Islandsbanki hf · OMXICE:ISB
Islandsbanki hf — Q1 2021 Earnings Presentation
48 slides from Islandsbanki hf's earnings presentation, May 5, 2021
Slide 1: 1Q21 Financial Results
Íslandsbanki 1Q21 Financial Results 5 May 2021 1Q21 Financial Results 5 May 2021 islandsbanki.is Birna Einarsdóttir Jón Guðni Ómarsson Chief Executive Officer Chief Financial Officer
Slide 2: Agenda
Íslandsbanki 1Q21 Financial Results 5 May 2021 Agenda 1. Key takeaways and highlights 2. Income statement 3. Balance sheet 4. Q&A 5. Annex: Financial overview and about Íslandsbanki 6. Annex: Icelandic economy update 2
Slide 3: 1. Key takeaways and highlights
Íslandsbanki 1Q21 Financial Results 5 May 2021 1. Key takeaways and highlights islandsbanki.is
Slide 4: 1Q21 Key takeaways
Íslandsbanki 1Q21 Financial Results 1Q21 Key takeaways Solid foundations and robust balance sheet deliver strong financial performance in the quarter 1. Steady and reliable underlying operations 2. Resilient top line performance 5 May 2021 ROE NIM 7,7% 2,8% ‒ Universal relationship 7,4% 7,6% ‒ The B
Slide 5: A return to solid growth in 2021 following COVID-19 recession
Íslandsbanki 1Q21 Financial Results A return to solid growth in 2021 following COVID-19 recession Strong foundations facilitate a robust recovery when world-wide pandemic impact fades 5 May 2021 Following a recession in 2020, the economy is likely to return to growth.. ...supported by a lower real e
Slide 6: 1Q21 operational highlights
Íslandsbanki 1Q21 Financial Results 1Q21 operational highlights Meaningful progress in all business and support units during the quarter 5 May 2021 – Continued activity in the housing market – 27% increase in real estate purchase agreements YoY – Significant increase in digital mortgage applications
Slide 7: Sustainability frontrunner with ESG-ingrained culture
Íslandsbanki 1Q21 Financial Results Sustainability frontrunner with ESG-ingrained culture Íslandsbanki's objective is to be a model of exemplary operations and a force for good in the Icelandic business community 5 May 2021 Clear sustainability leadership Sustainability approach and Successful trans
Slide 8: Attractive and achievable financial targets
Íslandsbanki 1Q21 Financial Results Attractive and achievable financial targets Updated targets define a clear path to ROE expansion, attractive capital return and optimisation Updated Previous 1Q21 2020 Guidance 5 May 2021 targets targets — Based on average expected risk-free rates through the busi
Slide 9: 2. Income statement
Íslandsbanki 1Q21 Financial Results 5 May 2021 2. Income statement islandsbanki.is
Slide 10: Focus on stable core revenue streams
Íslandsbanki 1Q21 Financial Results Focus on stable core revenue streams Another robust quarter with strong underlying operations Income statement, ISKm 1Q21 1Q20 Δ ∆% 4Q20 Δ ∆% 2020 5 May 2021 Highlights Net interest income 8,190 8,580 (390) (4.5%) 8,258 (68) (0.8%) 33,371 Net fee and commission in
Slide 11: Substantial increase in net profit YoY
Íslandsbanki 1Q21 Financial Results Substantial increase in net profit YoY Positive developments in impairments and net financial income 5 May 2021 Highlights Net profit development 1Q20 vs. 1Q21 – Net fee and commission income ISKm 2.972 (267) increases YoY for all business 261 segments and for Ice
Slide 12: NII and NIM have shown resilience despite lower base rate
Íslandsbanki 1Q21 Financial Results NII and NIM have shown resilience despite lower base rate Higher NIM on loans offsetting lower NIM on deposits 5 May 2021 Highlights Net interest income NII – Comparison 1Q YoY – The Bank has successfully Business segments, ISKm ISKm increased lending margins to 8
Slide 13: Diversified sources of NFCI
Íslandsbanki 1Q21 Financial Results Diversified sources of NFCI 15% increase YoY – well distributed by type and across business segments 5 May 2021 Highlights Net fee and commission income NFCI – Comparison 1Q YoY – Business Banking and Business segments, ISKm ISKm Corporate and Investment 2.862 2.8
Slide 14: Strong historical track record of consistently reducing OpEx
Íslandsbanki 1Q21 Financial Results Strong historical track record of consistently reducing OpEx Continued operating cost savings reflection of transformation into a digitised bank 5 May 2021 Highlights Administrative expenses Cost-to-income ratio1 – Salaries rose between years ISKm due to wage incr
Slide 15: 3. Balance sheet
Íslandsbanki 1Q21 Financial Results 5 May 2021 3. Balance sheet islandsbanki.is
Slide 16: Balance sheet reflects balanced loan and funding profile
Íslandsbanki 1Q21 Financial Results Balance sheet reflects balanced loan and funding profile Broad product offering, strong liquidity portfolio and stable funding 5 May 2021 Assets Simplified balance sheet structure – Strong liquidity portfolio is a 31.3.2021, ISK 1,385bn consistent factor in balanc
Slide 17: Growth in total assets
Íslandsbanki 1Q21 Financial Results Growth in total assets Loans to customers grew by 2.3% during the quarter, mainly from increase in mortgage lending 5 May 2021 Highlights Assets, ISKm 31.3.2021 31.12.2020 Δ Δ% – Four line-items: Cash and balances with Central Bank 88,748 78,948 9,800 12.4% – cash
Slide 18: Diversified and highly collateralised loan portfolio
Íslandsbanki 1Q21 Financial Results Diversified and highly collateralised loan portfolio Loans to individuals are 46% of loans to customers, mainly residential mortgages 5 May 2021 Loans to customers Loans to customers By business divisions, ISKbn By sector, standard sectors (left graph) and with to
Slide 19: LTV distributions point to healthy coverage ratios
Íslandsbanki 1Q21 Financial Results LTV distributions point to healthy coverage ratios Majority of collateral is in residential and commercial real estate 5 May 2021 Highlights LTV distribution by underlying asset class LTV distribution of mortgages to individuals – The weighted average LTV for 31.3
Slide 20: COVID-19 moratoria over, forbearance increases
Íslandsbanki 1Q21 Financial Results COVID-19 moratoria over, forbearance increases Temporary moratorium uniformly executed and broadly applied during 2020 providing shelter for customers as they weathered the storm 5 May 2021 Performing loans with forbearance Exposure to tourism by effect of COVID-1
Slide 21: Impairment allowance sufficient, uncertainty accounted for
Íslandsbanki 1Q21 Financial Results Impairment allowance sufficient, uncertainty accounted for Exposures in Stage 2 rose due to the COVID-19 pandemic, but Stage 3 has not increased 5 May 2021 Highlights Loans to customers & off-balance sheet items Loans to customers: gross carrying amount – The dist
Slide 22: Majority of net impairments are COVID-19 related
Íslandsbanki 1Q21 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 5 May 2021 Net impairment on financial assets Loans to customers in stage 3, impairment and collateral By period, ISKbn A few
Slide 23: Diversified funding base
Íslandsbanki 1Q21 Financial Results Diversified funding base Continued increase in deposits from customers 5 May 2021 Highlights Liabilities & Equity, ISKm 31.3.2021 31.12.2020 Δ Δ% – Customer deposits grew by Deposits from Central Bank and credit institutions 31,565 39,758 (8,193) (20.6%) 2.8% in t
Slide 24: Stable deposits remain the main source of funding
Íslandsbanki 1Q21 Financial Results Stable deposits remain the main source of funding Long term funding sources grew steadily during the year 5 May 2021 Highlights Funding sources Deposits from customers and credit institutions – Total increase in deposits By type, % of total liabilities and equity
Slide 25: Established, seasoned and diversified long-term funding programme
Íslandsbanki 1Q21 Financial Results Confidential Established, seasoned and diversified long-term funding programme Recent issuances demonstrate the depth of the available investor pool for targeted issues 5 May 2021 Highlights Sources of market borrowings Maturity profile of long-term funding Curren
Slide 26: Sound liquidity management, meeting all requirements
Íslandsbanki 1Q21 Financial Results Sound liquidity management, meeting all requirements Liquid assets of ISK 302bn are prudently managed, representing 22% of total assets 5 May 2021 Highlights Total liquidity coverage ratio1 (LCR) and total net stable Liquid assets – The Icelandic Central Bank fund
Slide 27: Market risk well within appetite
Íslandsbanki 1Q21 Financial Results Market risk well within appetite The Bank has a modest market risk profile 5 May 2021 Highlights Market risk exposure and market risk appetite Currency imbalance, compared with regulatory limit – The Bank's market risk is mainly Average positions per quarter, % of
Slide 28: Sound capital position to navigate uncertain environment
Íslandsbanki 1Q21 Financial Results Sound capital position to navigate uncertain environment High REA density and high leverage driven by CRD IV standardised approach Highlights – An ISK 3.4bn dividend payment to shareholders was approved in 5 May 2021 March, amounting to 50% of 2020 profits in line
Slide 29: Íslandsbanki's capital ratios well above target
Íslandsbanki 1Q21 Financial Results Íslandsbanki’s capital ratios well above target Excess capital of ISK ~30bn including capital structure optimisation Highlights – The Pillar 2-R capital requirements have remained 5 May 2021 unchanged at 1.7% for two years, but a revised requirement Current regula
Slide 30: Highly attractive capital return and growth opportunity
Íslandsbanki 1Q21 Financial Results Highly attractive capital return and growth opportunity Credible plan leveraging on strong foundations and proven track record of executing strategy 5 May 2021 Solid foundations for growth Clear path to existing ROE target Significant capital return potential Leve
Slide 31: Q&A
Íslandsbanki 1Q21 Financial Results 5 May 2021 Q&A Íslandsbanki.is
Slide 32: 4. Annex - Financial overview and about Íslandsbanki
Íslandsbanki 1Q21 Financial Results 5 May 2021 4. Annex - Financial overview and about Íslandsbanki islandsbanki.is
Slide 33: This is Íslandsbanki
Íslandsbanki 1Q21 Financial Results This is Íslandsbanki Moving Iceland forward by empowering our customers to succeed 5 May 2021 Vision and Values The Bank Market share1 Sustainability FTEs Green mortgages Vision to be 739 32% retail customers product launched number of FTEs at #1 for service Íslan
Slide 34: Financial overview
Íslandsbanki 1Q21 Financial Results Financial overview Key figures & ratios 1Q21 4Q20 3Q20 2Q20 1Q20 PROFITABILITY After tax profit, ISKm 3,615 3,525 3,361 1,245 (1,376) 5 May 2021 Return on equity 7.7% 7.6% 7.4% 2.8% (3.0%) Net interest margin (of total assets) 2.4% 2.5% 2.5% 2.6% 2.8% Cost-to-inco
Slide 35: 5. Annex – Icelandic economy update
Íslandsbanki 1Q21 Financial Results 5 May 2021 5. Annex – Icelandic economy update islandsbanki.is
Slide 36: Economy likely to gain a foothold this year after COVID-19
Íslandsbanki 1Q21 Financial Results Economy likely to gain a foothold this year after COVID-19 GDP growth to gain pace in H2/2021; robust growth expected in 2022 5 May 2021 Highlights GDP and the contribution of major subitems GDP forecast comparison – The COVID-19 pandemic has YoY change % YoY chan
Slide 37: Tourism sector hit hard by COVID-19 pandemic
Íslandsbanki 1Q21 Financial Results Tourism sector hit hard by COVID-19 pandemic The pace of recovery in the sector a major uncertainty factor for near-term GDP growth 5 May 2021 Highlights Foreign visitors GDP growth assuming different scenarios for tourism – As the recovery of the tourist sector D
Slide 38: Current account resilient to export shock
Íslandsbanki 1Q21 Financial Results Current account resilient to export shock Current account surplus in 2020 despite dramatic fall in exports, medium term outlook benign 5 May 2021 Highlights Export volume Current account balance1 and GDP growth – In the baseline forecast, this year’s YoY change, %
Slide 39: Domestic balance sheets staying healthy despite COVID-19
Íslandsbanki 1Q21 Financial Results Domestic balance sheets staying healthy despite COVID-19 Economy-wide leverage remains moderate in comparison with peers and historical levels 5 May 2021 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
Slide 40: Businesses expect improving conditions following headwinds
Íslandsbanki 1Q21 Financial Results Businesses expect improving conditions following headwinds Business investment has contracted and lending to businesses is stable 5 May 2021 Highlights Business sentiment, 400 largest companies Credit system net lending – Following a 3.7% decline in Index YoY % ch
Slide 41: Unemployment spike likely to subside in the near term
Íslandsbanki 1Q21 Financial Results Unemployment spike likely to subside in the near term The recovery of tourism plays a key role in determining how fast unemployment subsides 5 May 2021 Highlights Unemployment Unemployment – The pandemic has laid bare % of workforce, monthly average % of workforce
Slide 42: Private consumption a countercyclical force
Íslandsbanki 1Q21 Financial Results Private consumption a countercyclical force High unemployment impacting private consumption but the financial strength of most households and continuing rise in real wages is helping 5 May 2021 Highlights Private consumption and related indicators Private consumpt
Slide 43: Real estate market resilient despite recession
Íslandsbanki 1Q21 Financial Results Real estate market resilient despite recession Residential housing market turnover has been brisk and prices have risen steadily. Commercial property prices stabilizing after price decline in H1 of 2020 5 May 2021 Capital area house prices relative to macroeconomi
Slide 44: ISK likely to strengthen with rising tourist numbers
Íslandsbanki 1Q21 Financial Results ISK likely to strengthen with rising tourist numbers The CBI has significantly mitigated exchange rate volatility but is scaling down interventions 5 May 2021 Highlights ISK exchange rate and Central Bank FX interventions Real exchange rate indices and current acc
Slide 45: Inflation spike to retreat quickly in coming quarters
Íslandsbanki 1Q21 Financial Results Inflation spike to retreat quickly in coming quarters Policy rate to remain low throughout 2021 but rise gradually thereafter 5 May 2021 Highlights Inflation and contribution of main subitems Inflation, policy rate and real policy rate1 – Inflation has risen stead
Slide 46: Iceland's credit rating has remained at A
Íslandsbanki 1Q21 Financial Results Iceland’s credit rating has remained at A Setbacks in the tourist sector have not affected the sovereign ratings 5 May 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 sustaine
Slide 47: Disclaimer
Íslandsbanki 1Q21 Financial Results 5 May 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 of
Slide 48: islandsbanki.is
Íslandsbanki 1Q21 Financial Results 5 May 2021 islandsbanki.is