Islandsbanki hf · OMXICE:ISB
Islandsbanki hf — Íslandsbanki — Investor Presentation (September 2022)
56 slides from Islandsbanki hf's investor presentation, September 2022
Slide 1: Íslandsbanki: Investor Presentation August-September 2022
Íslandsbanki: Investor Presentation August-September 2022 islandsbanki.is
Slide 2: This is Íslandsbanki
This is Íslandsbanki August-September 2022 Moving Iceland forward by empowering our customers to succeed Vision and Values The Bank Market share1 Sustainability 2Q22 FTEs Íslandsbanki receives top ESG Vision to be 702 31% retail customers score (90/100) from Reitun for the second year in a row numbe
Slide 3: Export-driven GDP growth following robust growth in demand
Export-driven GDP growth following robust growth in demand August-September 2022 Strong foundations facilitate a vigorous recovery as world-wide pandemic impact fades Exports replace domestic demand as the key catalyst of healthy GDP growth… ...as tourism sector recovery continues following receding
Slide 4: Financial overview
of the issuer Financial overview islandsbanki.is August-September 2022
Slide 5: Increase in core revenues in a good quarter
Increase in core revenues in a good quarter August-September 2022 Control of costs further boost a positive result Profit for the period – 2Q21 vs 2Q22 ISKm 696 (565) 527 (454) 1,837 (1,562) (30) 5,880 5,431 2Q21 Net interest Net fee &Corporate Other netsector & public Operating Net impairment on In
Slide 6: NII rose strongly in all business segments
NII rose strongly in all business segments August-September 2022 NIM rose to 2.9% due to a higher interest rate environment Highlights Net interest income NII – comparison 2Q YoY – NII continued a positive By business segments, ISKm ISKm trend supported by 10,254 higher interest rate 8,792 9,209 518
Slide 7: NFCI rose 18.1% YoY
NFCI rose 18.1% YoY August-September 2022 Broad-based fee generation across the business units Highlights Net fee and commission income NFCI – comparison 2Q YoY – Revenues from investment Business segments, ISKm ISKm banking and brokerage 3,653 3,427 3,434 YoY increase from currency sales 2,907 170
Slide 8: Positive NFI in turbulent markets
Positive NFI in turbulent markets August-September 2022 Rising benchmark interest rates do however support financial income in other derivatives Highlights Net financial income Shares and equity instruments1 – Reduction in shares and ISKm ISKbn equity instruments in 2Q22 is 941 explained by Norðurtu
Slide 9: Administrative expenses stable in 2Q22
Administrative expenses stable in 2Q22 August-September 2022 5.9% reduction in real terms driven by lower salary costs Administrative expenses1 Cost-to-income ratio2 ISKm 5,900 5,768 5,834 5,993 49.9% 47.6% 5,088 446 45.3% 42.7% 413 532 358 39.4% 1,466 327 1,506 1,515 1,457 1,273 1,598 1,500 1,601 1
Slide 10: Impairment reversals continued in 2Q22
Impairment reversals continued in 2Q22 August-September 2022 Majority of forborne borrowers have resumed payments Highlights Net impairment on financial assets Loans to customers: Stage 2 and 3 (NPL) By period, ISKbn Changes in models Development of gross carrying amount as ratio of total loans – Re
Slide 11: Lending volume growth across all business units
Lending volume growth across all business units August-September 2022 Credit quality remains strong and highly collateralised loan portfolio Loans to customers +4.1% Loans to customers By business division, ISKbn By sector, with tourism as a separate sector 1,087 1,108 1,154 1,090 1,081 347 +2.0% 35
Slide 12: Deposits are the largest source of funding
Deposits are the largest source of funding August-September 2022 Retail deposits continue to increase Highlights Funding sources Customer loans to customer deposits ratio – Term deposits are 18% of total By type, % of total liabilities and equity Development, % deposits 46% 152% 142% 143% 146% 145%
Slide 13: Seasoned and diversified long-term funding programme
Seasoned and diversified long-term funding programme Majority of 2022 maturities already funded through €300m sustainable bond issue in January August-September 2022 Highlights Sources of borrowings Contractual maturity profile of Currency split of borrowings Development, ISKbn borrowings 30.6.22 –
Slide 14: Strong capital position and dividend capacity
Strong capital position and dividend capacity August-September 2022 Opportunity exists to optimise capital composition and to continue consistent dividends Highlights Capital ratios and leverage ratio Capital distribution plans – Current and long-term expected % of REA (% of total exposure for lever
Slide 15: Mortgage underwriting and origination
Mortgage underwriting origination and islandsbanki.is August-September 2022
Slide 16: Mortgage portfolio – a broad offering
Mortgage portfolio – a broad offering August-September 2022 Direct origination and competitive interest rates Characteristics Type of . product offerings – Íslandsbanki originates mortgage loans directly, without collaborating 1 Variable non-indexed mortgage with any brokers – The pricing strategy i
Slide 17: Different features for different needs
Different features for different needs August-September 2022 Borrowers can choose from an array of solutions Non-indexed loans Indexed loans Equal payments Equal instalments — Higher debt burden to — Lower debt burden to — Borrower pays the — Borrower pays the begin with begin with same total amount
Slide 18: Conservative lending criteria
Conservative lending criteria August-September 2022 Applicants must meet a stringent set of requirements – Individuals intending to buy or refinance a home for own use can apply for a mortgage with Íslandsbanki – Borrowers can renew their interest rates due to lower LTVs through refinancing, which i
Slide 19: Higher interest rates for higher LTVs
Higher interest rates for higher LTVs August-September 2022 Generally the loan part that exceeds the 70% limit is subject to a higher rate Loan period Mortgage book breakdown as at 30 Mortgage product type Current interest rate LTV (years) June 2022 (ISKbn) Variable non-indexed mortgage 6.65% 70% 40
Slide 20: Robust mortgage portfolio
Robust mortgage portfolio August-September 2022 Average LTVs stable and built-in buffers for rate increases Highlights Mortgage portfolio LTV distribution of mortgages to individuals Gross carrying amount, ISKbn Gross carrying amount, ISKbn, 30.6.2022 – Conservative payment assessment for non-indexe
Slide 21: Property valuations are regularly updated
Property valuations are regularly updated August-September 2022 LTVs are generally determined based on the official real estate value Highlights Example An individual buys an apartment for the first time. The price is ISK – Property valuations are updated at least once a year by 50.000.000 and the o
Slide 22: Application process is streamlined
Application process is streamlined August-September 2022 Response is normally delivered within 1 to 5 days The application process for a mortgage is fully digital, with 99% of applications being made digitally Information required: All necessary data is retrieved digitally through a third party, suc
Slide 23: Loans past due are monitored closely
Loans past due are monitored closely August-September 2022 Foreclosure procedures are not expected to take more than 18 months Highlights Foreclosure procedure – Íslandsbanki takes out a list once a month of all debts that are in arrears – If the debt is secured, letter number two is a payment chall
Slide 24: Covered bond programme and cover pool
cover pool Covered bond programme and islandsbanki.is August-September 2022
Slide 25: Íslandsbanki's covered bond programme
Íslandsbanki’s covered bond programme Assets are ring-fenced on the issuer’s balance sheet August-September 2022 Transaction Structure Key features – Íslandsbanki’s covered bond programme reflects the Icelandic ring fencing on balance sheet structure: the assets inlcuded in the cover pool are segreg
Slide 26: Íslandsbanki's covered bond programme – cont'd
Íslandsbanki’s covered bond programme – cont’d August-September 2022 Monitoring / Representation of Bondholders / Oversight Issuer bankruptcy does not entitle covered bondholders to accelerate the programme – The Independent Inspector is appointed by the issuer and approved by the Icelandic – The pr
Slide 27: Matching rules are there to protect the investor
Matching rules are there to protect the investor August-September 2022 The Icelandic Covered Bond Act requires issuers to satisfy a set of requirements, known as matching rules, to ensure that the covered bond programme is able to mitigate asset-liability mismatches Breach of matching rules Nominal
Slide 28: Cover Pool – main features
Cover Pool – main features August-September 2022 Cover pool made of entirely residential mortgage loans Composition of the cover pool Cover pool has expanded over years ISKm – The cover pool currently consists of mortgage loans secured against residential properties located in Iceland – going forwar
Slide 29: Cover Pool – main features – cont'd
Cover Pool – main features – cont’d August-September 2022 Nearly ISK 300bn of collateral backing the loans Cover pool composition as at 30 June Current balance range 2022 ISKm, 30 June 2022 35% 32.22% Cut-off Date 30/06/2022 30% 25% 23.62% 21.24% Current Balance (ISKm) 360,064 20% Cover Pool Balance
Slide 30: Cover Pool – main features – cont'd
Cover Pool – main features – cont’d August-September 2022 Loan features are aligned with market standards Seasoning profile, months Interest rate range (% of current principal balance), 30 June 2022 (% of current principal balance), 30 June 2022 60% 70% 64.47% 50.17% 60% 50% 50% 40% 40% 34.31% 30% 2
Slide 31: Appendix I – About Íslandsbanki and additional financial information
August-September 2022 Appendix I – About Íslandsbanki and additional financial information islandsbanki.is
Slide 32: Financial overview
Financial overview August-September 2022 Key figures & ratios 2Q22 1Q22 4Q21 3Q21 2Q21 PROFITABILITY Profit for the period, ISKm 5,880 5,187 7,092 7,587 5,431 Return on equity 11.7% 10.2% 14.2% 15.7% 11.6% Net interest margin (of total assets) 2.9% 2.6% 2.4% 2.4% 2.4% Cost-to-income ratio1 42.7% 47.
Slide 33: Income growth of 16% YoY driven by NII and NFCI
Income growth of 16% YoY driven by NII and NFCI August-September 2022 Robust profitability in 2Q22 built on a solid platform Income statement, ISKm 2Q22 2Q21 ∆% 1H22 1H21 ∆% 2021 Net interest income 10,254 8,417 22% 19,463 16,607 17% 34,043 Net fee and commission income 3,434 2,907 18% 6,498 5,769 1
Slide 34: Balance sheet reflects a balanced loan and funding profile
Balance sheet reflects a balanced loan and funding profile August-September 2022 Conservative mix of assets and stable funding Assets Simplified balance sheet structure – Vast majority of assets consist of 30.6.2022, ISK 1,437bn lending to both retail and corporates Deposits from credit inst. – Stro
Slide 35: Growth in loans to customers continues
Growth in loans to customers continues August-September 2022 Steady mortgage growth supported by a strong capital base Assets, ISKm 30.6.22 31.3.22 Δ Δ% 31.12.21 Δ Δ% Cash and balances with Central Bank 77,884 77,799 85 0% 113,667 (35,783) (31%) Loans to credit institutions 37,226 73,220 (35,994) (4
Slide 36: Diversified funding base
Diversified funding base August-September 2022 Deposits are the largest source of funding Liabilities & Equity, ISKm 30.6.22 31.3.22 Δ Δ% 31.12.21 Δ Δ% Deposits from Central Bank and credit institutions 11,437 10,949 488 4% 13,384 (1,947) (15%) Deposits from customers 756,862 761,471 (4,609) (1%) 74
Slide 37: Appendix II – Icelandic economy update
August-September 2022 Appendix II – Icelandic economy update islandsbanki.is
Slide 38: Export-driven GDP growth following robust growth in demand
Export-driven GDP growth following robust growth in demand August-September 2022 GDP growth rapid in 2022 but slower in coming years Highlights GDP and contribution of its subcomponents GDP, domestic demand, and external trade – After a 7.1% contraction in 2020, the Volume change from prior year (%)
Slide 39: Tourism recovering swiftly from a two-year drought
Tourism recovering swiftly from a two-year drought August-September 2022 We forecast that 1.5-1.6 million tourists will visit Iceland in 2022 Highlights Number of foreign tourists, by month Number of foreign tourists, by year – After a turbulent two-year period the thousands thousands tourist sector
Slide 40: Current account balance set to improve in the near term
Current account balance set to improve in the near term August-September 2022 Increased share of exports in GDP growth spurs a recovery of external trade in coming quarters Highlights Exports and contribution from subcomponents Current account balance and GDP growth – The rapid recovery of tourism %
Slide 41: Domestic balance sheets still healthy
Domestic balance sheets still healthy August-September 2022 Economy-wide leverage remains moderate in comparison with peers and historical levels 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 2003 2004 2005 2006 2007 2008 2009 2010 201
Slide 42: Investment growth loses pace after a growth spurt
Investment growth loses pace after a growth spurt August-September 2022 Residential investment to take over from business investment as the driver of growth Highlights Investment, real change, and contribution of subcomponents Executives’ expectations and business investment – After a two-year contr
Slide 43: Unemployment continues to fall
Unemployment continues to fall August-September 2022 A growing labour shortage will probably be one of the greatest challenges Highlights Labour supply according to corporate executives Unemployment1 – Unemployment has fallen swiftly % % of workforce, annual average after peaking in January 2021 as
Slide 44: Inflation erodes household purchasing power
Inflation erodes household purchasing power August-September 2022 Private consumption growth will be weaker in the near term as a result Highlights Private consumption and related indicators – Private consumption rallied last % change year-on-year (left) and index value (right) year, growing by 7.6%
Slide 45: Real estate markets still buoyant
Real estate markets still buoyant August-September 2022 Commercial property prices rising again while residential house price rises have gained steam Capital area house prices relative to macroeconomic fundamentals Residential house prices and turnover in greater Reykjavik Index, January 2011=100 %
Slide 46: Inflation to spike in autumn 2022
Inflation to spike in autumn 2022 August-September 2022 House prices and import costs the main drivers short-term but wage costs also matter Highlights Inflation and the CBI inflation target Inflation by contribution of main categories – Inflation started rising in mid-2020, % % in the wake of the C
Slide 47: Policy rate to rise rapidly throughout 2022
Policy rate to rise rapidly throughout 2022 August-September 2022 Gradual easing further ahead; equilibrium rate in sight by the end of the horizon Highlights Policy rate and inflation Interest rates – The Central Bank of Iceland has % % hiked its policy by 4 percentage points since May 2021, after
Slide 48: ISK likely to appreciate further
ISK likely to appreciate further CA surplus and inflows for securities purchases offset pension funds’ foreign investments August-September 2022 Highlights ISK exchange rate and CBI FX market intervention Real exchange rate and current account balance – Following nearly 3% appreciation in EUR m (lef
Slide 49: Alternative scenarios demonstrate impact of key uncertainties
Alternative scenarios demonstrate impact of key uncertainties August-September 2022 COVID-19, war in Ukraine and upcoming wage negotiations could have significant impact Highlights GDP growth, % Inflation, % – The economic outlook for Iceland, like the 8.9 5.9 global outlook, has fluctuated widely i
Slide 50: Iceland's credit rating has remained at A
Iceland’s credit rating has remained at A August-September 2022 Rating companies acknowledge the flexibility of the economy and resilience to the pandemic shock 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 sustain
Slide 51: Appendix III – Covered bond frameworks
August-September 2022 Appendix III – Covered bond frameworks islandsbanki.is
Slide 52: The Icelandic covered bond framework
The Icelandic covered bond framework August-September 2022 Regular oversight performed by the FME Governed by the Icelandic Covered Bond Act (ICBA), which came into force on March 2008, complemented by the Rules of the Financial Supervisory Authority no. 528/2008 Legal framework (“ICBR”) Direct on-b
Slide 53: Covered bond framework comparison
Covered bond framework comparison August-September 2022 The Iceland framework is largely aligned with the main European jurisdictions Iceland Germany Norway Sweden Hypothekenpfandbriefe, Öffentliche Pfandbriefe, Name of instrument Sértryggð skuldabréf Schiffspfandbriefe, Flugzeugpfandbriefe Obligasj
Slide 54: Covered bond framework comparison – cont'd
Covered bond framework comparison – cont’d August-September 2022 Iceland Finland Denmark Særligt Dækkede Name of instrument Sértryggð skuldabréf Finnish Covered Bonds Særligt Dækkede Obligationer Realkreditobligationer Realkreditobligationer Supervision Icelandic Financial Supervisory Authority (FME
Slide 55: Disclaimer
August-September 2022 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 of its future results and re
Slide 56: islandsbanki.is
islandsbanki.is
Íslandsbanki — Investor Presentation (September 2022) on 6ix