Islandsbanki hf · OMXICE:ISB
Islandsbanki hf — Q3 2023 Earnings Presentation
49 slides from Islandsbanki hf's earnings presentation, Oct 26, 2023
Slide 1: 3Q23 Financial Results
3Q23 Financial Results 26 October 2023 Jón Guðni Ómarsson Chief Executive Officer Bjarney Anna Bjarnadóttir Investor Relations
Slide 2: ROE of 11.0% in 3Q23 in a mixed business environment
Íslandsbanki 3Q23 Financial Results ROE of 11.0% in 3Q23 in a mixed business environment Asset quality remains strong despite high inflation 26 October 2023 Core income growth between years C/I ratio below guidance NII and NFCI, ISKbn C/I ratio1 C/I +4.7% target 12.3 12.4 12.6 11.8 <45% 40.6% 42.1%
Slide 3: Delivering on financial targets in the third quarter
Íslandsbanki 3Q23 Financial Results Delivering on financial targets in the third quarter CET1 ratio buffer increased during the quarter 26 October 2023 Target 3Q23 Highlights — Updated ROE guidance for 2023 is towards a range of Return on equity >10% 11.0% 10.7-11.7% — 2023 guidance for C/I ratio re
Slide 4: Economy cooling as tighter policy has impact
Íslandsbanki 3Q23 Financial Results Economy cooling as tighter policy has impact GDP growth to lose steam in 2023 and then gradually regain strength 26 October 2023 Considerably slower GDP growth tempo ahead as exports take lead.. ..and housing market prices have levelled off after steep price incre
Slide 5: Robust earnings in a mixed quarter
Íslandsbanki 3Q23 Financial Results Robust earnings in a mixed quarter Universal banking model supports a solid result 26 October 2023 Corporate & Personal Banking Business Banking Investment Banking Iceland Funds 21.5% ROE 22.7% ROE 11.9% ROE 20.5% ROE 29.8% Cost-to-income ratio 32.9% Cost-to-incom
Slide 6: Our fight against fraud
Íslandsbanki 3Q23 Financial Results Our fight against fraud • Fraud attempts have increased alongside increased digital activity in banking services • Íslandsbanki is raising awareness through training and education • We offer enhanced services to customer who are victims of frauds – including a 24/
Slide 7: Fróði the friendly chatbot & NLP innovation
Íslandsbanki 3Q23 Financial Results Fróði the friendly chatbot “Are you a living & NLP innovation person or is the Leveraging AI to boost customer service and efficiency program really that well created?” - Happy Fróði customer • Fróði was introduced as a staff member of Íslandsbanki 3 years ago and
Slide 8: We believe in great ideas
Íslandsbanki 3Q23 Financial Results Íslandsbanki's Entrepreneurship Fund We support the ISK 165 million Íslandsbanki blossoming start-up awarded in last contributes a part of and entrepreneurial three years the annual balance of community in Vaxtasproti savings Iceland account to the Fund The fund w
Slide 9: ISK 200 million raised
Íslandsbanki 3Q23 Financial Results 11,307 ISK 200 million 175 participants of all ages raised charitable organisations benefit for charities by participants 9
Slide 10: Financial overview
Íslandsbanki 3Q23 Financial Results Financial overview islandsbanki.is
Slide 11: Core banking operations remain solid
Íslandsbanki 3Q23 Financial Results Core banking operations remain solid Normalising impairments affect 3Q23 26 October 2023 Profit for the period – 3Q22 vs 3Q23 ISKm (117) 527 (754) 3Q22 531 Net fee & Other net Operating Net interest commission operating expenses income income income (1,748) 191 (1
Slide 12: Core NII holding steady
Íslandsbanki 3Q23 Financial Results Core NII holding steady Central Bank policy rates unchanged in October meeting 26 October 2023 Highlights Net interest income Net interest income – YoY comparison By business segments, ISKm ISKm – Lending margin was 1.8% in 3Q23 (1.9% in 12,348 12,423 12,612 11,84
Slide 13: Strong fee income from cards and payment processing
Íslandsbanki 3Q23 Financial Results Strong fee income from cards and payment processing Allianz Ísland hf., a subsidiary of the Bank, continues to contribute to NFCI growth 26 October 2023 Highlights Net fee and commission income Net fee and commission income – YoY comparison Business segments, ISKm
Slide 14: NFI affected by volatile market environment
Íslandsbanki 3Q23 Financial Results NFI affected by volatile market environment Equity exposures remain modest 26 October 2023 Highlights Net financial income (expense) Shares and equity instruments 1 ISKm ISKbn – Loss in NFI in the quarter is mainly due to loss from the liquidity portfolio due 6.5
Slide 15: Cost-to-income ratio beats target
Íslandsbanki 3Q23 Financial Results Cost-to-income ratio beats target Seasonality in salary expenses supports low C/I ratio 26 October 2023 Highlights Administrative expenses Cost-to-income ratio1,2 – Decrease in salaries in ISKm 3Q23 is affected by 7,551 42.1% 42.6% 6,818 7,042 40.6% 39.0% seasonal
Slide 16: Lending growth moderates
Íslandsbanki 3Q23 Financial Results Lending growth moderates Diversified and highly collateralised loan portfolio 26 October 2023 Highlights Loans to customers Loans to customers By business division, ISKbn By sector, with tourism as a separate sector – The credit quality of the 1,219 1,238 1,210 1,
Slide 17: Credit quality remains strong
Íslandsbanki 3Q23 Financial Results Credit quality remains strong Stage 2 loans have reached normalised levels 26 October 2023 Highlights Net impairment on financial assets Loans to customers: Stage 2 and 3 (NPL) By period, ISKbn Development of gross carrying amount as ratio of total loans – The 3Q2
Slide 18: Mortgage portfolio shows a shift to CPI-linked loans
Íslandsbanki 3Q23 Financial Results Mortgage portfolio shows a shift to CPI-linked loans Loan to value is strong and supports this shift 26 October 2023 Highlights Mortgage portfolio Interest rate reset profile for NIL 3-5Y fixed rate mortgages By interest rate type, gross carrying amount, ISKbn Gro
Slide 19: Real estate and construction sector in a good shape
Íslandsbanki 3Q23 Financial Results Real estate and construction sector in a good shape High interest rates and inflation reduce loan growth 26 October 2023 Highlights Development of exposure to real estate companies Development of construction exposure Gross carrying amount by period, ISKbn Gross c
Slide 20: Deposits are the largest source of funding
Íslandsbanki 3Q23 Financial Results Deposits are the largest source of funding Significant growth in retail deposits 26 October 2023 Highlights Funding sources Customer loans to customer deposits ratio – Term deposits are 21% of total By type, % of total liabilities and equity Development, % deposit
Slide 21: Seasoned and diversified long-term funding programme
Íslandsbanki 3Q23 Financial Results Seasoned and diversified long-term funding programme Focus on local issuance in 3Q23 26 October 2023 Highlights Sources of borrowings Contractual maturity profile of Currency split of borrowings Development, ISKbn borrowings 30.9.23 – The Bank has been assigned an
Slide 22: Sound liquidity management, ratios well above requirements
Íslandsbanki 3Q23 Financial Results Sound liquidity management, ratios well above requirements Liquid assets of ISK 371bn, representing 23% of total assets 26 October 2023 Highlights Total liquidity coverage ratio (LCR) Liquidity coverage ratio – foreign currencies and ISK 900% – All liquidity measu
Slide 23: Strong capital position
Íslandsbanki 3Q23 Financial Results Strong capital position Capital ratios rise with issuance of Tier 2 bonds 26 October 2023 Highlights Capital ratios and leverage ratio Capital requirements – The financial stability board has % of REA (% of total exposure for leverage ratio) announced an increase
Slide 24: Q&A
Íslandsbanki 3Q23 Financial Results 26 October 2023 Q&A islandsbanki.is
Slide 25: Appendix I – About Íslandsbanki and additional financial information
Íslandsbanki 3Q23 Financial Results Appendix I – About Íslandsbanki and additional financial information islandsbanki.is
Slide 26: This is Íslandsbanki
Íslandsbanki 3Q23 Financial Results This is Íslandsbanki Our purpose is to be a force for good by empowering our customers to succeed 26 October 2023 Vision and Values The Bank Market share1 Sustainability 3Q23 FTEs To create value 716 30% retail customers IS HAF fjárfestingar concluded its first tw
Slide 27: Financial overview: Key figures & ratios
Íslandsbanki 3Q23 Financial Results Financial overview Key figures & ratios 3Q23 2Q23 1Q23 4Q22 3Q22 PROFITABILITY 6,007 26 October 2023 Profit for the period, ISKm 6,139 6,211 5,982 7,486 Return on equity 11.0% 11.5% 11.4% 11.1% 14.4% Net interest margin (of total assets) 2.9% 3.2% 3.2% 3.1% 3.0% C
Slide 28: Income Statement
Íslandsbanki 3Q23 Financial Results Income Statement Income growth continues and profitability is robust Income statement, ISKm 3Q23 3Q22 ∆% 9M23 9M22 ∆% 2022 26 October 2023 Net interest income 11,846 11,315 5% 36,881 30,778 20% 43,126 Net fee and commission income 3,400 3,517 (3%) 10,461 10,015 4%
Slide 29: Balance sheet reflects a balanced loan and funding profile
Íslandsbanki 3Q23 Financial Results Balance sheet reflects a balanced loan and funding profile Conservative mix of assets and stable funding 26 October 2023 Assets Simplified balance sheet structure 30.9.23, ISK 1,644bn – Vast majority of assets consist of lending to both retail and corporates Cash
Slide 30: Assets
Íslandsbanki 3Q23 Financial Results Assets Asset base mainly consists of loans and liquid assets 26 October 2023 Assets, ISKm 30.9.23 30.6.23 Δ Δ% 31.12.22 Δ Δ% Cash and balances with Central Bank 84,332 78,275 6,057 8% 94,424 (10,092) (11%) Loans to credit institutions 117,699 97,749 19,950 20% 110
Slide 31: Liabilities and equity
Íslandsbanki 3Q23 Financial Results Liabilities and equity Deposits continue to be the largest source of funding 26 October 2023 Liabilities & Equity, ISKm 30.9.23 30.6.23 Δ Δ% 31.12.22 Δ Δ% Deposits from Central Bank and credit institutions 15,159 14,306 853 6% 15,269 (110) (1%) Deposits from custo
Slide 32: Appendix II – Icelandic economy update
Íslandsbanki 3Q23 Financial Results Appendix II – Icelandic economy update islandsbanki.is
Slide 33: GDP growth to lose steam in 2023, then gradually recover
Íslandsbanki 3Q23 Financial Results GDP growth to lose steam in 2023, then gradually recover Exports set to drive near-term growth, with domestic demand picking up later in the forecast horizon 26 October 2023 Highlights GDP and contribution of its subcomponents GDP, domestic demand, and external tr
Slide 34: Tourism to set new records during the forecast horizon
Íslandsbanki 3Q23 Financial Results Tourism to set new records during the forecast horizon Just over 2.2 million tourist arrivals expected in 2023, rising to more than 2.5 million in 2025 26 October 2023 Highlights Number of foreign tourists, by month Number of foreign tourists, by year – The post-p
Slide 35: The European energy crisis has a small impact on Iceland
Íslandsbanki 3Q23 Financial Results The European energy crisis has a small impact on Iceland Geothermal heating keeps energy costs at bay 26 October 2023 Highlights Share of primary energy from renewable sources Proportion of energy source in space heating – Being a small open economy, the % of tota
Slide 36: Current account broadly in balance in the coming term
Íslandsbanki 3Q23 Financial Results Current account broadly in balance in the coming term Tourism to drive export growth, with assistance from other sectors 26 October 2023 Highlights Exports and contribution from subcomponents Current account balance – A buoyant tourism sector explains the lion’s s
Slide 37: Domestic balance sheets remain healthy
Íslandsbanki 3Q23 Financial Results Domestic balance sheets remain healthy Economy-wide leverage remains moderate as the ratio of private sector debt to GDP declines 26 October 2023 Private sector debt Corporate debt % of GDP % of GDP 400 300 350 250 300 250 200 200 150 150 100 100 74 50 50 72 0 0 2
Slide 38: Investment virtually unchanged early on but set to surge later
Íslandsbanki 3Q23 Financial Results Investment virtually unchanged early on but set to surge later Business investment the sole source of growth in 2023, but residential investment will gain momentum in 2024 26 October 2023 Highlights Investment, real change, and contribution of subcomponents Execut
Slide 39: Labour market to remain relatively tight
Íslandsbanki 3Q23 Financial Results Labour market to remain relatively tight Real wage growth limited early on but will regain momentum in 2024 and 2025 26 October 2023 Highlights Wages, year on year change Unemployment1 – The labour market remains tight with % % of workforce, annual average a high
Slide 40: Private consumption growth slows compared to recent past
Íslandsbanki 3Q23 Financial Results Private consumption growth slows compared to recent past Icelanders are feeling the pinch from high inflation and interest rates 26 October 2023 Highlights Household saving Private consumption and related indicators – Private consumption increased by 8.5% YoY in r
Slide 41: The real estate market appears to be stabilising
Íslandsbanki 3Q23 Financial Results The real estate market appears to be stabilising Central Bank measures have contributed to slower price increases of residential housing 26 October 2023 Capital area house prices relative to macroeconomic fundamentals Residential house prices and turnover in great
Slide 42: The Icelandic housing market is relatively resilient
Íslandsbanki 3Q23 Financial Results The Icelandic housing market is relatively resilient Supply, demand, mortgage market factors combine to make a large price correction less likely 26 October 2023 Households are not highly indebted compared to peers Mortgage market is flexible w.r.t. loan types wit
Slide 43: Inflation to ease slowly at first, then fall faster in 2024
Íslandsbanki 3Q23 Financial Results Inflation to ease slowly at first, then fall faster in 2024 Domestic goods and services will account for a larger share of total inflation 26 October 2023 Highlights Inflation and the CBI inflation target Inflation by contribution of main categories – In September
Slide 44: Monetary tightening phase to conclude by end-2023
Íslandsbanki 3Q23 Financial Results Monetary tightening phase to conclude by end-2023 Interest rates to fall gradually towards equilibrium as inflation tapers off and demand pressures ease 26 October 2023 Highlights Policy rate and inflation Key interest rates – The CBI began its monetary %, Real po
Slide 45: Modest further strengthening of the ISK in coming quarters
Íslandsbanki 3Q23 Financial Results Modest further strengthening of the ISK in coming quarters A high real exchange rate will, however, constrain the scope for further strengthening post-2025 26 October 2023 Highlights ISK exchange rate and selected determinants Real exchange rate and current accoun
Slide 46: Iceland's credit rating has been resilient in turbulent times
Íslandsbanki 3Q23 Financial Results Iceland’s credit rating has been resilient in turbulent times Rating companies acknowledge the flexibility of the economy and resilience to recent global shocks 26 October 2023 Development of sovereign credit rating Fitch in Dec-17: Moody’s in Nov-19: Moody’s in J
Slide 47: The Icelandic economy and society draw on many strengths
Íslandsbanki 3Q23 Financial Results The Icelandic economy and society draw on many strengths Icelanders enjoy high standards of living in a modern, open and egalitarian society 26 October 2023 Iceland ranks highly on a variety of global Income inequality is low compared to OECD peers Sustainable ene
Slide 48: Disclaimer
Íslandsbanki 3Q23 Financial Results 26 October 2023 Disclaimer This presentation is for information purposes only and shall not be The forward-looking statements represent Íslandsbanki’s current construed as an offer or solicitation for the subscription or purchase or expectations, plans or forecast
Slide 49: islandsbanki.is
Íslandsbanki 3Q23 Financial Results islandsbanki.is