Islandsbanki hf.: Financial results for first quarter 2021

Kópavogur, ICELAND

First quarter 2021 (1Q21) financial highlights

  • Íslandsbanki reported a net profit of ISK 3.6bn in the first quarter (1Q20: ISK -1.4bn) generating an annualised return on equity of 7.7% (1Q20: -3.0%).
  • Net interest income amounted to ISK 8.2bn in the quarter compared to ISK 8.6bn in 1Q20. Net interest margin was 2.4% during the quarter compared to 2.8% in 1Q20. NII and NIM have shown resilience despite lower base rate.
  • Overall growth in both fee and commission income and expense supported an 14.9% increase in net fee and commission income, from ISK 2.5bn in 1Q20 to ISK 2.9bn in 1Q21.
  • The Bank recorded a net financial income of ISK 293m in 1Q21 (1Q20: -1.7bn) partially due to net valuation changes and favourable market conditions.
  • Administrative expenses increased slightly between years and totalled ISK 5.9bn (1Q20: 5.7bn). Increase in salaries between years is explained by general wage agreements, accrued leave, and redundancy payments while other operating expenses decrease between years.
  • Continuous digital uptake contributed to lower cost-to-income ratio (C/I ratio) which was 52.0% in the quarter, down from 62.9% in 1Q20.
  • Net impairment on financial assets dropped significantly YoY amounting to ISK 518m in 1Q21 (1Q20: ISK 3.5bn) due to more favourable economic environment. The net impairment charge over loans to customers (cost of risk) was 0.05% (0.20% annualised) compared to 0.91% in FY20.
  • Loans to customers grew 2.3% from YE20 mostly driven by mortgage lending.
  • At the end of March, the share of credit-impaired loans to customers was down 0.5% from year-end 2020, to 2.4% (gross).
  • Deposits from customers, the Bank’s main source of funding, grew ISK 19bn or 2.8% in the quarter.
  • The liquidity position remains strong with all ratios well above regulatory requirements and internal thresholds.
  • Total equity amounted to ISK 185bn at the end of March and the Bank’s capital ratio was 21.9%, considerably higher than the total capital ratio target which is currently at 17.5-19%. The leverage ratio was 12.6% at the end March compared to 13.6% at YE20, indicating low leverage.
  • Íslandsbanki’s financial targets have been updated, demonstrating the Bank’s development and the economic recovery.

Key figures and ratios

PROFITABILITYAfter tax profit, ISKm            3,615            3,525            3,361            1,245          (1,376)
 Return on equity7.7%7.6%7.4%2.8%(3.0%)
 Net interest margin (of total assets)2.4%2.5%2.5%2.6%2.8%
 Cost-to-income ratio¹52.0%51.7%46.7%57.5%62.9%
 Cost of risk (annualised)0.20%0.73%0.44%1.03%1.51%
BALANCE SHEETLoans to customers, ISKm1,029,4151,006,717970,309933,320923,850
 Total assets, ISKm1,385,2351,344,1911,328,7241,303,2561,255,691
 Risk exposure amount, ISKm954,712933,521942,339923,133911,375
 Deposits from customers, ISKm698,575679,455698,610681,223647,795
 Customer loans to customer deposits ratio147%148%139%137%143%
 NPL ratio²2.4%2.9%3.3%3.6%2.8%
LIQUIDITYLiquidity coverage ratio (LCR), for all currencies172%196%136%179%177%
 Net stable funding ratio (NSFR), for all currencies119%123%113%117%120%
CAPITALTotal equity, ISKm185,471186,204182,509179,722179,542
 Total capital ratio21.9%23.0%22.2%22.2%21.9%
 Tier 1 capital ratio19.2%20.1%19.4%19.4%19.2%
 Leverage ratio12.6%13.6%13.4%13.4%13.5%

Birna Einarsdóttir, CEO of Íslandsbanki

We are pleased with the first quarter results which are in line with the positive trend of the latter half of 2020. The Bank’s net profit was ISK 3.6bn, a turnaround from the same period last year, resulting in 7.7% return on equity. Total operating income rose between years and net impairment charges significantly dropped. The Bank has made investments in IT structure and digitisation over the past years which, along with the boost in customers’ digital usage, contribute to lower cost to income ratio. Deposits from customers grew by 2.8% from year-end and loans to costumers grew by 2.3%, driven by demand for mortgages and customers are very satisfied with our improved service and shorter queuing time. The Bank now offers green mortgages offering lower interest rate, fulfilling customers diverse demands.

Digital development has expedited over the past years and notably in the beginning of the COVID-19 pandemic. Annual growth in app usage between 2017 and 2019 was 20% and 99% of interactions with individuals are now via digital channels. We continue our digital journey, with the latest addition to the app being carbon footprint tracker for the Bank’s mobile banking app users.

Íslandsbanki recently announced its commitment to net zero emissions by 2040. The Bank’s own operations have been carbon neutral for the past two years and with this decision that commitment will also extend the carbon footprint to Íslandsbanki’s entire loan and asset portfolio. We are proud of this commitment which conforms with Iceland’s ambitious plan in climate changes. In April, the Bank was given the highest rating for sustainability that has been awarded by local ratings agency Reitun. According to the assessment, the Bank has worked effectively at incorporating sustainability-centred thinking into its operations. Íslandsbanki was also awarded the Kuðungur (the Conch), the Ministry for the Environment and Natural Resources’ environmental prize, for its outstanding work on environmental affairs in the past year. These steps clearly support the Bank’s role to be a force for good and shows that the Bank is successful on the sustainability front.

The Bank’s financial position and underlying operations are strong. Íslandsbanki has a robust balance sheet and equity and liquidity ratios are well above internal goals and regulatory requirements. The Bank’s financial targets have been updated to support development and strategic initiatives. It has been publicly stated by the Minister of Finance and Economic affairs that the process of preparing Íslandsbanki for a listing on a local regulated stock market has been initiated and that the consequent sale of shares in a public offering is scheduled in June. We look forward to exciting times ahead.

Investor relations

Earnings conference call and webcast in English on Wednesday 5 May

The Bank will host a virtual meeting in English for investors and market participants on Wednesday 5 May at 16.00 Reykjavík/GMT, 1700hrs London/BST, 1800hrs CET. 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 here. 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 3 544 55 77

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: 268 994 31#

All materials relating to the Bank’s operating results, together with information on the financial calendar and silent periods, can be found here:

For further information:

Íslandsbanki IR releases
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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.

This press release may contain “forward-looking statements,” involving uncertainty and risks that could cause actual results to differ materially from results expressed or implied by the statements. Íslandsbanki hf. undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release. It is the investor's responsibility to not place undue reliance on these forward-looking statements which only reflect the date of this press release. Forward-looking statements should not be considered as guarantees or predictions of future events and all forward-looking statements are qualified in their entirety by this cautionary statement.



2021.05.05_ISB_Investor Presentation_1Q21 Factsheet 1Q21 ISB_Condensed Consolidated Interim Financial Statements_first quarter 2021 ISB_Press_Release_1Q21 Íslandsbanki 1Q21 Factbook