Islandsbanki hf · OMXICE:ISB
Islandsbanki hf — H1 2010 Earnings Presentation
31 slides from Islandsbanki hf's earnings presentation, September 2010
Slide 1: 1H 2010 results
1H 2010 results September
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: Overview
Overview 01. The Icelandic economy, current issues & development 02. Reviewed financial results 03. Assets & Restructuring 04. Funding, liquidity & capital 05. Appendix 3
Slide 4: The Icelandic economy, current issues & development
01. The Icelandic economy, current issues & development
Slide 5: Current external issues
Current external issues Indications that recession Positive signs that the economy is reaching a turning point has reached a turning Favourable assessment by the IMF mission to Iceland announced on 28 June, third review of point IMF program expected to be brought for approval before the IMF Executiv
Slide 6: The state of the Icelandic economy
The state of the Icelandic economy Indicators suggest that the recession is receeding Positive signs that the economy is reaching a turning Inflation – monthly change (%) 20 point 18 16 – Decrease in unemployment 14 – Inflation has reduced sharply 12 10 – Consumer expectations noticeably rising 8 6
Slide 7: Facts on Iceland
Facts on Iceland Progressive modern European society Global competitiveness 2009 -2010 High standard of living despite recession – GDP pr. capita among highest in the world Overall ranking for Iceland* 26 – Unemployment less than European average Health and primary education 2 – Member UN, OECD, WTO
Slide 8: Reviewed financial results
02. Reviewed financial results
Slide 9: Highlights of Q2 2010
Highlights of Q2 2010 Solid results in line with budget Continued satisfactory results despite Build-up phase to continue in 2010 - 2011 uncertainties – Investments in infrastructure in line with – Return on equity 17.1% strategy to strengthen foundations – Net interest margin 5.7% – Resulting in hi
Slide 10: Income Statement
Income Statement 1 January – 30 June 2010 (ISK m) 1H 2010 1H 2009 Net interest income 20,280 12,231 Net interest income: Net fee & commission income 3,332 3,611 – Funding cost has reduced in 2010 Other net operating income 45 911 – Deposit margin higher than expected Net foreign exchange gain (loss)
Slide 11: Income split
Income split Retail banking continues to be the leading contributor ISK 20.3bn net interest income ISK 3.3bn net fee & commission – 39% from Retail Banking income – 31% from Treasury & Capital Markets – 59% from Retail Banking • Mainly fees from payment processing Net interest margin 5.7% and loans
Slide 12: Changes in the value of loan portfolio
Changes in the value of loan portfolio Net impact on P&L substantially lower than total impairments indicate Collective allowances: Net effect on P&L is ISK -3,4bn in 1H 2010 – Acquired portfolio: Same assumptions as in the – ISK -21.9bn specific and collective allowances for initial valuation impai
Slide 13: Assets & Restructuring
6D G iol =) a=) 1S} =) is} ep) i) aa B me ic) WN ie) < (a)
Slide 14: Balance sheet
Balance sheet Consolidated – 30 June 2010 (ISK m) 30.06.2010 31.12.2009 Asset split Cash and balances with Central Bank 25,372 38,743 Cash and balances Other Bonds and debt instruments 70,664 66,701 with CB 5% 3% Shares and equity instruments 2,025 2,250 Bonds and debt Loans to banks 95,726 87,416 i
Slide 15: Loan portfolio overview
Loan portfolio overview Book value ISK 570bn Large difference in book value and claim value Approximately 9% (ISK 50bn) of the loan portfolio is a government guaranteed asset Diversified exposures by sectors within Iceland – Issued by a credit institution in receivership 46% denominated in FX Loan p
Slide 16: Ruling on the legitimacy of FX/ISK loans
Ruling on the legitimacy of FX/ISK loans Total loan portfolio – ISK 570bn Background On 16 June the Supreme Court of Iceland ruled that certain types of FX loan agreements contained clauses in breach of articles 13 and 14 of Law 38/2001 on Interest . FX Other 46% The Ruling has not resulted in any c
Slide 17: Loans to companies & households
Loans to companies & households Book value ISK 468bn Corporate loan portfolio represents over half of Conventional retail products to households in Iceland the Bank’s total portfolio – 20% of loans to individuals are FX denominated (ISK – Diverse split between industries 33.6bn) – Approximately 2/3
Slide 18: Restructuring of companies
Restructuring of companies Loans to companies (corporates, SMEs and VSEs) Category analysis – customer position Restructuring going slower than expected due 4 Customers in legal collection to Supreme Court Ruling on FX linked loans 3 In restructuring and unresolved Considerable repayments by the bes
Slide 19: Restructuring of households
Restructuring of households Loans to households and individuals Category analysis – customer position 83% of book value is either paying according to original loan agreement or after some general 4 Customers in legal collection offer 3 In restructuring and unresolved – debt adjustment 2 Customers th
Slide 20: Funding, liquidity & capital
04. Appendix Funding, liquidity I – Key Figures & capital
Slide 21: Deposits largest source of funding
Deposits largest source of funding Fairly stable around ISK 450bn High deposit rates and implicit state guarantee The ratio of deposits of the Bank’s total have been attractive to investors funding base is expected to lower as – Interest rates have been coming down recently investors seek higher ret
Slide 22: Prudent internal liquidity measures
Prudent internal liquidity measures Conservative classification of liquid assets Liquid assets A Liquidation time 0-3 days Collateral that can be used for secure borrowing at central banks Should cover all liabilities maturing within the next 3 months Liquid assets B Liquidation time up to 15 days H
Slide 23: Strong focus on liquidity management
Strong focus on liquidity management All liquidity measures well above targets Liquidity in excess of regulatory requirements Liquid assets cover 42% of customer deposits – FME: Cash or cash like assets amounting to 5% – ISK 31% coverage ratio of demand deposits – FX 93% coverage ratio – FME: the Ba
Slide 24: Manageable imbalances
Manageable imbalances Increased uncertainty related to foreign currency loans The Bank focuses on both the gross and net FX gap: – Gross FX gap of ISK 183bn – Net FX gap of ISK 48bn Foreign currency Inflation – Uncertainty regarding the legitimacy of foreign (ISKbn) denominatd indexed currency loans
Slide 25: Capitalisation exceeds requirements
Capitalisation exceeds requirements Regulatory requirements were made more stringent after October 2008 FME now requires banks to hold Core Tier 1 ratio of 17.7% and total capital – 12% of RWA in the form of core Tier 1 capital ratio of 21.5% at 30 June 2010 allowing for Pillar 2 adjustment for FX/I
Slide 26: Appendix
05. Appendix 26
Slide 27: Key figures
Key figures Total assets Loan book Equity 741 100 750 700 100 92 717 598 577 570 699 90 76 600 513 700 493 80 65 68 500 70 658 ISKbn ISK bn 60 ISKbn 650 631 400 50 300 40 600 200 30 20 100 10 550 0 0 2008-10-15 2008-12-31 2010-06-30 2009-06-30 2009-12-31 2008-10-15 2008-12-31 2009-06-30 2009-12-31 2
Slide 28: Universal banking services in Iceland
Universal banking services in Iceland Expertise in select business areas Íslandsbanki’s branch network Comprehensive services Universal banking services for households, corporate clients and professional investors – Efficient retail distribution network Retail Banking – Well positioned corporate ban
Slide 29: Strong heritage in banking
Strong heritage in banking First privately owned bank in Iceland Has served Icelandic industry, households and Long history of consolidation commerce since 1904 Historically the Bank has a tradition of being in private ownership and leading in domestic consolidation 2008 International expansion 2004
Slide 30: New organisational chart as of 1 July 2010
New organisational chart as of 1 July 2010 Aligned with strategy Board of Directors Internal audit Ágúst Hrafnkelsson CEO Birna Einarsdóttir Corporate Banking Wealth Risk & Credit Retail Banking Markets CFO COO Vilhelm M. Management Control Una Steinsdottir Jóhannes Baldursson Sigrún R. Ólafsdóttir
Slide 31: Íslandsbanki´s Board of Directors
Íslandsbanki´s Board of Directors Independent board with wide experience from international financial markets Fridrik Sophusson, Chairman of the board An Icelandic national, has nearly forty years' wide-ranging experience in fiscal policy making, management and public service in Iceland. He served a