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Financial results for the first 9 months of 2019

In the first three quarters of the year, fee and commission income grew strongly (11%) year-on-year, as did interest income (6.5%), and the Bank’s loan book grew by 7.4%.  However, downward value adjustments, which stem in part from the cooling of the economy, have weakened the outcome, and the return on equity for the period is below the Bank’s target. 

First 9 months of 2019 (9M19) financial highlights

  • Profit after tax amounted to ISK 6.8bn (9M18: ISK 9.2bn) generating a 5.1% annualised return on equity (9M18: 7.1%).
  • Earnings from regular operations were ISK 8.7bn (9M18: ISK 9.9bn) with 7.3% annualised return on equity from regular operations normalised for 16% CET1 (9M18: 9.0%).
  • Net interest income was ISK 25.2bn (9M18: ISK 23.6bn), an increase of 6.5% between years and the net interest margin was 2.8% (9M18: 2.9%).
  • Net fee and commission income was ISK 9.7bn (9M18: ISK 8.7bn), up by 11% from the same period last year.
  • Loan impairment charges and net valuation changes generated a loss of ISK 2,078m for 9M19, compared to ISK 1,881m gain for 9M18.
  • Administrative costs grew by approximately 2.3% between years and totalled ISK 20.8bn (9M18: ISK 20.2bn).
  • The cost to income ratio for the Group for the period was 61.3% compared to 65.6% for the same period in 2018, while the same ratio for the parent company was 55.3% and in line with the Bank’s 55% long term target.
  • Loans to customers grew to a total of ISK 909.2bn at the end of September. Total new lending during the first three quarters of 2019 amounted to ISK 162.7bn, split across business segments.
  • Deposits from customers stood at ISK 610.3bn at the end of September, an increase of 5% in 2019.
  • The Bank’s liquidity position is strong in both the Icelandic króna and foreign currencies and exceeds all internal and external requirements. Capital ratios are high and in line with the Bank’s long-term targets.

Third quarter 2019 (3Q19) financial highlights

  • Profit after tax was ISK 2.1bn (3Q18: 2.1bn), generating a 4.7% annualised return on equity (3Q18: 4.9%).
  • Earnings from regular operations were ISK 3.0bn (3Q18: 2.9bn) and annualised return on equity for regular operations normalised for 16% CET1 was 7.9% (3Q18: 8.1%).
  • Net interest income amounted to ISK 8.4bn (3Q18: ISK 8.3bn) with 2.7% net interest margin (3Q18: 3.0%).
  • Net fee and commission income were ISK 3.1bn (3Q18: ISK 2.9bn).

Birna Einarsdóttir, CEO of Íslandsbanki

In the first three quarters of the year, fee and commission income grew strongly (11%) year-on-year, as did interest income (6.5%), and the Bank’s loan book grew by 7.4%.  However, downward value adjustments, which stem in part from the cooling of the economy, have weakened the outcome, and the return on equity for the period is below the Bank’s target.  In a positive development over the three-quarter period, the Bank’s expense ratio has been on the decline relative to the same period in 2018. At the parent company level, the expense ratio is currently very close to the long-term target of 55%, but efforts to streamline operations will continue.  The Bank’s liquidity remains strong and well above supervisory benchmarks, and its capital ratio is consistent with the long-term target.

The Bank recently awarded a total of ISK 30.5m in Entrepreneurship Fund grants to nine projects. In the selection of grant participants, priority was given to projects that foster the success of the four UN Sustainable Development Goals to which the Bank has committed in its strategy.  We are determined to be a positive force in the society and will continue to make every effort to be a leader in this endeavour.

First 9 months 2019 (9M19) operational highlights

  • A fully automated online mortgage application and evaluation procedure for individuals was introduced by the Bank.
  • In June, Íslandsbanki issued a SEK 500 m 10NC5 Tier 2 bond. This was the Bank‘s third Tier 2 bond issue and with this transaction the Bank reached its Tier 2 target which is an important milestone in optimising its long-term capital composition.
  • Íslandsbanki published new reports on the Icelandic tourism and real estate sectors in May and October.
  • Íslandsbanki released a new macro-economic forecast in June 2019 which was published during the bank’s annual Financial conference at the Hilton Nordica Hotel in September
  • Riaan Dreyer was appointed Managing director of Information Technology at the Bank.
  • S&P Global Ratings affirmed Íslandsbanki's rating of BBB+/A2 in July but changed the outlook from stable to negative in line with other Icelandic banks.  
  • In August, the Nordic CEOs for Sustainable Future, an alliance of the leaders of the Nordic region´s leading businesses, met in Reykjavik with the prime ministers of the five Nordic countries to discuss a collaborative approach to address sustainability challenges.  Íslandsbanki is a proud member of the group.
  • The Íslandsbanki Reykjavík Marathon was held on 24 August. A high point in the calendar for the Bank for several years, the Bank´s sponsorship of the event helped the 15 thousand runners raised ISK 167m for good causes and is the single largest charity event in Iceland.
  • In October 2019, the Icelandic Financial Supervisory Authority (FME) lowered the minimum requirement for total capital for Íslandsbanki from 19.3% to 18.8%. The decrease is credited to the Bank’s lower risk profile.

Investor call in English at 9.00 AM (GMT) on Thursday 31st October

The Bank will host an investor call in English at 9.00 AM (GMT) on Thursday, 31st October. 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 sending an email to: ir@islandsbanki.is. Dial-in details and presentation will be sent out prior to the call.

For further information on the 9 month 2019 results see here.

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