Islandsbanki hf · OMXICE:ISB
Islandsbanki hf — Q2 2023 Earnings Presentation
47 slides from Islandsbanki hf's earnings presentation, Jul 27, 2023
Slide 1: 2Q23 Financial Results
2Q23 Financial Results 27 July 2023 Jón Guðni Ómarsson Chief Executive Officer Jóhann Ottó Wathne Head of Treasury
Slide 2: ROE of 11.5% in 2Q23 led by growth in core income
Íslandsbanki 2Q23 Financial Results ROE of 11.5% in 2Q23 led by growth in core income Earnings above financial target largely due to release of impairments 27 July 2023 Solid top line growth in 2Q23 Growing revenues support C/I ratio NII and NFCI, ISKbn C/I ratio1 40.6% 42.1% 42.6% C/I +23.0% 42.7%
Slide 3: Final resolution in the FSA case
Íslandsbanki 2Q23 Financial Results Final resolution in the FSA case Administrative fine of ISK 1,160m and implementation of certain remedial measures 27 July 2023 Risk assessment Government sell down of a 22.5% stake in procedures March 2022 FSA preliminary findings received at end of Update policy
Slide 4: Delivering on financial targets in the second quarter
Íslandsbanki 2Q23 Financial Results Delivering on financial targets in the second quarter CET1 ratio buffer increased by 20bp during the quarter 27 July 2023 Target 2Q23 Highlights — Updated ROE guidance for 2023 is towards a range of Return on equity >10% 11.5% 10.7-11.7% — 2023 guidance for C/I ra
Slide 5: Fair economic weather ahead, with a chance of showers
Íslandsbanki 2Q23 Financial Results Fair economic weather ahead, with a chance of showers Considerably slower GDP growth ahead as exports take the lead from domestic demand 27 July 2023 Moderate, export led growth to take over from the strong recovery… ..and housing market is leveling off after stee
Slide 6: Sound performance across all business units
Íslandsbanki 2Q23 Financial Results Sound performance across all business units Strong ROE and growth in both lending and deposits Corporate & 27 July 2023 Personal Banking Business Banking Investment Banking Iceland Funds 21.6% ROE 14.0% ROE 21.6% ROE 20.3% ROE 73.6% Cost-to-income ratio1 45.2% Cos
Slide 7: Enhanced digital services increase flexibility
Íslandsbanki 2Q23 Financial Results Enhanced digital services increase flexibility 27 July 2023 Digital only 75% of account individuals Ávöxtun 90 day largest active in account in App in Q2 PB Pension Trading for 3 million Web now legal monthly connected entities visits to app to Online available in
Slide 8: Íslandsbanki Reykjavík Marathon
Íslandsbanki 2Q23 Financial Results Íslandsbanki Reykjavík Marathon Íslandsbanki Reykjavík Marathon 27 July 2023 Biggest ISK 1.3bn Key funding event for charitable in total many event of collected charitable the year since 2006 organisations Held on 19 August More than 170 charitable 2023 for organi
Slide 9: Financial overview
Íslandsbanki 2Q23 Financial Results 27 July 2023 Financial overview islandsbanki.is
Slide 10: Growth in Net Interest Income key driver in strong results
Íslandsbanki 2Q23 Financial Results Private and Confidential Growth in Net Interest Income key driver in strong results Interest income continues to rise in current interest rate environment 27 July 2023 Profit for the period – 2Q22 vs 2Q23 ISKm 158 (832) Net fee & commission 2,358 income Other net
Slide 11: NII increase due to high rates environment
Íslandsbanki 2Q23 Financial Results NII increase due to high rates environment Central Bank rates likely near its peak, with inflation subsiding slowly 27 July 2023 Highlights Net interest income Net interest income – YoY comparison By business segments, ISKm ISKm – Lending margin was 1.8% in 2Q23 (
Slide 12: Strong fee income from cards and payment processing
Íslandsbanki 2Q23 Financial Results Strong fee income from cards and payment processing Allianz Ísland hf., a subsidiary of the Bank, continues to contribute to NFCI growth 27 July 2023 Highlights Net fee and commission income Net fee and commission income – YoY comparison Business segments, ISKm IS
Slide 13: NFI affected by volatile market environment
Íslandsbanki 2Q23 Financial Results NFI affected by volatile market environment Exposure to shares and equity instruments continues to decline 27 July 2023 Highlights Net financial income (expense) Shares and equity instruments 1 ISKm ISKbn – Loss in NFI in the quarter is largely due to loss from th
Slide 14: C/I ratio in 2Q23 remains below target due to higher revenue
Íslandsbanki 2Q23 Financial Results C/I ratio in 2Q23 remains below target due to higher revenue Cost of ISK 860m due to the administrative fine 27 July 2023 Highlights Administrative expenses Cost-to-income ratio1,2 – Substantial increase in ISKm costs between years, 7,551 42.7% 42.1% 42.6% 6,818 7
Slide 15: Steady lending growth with a modest credit risk profile
Íslandsbanki 2Q23 Financial Results Steady lending growth with a modest credit risk profile Diversified and highly collateralised loan portfolio 27 July 2023 Highlights Loans to customers Loans to customers By business division, ISKbn 1,219 1,238 By sector, with tourism as a separate sector – The cr
Slide 16: Credit quality remains strong
Íslandsbanki 2Q23 Financial Results Credit quality remains strong Reversal of impairment for a few distressed credit cases in the tourism industry 27 July 2023 Highlights Net impairment on financial assets Loans to customers: Stage 2 and 3 (NPL) By period, ISKbn Development of gross carrying amount
Slide 17: Mortgage portfolio resistant to rising rates
Íslandsbanki 2Q23 Financial Results Mortgage portfolio resistant to rising rates Origination process has built-in buffers for expected rate increases, resulting in healthy coverage ratios 27 July 2023 Highlights Mortgage portfolio Interest rate reset profile for NIL 3-5Y fixed rate mortgages1 By int
Slide 18: Real estate and construction sector in a good shape
Íslandsbanki 2Q23 Financial Results Real estate and construction sector in a good shape Exposures in the real estate sector mostly to companies with diverse portfolios Highlights – Loans to real estate 27 July 2023 companies and construction amount to 11% and 6% of Development of exposure to real es
Slide 19: Deposits are the largest source of funding
Íslandsbanki 2Q23 Financial Results Deposits are the largest source of funding Steady increase in retail deposits 27 July 2023 Highlights Funding sources Customer loans to customer deposits ratio – Term deposits are 21% of total By type, % of total liabilities and equity Development, % deposits 152%
Slide 20: Seasoned and diversified long-term funding programme
Íslandsbanki 2Q23 Financial Results Seasoned and diversified long-term funding programme Majority of 2023 maturities already funded through a recent €300m bond issue 27 July 2023 Highlights Sources of borrowings Contractual maturity profile of Currency split of borrowings Development, ISKbn borrowin
Slide 21: Sound liquidity management, ratios well above requirements
Íslandsbanki 2Q23 Financial Results Sound liquidity management, ratios well above requirements Liquid assets of ISK 322bn, representing 20% of total assets 27 July 2023 Highlights Total liquidity coverage ratio (LCR) Liquidity coverage ratio – foreign currencies and ISK – All liquidity measures abov
Slide 22: Strong capital position
Íslandsbanki 2Q23 Financial Results Strong capital position Reduced Pillar 2-R capital requirements 27 July 2023 Highlights Capital ratios and leverage ratio SREP results 2023 – The financial stability board has % of REA (% of total exposure for leverage ratio) announced an increase in the – The Cen
Slide 23: Q&A
Íslandsbanki 2Q23 Financial Results 27 July 2023 Q&A islandsbanki.is
Slide 24: Appendix I – About Íslandsbanki and additional financial information
Íslandsbanki 2Q23 Financial Results 27 July 2023 Appendix I – About Íslandsbanki and additional financial information islandsbanki.is
Slide 25: This is Íslandsbanki
Íslandsbanki 2Q23 Financial Results This is Íslandsbanki Our purpose is to be a force for good by empowering our customers to succeed 27 July 2023 Vision and Values The Bank Market share1 Sustainability 2Q23 FTEs The Bank participated in the To create value 691 30% retail customers creation of a cli
Slide 26: Financial overview
Íslandsbanki 2Q23 Financial Results Financial overview Key figures & ratios 2Q23 1Q23 4Q22 3Q22 2Q22 PROFITABILITY Profit for the period, ISKm 6,139 6,211 5,982 7,486 5,880 27 July 2023 Return on equity 11.5% 11.4% 11.1% 14.4% 11.7% Net interest margin (of total assets) 3.2% 3.2% 3.1% 3.0% 2.9% Cost
Slide 27: Income Statement
Íslandsbanki 2Q23 Financial Results Income Statement Income growth continues and profitability is robust Income statement, ISKm 2Q23 2Q22 ∆% 1H23 1H22 ∆% 2022 Net interest income 12,612 10,254 23% 25,035 19,463 29% 43,126 27 July 2023 Net fee and commission income 3,592 3,434 5% 7,061 6,498 9% 14,05
Slide 28: Balance sheet reflects a balanced loan and funding profile
Íslandsbanki 2Q23 Financial Results Balance sheet reflects a balanced loan and funding profile Conservative mix of assets and stable funding 27 July 2023 Assets Simplified balance sheet structure 30.6.23, ISK 1,593bn – Vast majority of assets consist of lending to both retail and corporates Cash in
Slide 29: Assets
Íslandsbanki 2Q23 Financial Results Assets Asset base mainly consists of loans and liquid assets Assets, ISKm 30.6.23 31.3.23 Δ Δ% 31.12.22 Δ Δ% 27 July 2023 Cash and balances with Central Bank 78,275 67,764 10,511 16% 94,424 (16,149) (17%) Loans to credit institutions 97,749 81,331 16,418 20% 110,3
Slide 30: Liabilities and equity
Íslandsbanki 2Q23 Financial Results Liabilities and equity Deposits continue to be the largest source of funding Liabilities & Equity, ISKm 30.6.23 31.3.23 Δ Δ% 31.12.22 Δ Δ% 27 July 2023 Deposits from Central Bank and credit institutions 14,306 13,694 612 4% 15,269 (963) (6%) Deposits from customer
Slide 31: Appendix II – Icelandic economy update
Íslandsbanki 2Q23 Financial Results 27 July 2023 Appendix II – Icelandic economy update islandsbanki.is
Slide 32: GDP growth to ease after the recent surge
Íslandsbanki 2Q23 Financial Results GDP growth to ease after the recent surge GDP growth driven mainly by exports in 2023, with domestic demand gradually regaining ground Highlights 27 July 2023 GDP and contribution of its subcomponents GDP, domestic demand, and external trade – Iceland’s GDP grew b
Slide 33: Tourism enjoying brisk tailwinds
Íslandsbanki 2Q23 Financial Results Tourism enjoying brisk tailwinds Over 2.1 million tourists to visit Iceland in 2023, and nearly 2.5 million in 2025 Highlights 27 July 2023 Number of foreign tourists, by month Number of foreign tourists, by year – The post-pandemic rebound of the tourist sector h
Slide 34: Current account balance to improve in the coming term
Íslandsbanki 2Q23 Financial Results Current account balance to improve in the coming term Tourism the backbone of export growth, but other sectors contribute Highlights 27 July 2023 Exports and contribution from subcomponents Current account balance – A buoyant tourism sector explains the lion’s sha
Slide 35: Domestic balance sheets remain healthy
Íslandsbanki 2Q23 Financial Results Domestic balance sheets remain healthy Economy-wide leverage remains moderate as the ratio of private sector debt to GDP declines 27 July 2023 Private sector debt Corporate debt % of GDP % of GDP 400 300 350 250 300 250 200 200 150 150 100 100 50 50 0 0 2003200420
Slide 36: Investment set to dip in 2024 and then recover quickly
Íslandsbanki 2Q23 Financial Results Investment set to dip in 2024 and then recover quickly Residential investment returns to robust growth in 2023, corporate investment set to regain steam Highlights 27 July 2023 Investment, real change, and contribution of subcomponents Executives’ expectations and
Slide 37: Strong demand pressures in the labour market
Íslandsbanki 2Q23 Financial Results Strong demand pressures in the labour market Real wage growth limited early on but will regain momentum in 2024 27 July 2023 Highlights Wages, year on year change Unemployment1 – The Icelandic labour market has % % of workforce, annual average shown once again how
Slide 38: Private consumption growth eases after rising steeply
Íslandsbanki 2Q23 Financial Results Private consumption growth eases after rising steeply Consumption appears not to be credit-driven; household saving is now on the decline Highlights 27 July 2023 Private consumption and related indicators – Private consumption grew by nearly 9% in 2022, the fastes
Slide 39: The real estate market appears to be stabilising
Íslandsbanki 2Q23 Financial Results The real estate market appears to be stabilising Central Bank measures have contributed to slower price increases of residential housing 27 July 2023 Capital area house prices relative to macroeconomic fundamentals Residential house prices and turnover in greater
Slide 40: The Icelandic housing market is relatively resilient
Íslandsbanki 2Q23 Financial Results The Icelandic housing market is relatively resilient Supply, demand, mortgage market factors combine to make a large price correction less likely 27 July 2023 Households are not highly indebted compared to peers Mortgage market is flexible w.r.t. loan types with d
Slide 41: Inflation set to taper off
Íslandsbanki 2Q23 Financial Results Inflation set to taper off How fast it falls will depend on the housing market and imported inflation 27 July 2023 Highlights Inflation and the CBI inflation target Inflation by contribution of main categories – Twelve-month inflation peaked in % % February at 10.
Slide 42: Monetary tightening phase to end in 2H 2023
Íslandsbanki 2Q23 Financial Results Monetary tightening phase to end in 2H 2023 Over time, the policy rate will gradually approach equilibrium, at a higher level than assumed earlier Highlights 27 July 2023 Policy rate and inflation Key interest rates – Following a series of rate hikes, the %, Real
Slide 43: ISK likely to strengthen somewhat over time
Íslandsbanki 2Q23 Financial Results ISK likely to strengthen somewhat over time The real exchange rate is approaching its previous high, however Highlights 27 July 2023 ISK exchange rate and selected determinants Real exchange rate and current account balance – The ISK depreciated slightly in 2022.
Slide 44: Iceland's credit rating has been resilient in turbulent times
Íslandsbanki 2Q23 Financial Results Iceland’s credit rating has been resilient in turbulent times Rating companies acknowledge the flexibility of the economy and resilience to the pandemic shock 27 July 2023 Development of sovereign credit rating Fitch in Dec-17: Moody’s in Nov-19: AAA/Aaa Rating up
Slide 45: The Icelandic economy and society draw on many strengths
Íslandsbanki 2Q23 Financial Results The Icelandic economy and society draw on many strengths Icelanders enjoy high standards of living in a modern, open and egalitarian society 27 July 2023 Iceland ranks highly on a variety of global Income inequality is low compared to OECD peers Sustainable energy
Slide 46: Disclaimer
Íslandsbanki 2Q23 Financial Results 27 July 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 forecasts o
Slide 47: islandsbanki.is
Íslandsbanki 2Q23 Financial Results 27 July 2023 islandsbanki.is