Islandsbanki hf · OMXICE:ISB
Islandsbanki hf — FY2010 Earnings Presentation
40 slides from Islandsbanki hf's earnings presentation, 2011
Slide 1: Íslandsbanki 2010 results
[slandsbanki ~ ey 2010 results istandsbanki
Slide 2: Disclaimer
Disclaimer This material has been prepared for professional investors. Íslandsbanki hf. (ÍSB) when preparing this report has not taken into account any one customer’s particular investment objectives, financial resources or other relevant circumstances and the opinions and recommendations herein are
Slide 3: Agenda
Agenda g 01. Economic outlook [4] 02. Highlights of the year [7] 03. Income statement [9] 04 Assets and restructuring 04. [ 14 ] 05. Funding, liquidity and capitalisation [ 21 ] 06. Summary & outlook [ 26 ] 07. Appendix [ 29] 3
Slide 4: 01. Economic outlook
01. Economic outlook
Slide 5: Economy is stabilising
Economy y is stabilising g Lifting of capital controls is the next challenge Moderate inflation has supported rate cuts Lifting of capital controls expected to start this year • Inflation has reached the Central Bank’s target • ISK has been rather stable Currently 1.9%, the lowest since 1H 2004
Slide 6: Modest growth expected in second half
Modest g growth expected p in second half Uncertainties still considerable All forecasts project growth in 2011 Considerable slack in labour market • Recovery will be gradual • Unemployment thought to have peaked Moderate growth in exports due to increased world High historically for Iceland and
Slide 7: 02. Highlights of the year
02. Highlights g g of the year y
Slide 8: Full year 2010 results
Full y year 2010 results Robust capital ratios on back of strong earnings Financial highlights Operational highlights • Capital base remains strong • Restructuring in full force Total capital ratio 26.6% at year end Suffered temporary set back due to the Supreme Court Tier Ti 1 ratio ti 22 22.
Slide 9: 03. Income statement
03. Income statement
Slide 10: Income Statement
Income Statement Full year 2010 Net interest income ISK m 2010 2009 • 9% increase YoY mainly due to lower cost of funding Net interest income 34,875 31,984 High equity level increases NII Net valuation changes 14,507 801 Latent impairment ‐514 ‐477 • Deposit margin is declining as result of fallin
Slide 11: Income split
Income split p Business mix will change with increased CM activity Steady progress in income revenues Net interest margin high in short term • Net interest income up 9% YoY • Net interest margin is 5.0% for the year Starting to see positive impact of interest rate reset Expected to lower to hist
Slide 12: Administrative expenses
Administrative expenses p Costs expected to lower as restructuring completes in 2012 Costs are in line with budget Operating expenses & core cost / income ratio • Increase of 41 FTEs in 2010 9,000 60% 50.0% • National Insurance contribution increased 8,000 43.7% 50% 7,000 39.4% • Mid‐year collective
Slide 13: Changes in the value of the loan portfolio
Changes g in the value of the loan p portfolio Extensive impairment process performed at year end 2010 Impairment allowances Allowances for impairment (BS) • Specifically p y assessed impairment p allowance (Black book) Allowances ll for f impairment All loans with exposure exceeding 20m where the
Slide 14: 04. Assets & restructuring
04. Assets & restructuringg
Slide 15: Balance sheet - assets
Balance sheet ‐ assets Consolidated – 31 December 2010 Asset split (ISK m) 31.12.10 31.12.09 Cash and balances with Central Bank 30,799 38,743 5.6% Loans to customers Derivatives 70 0 4.5% 4.5% Bonds and debt instruments 68,024 66,701 Bonds and debt Sh Shares and d equity it iinstruments t t 3 022 3
Slide 16: Balance sheet - liabilities
Balance sheet ‐ liabilities Consolidated – 31 December 2010 Liability split (ISK m) 31.12.10 31.12.09 Financial Liabilities 9,090 7,332 8.1% Deposits from customers Derivatives 429 0 Deposits from CB and credit institutions 96,238 139,092 12.1% Equity D Deposits it ffrom customers t 327 158 327,158
Slide 17: Loan portfolio split
Loan p portfolio split p Consolidated 31 December 2010 ‐ book value ISK 546bn Diversified exposure by sectors within Iceland Sector split • Large difference in book value and claim value Individuals 3% 3% • Exposure to financial institutions decreases due 4% 3% Real estate to loan reclassification 5
Slide 18: Overdue and impaired loans
Overdue and impaired p loans Book value reflects expected recovery ISKm Recorded past due loan information is skewed Overdue exposures 1‐30d 31‐60d 61‐90d >90d Total Banks 8 0 0 0 8 Companies 5.189 2.577 685 12.743 21.194 • Majority of past due loans are in some Individuals 5.864 1.707 772 10.001 18
Slide 19: Restructuring of households
Restructuring g of households Loans to households and individuals • Restructuring delayed due to: • Recalculations of FX‐linked loans finalised before mid year Supreme Court ruling on FX loans 5,000 individual mortgages Alignment within the financial sector 10,000 individual car loans New
Slide 20: Restructuring of companies
Restructuring g of companies p Loans to companies (corporations, SMEs and VSEs) • Companies are doing better, in general, than • 100% ddebt b solution l i approach h approved d by b allll expected when portfolio was acquired members of Icelandic Financial Services Association • Restructuring going s
Slide 21: 05. Funding, liquidity and capitalisation
05. Funding,g, liquidity q y and capitalisation p
Slide 22: Deposits largest source of funding
Deposits epo i largest a ge source ou e of o funding u i g Revision of deposit insurance scheme is pending Deposits still guaranteed in full by government ... but changes are being discussed • Deposit levels in line with what was expected • The deposit insurance will be changed in the near with decl
Slide 23: Strong liquidity position
Strong g liquidity q ypposition Liquid assets predominately in the A category Liquidity ratios remained high throughout 2010 Development of internal liquidity ratios* – all currencies • The FME requires the Bank to hold: 220% Liquidity Ratio A Liquidity Ratio B Cash or cash like assets against at
Slide 24: Capital ratios well above required minimum
Capital p ratios well above required q minimum Supervisory requirements still exceed legal minimum Capital ratios have steadily increased Capital ratios • Core Tier 1 ratio of 22.6 % and total capital ratio 28% 26.6% of 26.6% at 31 December 2010 26% 4% 24% FME requirements assume 12% and 16% respe
Slide 25: Imbalances being actively reduced
IImbalances a a e being ei g aactively i e y reduced e u e Net FX gap closed during Q4 Successful closure of net FX gap Imbalances of 31 December 2010 • The Bank’s foreign currency denominated loan book of ISK 255 billion is split in two Foreign currency Gross FX gap of ISK 104bn is expected to be
Slide 26: 06. Summary & outlook
06. Summaryy & outlook
Slide 27: Summary & outlook
Summary y & outlook External Internal • Indications that recession has reached a turning • High level of indebtedness of households and point corporations – ISK has strengthened and unemployment to decrease – Restructuring going slower than anticipated – Benchmark rates and inflation very low histor
Slide 28: Strategy development was in focus in 2010
Strategy gy development p was in focus in 2010 Broad participation by employees in the strategic process Strategic priorities for 2011 Key goals categories Vision • Finalise restructuring • Re‐price loan book People Growth • Increase fee and commission i i iincome • Grow loan book Service Restructur
Slide 29: 07. Appendix
07. Appendix pp
Slide 30: Key figures
Key figures Total assets Total Loan book ISK bn 800 717 700 700 715 683 ISK bn 700 700 577 568 570 564 546 600 600 500 500 400 400 300 300 200 100 200 0 100 Q4 Q1 Q2 Q3 Q4 0 Q4 Q1 Q2 Q3 Q4 2009 2010 2009 2010 Total borrowing Equity ISK bn 80.0 ISK bn 69.2 70.0 140 121 60.4 59.0 57.7 60.0 55.4 120 10
Slide 31: Key figures
Key figures Total deposit / loan ratio Net interest margin 90% 83% 82% 80% 81% 6% 78% 5 2% 5.2% 5 2% 5.2% 5 2% 5.2% 80% 4.7% 5% 4.7% 70% 60% 4% 50% 3% 40% 30% 2% 20% 1% 10% 0% 0% Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 2009 2010 2009 2010 Return on equity Core cost / income ratio 60% 70% 63.0% 49.4% 50% 43.1%
Slide 32: Key figures
Key figures Salary & related expense Other operating expenses ISK bn ISK bn 3.0 3.0 2.43 2.52 2.51 2.56 2.5 2.17 2.16 2.09 2.5 2.19 2.19 2.01 2.0 2.0 1.5 1.5 1.0 1.0 0.5 0.5 0 0 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 2009 2010 2009 2010 Total administrative expenses FTE (quarterly average) ISK bn 6.0 1,200.0
Slide 33: Universal banking services in Iceland
Universal banking g services in Iceland International reach through Seafood and Geothermal energy Universal banking services for households, Building on industry background and corporate clients and professional investors heritage in home market • Efficient retail distribution network • Dedicated te
Slide 34: Strong heritage in banking
Strong g heritage g in banking g Has served Icelandic industry, households and commerce since 1904 Historically the Bank has a tradition of being Íslandsbanki was re‐established on 15 October 2008 in private ownership and leading in domestic after the collapse of Glitnir Banki consolidation • Assume
Slide 35: Organisational chart
Organisational O ga i a io a chart a Aligned with strategy Board of Directors Internal audit Ágúst g Hrafnkelsson CEO Birna Einarsdóttir ki Corporate Banking W lth Wealth Ri k & Credit Risk C dit Retail Banking Markets CFO COO Vilhelm M. Management Control Una Steinsdottir Jóhannes Baldursson Sigrún
Slide 36: Íslandsbanki's Board of Directors
Íslandsbanki´ss Board of Directors Íslandsbanki Independent board with wide experience from international financial markets Fridrik Sophusson, p , Chairman of the board An Icelandic national, has nearly forty years' wide‐ranging experience in fiscal policy making, management and public service in Ic
Slide 37: Íslandsbanki's ownership structure
Íslandsbanki’ss ownership structure Íslandsbanki Glitnir banki • Glitnir, Íslandsbanki and the Icelandic sovereign Resolution Committee reached an agreement on 13th September 2009 regarding settlement of assets and liabilities between the old and the new banks GLB Holding – Resolution Committee of G
Slide 38: Prudent internal liquidity measures
Prudent internal liquidity q y measures Conservative classification of liquid assets Liquid assets A Liquid assets B Liquid assets C • Liquidation time 0‐3 0 3 days • Liquidation time up to 15 days • Liquidation time up to 6 months • Collateral that can be used for • Highly liquid bonds (investment
Slide 39: Debt restructuring options
Debt restructuring g options p Standardised procedures & tailored solutions O ti Options Households • Principal adjustment ‐ FX linked mortgages General “off‐the‐shelf” • Payment adjustment ‐ All CPI linked mortgages • Recalculations according to Supreme Court ruling (FX linked car loans and mortgag
Slide 40: Iceland has valuable macro fundamentals
Iceland has valuable macro fundamentals Plenty of quality protein & sustainable power • High competitiveness and standard of living Export value of seafood GDP pr. capita among highest in the world 250 209 198 199 High educational level and good health care (even access) 200 178 172 179 192 165