Islandsbanki hf. : 1Q2014 Interim Consolidated Financial Statements

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| Source: Íslandsbanki hf.
HIGHLIGHTS

  * Profit after tax was ISK 8.3bn in 1Q14 compared to ISK 4.6bn for the same
    period in 2013. The difference is primarily driven by sale of non-current
    assets held for sale.
  * Return on equity was 19.3% in 1Q14 (1Q13: 12.2%), despite the equity base
    increasing 15% YoY from 152bn to 175bn.
  * Total capital ratio remains strong at 30.3% (2013: 28.4%), and Core Tier 1
    ratio was 27.0% (2013: 25.1%), in part due to a 2% decrease in RWA in the
    first quarter to 644bn (2013: 660bn).
  * Net interest income amounted to ISK 6.6bn (1Q13 ISK 7.5bn), a YoY decrease
    of 11.1%. The net interest margin was 3.0% in 1Q14 (4Q13: 3.1%) and has now
    stabilised.
  * Net fee and commission income was ISK 2.9bn in 1Q14 (1Q13: ISK 2.5bn). This
    is a YoY increase of 16.4% which can mainly be attributed to Markets,
    Retail, Wealth and fee generating subsidiaries.
  * Cost to income ratio decreased to 55.1% (1Q13: 67.1%); decrease is
    attributable to lower FTE's and continual cost management initiatives.
  * Around 35.9 thousand individuals and 4,160 corporates have received ISK
    555bn in debt forgiveness of some form since the Bank's establishment.
  * All large restructuring cases are now finalised, LPA ratio was 7.8% (Dec13:
    8.3%) and remaining cases are small and will each only move the ratio
    marginally. Ratio of loans more than 90 days past due ratio 3.8% (Dec13:
    3.5%) and increased temporarily due to the finalisation of restructuring of
    a large customer.
  * Total assets were ISK 884bn (Dec13: ISK 866bn) or 2% growth since YE13.
  * Total deposits increased to ISK 530bn (Dec12: ISK 519bn), due to normal
    fluctuation in deposits from customers and credit institutions.



Please find a more detailed version of the results announcement attached below.





Birna Einarsdóttir, Chief Executive Officer of Íslandsbanki:

"We are pleased with the first quarter results, with increased profitability,
rise in fee and commission income and reduction in costs compared to last year.
We also see growth in loans to customers in the first quarter - indeed, demand
for loans has grown by 2 % this year. Core earnings continue to strengthen and
net fee and commission income increased by 16% year-on-year.



Our cost initiatives have delivered good results. We recently announced the
merger of two branches and plans for transforming the Kringlan service centre to
a self-service operation, thereby improving branch network efficiency even
further.  Administrative cost was down 7.4 % in real terms year-on-year and the
cost to income ratio was 55.1 % which is in line with the Bank's long-term
financial target.



The Bank took an important step in May by issuing its first Euro- denominated
bond. The EUR 100 million two-year private placement was the first transaction
by an Icelandic bank in that currency since 2008 and is a big milestone for the
Bank and the Icelandic financial system.



Íslandsbanki has taken all the necessary steps in order to implement the
Government's debt relief programme. We are diligently preparing for this task
and seek to encourage all our customers to apply for the loan correction and the
tax-free disposition of special savings."



INVESTOR CALL

Later today, the Bank will host an investor call in English to present the
results at 1 pm Icelandic time, including a short macro update. To register for
the conference call, please e-mail:  ir@islandsbanki.is.



All presentation material will subsequently be available and archived on
www.islandsbanki.is/ir.





For further information:

  * Investor Relations - Tinna Molphy, tinna.molphy@islandsbanki.is  and tel:
    +354 440 3187.
  * Media Relations - Dögg Hjaltalín, dogg.hjaltalin@islandsbanki.is and tel:
    +354 440 3925.


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