Íslandsbanki's 2023 Annual and Sustainability Report, with the Consolidated Financial Statements and the Pillar 3 Report, provide a clear picture of the Bank's operations during the year.
Annual and Sustainability Report (PDF)
Financial Statements (PDF)
Pillar 3 Report (PDF)
It is important that knowledge and expertise be maintained within the Bank alongside new streams and concepts, and we are convinced that this year of readjustment will enable us to strengthen the foundations of our operations.
During the year, we placed particular emphasis on coordination and use of digital data with the establishment of a new department that combines the expertise of our best technology, product development, and data specialists.
We have come nose-to-nose with a host of new challenges in the past few years, including a global pandemic, high inflation, high interest rates, and demanding conditions in markets worldwide. 2023 was no exception.
We weathered various changes and faced strong headwinds during the year. We saw experienced leaders depart and welcomed new ones. We looked within, improved internal processes and regulatory provisions, updated risk assessments, and strengthened ourselves in numerous other areas. We also achieved outstanding results on many fronts. Team spirit, job satisfaction, and employee engagement have remained high throughout the turbulence, and we are proud of this. We did not back down in the face of challenges.
Instead, we reminded ourselves that challenges also bring opportunities, and we have emerged determined, as ever, to make Íslandsbanki an even more attractive workplace. Together we look ahead with optimistic eyes – stronger than before and filled with passion.
Instead, we reminded ourselves that challenges also bring opportunities, and we have emerged determined, as ever, to make Íslandsbanki an even more attractive workplace.
Hafsteinn Bragason
Head of Human Resources
Íslandsbanki's objective is to be a force for good, and the corporate vision is to create value for the future, with excellent service.
Íslandsbanki has adopted policies, rules and procedures to promote good corporate governance and to ensure compliance with the relevant laws and regulations applicable to the Bank's operations.
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. Our chatbot, Fróði, is constantly developing, and among other things, customers can ask Fróði for their bank account balances and the IBAN numbers of their own accounts. Fróði also received an international award for being the most liked chatbot, with an average of 85% satisfied with the answers received.
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, and it is therefore vital that the Bank be there for its customers at important turning points in their lives.
Digital advancements have led to better data oversight, which will strengthen the Bank's service to its customers and improve their service experience.
Ólöf Jónsdóttir
Managing Director, Personal Banking
2023 was characterised by well balanced growth in lending and deposits in the Business Banking division, with performance exceeding expectations and developing in line with estimated nominal GDP growth for the year. Growth in new lending was well distributed across sectors, branches, and corporate banking centres. Ergo had a fantastic year, logging loan book growth of nearly 21%. New loans exceeded ISK 50bn for the first time.
High interest rates and persistent inflation made their mark on companies’ operating environment, and if forecasts of interest rate cuts do not materialise in the coming term, the situation can be expected to test households’ and businesses' resilience. As yet, however, companies are showing no obvious signs of unfavourable developments such as increased arrears.
As in the past, system-related matters, development of digital channels, and product development were prominent activities during the year, not least the development of a new online bank for businesses, which will be rolled out during the year. We remain proud of our leading market share in the market for small and medium-sized businesses (SME), as our share in the capital region has not previously been higher. Business Banking's biggest project and greatest challenge for the future is to provide this large group of companies from all over Iceland with outstanding service, both in person and via digital channels.
As in the past, system-related matters, development of digital channels, and product development were prominent activities during the year, not least the development of a new online bank for businesses, which will be rolled out during the year.
Una Steinsdóttir
Managing Director, Business Banking
Corporate and Investment Banking had its best operational year to date despite a very demanding economic environment. Prolonged headwinds in securities markets had a negative impact on both Corporate Finance and Securities Sales, as high interest rates have historically dampened activity in these areas. Nevertheless, issuance of equity, tradable bonds and bills was successful, and towards the end of the year securities markets showed signs of firming up.
Difficult times in securities markets are always challenging for Asset Management, as high market volatility can test investors' risk tolerance. The Bank has emphasised active communications, educational efforts, and information disclosure to its customers. Íslandsbanki's FX Sales is a leader in the market and delivered yet another strong year in 2023. Turnover grew considerably, owing not least to the resurgence of tourism and to increased use of hedging instruments.
Lending activity was robust during the year, although competition from foreign financial institutions has grown significantly. Among large companies, demand for credit has contracted noticeably in the wake of interest rate hikes. The Bank’s main priority has therefore been on cementing strong business relationships by providing excellent comprehensive banking service. Cooperation with Iceland Funds' Corporate Lending Fund was successful during the year, with six joint projects underway and the fund more or less fully invested.
Difficult times in securities markets are always challenging for Asset Management, as high market volatility can test investors' risk tolerance. The Bank has emphasised active communications, educational efforts, and information disclosure to its customers.
Kristín Hrönn Guðmundsdóttir
Managing Director, Corporate and Investment Banking
For 30 years, Iceland Funds has offered Icelandic depositors a wide selection of savings options ranging from short-term funds for liquid assets to equity funds suited to long-term savings and investment. The most favourable option is to invest in funds by monthly subscription, which can be set up in the Íslandsbanki online bank.
The Icelandic equity market faced a demanding environment during the year, with a long and steep monetary tightening phase, persistent inflation, and various risk factors making an impact on the market. The bond market was sluggish early in the year but then rallied in the second half. Interest rates appear to have peaked, and markets are likely to rebound in the new year. In 2023, three new companies were listed on the stock market: mining company Amaroq, real estate firm Kaldalón, and fishing company Ísfélagið.
Iceland Funds established a new fund during the year – IS Haf fjárfestingar slhf. – in cooperation with primary investor UR Seafood. An institutional investment fund of ISK 10bn, IS Haf invests in ocean-related activities ranging from procurement of raw materials and processing to sea-related tech solutions, infrastructure, and biotechnology. The fund invested in two ocean-related companies during the year and is examining additional investment options.
For 30 years, Iceland Funds has offered Icelandic depositors a wide selection of savings options ranging from short-term funds for liquid assets to equity funds suited to long-term savings and investment.
Kjartan Smári Höskuldsson
Managing Director, Iceland Funds Ltd.
Over the past year, our focus hast shifted markedly to expediting the use of analytics and data within the Bank to drive the new differentiated service strategy. This strategic emphasis is not only technology focused but also about changing the data culture within the broader organisation through the use of enhanced analytical capabilities, allowing us to make data-driven decisions with greater confidence. A testament to our ongoing focus on technological excellence is the successful migration of our debit card services—a complex project that was executed with minimal business impact, the focus will shift to credit cards in 2024. We've also continued our focus on digitising corporate and business banking products and services with additional features within the onboarding process, ensuring that our business clients can commence their financial journeys with us more swiftly and smoothly than ever before. Our commitment to exploring leading-edge technology ensures we remain at the forefront of the banking sector, with cautious exploration of AI technologies within the customer service space.
Over the past year, our focus hast shifted markedly to expediting the use of analytics and data within the Bank to drive the new differentiated service strategy.
Riaan Dreyer
Managing Director, Digital and Data
Íslandsbanki has a clear strategy to create value for the future for our customers and shareholders. The key elements of differentiated and digital first service, with data insights will be the driving force behind development of Íslandsbanki's digital products and services.
Fróði is our chatbot, he is ready to answer your question any time of the day.
Even though banks are in many respects conservative institutions, their operating environment is constantly changing. New risks emerge regularly and can strongly affect banks' risk profile. These include technological innovations, social and political unrest, environmental impact, cyberthreats, and earthquakes. Such risks can have a major impact on banks' operating results and reputation. As a result, constant vigilance is needed, and risk management must be flexible and effective, so that new risks can be identified and assessed.
Because of internal and external events, 2023 was a demanding year in many ways. The Bank has monitored its credit risk closely, owing to high inflation and rapid changes in interest rates, yet arrears remain very limited despite these challenges.
Guðmundur Kristinn Birgisson
Chief Risk Officer
The implementation of changes designed to strengthen the Bank’s Compliance department is proceeding apace after a busy year. The year was clearly a very demanding one, and staff members are determined to do the job well.
Important reforms are now complete, and the Bank’s infrastructure and risk culture have been strengthened for the long term. But we must not forget that the journey we are taking is a long-term one and that we, like others in the financial market, must always be ready and willing to blaze new trails.
Compliance department staff members are ready for the next stage in the Bank’s activities and look forward to meeting the challenges the Bank will face in its future endeavours. An important element in this is to maintain and increase the level of experience, expertise, and skill within the department.
The implementation of changes designed to strengthen the Bank’s Compliance department is proceeding apace after a busy year. The year was clearly a very demanding one, and staff members are determined to do the job well.
Barbara Inga Albertsdóttir
Managing Director, Compliance
Íslandsbanki has resolved to be a force for good in the Icelandic economy. The Bank is dedicated to working with its customers and thereby making an impact on Icelandic society.
Íslandsbanki’s Sustainability Policy aims at making the Bank a model of exemplary operations in the Icelandic business community and a catalyst for positive social action, moving Iceland forward by empowering its customers to succeed.
The sustainability statement covers environmental, social and corporate governance factors and are presented in line with ESG guidelines issued by Nasdaq Iceland in 2019, for the last time.
We want to be a role model for the Icelandic economy and take an active part in society. We want our products to reflect rising customer demand for sustainable operations and development. We always want to be where you are.
The Icelandic economy shifted gears in 2023, after a spate of strong growth driven mainly by domestic demand. There are signs of a temporary contraction in private consumption and investment, while at the same time, the current account balance has firmed up and there are fewer indicators of tension in the housing and labour markets. The outlook is for modest growth in the Icelandic economy in 2024. Growth will presumably be export-driven early on, with domestic demand gaining steam as the year progresses, in tandem with declining inflation and a slight drop in interest rates.
Íslandsbanki's 2023 operations were strong and results good. Return on equity was 11.3% for the year, which exceeds the Bank's financial target. Revenue generation was very sound with a 12% increase during the year. The cost-to-income ratio for 2023 was 41.6%, which is the same as it was for 2022. Net impairment on financial assets in 2023 was ISK 1,015 million, due to uncertainty as to seismic activity affecting the town of Grindavík. Growth in lending to customers was modest by 3%, with the high interest environment clearly playing its part in that. Deposits from customers rose by 8% and remain the biggest pillar of the Bank's funding. The Bank's bond issues were well received and as the year drew to a close there were signs of markets abroad reaching a level of normality after turbulent 18 months. The Bank is 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 ISK 12.3 billion be paid as a dividend, which is in accordance with the Bank's dividend policy. Distribution of excess CET1 capital in the amount of ISK 10 billion through continued standard repurchase of own shares is planned throughout 2024.
Íslandsbanki's 2023 operations were strong and results good. Return on equity was 11.3% for the year, which exceeds the Bank's financial target. Revenue generation was very sound with a 12% increase during the year.
Ellert Hlöðversson
Chief Financial Officer
The management and ultimate control over Íslandsbanki is divided among shareholders, the Board of Directors, and the CEO, in accordance with the Bank's Articles of Association and the applicable law and regulatory provisions.
The Board oversees the Bank's activities and ensures that they are in compliance with the applicable regulatory provisions, sound business and governance practices, and rules adopted by the Board for the Bank's activities.
The Executive Committee oversees and coordinates key aspects of the Bank's activities and has decision-making authority in matters assigned to it by the CEO, in accordance with policies, goals, and risk appetite as defined by the Board.
