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Islandsbanki Financial Supplement Data 2021

Jul 28, 2021

2190_rns_2021-07-28_bf26721a-7515-47be-97e8-008068ee711b.pdf

Financial Supplement Data

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2Q2021

Íslandsbanki Factbook

islandsbanki.is
440 4000
©islandsbanki

Supplementary information for market participants (Unaudited)

Íslandsbanki Factbook 2Q21

Contents

Investor relations information
Page
3

Overview

  • Key performance indicators
    4
  • Income statement
    5
  • Balance sheet
    6
  • Net interest income
    7
  • Net fee & commissions income
    8
  • Loans to customers
    9
  • Capital and risk exposure amount
    10
  • Average balances
    11

9 Quarters review

  • Key performance indicators
    12
  • Income statement
    13
  • Balance sheet
    14
  • Net interest income
    15
  • Net fee & commissions
    16
  • Loans to customers
    17
  • Capital and risk exposure amount
    18

  • Average balances
    19

  • Allocation and impact report
    20

  • Macroeconomics
    21
  • Other information
    22
  • Financial targets
    23
  • Ratings
    24
  • Disclaimer
    25

Investor relations

IR contact

Email: [email protected]

Investor relations web-site

https://www.islandsbanki.is/en/landing/about/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 28 July at 16.00 Reykjavík/GM1 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: +45 354 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: 67974052#

Additional investor material

All investor material will subsequently be available and archived on the Bank's Investor Relations website where other information on the Bank's financial calendar and silent periods is also available:

https://www.islandsbanki.is/en/landing/about/investor-relations

Financial calendar

Íslandsbanki plans to publish its financial statements according to the financial calendar below:

3Q21 results — 28 October 2021

4Q21 results — 10 February 2022

Annual General Meeting — 17 March 2022

1Q22 results — 5 May 2022

2Q22 results — 28 July 2022

3Q22 results — 27 October 2022

Please note that these dates are subject to change.

Íslandsbanki Factbook 2Q21

Key performance indicators - 5 years

1H21 2020 2019 2018 2017
Profitability
Return on equity^{1} 9.7% 3.7% 4.8% 6.1% 7.5%
Return on assets^{1} 1.3% 0.5% 0.7% 1.0% 1.3%
Earnings per share 0.90 0.72 0.92 1.01 1.10
Core income / total operating income^{2} 0.94 1.02 0.97 0.98 0.99
Net interest margin
Net interest margin on total assets^{1} 2.4% 2.6% 2.7% 2.9% 2.9%
Efficiency
Cost-to-income ratio^{3} 50.6% 54.3% 58.8% 66.3% 62.5%
Cost-to-total assets ratio^{1} 1.74% 1.82% 2.11% 2.57% 2.67%
Cost of risk^{1} -0.12% 0.91% 0.39% -0.20% -0.21%
Number of FTEs at period end - Consolidated^{4} 768 779 984 1,075 1,042
Number of FTEs at period end - Parent^{4} 733 745 749 834 860
Number of branches at period end 12 12 14 14 14
Assets
Loans to customers (ISKm) 1,089,723 1,006,717 899,632 846,599 755,175
LTV on mortgages to individuals^{5} 66.0% 64.0% 62.0% 61.0% 63.3%
Risk exposure amount / total assets 63.9% 69.4% 73.7% 74.8% 74.9%
Non-performing loans (NPL) ratio^{6} 2.1% 2.9% 3.0% 2.0% 1.0%
Asset encumbrance ratio 18.9% 18.7% 18.1% 18.0% 15.2%
Financial strength
Equity as % of total assets 13.2% 13.9% 15.0% 15.6% 17.5%
Liquidity
Liquidity coverage ratio (LCR) - All currencies 187% 196% 155% 172% 142%
Liquidity coverage ratio (LCR) - Domestic currency 133% 95% 110% n.a. n.a.
Liquidity coverage ratio (LCR) - Foreign currencies 287% 463% 325% 544% 155%
Net stable funding ratio (NSFR) - All currencies 122% 123% 119% 114% 117%
Net stable funding ratio (NSFR) - Foreign currencies 154% 179% 156% 149% 122%
Term deposits % of total deposits 20.3% 24.6% 28.0% 27.1% 29.4%
Customer loans to customer deposits ratio 142% 148% 145% 146% 133%
Capital
Tier 1 ratio 20.1% 20.1% 19.9% 20.3% 22.6%
Tier 2 ratio 2.8% 2.9% 2.5% 1.9% 1.5%
Total capital ratio 22.9% 23.0% 22.4% 22.2% 24.1%
Leverage ratio 12.4% 13.6% 14.2% 14.6% 16.2%
Risk exposure amount (ISKm) 924,375 933,521 884,550 845,949 775,492
  1. Calculated based on annualised figures.
  2. Core income is defined as net interest income plus net fee & commission income.
  3. Calculated as (Administrative expenses + Contribution to the Depositors' and Investors' Guarantee Fund – One-off items) / (Total operating income – One-off items).
  4. Numbers exclude seasonal employees.
  5. The average LTV can be calculated in many different ways and therefore the definition is important for comparison to other banks.
    The weight is Íslandsbanki's total amount outstanding on the property and the LTV used is the maximum LTV of all Íslandsbanki's loans of the property.
  6. Stage 3, loans to customers, gross carrying amount.

Íslandsbanki Factbook 2Q21

Income statement - 5 year summary

ISK million 1H21 2020 2019 2018 2017
Interest income 28,137 55,695 61,965 61,675 56,767
Interest expense (11,530) (22,324) (29,143) (29,738) (26,768)
Net interest income 16,607 33,371 32,822 31,937 29,999
Fee and commission income 6,836 12,651 12,052 19,853 20,855
Fee and commission expense (1,067) (2,126) (1,153) (7,626) (7,105)
Net fee and commission income 5,769 10,525 10,899 12,227 13,750
Net financial income (expense) 912 (1,391) (820) (962) (715)
Net foreign exchange gain 225 451 139 1 527
Other operating income 204 197 2,125 1,784 628
Other net operating income 1,341 (743) 1,444 823 440
Total operating income 23,717 43,153 45,165 44,987 44,189
Administrative expenses (12,340) (22,746) (24,488) (27,650) (26,968)
Contribution to the Depositors' and Investors' Guarantee Fund (344) (679) (936) (1,173) (1,083)
Bank tax (861) (1,588) (3,528) (3,281) (2,892)
Total operating expenses (13,545) (25,013) (28,952) (32,104) (30,943)
Profit before net impairment on financial assets 10,172 18,140 16,213 12,883 13,246
Net impairment on financial assets 622 (8,816) (3,480) 1,584 1,556
Profit before tax 10,794 9,324 12,733 14,467 14,802
Income tax expense (1,805) (2,472) (3,909) (4,734) (4,151)
Profit for the period from continuing operations 8,989 6,852 8,824 9,733 10,651
Discontinued operations held for sale, net of income tax 57 (97) (370) 912 2,575
Profit for the period 9,046 6,755 8,454 10,645 13,226
Basic earnings per share from profit for the period 0.90 0.72 0.92 1.01 1.10

Íslandsbanki Factbook 2Q21

Balance sheet - 5 year summary

ISK million 30.6.21 2020 2019 2018 2017
Cash and balances with Central Bank 130,968 78,948 146,638 135,056 189,045
Loans to credit institutions 57,793 89,920 54,376 41,577 26,617
Bonds and debt instruments 110,499 128,216 52,870 69,415 27,090
Derivatives 2,649 6,647 5,621 4,550 2,896
Loans to customers 1,089,723 1,006,717 899,632 846,599 755,175
Shares and equity instruments 31,751 14,851 18,426 13,074 10,177
Investments in associates 911 775 746 682 704
Property and equipment 7,246 7,341 9,168 5,271 7,128
Intangible assets 3,307 3,478 4,330 5,002 4,231
Other assets 10,474 4,125 6,608 9,177 12,759
Non-current assets and disposal groups held for sale 1,539 3,173 1,075 - -
Total Assets 1,446,860 1,344,191 1,199,490 1,130,403 1,035,822
Deposits from Central Bank and credit institutions 32,240 39,758 30,925 15,619 11,189
Deposits from customers 765,614 679,455 618,313 578,959 567,029
Derivative instruments and short positions 10,079 6,936 6,219 5,521 5,492
Debt issued and other borrowed funds 398,786 387,274 306,381 300,976 217,748
Subordinated loans 25,297 27,194 22,674 16,216 9,505
Tax liabilities 6,025 5,450 7,853 7,150 7,787
Other liabilities 18,464 11,920 27,063 29,649 36,027
Total Liabilities 1,256,505 1,157,987 1,019,428 954,090 854,777
Share capital 10,000 10,000 10,000 10,000 10,000
Share premium 55,000 55,000 55,000 55,000 55,000
Reserves 5,401 6,181 7,065 6,499 6,179
Retained earnings 119,535 113,529 105,569 102,496 107,387
Total Shareholder's Equity 189,936 184,710 177,634 173,995 178,566
Non-controlling interests 419 1,494 2,428 2,318 2,479
Total Equity 190,355 186,204 180,062 176,313 181,045
Total Liabilities and Equity 1,446,860 1,344,191 1,199,490 1,130,403 1,035,822

Íslandsbanki Factbook 2Q21

Net interest income - 5 year summary

ISK million 1H21 2020 2019 2018 2017
Cash and balances with Central Bank 258 1,750 4,452 7,279 10,541
Loans at amortised cost 27,016 51,628 54,837 52,462 45,162
Financial assets mandatorily at fair value through profit or loss 860 2,314 2,630 1,825 -
Financial assets designated at fair value through profit or loss - - - - 50
Financial assets held for trading - - - - 879
Other assets 3 3 46 109 135
Total interest income 28,137 55,695 61,965 61,675 56,767
Deposits from Central Bank and credit institutions (191) (736) (625) (409) (170)
Deposits from customers (3,120) (7,700) (15,242) (16,539) (17,461)
Debt issued and other borrowed funds at fair value through profit and loss (364) (608) (734) (963) -
Debt issued and other borrowed funds at amortised cost (6,747) (11,179) (9,818) (9,035) (8,107)
Subordinated loans (339) (763) (501) (198) (14)
Other liabilities (769) (1,338) (2,223) (2,594) (1,016)
Total interest expense (11,530) (22,324) (29,143) (29,738) (26,768)
Net interest income 16,607 33,371 32,822 31,937 29,999
Net interest income on loans^{1}
Personal Banking 3,777 5,835 3,868 3,838 n.a.
Business Banking 3,940 7,702 6,010 5,276 n.a.
Corporate & Investment Banking 3,855 6,986 5,292 4,578 n.a.
Total net interest income on loans 11,572 20,523 15,170 13,692 -
Net interest income on deposits^{1}
Personal Banking 2,066 4,761 5,832 5,239 n.a.
Business Banking 1,218 2,628 3,629 3,321 n.a.
Corporate & Investment Banking 411 930 1,045 1,160 n.a.
Total net interest income on deposits 3,695 8,319 10,506 9,720 -
  1. 2017 numbers are not applicable due to structural changes.

Íslandsbanki Factbook 2Q21

Net fee & commission income - 5 year summary

ISK million 1H21 2020 2019 2018 2017
Asset management 1,424 2,382 2,225 2,116 1,964
Investment banking and brokerage 1,349 2,487 2,430 2,303 2,280
Payment processing 2,099 4,378 3,810 12,065 13,094
Loans and guarantees 1,064 2,014 1,510 1,467 1,427
Other fee and commission income 900 1,390 2,077 1,902 2,090
Total fees and commission income 6,836 12,651 12,052 19,853 20,855
Brokerage (226) (360) (337) (300) (128)
Clearing and settlement (835) (1,766) (806) (7,302) (6,956)
Other fee and commission expense (6) - (10) (24) (21)
Total fee and commission expense (1,067) (2,126) (1,153) (7,626) (7,105)
Net fee and commission income 5,769 10,525 10,899 12,227 13,750

Íslandsbanki Factbook 2Q21

Loans to customers - 5 year summary

ISK million 30.6.21 2020 2019 2018 2017
Individuals 501,025 437,377 349,181 319,390 299,350
Commerce and services 175,647 124,260 126,488 124,242 112,144
Construction 38,987 42,352 44,420 29,095 24,797
Energy 9,239 8,673 7,887 6,858 7,109
Financial services 1,440 1,539 2,315 1,704 26
Industrial and transportation 91,670 78,561 82,288 79,824 69,961
Investment companies 23,805 23,440 23,590 23,799 19,726
Public sector and non-profit organisations 10,113 10,911 12,312 12,087 11,871
Real estate 120,276 157,502 145,559 142,885 127,067
Seafood 117,521 122,102 105,592 106,715 84,853
Loans to customers before collective impairment allowance 1,089,723 1,006,717 899,632 846,599 756,904
Collective impairment allowance - - - - (1,729)
Loans to customers 1,089,723 1,006,717 899,632 846,599 755,175
Loans to customers - by product
Overdrafts 42,236 42,212 48,938 48,581 45,650
Credit cards 17,308 16,888 19,026 18,242 18,800
Mortgages 439,797 377,155 281,499 249,296 225,765
Capital leases 43,377 44,194 45,623 45,116 40,765
Government guarantee schemes 4,189 3,594 - - -
Other loans 542,816 522,674 504,546 485,364 425,924
Loans to customers before collective impairment allowance 1,089,723 1,006,717 899,632 846,599 756,904
Collective impairment allowance - - - - (1,729)
Loans to customers 1,089,723 1,006,717 899,632 846,599 755,175

Íslandsbanki Factbook 2Q21

Capital and risk exposure amount - 5 year summary

ISK million 30.6.21 2020 2019 2018 2017
Ordinary share capital 10,000 10,000 10,000 10,000 10,000
Share premium 55,000 55,000 55,000 55,000 55,000
Reserves 5,401 6,181 7,065 6,499 6,179
Retained earnings 119,535 113,529 105,569 102,496 107,387
Non-controlling interests 419 1,494 2,428 2,318 2,479
IFRS 9 reversal due to transitional rules 3,699 5,164 - - -
Fair value changes due to own credit standing 958 238 392 376 -
Expected or proposed dividend payment (4,271) - - - -
Tax assets (1,200) (259) (476) (215) (4)
Intangible assets (3,307) (3,478) (4,330) (5,002) (4,231)
Other regulatory adjustments - - - - (1,285)
Total CET1 capital 186,234 187,869 175,648 171,472 175,525
Tier 2 capital
Qualifying subordinated loans 25,297 27,194 22,674 16,216 9,505
General credit risk adjustments - - - - 1,729
Total capital base 211,531 215,063 198,322 187,688 186,759
Risk exposure amount
- due to credit risk 819,122 830,141 789,180 750,801 682,525
- due to market risk: 18,566 16,626 7,919 7,622 8,102
Market risk, trading book 16,274 11,306 6,488 6,649 6,709
Currency risk 2,292 5,320 1,431 973 1,393
- due to credit valuation adjustment 1,661 1,728 2,027 2,385 1,534
- due to operational risk 85,026 85,026 85,424 85,141 83,331
Total risk exposure amount 924,375 933,521 884,550 845,949 775,492
Capital ratios
Tier 1 ratio 20.1% 20.1% 19.9% 20.3% 22.6%
Tier 2 ratio 2.8% 2.9% 2.5% 1.9% 1.5%
Total capital ratio 22.9% 23.0% 22.4% 22.2% 24.1%
Leverage ratio 12.4% 13.6% 14.2% 14.6% 16.2%

Íslandsbanki Factbook 2Q21

Average balances - 5 year summary

ISK million 30.6.21 2020 2019 2018 2017
Average assets
Personal Banking 454,910 355,295 317,383 299,603 n.a.
Business Banking 236,722 237,632 233,470 225,408 n.a.
Corporate & Investment Banking 364,530 360,690 340,161 323,807 n.a.
Íslandsbanki 1,378,053 1,285,310 1,206,090 1,120,084 1,051,241
Average equity
Personal Banking 35,058 30,995 28,222 24,632 n.a.
Business Banking 37,661 38,549 38,503 37,255 n.a.
Corporate & Investment Banking 62,953 61,792 58,972 57,200 n.a.
Íslandsbanki 187,405 181,587 176,967 174,183 176,891
Average loans to customers
Personal Banking 451,612 351,584 315,128 299,429 n.a.
Business Banking 234,604 234,955 230,040 219,608 n.a.
Corporate & Investment Banking 358,696 355,760 336,244 322,974 n.a.
Íslandsbanki¹ 1,044,912 942,299 881,412 842,011 -
Average deposits from customers
Personal Banking 328,659 306,871 279,627 275,265 n.a.
Business Banking 196,259 183,604 172,247 167,463 n.a.
Corporate & Investment Banking 136,872 130,655 107,431 101,417 n.a.
Íslandsbanki¹ 661,790 621,130 559,305 544,145 -

2018 is year-end number for segments and 2017 numbers are not applicable due to structural changes.
Average balances are calculated using month-end figures, including previous period end figure.
1. Sum of average loans to customers and sum of average deposits for Personal Banking, Business Banking and Corporate & Investment Banking

Íslandsbanki Factbook 2Q21

Key performance indicators - 9 quarters

2Q21 1Q21 4Q20 3Q20 2Q20 1Q20 4Q19 3Q19 2Q19
Profitability
Return on equity^{1} 11.6% 7.7% 7.6% 7.4% 2.8% -3.0% 3.7% 4.7% 4.9%
Return on assets^{1} 1.6% 1.1% 1.1% 1.0% 0.4% -0.4% 0.5% 0.7% 0.7%
Earnings per share 0.54 0.36 0.34 0.31 0.17 (0.10) 0.21 0.21 0.24
Core income / total operating income^{2} 0.93 0.95 0.92 1.01 0.99 1.18 0.98 1.04 0.98
Net interest margin
Net interest margin on total assets^{1} 2.4% 2.4% 2.5% 2.5% 2.6% 2.8% 2.7% 2.7% 2.8%
Efficiency
Cost-to-income ratio^{3,7} 49.9% 51.3% 51.7% 46.7% 57.5% 62.9% 62.9% 56.3% 56.5%
Cost-to-total assets ratio^{1,7} 1.74% 1.75% 1.88% 1.57% 1.90% 1.93% 2.18% 1.89% 2.12%
Cost of risk^{1} -0.42% 0.20% 0.73% 0.44% 1.03% 1.51% 0.64% 0.09% 0.40%
Number of FTEs at period end - Consolidated^{4} 768 774 779 778 770 780 984 1,022 1,053
Number of FTEs at period end - Parent^{4} 733 739 745 744 735 746 749 784 806
Asset quality
Loans to customers (ISKm) 1,089,723 1,029,415 1,006,717 970,309 933,320 923,850 899,632 909,175 894,446
LTV on mortgages to individuals^{5} 66.0% 65.0% 64.0% 64.0% 63.0% 62.0% 62.0% 61.0% 61.0%
Risk exposure amount / total assets 63.9% 68.9% 69.4% 70.9% 70.8% 72.6% 73.7% 74.0% 74.1%
Non-performing loans (NPL) ratio^{6} 2.1% 2.4% 2.9% 3.3% 3.6% 2.8% 3.0% 2.8% 2.4%
Asset encumbrance ratio 18.9% 18.3% 18.7% 17.3% 17.9% 18.2% 18.1% 17.6% 17.2%
Financial strength
Equity as % of total assets 13.2% 13.4% 13.9% 13.7% 13.8% 14.3% 15.0% 14.4% 14.3%
Liquidity
Liquidity coverage ratio (LCR) 187% 172% 196% 136% 179% 177% 155% 174% 185%
Liquidity coverage ratio (LCR) - Domestic currency 133% 93% 95% 96% 119% n.a. 110% n.a. n.a.
Liquidity coverage ratio (LCR) - Foreign currencies 287% 235% 463% 405% 325% 324% 325% 484% 456%
Net stable funding ratio (NSFR) - All currencies 122% 119% 123% 113% 117% 120% 119% 117% 117%
Net stable funding ratio (NSFR) - Foreign currencies 154% 182% 179% 149% 147% 151% 156% 163% 179%
Term deposits % of total deposits 20.3% 24.4% 24.6% 25.0% 25.7% 27.4% 28.0% 28.5% 28.2%
Customer loans to customer deposits ratio 142% 147% 148% 139% 137% 143% 145% 149% 145%
Capital
Tier 1 ratio 20.1% 19.2% 20.1% 19.4% 19.4% 19.2% 19.9% 19.0% 18.8%
Tier 2 ratio 2.8% 2.7% 2.9% 2.8% 2.8% 2.7% 2.5% 2.4% 2.6%
Total capital ratio 22.9% 21.9% 23.0% 22.2% 22.2% 21.9% 22.4% 21.4% 21.4%
Leverage ratio 12.4% 12.6% 13.6% 13.4% 13.4% 13.5% 14.2% 13.6% 13.4%
Risk exposure amount (ISKm) 924,375 954,712 933,521 942,339 923,133 911,375 884,550 912,843 911,784
  1. Calculated based on annualised figures.
  2. Core income is defined as net interest income plus net fee & commission income.
  3. Calculated as (Administrative expenses + Contribution to the Depositors' and Investors' Guarantee Fund – One-off items) / (Total operating income – One-off items).
  4. Numbers exclude seasonal employees.
  5. The average LTV can be calculated in many different ways and therefore the definition is important for comparison to other banks.

The weight is Íslandsbanki's total amount outstanding on the property and the LTV used is the maximum LTV of all Íslandsbanki's loans of the property.

  1. Stage 3, loans to customers, gross carrying amount.
  2. IPO costs in 1Q21 were not adjusted for in the 1Q21 results.

Íslandsbanki Factbook 2Q21

Income statement - 9 quarter summary

ISK million 2Q21 1Q21 4Q20 3Q20 2Q20 1Q20 4Q19 3Q19 2Q19
Net interest income 8,417 8,190 8,258 8,305 8,228 8,580 8,291 8,190 8,404
Net fee and commission income 2,907 2,862 2,865 2,862 2,307 2,491 2,945 2,549 2,758
Net financial income (expense) 619 293 783 (255) (181) (1,738) (840) (602) 180
Net foreign exchange gain (loss) 95 130 87 101 208 55 116 159 (15)
Other operating income 82 123 63 44 71 19 920 37 27
Other net operating income 796 546 933 (110) 98 (1,664) 196 (406) 192
Total operating income 12,120 11,598 12,056 11,057 10,633 9,407 11,432 10,333 11,354
Administrative expenses (6,488) (5,852) (6,073) (5,110) (5,871) (5,692) (6,447) (5,608) (6,220)
Contribution to the Depositors' and Investors' Guarantee Fund (162) (183) (154) (50) (247) (228) (216) (210) (198)
Bank tax (451) (410) (414) (416) (399) (359) (814) (900) (934)
Total operating expenses (7,101) (6,445) (6,641) (5,576) (6,517) (6,279) (7,477) (6,718) (7,352)
Profit before net impairment on financial assets 5,019 5,153 5,415 5,481 4,116 3,128 3,955 3,615 4,002
Net impairment on financial assets 1,140 (518) (1,829) (1,058) (2,439) (3,490) (1,463) (208) (902)
Profit (loss) before tax 6,159 4,635 3,586 4,423 1,677 (362) 2,492 3,407 3,100
Income tax expense (769) (1,036) (234) (1,350) (119) (769) (659) (1,328) (726)
Profit (loss) for the period from continuing operations 5,390 3,599 3,352 3,073 1,558 (1,131) 1,833 2,079 2,374
Discontinued operations held for sale, net of income tax 41 16 173 288 (313) (245) (174) 7 (254)
Profit (loss) for the period 5,431 3,615 3,525 3,361 1,245 (1,376) 1,659 2,086 2,120

Íslandsbanki Factbook 2Q21

Balance sheet - 9 quarter summary

ISK million 30.6.21 31.3.21 31.12.20 30.9.20 30.6.20 31.3.20 31.12.19 30.9.19 30.6.19
Cash and balances with Central Bank 130,968 88,748 78,948 95,022 103,569 123,062 146,638 129,115 122,794
Loans to credit institutions 57,793 103,333 89,920 61,898 70,307 84,263 54,376 66,409 77,387
Bonds and debt instruments 110,499 103,627 128,216 149,426 140,422 69,368 52,870 73,899 77,033
Derivatives 2,649 2,536 6,647 3,731 6,366 4,772 5,621 5,438 5,843
Loans to customers 1,089,723 1,029,415 1,006,717 970,309 933,320 923,850 899,632 909,175 894,446
Shares and equity instruments 31,751 25,763 14,851 14,657 10,943 12,496 18,426 19,200 19,176
Investments in associates 911 841 775 750 750 712 746 687 687
Property and equipment 7,246 7,191 7,341 7,409 7,549 8,015 9,168 9,442 9,504
Intangible assets 3,307 3,357 3,478 3,554 3,667 3,736 4,330 4,709 4,882
Other assets 10,474 17,566 4,125 17,159 6,370 5,154 6,608 15,781 18,224
Non-current assets and disposal groups held for sale 1,539 2,858 3,173 4,809 19,993 20,263 1,075 - -
Total Assets 1,446,860 1,385,235 1,344,191 1,328,724 1,303,256 1,255,691 1,199,490 1,233,855 1,229,976
Deposits from Central Bank and credit institutions 32,240 31,565 39,758 36,438 35,461 33,773 30,925 31,808 19,830
Deposits from customers 765,614 698,575 679,455 698,610 681,223 647,795 618,313 610,281 615,869
Derivative instruments and short positions 10,079 9,533 6,936 8,406 7,519 12,045 6,219 7,910 6,903
Debt issued and other borrowed funds 398,786 398,225 387,274 324,752 321,803 322,280 306,381 331,938 337,473
Subordinated loans 25,297 25,259 27,194 26,798 25,834 24,456 22,674 21,993 23,431
Tax liabilities 6,025 5,947 5,450 7,137 6,438 8,155 7,853 10,127 8,674
Other liabilities 18,464 30,660 11,920 44,074 45,256 27,645 27,063 41,814 42,012
Total Liabilities 1,256,505 1,199,764 1,157,987 1,146,215 1,123,534 1,076,149 1,019,428 1,055,871 1,054,192
Share capital 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Share premium 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000
Reserves 5,401 6,353 6,181 7,258 7,262 8,016 7,065 6,801 6,816
Retained earnings 119,535 113,335 113,529 108,383 105,681 104,349 105,569 103,785 101,534
Total Shareholder's Equity 189,936 184,688 184,710 180,641 177,943 177,365 177,634 175,586 173,350
Non-controlling interests 419 783 1,494 1,868 1,779 2,177 2,428 2,398 2,434
Total Equity 190,355 185,471 186,204 182,509 179,722 179,542 180,062 177,984 175,784
Total Liabilities and Equity 1,446,860 1,385,235 1,344,191 1,328,724 1,303,256 1,255,691 1,199,490 1,233,855 1,229,976

Íslandsbanki Factbook 2Q21

Net interest income - 9 quarter summary

ISK million 2Q21 1Q21 4Q20 3Q20 2Q20 1Q20 4Q19 3Q19 2Q19
Cash and balances with Central Bank 153 105 105 235 408 1,002 1,009 993 1,184
Loans at amortised cost 14,775 12,241 12,511 13,001 14,026 12,090 13,273 13,194 15,208
Financial assets mandatorily at fair value through profit or loss 424 436 661 583 519 551 606 743 713
Other assets 1 2 - 1 - 2 14 10 12
Total interest income 15,353 12,784 13,277 13,820 14,953 13,645 14,902 14,940 17,117
Deposits from Central Bank and credit institutions (98) (93) (124) (192) (199) (221) (237) (159) (122)
Deposits from customers (1,925) (1,195) (1,376) (1,625) (2,236) (2,463) (3,064) (3,475) (4,660)
Debt issued and other borrowed funds at fair value through profit and loss (179) (185) (162) (150) (154) (142) (176) (184) (194)
Debt issued and other borrowed funds at amortised cost (4,096) (2,651) (2,826) (2,979) (3,327) (2,047) (2,414) (2,271) (2,914)
Subordinated loans (176) (163) (193) (211) (193) (166) (160) (168) (93)
Other liabilities (462) (307) (338) (358) (616) (26) (560) (493) (730)
Total interest expense (6,936) (4,594) (5,019) (5,515) (6,725) (5,065) (6,611) (6,750) (8,713)
Net interest income 8,417 8,190 8,258 8,305 8,228 8,580 8,291 8,190 8,404
Net interest income on loans
Personal Banking 1,892 1,885 1,794 1,562 1,354 1,155 1,062 968 939
Business Banking 1,967 1,973 2,042 2,038 1,932 1,690 1,605 1,493 1,475
Corporate & Investment Banking 1,975 1,881 1,848 1,829 1,726 1,587 1,447 1,305 1,259
Total net interest income on loans 5,739 5,739 5,684 5,429 5,012 4,432 4,114 3,766 3,673
Net interest income on deposits
Personal Banking 1,062 1,003 987 1,041 1,283 1,450 1,462 1,484 1,455
Business Banking 634 584 599 586 658 784 858 915 937
Corporate & Investment Banking 510 201 168 220 253 288 272 265 251
Total net interest income on deposits 1,788 1,788 1,754 1,847 2,194 2,522 2,592 2,664 2,643

Íslandsbanki Factbook 2Q21

Net fee and commission income - 9 quarter summary

ISK million 2Q21 1Q21 4Q20 3Q20 2Q20 1Q20 4Q19 3Q19 2Q19
Asset management 769 655 636 576 605 565 590 512 575
Investment banking and brokerage 689 660 656 684 576 571 688 598 613
Payment processing 1,154 945 1,081 1,697 786 814 987 947 1,046
Loans and guarantees 526 538 690 514 427 383 389 367 376
Other fee and commission income 391 509 410 322 228 430 734 373 385
Total fee and commission income 3,529 3,307 3,473 3,793 2,622 2,763 3,388 2,797 2,995
Brokerage (136) (90) (127) (67) (113) (53) (128) (65) (75)
Clearing and settlement (486) (349) (481) (864) (202) (219) (324) (174) (174)
Other fee and commission expense - (6) - - - - 9 (9) 12
Total fee and commission expense (622) (445) (608) (931) (315) (272) (443) (248) (237)
Net fee and commission income 2,907 2,862 2,865 2,862 2,307 2,491 2,945 2,549 2,758

Íslandsbanki Factbook 2Q21
16

Loans to customers - 9 quarter summary

ISK million 30.6.21 31.3.21 31.12.20 30.9.20 30.6.20 31.3.20 31.12.19 30.9.19 30.6.19
Individuals 501,025 468,256 437,377 379,966 355,524 347,539 349,181 345,234 334,749
Commerce and services 175,647 119,916 124,260 121,951 122,581 127,887 126,488 130,879 135,041
Construction 38,987 41,186 42,352 44,550 46,463 45,621 44,420 33,865 33,445
Energy 9,239 8,543 8,673 8,316 8,344 8,024 7,887 6,803 6,934
Financial services 1,440 1,418 1,539 1,776 2,239 1,436 2,315 2,768 23
Industrial and transportation 91,670 76,262 78,561 82,458 83,731 84,709 82,288 84,127 81,784
Investment companies 23,805 22,337 23,440 24,747 24,578 25,184 23,590 27,507 26,052
Public sector and non-profit organisations 10,113 10,497 10,911 11,622 11,641 11,339 12,312 11,615 11,453
Real estate 120,276 157,451 157,502 165,370 150,090 149,138 145,559 156,548 153,077
Seafood 117,521 123,549 122,102 129,553 128,129 122,973 105,592 109,829 111,888
Loans to customers 1,089,723 1,029,415 1,006,717 970,309 933,320 923,850 899,632 909,175 894,446
Loans to customers - by product
Overdrafts 42,236 39,512 42,212 43,294 47,513 44,929 48,938 54,510 51,836
Credit cards 17,308 14,811 16,888 16,060 16,704 15,621 19,026 19,777 17,492
Mortgages 439,797 410,781 377,155 316,896 293,838 285,670 281,499 274,186 267,762
Capital leases 43,377 41,905 44,194 45,514 45,039 47,872 45,623 46,583 50,588
Government guarantee schemes 4,189 3,986 3,594 1,658 - - - - -
Other loans 542,816 518,420 522,674 546,887 530,226 529,758 504,546 514,119 506,768
Loans to customers 1,089,723 1,029,415 1,006,717 970,309 933,320 923,850 899,632 909,175 894,446

Íslandsbanki Factbook 2Q21

Capital and risk exposure amount - 9 quarter summary

ISK million 30.6.21 31.3.21 31.12.20 30.9.20 30.6.20 31.3.20 31.12.19 30.9.19 30.6.19
Ordinary share capital 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Share premium 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000
Reserves 5,401 6,353 6,181 7,258 7,262 8,016 7,065 6,801 6,816
Retained earnings 119,535 113,335 113,529 108,383 105,681 104,349 105,569 103,785 101,534
Non-controlling interests 419 783 1,494 1,868 1,779 2,177 2,428 2,398 2,434
IFRS 9 reversal due to transitional rules 3,699 3,853 5,164 4,088 3,810 - - - -
Fair value changes due to own credit standing 958 434 238 (239) (427) (773) 392 731 760
Expected or proposed dividend payment (4,271) (1,725) - - - - - - -
Tax assets (1,200) (1,087) (259) (173) (88) (30) (476) (445) (394)
Intangible assets (3,307) (3,357) (3,478) (3,554) (3,667) (3,736) (4,330) (4,709) (4,882)
Other regulatory adjustments - - - - - - - - -
Total CET1 capital 186,234 183,589 187,869 182,631 179,350 175,003 175,648 173,561 171,268
Tier 2 capital
Qualifying subordinated loans 25,297 25,259 27,194 26,798 25,834 24,456 22,674 21,993 23,431
Total regulatory capital 211,531 208,848 215,063 209,429 205,184 199,458 198,322 195,554 194,699
Risk exposure amount
- due to credit risk 819,122 851,309 830,141 836,662 821,457 811,936 789,180 815,266 809,840
- due to market risk: 18,566 17,447 16,626 18,748 14,435 12,350 7,919 10,482 13,988
Market risk, trading book 16,274 14,062 11,306 15,281 12,024 9,095 6,488 8,736 10,072
Currency risk 2,292 3,385 5,320 3,467 2,411 3,255 1,431 1,746 3,916
- due to credit valuation adjustment 1,661 930 1,728 1,505 1,817 1,665 2,027 1,954 2,815
- due to operational risk 85,026 85,026 85,026 85,424 85,424 85,424 85,424 85,141 85,141
Total risk exposure amount 924,375 954,712 933,521 942,339 923,133 911,375 884,550 912,843 911,784
Capital ratios
Tier 1 ratio 20.1% 19.2% 20.1% 19.4% 19.4% 19.2% 19.9% 19.0% 18.8%
Tier 2 ratio 2.8% 2.7% 2.9% 2.8% 2.8% 2.7% 2.5% 2.4% 2.6%
Total capital ratio 22.9% 21.9% 23.0% 22.2% 22.2% 21.9% 22.4% 21.4% 21.4%
Leverage ratio 12.4% 12.6% 13.6% 13.4% 13.4% 13.5% 14.2% 13.6% 13.4%

Íslandsbanki Factbook 2Q21

Average balances - 9 quarter summary

ISK million 30.6.21 31.3.21 31.12.20 30.9.20 30.6.20 31.3.20 31.12.19 30.9.19 30.6.19
Average assets
Personal Banking 469,726 439,696 395,822 352,537 335,158 332,523 330,340 321,852 312,744
Business Banking 237,992 235,390 238,179 238,376 238,687 235,938 235,601 237,976 235,347
Corporate & Investment Banking 368,735 357,527 369,606 370,135 361,538 345,602 341,460 349,150 341,768
Íslandsbanki 1,397,070 1,360,832 1,326,162 1,310,526 1,285,319 1,227,167 1,221,755 1,228,714 1,209,152
Average equity
Personal Banking 35,051 35,157 32,695 29,837 30,192 30,637 29,765 28,947 28,067
Business Banking 37,803 37,486 38,305 38,032 38,536 39,479 39,246 39,401 38,585
Corporate & Investment Banking 63,251 62,325 63,989 62,166 61,944 59,102 59,630 59,932 59,203
Íslandsbanki 187,638 186,690 184,489 180,698 179,761 180,651 178,999 177,261 174,541
Average loans to customers
Personal Banking 466,541 436,336 391,334 347,944 331,929 329,133 327,458 319,925 310,297
Business Banking 235,871 233,281 235,927 235,921 235,820 232,786 232,459 234,609 231,734
Corporate & Investment Banking 362,002 351,879 365,229 366,410 357,988 338,908 340,941 342,634 335,788
Íslandsbanki¹ 1,064,414 1,021,496 992,490 950,275 925,737 900,826 900,858 897,168 877,819
Average deposits from customers
Personal Banking 334,044 324,613 317,155 310,144 305,232 293,117 285,445 278,734 278,258
Business Banking 200,692 192,024 195,641 191,660 180,183 169,702 172,685 172,649 172,820
Corporate & Investment Banking 136,005 137,747 136,071 146,686 131,423 115,840 106,500 111,106 109,229
Íslandsbanki¹ 670,741 654,384 648,866 648,490 616,838 578,660 564,631 562,490 560,308

Average balances are calculated using month-end figures, including previous period end figure.
1. Sum of average loans to customers and sum of average deposits for Personal Banking, Business Banking and Corporate & Investment Banking

Íslandsbanki Factbook 2Q21

Allocation and Impact of Eligible Projects for Íslandsbanki's Sustainable Financing Framework

Allocation to Eligible Projects Selected impact indicators
Amount outstanding 31.12.2020 Share of funding Share of capex Avoided greenhouse gas emissions Clean vehicles^{1} Clean energy produced Green building Additional waste recycled Companies supported^{2} Dwellings Students reached Avoided greenhouse gas emissions per million ISK
ISK million % % tCO2e number of GWh number of tonnes number of number of number of tCO2e
Clean Transportation 3,392 100% 100% 1,734 1,190 0.5
Renewable energy 6,307 100% 100% 3,500 87 0.6
Green buildings 1,502 11% 100% 1
Sustainable waste management 902 30% 100% 530 800 0.6
Government defined company support 3,271 n.a. 0% 342
Affordable housing 2,242 100% 100% 140
Education and vocational training 7,061 60% 100% 3,000
24,677 5,764 1,190 87 1 800 342 140 3,000
  1. in addition 11 charging stations and 24 electric bikes were funded
  2. Average loan size ISK 9.6 m
  3. EUR/ISK=156 on 31.12.2020

Íslandsbanki Factbook 2Q21

Macroeconomics - summary

2Q21 1Q21 4Q20 3Q20 2Q20 1Q20 4Q19 3Q19 2Q19
YoY change, %
GDP growth -1.7 -5.1 -9.1 -10.1 -1.9 4.2 1.0 2.8 -0.3
Total investment -2.9 -4.6 -10.5 -14.1 4.9 -4.2 2.9 -8.2 -18.9
Business investment -4.9 -12.1 -17.8 -12.7 14.1 0.6 -5.3 -26.9 -35.9
Residential investment -8.8 11.6 1.0 -11.6 -4.4 13.4 51.8 41.3 21.8
Personal consumption 0.8 -3.1 -2.2 -8.7 1.2 1.1 2.6 1.1 2.6
Unemployment rate, % of workforce 11.3 7.6 5.8 7.9 4.4 3.3 3.5 4.4 3.0
Current account, % of GDP -3.8 2.8 0.4 -0.8 1.7 6.6 8.8 2.9 7.2
International investment position, % of GDP 36.2 35.3 32.4 27.3 22.0 21.7 20.1 17.2 18.1
Gross general govt. debt, % of GDP 79.9 68.3
Household debt, gross, % of GDP 85.7 84.2 81.7 78.3 75.6 74.1 74.6 74.8 75.2
Corporate debt, gross, % of GDP 87.8 89.4 91.8 89.5 88.0 83.0 85.2 88.1 90.0
YoY change, %
Inflation 4.2 3.6 3.2 2.5 2.1 2.5 3.1 3.4 3.1
Residential real estate price index 4.2 3.5 4.1 3.6 2.6 1.9 0.2 1.3 2.1
Wages 10.5 7.2 6.5 6.7 4.9 4.3 4.3 5.4 5.7
Real wages 6 3.5 3.1 4.1 2.8 1.7 1.2 1.9 2.5
ISK index, average 200.0 206.3 207.8 203.2 186.4 180.6 182.1 181.8 179.2
Central bank policy rate (1W) 0.75 0.9 1.0 1.0 1.8 3.1 3.6 4.3 4.5
Long-term nominal yield 3.5 3.1 2.6 2.5 3.1 3.6 3.8 4.2 5.2
Long-term real yield 0.6 0.5 -0.4 0.0 0.5 0.8 0.8 1.1 1.4

Íslandsbanki Factbook 2Q21

Other

Currencies 30.6.21 31.3.21 31.12.20 30.9.20 30.6.20 31.3.20 31.12.19 30.9.19 30.6.19
Currencies
USD 123.2 126.3 127.2 138.5 138.6 141.7 121.1 123.7 124.5
GBP 170.7 173.8 173.6 177.7 170.2 175.2 159.4 152.2 157.8
EUR 146.5 148.1 156.1 162.2 155.4 155.3 135.8 135.1 141.7
DKK 19.7 19.9 21.0 21.8 20.9 20.8 18.2 18.1 19.0
SEK 14.5 14.5 15.6 15.4 14.8 14.0 13.0 12.6 13.4
CHF 133.4 133.8 144.4 150.1 145.8 146.8 125.1 124.3 127.7

Íslandsbanki Factbook 2Q21

Attractive and achievable financial targets

Updated targets define a clear path to ROE expansion, attractive capital return and optimisation

Financial targets 2Q21 1Q21 2020 Guidance
Return on equity^{1} 8-10% by 2023
>10% long-term 11.6% ☑ 7.7% 3.7% — Based on average expected risk-free rates through the business cycle
— The Bank has a clearly identified path to ROE improvements, supported by a clear action plan and economic recovery
— The Bank assumes the loan book will grow in line with nominal GDP on average through the business cycle
Cost-to-income ratio^{2} <45% by 2023 49.9% ☑ 51.3% ☑ 54.3% ☑ — The Bank continues to invest in IT infrastructure and process efficiency to improve the C/I ratio in the medium to long-term
— Costs to remain broadly flat over the next 3 years
CET1 capital ratio >16% 20.1% ☑ 19.2% ☑ 20.1% ☑ — Based on current regulatory requirements and management buffer of 50-200bps, the CET1 target range is currently 13.2-14.7%
— Assuming that the countercyclical buffer increases from 0% to 2%
— The Bank will start paying out a part of its excess capital in parallel with its ordinary dividend payable for the FY 2021 – the amount to be decided at that time
Total capital ratio 18.3-19.8% 22.9% ☑ 21.9% ☑ 23.0% ☑ — Based on current regulatory requirements and management buffer of 50-200bps
— Long term target range is 19.5-21.0%, assuming that the countercyclical buffer increases from 0% to 2% and the COVID-19 effects on the Pillar 2-R requirements is reversed
— The Bank will issue an AT1 instrument over the course of next 6-18 months, given favourable market conditions (including tax deductibility of such instruments)
Dividend payout ratio c. 50% 50% ☑ — Target for annual regular dividend
— Excess capital to support further dividend payments, buybacks, and/or ROE enhancing growth
— Additional capital return to approach capital targets over the medium term
  1. ROE excluding one-off cost is 12.6% for 2Q21, one-off cost for 2Q21 is 627m. 2. Calculated as (Administrative expenses + Contribution to the Depositors' and Investors' Guarantee Fund – One-off items) / (Total operating income – One-off items).
    IPO costs in 1Q21 were not adjusted for in the 1Q21 results.

Íslandsbanki Factbook 2Q21

Íslandsbanki S&P credit ratings

Rating lowered in April 2020

BBB/A-2 Stable Outlook

Press Release 24 April 2020

In late April 2020 S&P lowered Íslandsbanki's rating to BBB/A-2 with a stable outlook from previous BBB+/A-2 with a negative outlook

In its report, S&P expects Íslandsbanki to enter this crisis on a more solid foothold than the 2008 financial crisis. The 'BBB' rating level and stable outlook factor in the solid market position of the bank in Iceland, which has a relatively advanced digitalised banking platform. In S&P's view, the bank is well ahead of many other European banks in its preparation for technological disruption. S&P also notes the Bank's funding and liquidity metrics are adequate for the Bank's risk profile, with comfortable liquidity ratios and liquid assets covering more than 3x the average short-term funding in 2019. Moreover, S&P states that the wholesale funding needs are limited in 2020, which coupled with the additional central bank liquidity facilities announced recently by the Icelandic Central Bank, eases pressure on liquidity needs

S&P's rationale for the change is mostly derived from its view that economic activity will reduce in Iceland and Europe in 2020 and thus could impair Íslandsbanki's asset quality, increase credit losses, reduce business and revenue generation, and potentially erode its capital. S&P's view is that Iceland's operating environment will remain challenging, affected by the 2020 economic recession, declining interest rates, stiff competition from pension funds in mortgage lending and thus contributing to the declining profitability of the Bank

Íslandsbanki S&P
Long-term BBB
Short-term A-2
Outlook Stable
Affirmed (date) April 20
Icelandic sovereign S&P
--- ---
Long-term A
Short-term A-1
Outlook Stable
Affirmed (date) November 20

Íslandsbanki Factbook 2Q21

Disclaimer

All information contained in this document should be regarded as preliminary and based on company data available. Due care and attention has been used in the preparation of forecast information. However, actual results may vary from their forecasts, and any variation may be materially positive or negative. Forecasts, by their very nature, are subject to uncertainty and contingencies, many of which are outside the control of Íslandsbanki.

Íslandsbanki cannot guarantee that the information contained herein is without fault or entirely accurate. The information in this material is based on sources that Íslandsbanki believes to be reliable. Íslandsbanki can however not guarantee that all information is correct. Furthermore, information and opinions may change without notice. Íslandsbanki is under no obligation to make amendments or changes to this publication if errors are found or opinions or information change. Íslandsbanki accepts no responsibility for the accuracy of its sources.

Íslandsbanki and its management may make certain statements that constitute "forward-looking statements". These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as "anticipates," "targets," "expects," "estimates," "intends," "plans," "goals," "believes" and other similar expressions or future or conditional verbs such as "will," "should," "would" and "could."

The forward-looking statements represent Íslandsbanki's current expectations, plans or forecasts of its future results and revenues and beliefs held by the company at the time of publication. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and are often beyond Íslandsbanki's control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.

Forward-looking statements speak only as of the date they are made, and Íslandsbanki undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

Íslandsbanki does not assume any responsibility or liability for any reliance on any of the information contained herein. Íslandsbanki is the owner of all works of authorship including, but not limited to, all design, text, sound recordings, images and trademarks in this material unless otherwise explicitly stated. The use of Íslandsbanki's material, works or trademarks is forbidden without written consent except were otherwise expressly stated. Furthermore, it is prohibited to publish material made or gathered by Íslandsbanki without written consent.

Íslandsbanki Factbook 2Q21
25

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