Price range announced and prospectus published for Íslandsbanki IPO

Highlights of the Offering

• The Offering will comprise up to 636,363,630 existing Shares of Íslandsbanki hf. (“Offer Shares”) offered by Icelandic State Financial Investments on behalf of the Treasury of Iceland (the "Selling Shareholder").
• In addition, the managers have been granted, as part of the Offering, an over-allotment option of 63,636,363 existing shares, representing up to an additional 10% of the Offer Shares (the “Over-Allotment Shares”).
• The Offer Shares and the Over-Allotment Shares together represent 35% of the Shares of the Bank.
• The indicative price range for the Offering has been set at ISK 71 to ISK 79 per Offer Share.
• The Bank’s implied market capitalisation following the Offering will be approximately 150 billion, assuming that the offer price is set at the mid-point of the indicative price range.
• The Offering consists of a public offering of the Offer Shares to institutional and retail investors in Iceland and a private placement to certain institutional investors in various other jurisdictions.
• Each of (i) funds managed and advised by Capital World Investors, (ii) RWC Asset Management LLP, (iii) Gildi-lífeyrissjóður and (iv) Lífeyrissjóður verzlunarmanna, as Cornerstone Investors, has committed to acquire at the Offer Price (and at any such price throughout the Offer Price Range) 76,923,077, 30,769,231, 46,153,846 and 46,153,846 Offer Shares, respectively.
• The offer period commences on Monday 7 June at 9:00 GMT and is expected to close on Tuesday 15 June at 12:00 GMT
• The Financial Supervisory Authority of the Central Bank of Iceland approved the prospectus for the Offering.
• The Board of Directors of the Bank will submit an application for all shares in the Bank to be admitted to trading on the regulated market of Nasdaq Iceland.
• The Selling Shareholder will receive all the net proceeds from the Offering.
• The Treasury of Iceland, directly and indirectly, currently holds 100% of the issued and outstanding ordinary shares of the Bank and following closing of the Offering will hold at least 65% of the Shares.
• The Selling Shareholder will not divest its remaining Shares for a period of 180 days after the first day of trading in the Shares on Nasdaq Iceland, subject to certain exceptions – in line with standard market practice.
• Citigroup Global Markets Europe AG, Íslandsbanki hf. and J.P. Morgan AG are acting as Joint Global Coordinators and Joint Bookrunners of the Offering, alongside the Joint Bookrunners Barclays Bank Ireland PLC, HSBC Continental Europe, Fossar markaðir hf. and Landsbankinn hf., and the Joint Lead Managers Arion Bank hf. and Kvika banki hf., and the Co-Lead Managers Arctica Finance hf., Íslenskir fjárfestar hf. and Íslensk verðbréf hf.

Overview of Íslandsbanki

• Íslandsbanki is headquartered in Iceland, its primary market. In December 2020, the Bank had approximately 31% market share in Personal Banking, 35% market share in Business Banking and 35% market share in Corporate & Investment Banking in Iceland. Íslandsbanki has a BBB/A-2 rating (stable outlook) from S&P Global Ratings.
• Íslandsbanki is a customer-centric universal bank in Iceland with strong positions across the personal, SME, corporate banking sectors, investment banking and asset management.
• The Bank is well-positioned to capture opportunities ahead in the attractive domestic market, as the outlook is vital both in terms of GDP growth and rising interest rates.
• Íslandsbanki leverages its omnichannel delivery model to maintain high customer satisfaction while operating the most efficient domestic branch network.
• The Bank considers itself a digital champion with a state-of-the-art banking platform, investing significantly in digital development and replacing all legacy core systems.
• The Bank is a sustainability frontrunner in Iceland and a global leader in gender equality and has successfully translated sustainability ambitions into differentiated customer propositions. Íslandsbanki is the first Icelandic bank to develop and publish a Sustainable Financing Framework for sustainable loans in its portfolio.
• In addition to being a model of environmental, social, and governance (ESG) in its operations, the Bank is committed to initiating broader collaboration on responsible business practices that contribute to sustainable development in the Icelandic economy.
• Íslandsbanki has a clean and robust balance sheet and a solid foundation to deliver strong financial performance. The Bank has committed itself to ambitious targets and has a clear path to provide increased return on equity (RoE) over the coming years.
• Strong capitalisation provides opportunities for capital return and further RoE growth.

Key Investment Highlights

• Attractive industry dynamics with a concentrated banking market exhibiting strong capitalisation ratios compared to European peers[1], the highest level of digital banking penetration in Europe[2], and an outlook for strong growth.
• Icelandic macro-economic landscape benefiting from proven track record of a fast recovery with a domestic economy that is well positioned to benefit from the on-going re-opening of the global economy from tourism, and a positive interest rate environment.
• The Bank considers itself a digital champion with 99% of customer interactions with individuals through digital channels in 2020, supported by a solid technical foundation, a customer base of which 71% are digital-only, and an efficient omnichannel strategy with the most efficient branch network in Iceland.
• The Bank has a clean and robust balance sheet with a diversified loan portfolio (where mortgages represent the largest category at 37%[3]) and funding structure (of which 54% represent deposits from customers[4]), supported by a disciplined risk management culture of which non-performing loans comprised 2.9% of gross carrying amount as at 31 December 2020 (compared to 3.0% in 2019).
• The Bank is a prominent domestic universal bank in Iceland with a differentiated and innovative approach and market leading positions across its business segments of Personal Banking, Business Banking, Corporate & Investment Banking and Iceland Funds subsidiary.
• The Bank is a sustainability frontrunner in the Icelandic financial services industry with an ESG-ingrained culture embedded across its banking activities and own operations, and currently holds the highest ESG rating in Iceland as evaluated by Reitun (90 out of 100 points).[5]
• Íslandsbanki is led by a strong and experienced management team with a proven track record of delivery at the Bank, including successful restructuring of the loan book since 2011, rigorous execution of the Bank‘s strategy towards increased efficiency and competitiveness, and an impactful response to the COVID-19 pandemic.
• The Bank has a solid financial foundation underpinning a clear path towards double-digit return on equity in the medium term, and capital return potential through sustainable ordinary dividends and opportunity for capital optimisation.

Expected Timetable

• The timetable below sets forth certain expected key dates for the Offering:
• The offering commences Monday, 7 June 2021, at 9:00 GMT.
• The offering is expected to close on Tuesday, 15 June 2021, at 12:00 GMT (for both institutional and retail investors).
• Determination and announcement of the Offer Price, and number of the Offer Shares, are expected to take place on or about Tuesday, 15 June 2021.
• Results of allocations under the Offer are expected to be notified to investors on Wednesday, 16 June 2021.
• Payment for Offer Shares is expected to take place by Monday, 21 June 2021.
• Admission to trading and commencement of unconditional trading on Nasdaq Iceland is expected at 9:30 GMT on Tuesday, 22 June 2021.
• Delivery of Offer Shares is expected in most cases to occur by Tuesday, 22 June 2021.[6] 

[1] Source: European Banking Authority
[2] 96% of individuals (Source: Eurostat, 2020)
[3] As of year-end 2020
[4] As of year-end 2020
[5] Reitun is an Icelandic rating agency.
[6] Because the final due date for payment of the allocated Offer Shares is set for 21 June 2021, and paid Offer Shares are expected to be delivered to the investors within two business days after payment is received, the estimated final date for delivery of the Offer Shares to investors is no later than 23 June 2021.