Through col­lab­or­a­tion we are #1 for ser­vice

We are here for our customers

Financial services for individuals have changed radically in recent years. Financial health, financial education, and customers’ oversight of their own finances provide the foundation for successful growth. With digital solutions and automation, customers are managing their finances to an increasing degree outside conventional banking hours. During the year, Íslandsbanki was Iceland’s first bank to roll out a solution enabling customers to open an account or add on products with a single authentication – an experience like that offered by a good online merchant. Furthermore, major changes were made to automated loan processes that enable customers to apply for a loan within minutes and have the application processed without employee involvement – after all, unexpected expenses often require immediate action. Digital advancements have led to better data oversight, which will strengthen the Bank’s service to its customers and improve their service experience. Íslandsbanki’s aim is to be a force for good in the community, and it is therefore vital that the Bank be there for its customers at important turning points in their lives.

2022 was a strong year

Vigour and optimism characterised the Icelandic business community in 2022. The economy engaged in rebuilding after the challenges of COVID-19, and there was considerable pent-up demand for both investment and consumption. Both deposits and lending were well above the division’s targets. The stock of new loans issued by Business Banking, through branches and asset financing company Ergo, has seldom been larger, easily keeping pace with nominal GDP growth. Development loans and loans to tourism companies such as car rental agencies were prominent in lending activities. Households and businesses are undeniably well positioned, but challenges relating to the war in Ukraine and rising interest rates and inflation will doubtless affect balance sheets and profit and loss accounts in the years to come. However, we still do not see any serious signs of adverse developments in indicators such as non-performing loan ratios.

Concurrent with a brisk and busy year on the customer side of Business Banking, significant work was done on systems, distribution channels, and product development. Emphasis was placed on internal and external education relating to sustainability, which plays a constantly growing role in the division’s activities and will be interlinked with lending processes and risk assessments for the foreseeable future. A newly established centralised support unit will be responsible for legal entities’ due diligence and anti-money laundering defences.

The Bank launched a new advertising campaign during the year, focusing on its diverse customer group. We are proud to maintain our strong market share and thank our customers for choosing us as their commercial bank. By working together, we contribute to our customers’ success as well as our own.

Outstanding results from all units in a volatile market

Corporate and Investment Banking delivered outstanding results from all units in 2022. Income from fees and commissions continued to grow after a record-breaking 2021, and emphasis on balance sheet management, with priority given to profitability over growth, produced excellent results. New lending totalled ISK 72 billion and refinancing during the year amounted to ISK 85 billion. Furthermore, the division worked strategically with customers to create the most efficient capital structure, including bond issues and new loans. In addition, the first loans were issued in cooperation with Iceland Funds' Corporate Credit Fund. Loans that meet the requirements of the Bank’s Sustainable Financing Framework totalled ISK 47 billion, and 76% of the loan portfolio has been assessed from the perspective of sustainability.

FX Sales had a good year, and the Bank is the market leader. Organisational changes were made where all securities sales and advisory services merged under Securities Sales, with the aim of strengthening the Bank in the securities market and enhancing product development. Íslandsbanki is a leader in the primary bond market, issuing ISK 62 billion in new bonds for its customers in 2022. Despite difficult market conditions, net inflow into Private Banking were strong, and a steadily increasing number of Íslandsbanki customers choose to use the service after targeted promotional efforts during the year.

Strong returns and readier access to funds are positive for savers

The year 2022 was defined by demanding market conditions, both globally and domestically which can be traced to the war in Ukraine, rising interest rates and inflation due to the pandemic. We put an emphasis on long-term savings and asset allocation and offer a wide selection of mutual funds which have delivered a strong performance in comparison with other funds in the Icelandic market in the longer term.

Icelandic households' deposits continue to grow and the number of shareholders in the Nasdaq Iceland stock exchange has nearly doubles in two years. This is a highly favourable trend, as increased savings provide a measure of security during times of uncertainty. Customers in monthly subscriptions to funds have increased by 25% during the year 2022.

The market listing of Ölgerðin was successful, and Akur, a private equity fund managed by Iceland Funds and one of the largest owners of Ölgerðin, led the listing process together with other primary investors. The sale of Míla to Ardian France SA was hands-down the transaction of the year in the opinion of Íslandsbanki. Iceland Funds' IS Corporate Credit Fund participated in the financing of that transaction.

Digital services built on a data powerhouse

The journey towards digital, data-driven banking services continued at full speed in 2022. A key milestone on that journey was the implementation of a digital platform for the purchase of the Bank’s services, and the next step will entail implementing built-in digital sales and marketing.Íslandsbanki is working continuously on upgrading its distribution channels and, among other things, was first in the Icelandic market to offer contactless payments via Google Wallet. Customers can now use ATMs without a card, carry out self-serve transactions on the new pension fund member website, and buy and sell equity securities using the Íslandsbanki app. In 2023, we will focus on becoming the market leader in digital experience and service for companies and in harnessing data for digital service and sales.

Comprehensive overview of risk

Íslandsbanki has a long tradition of assisting Icelandic households and businesses with financing, and credit risk is a major risk factor in its operations. Even though credit risk accounts for about 90% of the Bank’s risk-weighted assets, it is important that the risk management framework cover all of the risks the Bank faces. Having a comprehensive overview of risk enables the management team to take informed decisions that are compatible with the Bank’s defined risk appetite.  

The operating environment for banking is continually changing, and new risk factors emerge that could affect Íslandsbanki’s risk profile. It is therefore important that the risk management framework be flexible so that new risk factors can be identified and assessed. With greater technological development and a more effective risk management framework, Íslandsbanki is well prepared both to face changed requirements and to monitor and manage new and existing risks. 

Fin­an­cials and fund­ing

A successful year with strong results

The year 2022 was an eventful year at Íslandsbanki, as operations were strong and the results were good. Profitability was 11.8% for the year, which exceeds the Bank's financial goals. Revenue generation was very sound with a 14.1% increase during the year and revenue growth in all business units. The cost-to-income ratio was 42.1%, which is a fall from 46.2%for the previous year.Impairment was positive by ISK 1.6billion, largelyexplained by a better outlook for tourism. Growth in lending to both retail and corporate customers contributed to a 9.2% increase in loans. Deposits from customers rose by 6.2% and is the biggest pillar of the Bank's funding. Conditions on the bond market were challenging during the year, and yet the Bank showed its strength with increased funding diversification. For example,it issued its first covered bonds denominated in euros and issued subordinated bonds in Icelandic króna for the very first time. The Bank is therefore well funded with all liquidity and capital ratios above targets and regulatory requirements. The Bank's board will therefore propose at the annual general meeting that nearly ISK12.3 billion be paid as a dividend, and this is in accordance with the Bank's dividend policy. The Bankis further planning to start its share buyback program with a standard ISK 5 billion buyback program.

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