Islandsbanki hf · OMXICE:ISB
Islandsbanki hf — Q2 2021 Earnings Presentation
49 slides from Islandsbanki hf's earnings presentation, Jul 28, 2021
Slide 1: 2Q21 Financial Results
2Q21 Financial Results 28 July 2021 Birna Einarsdóttir Chief Executive Officer Jón Guðni Ómarsson Chief Financial Officer islandsbanki.is
Slide 2: Agenda
Íslandsbanki 2Q21 Financial Results 28 July 2021 Agenda 1. Financial and operational highlights 2. Income statement 3. Balance sheet 4. Q&A 5. Annex: About Íslandsbanki and financial overview 6. Annex: Icelandic economy update 2
Slide 3: 1. Financial and operational highlights
Íslandsbanki 2Q21 Financial Results 28 July 2021 1. Financial and operational highlights islandsbanki.is
Slide 4: 2Q21 Financial highlights
Íslandsbanki 2Q21 Financial Results 2Q21 Financial highlights ROE above financial targets supported by economic recovery and resilience of borrowers 1. operations bring ROE above financial targets 2. Continued solid top line performance Positive impairments and reliable underlying 28 July 2021 ‒ Uni
Slide 5: A return to solid growth in 2021 following COVID-19 recession
Íslandsbanki 2Q21 Financial Results A return to solid growth in 2021 following COVID-19 recession Strong foundations facilitate a robust recovery as world-wide pandemic impact fades 28 July 2021 Following a recession in 2020, the economy is likely to return to growth.. ...supported by a lower real e
Slide 6: 2Q21 Operational highlights
Íslandsbanki 2Q21 Financial Results 2Q21 Operational highlights Íslandsbanki welcomed to Nasdaq Iceland Main Market — Íslandsbanki was listed on Nasdaq Iceland Main Market on 22 June after the successful completion of the 28 July 2021 Bank’s IPO which, the largest IPO in Iceland to date. The Bank’s
Slide 7: Attractive and achievable financial targets
Íslandsbanki 2Q21 Financial Results Attractive and achievable financial targets Clear path to ROE expansion, attractive capital return and optimisation Financial 28 July 2021 2Q21 1Q21 2020 Guidance targets — Based on average expected risk-free rates through the business cycle 8-10% by 2023 — The Ba
Slide 8: 2. Income statement
Íslandsbanki 2Q21 Financial Results 28 July 2021 2. Income statement islandsbanki.is
Slide 9: Significant increase in total operating income YoY
Íslandsbanki 2Q21 Financial Results Significant increase in total operating income YoY Economic recovery yields positive net impairment on financial assets Highlights Income statement, ISKm 2Q21 2Q20 Δ ∆% 1H21 1H20 Δ ∆% 2020 28 July 2021 Net interest income 8,417 8,228 189 2.3% 16,607 16,808 (201) (
Slide 10: Increase in net profit YoY
Íslandsbanki 2Q21 Financial Results Increase in net profit YoY Positive impairments and net financial income have positive impact on 2Q21 net profit 28 July 2021 Highlights Net profit development 2Q20 vs. 2Q21 – Net fee and commission income ISKm increases YoY for all business segments and subsidiar
Slide 11: NII and NIM have shown resilience despite lower base rate
Íslandsbanki 2Q21 Financial Results NII and NIM have shown resilience despite lower base rate Lending volume offsetting pressure on deposit NIM 28 July 2021 Highlights Net interest income NII – Comparison 2Q YoY – Net interest margin on total Business segments, ISKm ISKm assets was relatively stable
Slide 12: Diversified sources of NFCI
Íslandsbanki 2Q21 Financial Results Diversified sources of NFCI 26% increase YoY distributed across business segments 28 July 2021 Highlights Net fee and commission income NFCI – Comparison 2Q YoY – YoY increase in net fee and Business segments, ISKm ISKm commission income YoY is well 2,862 2,865 2,
Slide 13: Positive turnaround in net financial income
Íslandsbanki 2Q21 Financial Results Positive turnaround in net financial income Strong domestic equity market performance in the quarter 28 July 2021 Highlights Net financial income (expense) Bonds and debt instruments1 – Net financial income in 2Q21 is ISKm ISKbn mainly driven by income from shares
Slide 14: Substantial YoY reduction in C/I ratio
Íslandsbanki 2Q21 Financial Results Substantial YoY reduction in C/I ratio Strong historical track record of real cost savings 28 July 2021 Highlights Administrative expenses1 Cost-to-income ratio2,3 – Depreciation was lower in 2Q21 ISKm than in 2Q20 mainly as a result of higher depreciation of asse
Slide 15: 3. Balance sheet
Íslandsbanki 2Q21 Financial Results 28 July 2021 3. Balance sheet islandsbanki.is
Slide 16: Balance sheet reflects balanced loan and funding profile
Íslandsbanki 2Q21 Financial Results Balance sheet reflects balanced loan and funding profile Broad product offering, strong liquidity portfolio and stable funding 28 July 2021 Assets Simplified balance sheet structure – Vast majority of assets consist of 30.6.2021, ISK 1,447bn lending to both indivi
Slide 17: Growth in total assets
Íslandsbanki 2Q21 Financial Results Growth in total assets 6% growth in loans to customers in 2Q21 driven by mortgages 28 July 2021 Highlights Assets, ISKm 30.6.21 31.3.21 Δ Δ% 31.12.20 Δ Δ% – Four line items: Cash and balances with Central Bank 130,968 88,748 42,220 47.6% 78,948 52,020 65.9% – cash
Slide 18: Diversified and highly collateralised loan portfolio
Íslandsbanki 2Q21 Financial Results Diversified and highly collateralised loan portfolio Loans to individuals are 46% of loans to customers, mainly residential mortgages 28 July 2021 Loans to customers Loans to customers By business division, ISKbn By sector, standard sectors (left graph) and with t
Slide 19: LTV distributions point to healthy coverage ratios
Íslandsbanki 2Q21 Financial Results LTV distributions point to healthy coverage ratios Majority of collateral is in residential and commercial real estate 28 July 2021 Highlights LTV distribution by underlying asset class LTV distribution of mortgages to individuals – The weighted average LTV for 30
Slide 20: COVID-19 moratoria over, more clarity on forbearance
Íslandsbanki 2Q21 Financial Results COVID-19 moratoria over, more clarity on forbearance Temporary moratorium uniformly executed and broadly applied during 2020 providing shelter for customers as they weathered the storm. Payments have resumed for 62% of loans in forbearance 28 July 2021 Performing
Slide 21: Impairment allowance sufficient, uncertainty accounted for
Íslandsbanki 2Q21 Financial Results Impairment allowance sufficient, uncertainty accounted for Exposures in Stage 2 rose due to the COVID-19 pandemic, but Stage 3 has decreased 28 July 2021 Highlights Loans to customers & off-balance sheet items Loans to customers: gross carrying amount – The distri
Slide 22: Majority of net impairments are COVID-19 related
Íslandsbanki 2Q21 Financial Results Majority of net impairments are COVID-19 related Tourism sector hit hard and fully in Stage 2, overlay factors to account for uncertainty 28 July 2021 Net impairment on financial assets Exposure to tourism by effect of COVID-19 crisis By period, ISKbn A few distre
Slide 23: Diversified funding base
Íslandsbanki 2Q21 Financial Results Diversified funding base Deposits largest source of funding 28 July 2021 Highlights Liabilities & Equity, ISKm 30.6.21 31.3.21 Δ Δ% 31.12.20 Δ Δ% – Deposits from customers grew Deposits from Central Bank and credit institutions 32,240 31,565 675 2.1% 39,758 (7,518
Slide 24: Stable deposits remain the main source of funding
Íslandsbanki 2Q21 Financial Results Stable deposits remain the main source of funding Long term funding sources grew steadily during the year 28 July 2021 Highlights Funding sources Deposits from customers and credit institutions – Total increase in deposits By type, % of total liabilities and equit
Slide 25: Seasoned and diversified long-term funding programme
Íslandsbanki 2Q21 Financial Results Seasoned and diversified long-term funding programme Recent issues demonstrate the depth of the available investor pool for targeted issues 28 July 2021 Highlights Sources of market borrowings Maturity profile of long-term funding Currency split of capital market
Slide 26: Sound liquidity management, meeting all requirements
Íslandsbanki 2Q21 Financial Results Sound liquidity management, meeting all requirements Liquid assets of ISK 312bn are prudently managed, representing 22% of total assets 28 July 2021 Highlights Total liquidity coverage ratio1 (LCR) and total net stable Liquid assets – The Icelandic Central Bank fu
Slide 27: Market risk well within appetite
Íslandsbanki 2Q21 Financial Results Market risk well within appetite The Bank has a modest market risk profile 28 July 2021 Highlights Market risk exposure and market risk appetite Currency imbalance, compared with regulatory limit – The Bank's market risk mainly Average positions per quarter, % of
Slide 28: Sound capital position
Íslandsbanki 2Q21 Financial Results Sound capital position Highlights High REA density and high leverage driven by CRD IV standardised approach – An ISK 3.4bn dividend payment was paid out in March and the coefficient for the IFRS 9 28 July 2021 transitional rules fell from 70% to 50% in January 202
Slide 29: Íslandsbanki's capital ratios well above target
Íslandsbanki 2Q21 Financial Results Íslandsbanki’s capital ratios well above target Excess capital of ISK ~30bn including capital structure optimisation Highlights 28 July 2021 Current regulatory requirements and minimum capital target – The Pillar 2-R capital requirement has been revised following
Slide 30: Clear path to a double-digit ROE
Íslandsbanki 2Q21 Financial Results Clear path to a double-digit ROE A realistic plan to reach ambitious and yet achievable ROE target 28 July 2021 Real cost decrease YoY excluding one-offs -4% Rate hike NFCI growth YoY announced on Target ROE 19.5.21 20% Capital Reported cost of +25bps optimisation
Slide 31: Q&A
Íslandsbanki 2Q21 Financial Results 28 July 2021 Q&A Íslandsbanki.is
Slide 32: 4. Annex – About Íslandsbanki and financial overview
Íslandsbanki 2Q21 Financial Results 28 July 2021 4. Annex – About Íslandsbanki and financial overview islandsbanki.is
Slide 33: This is Íslandsbanki
Íslandsbanki 2Q21 Financial Results This is Íslandsbanki Moving Iceland forward by empowering our customers to succeed 28 July 2021 Vision and Values The Bank Market share1 Sustainability 2Q21 Commitment to reaching net FTEs zero emissions by 2040 and Vision to be 733 32% retail customers only Icela
Slide 34: Financial overview
Íslandsbanki 2Q21 Financial Results Financial overview Key figures & ratios 2Q21 2Q20 1H21 1H20 2020 PROFITABILITY After tax profit (loss), ISKm 5,431 1,245 9,046 (131) 6,755 28 July 2021 Return on equity 11.6% 2.8% 9.7% (0.1%) 3.7% Net interest margin (of total assets) 2.4% 2.6% 2.4% 2.7% 2.6% Cost
Slide 35: 5. Annex – Icelandic economy update
Íslandsbanki 2Q21 Financial Results 28 July 2021 5. Annex – Icelandic economy update islandsbanki.is
Slide 36: Economic recovery to take root this year and blossom in 2022
Íslandsbanki 2Q21 Financial Results Economic recovery to take root this year and blossom in 2022 GDP growth to gain pace in 2H2021; robust growth expected in 2022 28 July 2021 Highlights GDP and the contribution of major subitems GDP forecast comparison – The COVID-19 pandemic impact on YoY change %
Slide 37: Tourism sector hit hard by COVID-19 pandemic
Íslandsbanki 2Q21 Financial Results Tourism sector hit hard by COVID-19 pandemic Uptick in tourist arrivals has started and is likely to accelerate in coming quarters 28 July 2021 Highlights Foreign visitors Foreign visitors – An upswing in tourist arrivals in the Departures through KEF airport and
Slide 38: Current account surplus to increase again in coming years
Íslandsbanki 2Q21 Financial Results Current account surplus to increase again in coming years The recovery of tourism will support both the current account and GDP growth in coming years 28 July 2021 Highlights Export volume Current account balance1 and GDP growth – This year’s rise in foreign visit
Slide 39: Domestic balance sheets remain healthy despite COVID-19
Íslandsbanki 2Q21 Financial Results Domestic balance sheets remain healthy despite COVID-19 Economy-wide leverage remains moderate in comparison with peers and historical levels 28 July 2021 Private sector debt Corporate debt % of GDP % of GDP 400 300 350 250 300 250 200 200 150 150 83 100 100 50 50
Slide 40: Public sector to lead investment growth in 2021
Íslandsbanki 2Q21 Financial Results Public sector to lead investment growth in 2021 Private sector to take the lead thereafter 28 July 2021 Highlights Investment Investment, real change, and contribution of subcomponents – Investment has sagged for two % of GDP % years running, after a period of rel
Slide 41: Rising business sentiment signals investment growth to come
Íslandsbanki 2Q21 Financial Results Rising business sentiment signals investment growth to come Reduced uncertainty and favourable financing conditions should put an end to the contraction in business investment 28 July 2021 Highlights Business sentiment, 400 largest companies Executives’ expectatio
Slide 42: Unemployment more persistent than previously hoped
Íslandsbanki 2Q21 Financial Results Unemployment more persistent than previously hoped Equilibrium unemployment will probably be higher further ahead 28 July 2021 Highlights Unemployment 1 Unemployment – Unemployment rose rapidly from % of workforce, monthly average % of workforce, annual average mi
Slide 43: Robust real wage growth supports private consumption
Íslandsbanki 2Q21 Financial Results Robust real wage growth supports private consumption Private consumption growing steadily once again 28 July 2021 Highlights Private consumption and related indicators Private consumption, unemployment and real wages – Although private consumption YoY real % chang
Slide 44: Real estate market resilient throughout pandemic
Íslandsbanki 2Q21 Financial Results Real estate market resilient throughout pandemic Residential housing market turnover has been brisk and price increase has been accelerating Commercial property prices have stabilised after price decline in 1H2020 28 July 2021 Capital area house prices relative to
Slide 45: ISK appreciation to build a head of steam in the coming term
Íslandsbanki 2Q21 Financial Results ISK appreciation to build a head of steam in the coming term The CBI has mitigated exchange rate volatility in the past decade 28 July 2021 Highlights ISK exchange rate and Central Bank FX interventions Real exchange rate indices and current account balance – The
Slide 46: Inflation has peaked and is set to taper off
Íslandsbanki 2Q21 Financial Results Inflation has peaked and is set to taper off We expect inflation to align with the CBI’s 2.5% inflation target around mid-2022 28 July 2021 Highlights Inflation and contribution of main subitems Inflation, policy rate and real policy rate – Inflation rose steadily
Slide 47: Iceland's credit rating has remained at A
Íslandsbanki 2Q21 Financial Results Iceland’s credit rating has remained at A Setbacks in the tourist sector have not affected the sovereign ratings 28 July 2021 Development of sovereign credit rating Fitch in Dec-17: Moody’s in Nov-19: AAA/Aaa Rating upgrade to A on economic Upgrade to A2 on sustai
Slide 48: Disclaimer
Íslandsbanki 2Q21 Financial Results 28 July 2021 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 49: islandsbanki.is
Íslandsbanki 2Q21 Financial Results 28 July 2021 islandsbanki.is