Islandsbanki hf. : 2Q2014 Condensed Consolidated Interim Financial Statements

HIGHLIGHTS

  * Profit after tax was ISK 6.4bn in 2Q14 (2Q13: ISK 6.6bn), and ISK 14.7bn
    in1H14 (1H13: ISK 11.2bn)
  * Return on equity was 14.5% in the quarter (2Q13: 17.4%), and was 16.9% in
    1H14 (1H13: 14.8%). This improvement in 1H is despite the equity base
    increasing 14% YoY from 156bn to 178bn.
  * Total capital ratio remains strong at 29.3% (Mar14: 30.3%), and Core Tier 1
    ratio was 26.1% (Mar14: 27.0%), decrease in part due to a 2% increase in RWA
    to ISK 674bn (1Q14: 644bn).
  * Net interest income amounted to ISK 6.9bn in 2Q14 (2Q13 ISK 7.0bn), and ISK
    13.6bn in 1H14 (1H13:  ISK 14.5bn). The net interest margin was 3.1% in
    2Q14 (2Q13: 3.4%) and now at expected long term level.
  * Net fee and commission income was ISK 2.8bn in 2Q14 (2Q13: ISK 2.7bn) a
    5.5% increase and 5.7bn in 1H14 (1H13: 5.1bn). This increase can mainly be
    attributed to Markets, Wealth and fee generating subsidiaries.
  * Cost to income ratio was 56.0% (2Q13: 58.8%); decrease is attributable to
    lower FTEs and continual cost management initiatives.
  * Around 36 thousand individuals and 4,200 corporates have received ISK 561bn
    in write-offs and remissions since the Bank's establishment.
  * All large restructuring cases are now finalised, LPA ratio was 7.3% (Mar14:
    7.8%) and remaining cases are small and will each only move the ratio
    marginally. Ratio of loans more than 90 days past due was 3.5% (Mar14:
    3.8%).
  * Total assets were ISK 908bn (Mar14: ISK 884bn) or 3% growth since Mar14.
    Loans to customers amounted to ISK 604bn (Mar14: ISK 566bn), up 7% from
    Mar14.
  * Total deposits increased to ISK 543bn (Mar14: ISK 530bn), 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:

"The second quarter results are very satisfying with a return on equity of
14.5%. In the past two quarters we have seen increased demand for new loans,
which have risen by 9% since the beginning of the year. We also note broad
growth in fee and commission income across the Bank's income divisions.

Cost initiatives continue to deliver good results with a 13.4% reduction in
administrative expenses year-on-year. We continued to improve the efficiency of
our branch network, replacing the Bank's Kringlan branch with a new self-service
ATM Service Centre and merging branches in Seltjarnarnes and Central Reykjavik
into a new branch in western Reykjavik scheduled for early 2015. We also note a
great rise in numbers of App-users and customers have welcomed recent additions
e.g. ability to pay bills, make large transfers and gain a good overview of
their personal finance.

The Bank issued its first EUR denominated bond in the quarter. The EUR 100m bond
was the first EUR issue for an Icelandic bank since 2008, and marks a very
positive step for the Icelandic financial system. The trade followed Bank's
recently assigned S&P rating of BB+/B with stable outlook, which is one notch
below the Icelandic sovereign.

Íslandsbanki's leading market position in Iceland has been well noted abroad,
most recently by Euromoney who awarded Íslandsbanki as the best bank in Iceland
for the second year in a row. Íslandsbanki also won in the category for best
investment bank in Iceland, but this was the first time Euromoney gives out an
award in that category in Iceland. "



INVESTOR MEETING AT KIRKJUSANDUR

Later today at 11.30 am, Birna Einarsdóttir, CEO of Íslandsbanki, and Jón Guðni
Ómarsson, CFO, will present the financial results to market participants,
followed by a Q&A session. The meeting is conducted in Icelandic and held at the
Bank's headquarters at Kirkjusandur.

Registration to the investor meeting at Kirkjusandur.





INVESTOR CALL IN ENGLISH

The Bank will also host an investor call in English to present the results at 2
pm Icelandic time. The call will start with a short macro update on the
Icelandic economy, followed by a review of the financial results and Q&A. Please
register by replying to ir@islandsbanki.is. Dial-in details and presentation
will be sent out two hours prior to the call.

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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