsbanki in brief 03. Íslandsbanki’s 9M 2010 results (unaudited) 04. Assets and restructuring 05. Funding, liquidity and capitalisation 06. Appendix I – Key Figures 07. Appendix II – Íslandsbanki’s P&L explained 3
Slide 4: 01. Economic update
O1. Economic update j Pas sia
Slide 5: Getting there slowly
Getting there slowly Several positive factors but still no growth • Some positive news from and for households GDP growth forecast – Real wages are increasing and unemployment has 4% peaked 3% – The ISK has appreciated 2% Central Bank ASÍ* – Credit card turnover on the rise again 1% IMF – However: C
Slide 6: Sovereign debt cause for world wide concern
Sovereign debt cause for world wide concern Fiscal austerity and reforms of public finances seem inevitable Sovereign debt (% of GDP) • High levels of sovereign debt are wide spread – Debt accumulated during the credit crunch has Japan Greece strained many sovereigns ICELAND Italy – Not restricted t
Slide 7: Iceland has valuable macro fundamentals
Iceland has valuable macro fundamentals Plenty of quality protein & sustainable power • High competitiveness and standard of living Export value of seafood – GDP pr. capita among highest in the world – High educational level and good health care (even access) 250 209 198 199 192 – Member UN, OECD, W
Slide 8: 02. Íslandsbanki in brief
02. Íslandsbanki in brief
Slide 9: Universal banking services in Iceland
Universal banking services in Iceland Expertise in select business areas • Universal banking services for households, corporate Íslandsbanki’s branch network Comprehensive services clients and professional investors – Efficient retail distribution network Retail Banking – Well positioned corporate b
Slide 10: Strong heritage in banking
Strong heritage in banking First privately owned bank in Iceland • Has served Icelandic industry, households • Íslandsbanki was re-established on 15 October 2008 and commerce since 1904 after the collapse of Glitnir Banki – Assumed Glitnir’s domestic assets and deposits • Historically the Bank has a
Slide 11: Organisational chart
Organisational chart Aligned with strategy Board of Directors Internal audit Ágúst Hrafnkelsson CEO Birna Einarsdóttir Corporate Banking Wealth Risk & Credit Retail Banking Markets CFO COO Vilhelm M. Management Control Una Steinsdottir Jóhannes Baldursson Sigrún R. Ólafsdóttir Sigrídur Olgeirsdóttir
Slide 12: Íslandsbanki´s Board of Directors
Íslandsbanki´s Board of Directors Independent board with wide experience from international financial markets Fridrik Sophusson, Chairman of the board An Icelandic national, has nearly forty years' wide-ranging experience in fiscal policy making, management and public service in Iceland. He served a
Slide 13: Íslandsbanki’s ownership structure
Íslandsbanki’s ownership structure Glitnir banki • Glitnir, Íslandsbanki and the Icelandic sovereign Resolution Committee reached an agreement on 13th September 2009 regarding settlement of assets and liabilities between the old and the new banks GLB Holding – Resolution Committee of Glitnir decided
Slide 14: 03. Íslandsbanki’s 9M 2010 results (unaudited)
03. Íslandsbanki’s 9M 2010 results (unaudited)
Slide 15: Highlights first 9M 2010
Highlights first 9M 2010 Impact of September Supreme Court ruling in line with estimates • Strong capital ratios and solid return on equity • Capital ratio unaffected by the 16 – Annualised return on equity 17.6% September Supreme Court ruling – Net interest margin 5.7% – Even in a worst case scenar
Slide 16: Income Statement January – September 2010
Income Statement 1 January – 30 September 2010 Jan-Sep Jan - Dec • Net interest income ISK m Q3 2010 2010 2009 – Funding cost has decreased in 2010 Net interest income 10,057 30,337 31,984 – Deposit margin is declining Revised estimated future cash flow from loans 1,227 25,124 18,419 FX gain (loss)
Slide 17: Changes in the value of loan portfolio
Changes in the value of loan portfolio Net impact on P&L substantially lower than total impairments indicate • Collective allowances: • Net effect on P&L is ISK -2,8bn at 9M 2010 – Acquired portfolio: Same assumptions as in the – ISK -17.5bn specific and collective allowances for initial valuation i
Slide 18: 04. Assets and restructuring
04. Assets and restructuring
Slide 19: Balance sheet
Balance sheet Consolidated – 30 September 2010 Asset split (ISK m) 30.09.10 31.12.09 Cash and balances with Central Bank 26,267 38,743 6% 4% Bonds and debt instruments 78,683 66,701 Cash and balances with CB 11% 14% Shares and equity instruments 2,300 2,250 Loans to credit institutions Loans to cred
Slide 20: Loan portfolio overview
Loan portfolio overview Book value ISK 564bn • Large difference in book value and claim value • Approximately 9% (ISK 50bn) of the loan • Diversified exposures by sectors within Iceland portfolio is a government guaranteed • 44% denominated in FX asset – Issued by a credit institution • Individuals
Slide 21: Loans to individuals
Loans to individuals Book value ISK 169bn • Conventional retail products to households in • Retail mortgages are approx. 2/3 of the Iceland exposure • 20% of loans to individuals in FX • Non CPI-linked mortgages are currently around 14% of the mortgage portfolio Loans to individuals Loan type Curren
Slide 22: Loans to companies
Loans to companies Book value ISK 291bn • Over half of the bank’s portfolio • Includes loans to : • Approximately 60% of denominated in FX – Holding companies – IPRE’s – Operating companies Loans to companies Loan type Currency split 2% 1% 4% Term loan 15% FX 6% Leasing Overdraft facilities Non CPI-
Slide 23: Loans to banks and public sector
Loans to banks and public sector Book value ISK 104bn • Exposure to banks has increased by ISK 15bn • Exposure to public sector of ISK 7bn from previous quarter includes sovereign, local government and – Exposure is is in large part due to Treasury public sector entities activities Loans to banks &
Slide 24: Restructuring of companies
Restructuring of companies Loans to companies (corporations, SMEs and VSEs) Category analysis – customer position • Restructuring going slower than anticipated due to: 1 Customers that have not needed restructuring – Supreme Court ruling on FX loans – Delays in alignment of efforts of all associated
Slide 25: Restructuring of households
Restructuring of households Loans to households and individuals Category analysis – customer position • Restructuring going slower than anticipated due 1 Customers that have not needed restructuring to: – Supreme Court ruling on FX loans 2 Customers that have undergone restructuring – Delays in alig
Slide 26: 05. Funding, liquidity and capitalisation
05. Funding, liquidity and capitalisation
Slide 27: Deposits largest funding source
Deposits largest funding source Stable source of funding • High deposit rates and implicit state guarantee • Minor outflow of deposits over have been attractive to investors last months, as expected – Considerable rate cuts starting to influence – Íslandsbanki well prepared to meet investors seeking
Slide 28: Prudent internal liquidity measures
Prudent internal liquidity measures Conservative classification of liquid assets Internal liquidity measures Liquid assets A • Liquidation time 0-3 days • Collateral that can be used for secure borrowing at central banks • Should cover all liabilities maturing within the next 3 months Liquid assets
Slide 29: Comfortable liquidity position
Comfortable liquidity position Liquid assets predominantly in the A category • Well in excess of regulatory requirements • Internal liquidity ratios well above targets – FME: Bank must be able to withstand 20% of • Liquid assets cover 39% of retail deposits instantaneous outflow of deposits – ISK de
Slide 30: Manageable imbalances
Manageable imbalances Uncertainty regarding foreign currency loans remains despite recent rulings • The Bank focuses on both the gross and net FX gap: – Gross FX gap of ISK 175bn Foreign currency Inflation (ISK bn) denominated indexed – Net FX gap of ISK 47bn Assets 280 138 – Bank is actively seekin
Slide 31: Capitalisation exceeds requirements
Capitalisation exceeds requirements Regulatory requirements have become more stringent • FME now requires banks to hold • Core Tier 1 ratio of 18.7% and total capital – 12% of RWA in the form of core Tier 1 capital ratio of 22.6% at 30 September 2010 allowing for Pillar 2 adjustment for FX/ISK loans
Slide 32: 06. Appendix I
06. Appendix I
Slide 33: Key figures
Key figures Total assets Loan book Equity 74,150 71,730 71,500 69,950 70,000 120 105 70,000 63,100 65,800 59,210 57,700 57,000 100 56,370 92 60,000 51,330 100 60,000 49,320 50,000 76 80 68 ISKbn 65 ISK m 50,000 ISKm 40,000 40,000 60 30,000 30,000 20,000 40 20,000 10,000 20 10,000 0 0 2008-10-15 2008
Slide 34: 07. Appendix II
07. Appendix II
Slide 35: Íslandsbanki’s P&L explained
Íslandsbanki’s P&L explained Íslandsbanki acquired a large part of Glitnir’s loan portfolio at deep discount 1. 2. 3. 4. 5. 6. Thorough valuation of Concession is split into: Íslandsbanki founded Loan portfolio Agreement reached Discount is amortised assets to be acquired 1. Impairment of on 15 Octo
Slide 36: Thorough internal valuation performed
Thorough internal valuation performed Prepared by the Bank´s industry experts and portfolio managers Team • Market experts engaged in the valuation of the portfolios • Loan officers provided details on borrowers Valuation committees Prudence • Steering committee of five senior • Great effort made to
Slide 37: Accounting for a deep discount portfolio
Accounting for a deep discount portfolio Affects mainly three items in the P&L Jan-Sep Jan-Sep • Net interest income ISK m 2010 2009 – Amortised discount reflected in NII Net interest income 30,337 23,000 • Through 2011 for corporate loan book Net fee & commission income 5,234 5,350 • Through 2013 f
Slide 38: Revaluation / Impairment process
Revaluation / Impairment process IFRS standard prohibits netting of estimated future cash flows and impairments • Effect on P&L may seem larger than it actually is • Impairment process performed quarterly – Large movements can be expected in the value of – Collective allowances loans to largest borr
Slide 39: Glitnir becomes 95% owner of Íslandsbanki
Glitnir becomes 95% owner of Íslandsbanki Glitnir was faced with two options after the 13th September agreement A: Joint Capitalisation Agreement B: Alternative Capitalisation Agreement Glitnir becomes the owner of a 95% stake Icelandic Government continues to own in Íslandsbanki Íslandsbanki • Glit