English Icelandic
Published: 2022-05-05 18:04:05 CEST
Íslandsbanki hf.
Interim report (Q1 and Q3)

Islandsbanki hf.: Financial results for first quarter 2022

First quarter 2022 (1Q22) financial highlights – satisfying results with ROE in line with financial targets

  • Íslandsbanki reported a profit of ISK 5.2bn in the first quarter (1Q21: ISK 3.6bn), generating an annualised return on equity (ROE) of 10.2% (1Q21: 7.7%), which is above both the Bank’s financial targets and market consensus. The main drivers were strong income generation, good cost control, and positive net impairment.
  • Net interest income (NII) grew by 12.4% YoY and totalled ISK 9.2bn in 1Q22, compared to ISK 8.2bn in 1Q21, owing mainly to growth in loans to customers and a higher interest rate environment. The net interest margin was 2.6% in 1Q22, compared to 2.4% in 1Q21.
  • Net fee and commission income (NFCI) grew 7.1% YoY and amounted to ISK 3.1bn in 1Q22, compared to ISK 2.9bn in 1Q21. Cards and payment processing, investment banking and brokerage, and asset management are primary drivers of the increase.
  • The Bank focuses on core banking operations, with NII and NFCI accounting for around 97% of total operating income in 1Q22, compared to 95% in 1Q21. These two items combined grew 11.0% from 1Q21 to 1Q22.
  • Net financial expenses were ISK 95m in 1Q22, compared to net financial income of ISK 293m in 1Q21.
  • Administrative expenses were ISK 5.8bn in 1Q22, a decline of 0.3% YoY, as a result of continued cost awareness.
  • The cost-to-income ratio (C/I ratio) was 47.6% in 1Q22, well within the guidance for 2022, down from 51.3% in 1Q21, due to strong revenue generation and cost reduction efforts.
  • Positive ISK 483m net impairment of financial assets in 1Q22 is mainly attributable to a brighter outlook for the tourism industry. This is compared to an impairment charge of ISK 518m in 1Q21. The net impairment charge as a share of loans to customers, the annualised cost of risk, was -17bp in 1Q22, compared to +20bp in 1Q21.
  • Loans to customers rose by ISK 21.6bn, or 2.0%, during the quarter, to ISK 1,108bn, led by mortgage lending.
  • Deposits from customers increased by ISK 17.4bn, or 2.3%, during the quarter, to ISK 761bn. The rise was mainly as a result of the cash settlement of the Icelandic Government’s sale of its holding in Íslandsbanki.
  • The Bank’s liquidity position remains strong, with all ratios well above regulatory requirements and internal thresholds.
  • Total equity amounted to ISK 197.2bn at the end of March 2022. The corresponding capital base, that includes the AT1 and Tier2 issuances, decreased from ISK 228bn to ISK 210bn due to an authorised ISK 15bn buyback of own shares. The Bank’s total capital ratio was 22.5%, including the 1Q22 profit, compared to 25.3% at YE21. The corresponding CET1 ratio was 18.8%, down from 21.3% at YE21. This is considerably above the long-term CET1 target of ~16.5%. The capital ratios are lower mostly due to the reduction in the capital base and an increase in the risk exposure amount (REA).
  • The Bank estimates that long-term excess CET1 capital equals approximately ISK 35-40bn.The Bank assumes that CET1 capital will be optimised in the next 12–24 months.
  • The leverage ratio was 12.4% at the end of March, including 1Q22 profit, compared to 13.6% at YE21, indicating low leverage. 

Key figures and ratios

    1Q22 4Q21 3Q21 2Q21 1Q21
PROFITABILITY Profit for the period, ISKm 5,187 7,092 7,587 5,431 3,615
  Return on equity 10.2% 14.2% 15.7% 11.6% 7.7%
  Net interest margin (of total assets) 2.6% 2.4% 2.4% 2.4% 2.4%
  Cost-to-income ratio¹ 47.6% 45.3% 39.4% 49.9% 51.3%
  Cost of risk (0.17%) (0.23%) (0.64%) (0.42%) 0.20%
    31.3.22 31.12.21 30.9.21 30.6.21 31.3.21
BALANCE SHEET Loans to customers, ISKm 1,107,893 1,086,327 1,081,418 1,089,723 1,029,415
  Total assets, ISKm 1,446,355 1,428,821 1,456,372 1,446,860 1,385,235
  Risk exposure amount, ISKm 945,321 901,646 917,764 924,375 954,712
  Deposits from customers, ISKm 761,471 744,036 754,442 765,614 698,575
  Customer loans to customer deposits ratio 145% 146% 143% 142% 147%
  Non-performing loans (NPL) ratio² 1.8% 2.0% 2.0% 2.1% 2.4%
LIQUIDITY Net stable funding ratio (NSFR), for all currencies 123% 122% 121% 122% 119%
  Liquidity coverage ratio (LCR), for all currencies 195% 156% 225% 187% 172%
CAPITAL Total equity, ISKm 197,201 203,710 197,381 190,355 185,471
  CET 1 ratio3 18.8% 21.3% 20.6% 20.1% 19.2%
  Tier 1 ratio3 19.9% 22.5% 21.8% 20.1% 19.2%
  Total capital ratio3 22.5% 25.3% 24.7% 22.9% 21.9%
  Leverage ratio3 12.4% 13.6% 13.2% 12.4% 12.6%

1. Calculated as (Administrative expenses + Contribution to the Depositors' and Investors' Guarantee Fund – One-off items) / (Total operating income – One-off items)
2. Stage 3, loans to customers, gross carrying amount
3. Including first quarter profit for 31.3.22 and third quarter profit for 30.9.21

Birna Einarsdóttir, CEO of Íslandsbanki

Íslandsbanki had a very satisfactory start to 2022, returning a profit of ISK 5.2bn for the first quarter. The return on equity was 10.2%, at our financial target and once again a solid result. Net interest income was 12.4% higher than for the same quarter of 2021, and the net interest margin rose to 2.6%. Net fee and commission income grew by 7.1% year-on-year in 1Q22, with the increase stemming from diverse sources. Cost awareness measures continue to deliver benefits, with administrative expenses remaining flat from the same quarter of 2021 despite 6.1% inflation in 1Q22. Loans to customers increased by 2% from year-end 2021, which is in line with our target of growing in tandem with nominal GDP.

During the quarter, the Icelandic Government continued the sale of its holding in Íslandsbanki following the IPO in 2021. It currently owns a 42.5% share in the Bank. The sale sparked a debate in Iceland regarding the process and its mechanism. Among other things, the participation of the Bank’s employees has been criticised. We take these criticisms seriously and have commenced the process of amending the Bank’s internal rules on this front.

As has often been said, technology has revolutionised banking in recent years, and it is gratifying to see how many have welcomed it. We recently launched a new sales platform that makes it easy for both retail and SME’s to join the Bank as a customer, add the Bank’s products, and explore our product offerings. Digital sales in the retail market now account for about 75% of all sales, and with this new sales platform we are sure to see that figure rise. Among product offerings is our new sustainable savings account, which has been well received by our customers.

Prospects for 2022 appear bright, as the economy is clearly in a growth phase and there are early signs that the tourism industry may quickly recoup its pre-pandemic level of activity.

Investor relations

An earnings conference call and webcast will take place on Friday 6 May at 8.30 Reykjavík/GMT, 9.30 London/BST, 10.30 CET

The Bank will host a virtual meeting in English for investors and market participants on Friday 6 May at 8.30 GMT. Birna Einarsdóttir, CEO, and Jón Guðni Ómarsson, CFO, will give an overview of the first quarter financial results and operational highlights.

Participant registration is accessible via this link. A recording will be available after the meeting on the Investor Relations website.

To participate in the webcast via telephone and in order to be able to ask questions please use the following dial-in details:

Iceland:+354 800 74 37
Denmark:+45 354 45 577
Sweden:+46 8 566 42 651
Norway:+47 235 00 243
United Kingdom:+44 33 330 00 804
United States:+1 631 913 1422

Confirmation Code:  11682344#

For further information please contact:

Investor Relations, Margrét Lilja Hrafnkelsdóttir, ir@islandsbanki.is and tel: +354 844 4033.

Public Relations – Edda Hermannsdóttir, pr@islandsbanki.is Sími: +844 4005.

Íslandsbanki IR releases
If you wish to receive Íslandsbanki press releases by e-mail please register at: https://www.islandsbanki.is/en/article/email_list_ir

About Íslandsbanki
With a history that dates from 1875, Íslandsbanki is an Icelandic universal bank with a strong customer focus. The Bank believes in moving Iceland forward by empowering its customers to succeed - reflecting a commitment to run a solid business that is a force for good in society. Driven by the ambition to be #1 for service, Íslandsbanki’s banking model is led by three business divisions that build and manage relationships with its customers. Íslandsbanki maintains a strong market share with the most efficient branch network in the country, supporting at the same time its customers’ move to more digital services. The Bank operates in a highly attractive market and, with its technically strong foundations and robust balance sheet, is well positioned for the opportunities that lie ahead. Íslandsbanki has a BBB/A-2 rating from S&P Global Ratings. The Bank’s shares are listed on Nasdaq Iceland Main Market.


1Q 2022 Factbook.pdf
1Q 2022 Factsheet.pdf
1Q 2022 Investor Presentation.pdf
1Q 2022 Press_Release.pdf
ISB_Condensed Consolidated Interim Financial Statements_first quarter 2022.pdf