Chair­man's state­ment

2021 was a busy, eventful, and successful year for Íslandsbanki. The Bank’s shares were listed on the Nasdaq Iceland exchange after the State sold a portion of its holding. The IPO and the market listing placed considerable demands on Bank staff, and the pandemic-induced changes in our business and service imposed its own requirements. Nonetheless, Íslandsbanki’s business prospered and returns were solid.

The economy performed more strongly than could have been expected at the beginning of 2021. GDP growth has firmed up more, unemployment has fallen faster and the ISK has appreciated somewhat. Tourism rebounded quickly after travel restrictions were eased, indicating that we still have considerable upside potential in this important sector of the economy. The fishing industry showed its strength during the year, and the increased capelin quota for the 2022 fishing year was especially good news, as it is likely to generate significant revenue for the economy. In another arena, Icelandic intellectual property has continued to flourish. We can expect to see new businesses created in the intellectual property sector, the economy will diversify bringing innovation, growth and new opportunities with it.

Even though the Icelandic economy has been temporarily knocked back, we still have every reason to be optimistic about the future.

An important step forwards and a successful IPO

At the end of 2020, Icelandic State Financial Investments recommended to the Minister of Finance and Economic Affairs that a portion of the State’s holding in Íslandsbanki be divested. Therefore, the Minister decided early in 2021 to begin the sale process. A meticulously prepared sale of approximately one-third of the State’s holding in the Bank concluded in mid-June, with the largest initial public offering ever held in Iceland. The total proceeds from the IPO came to just over ISK 55bn. Demand for shares at the final IPO price exceeded supply many times over, and retail and institutional investors from Iceland and abroad demonstrated keen interest. Total demand came to ISK 486bn, and at that time the Bank’s market value (at the IPO price) was approximately ISK 158bn. After the IPO, the Bank had around 24,000 shareholders, more than any other listed company in Iceland.

Íslandsbanki shares were admitted for trading on the Nasdaq Iceland Main Market on 22 June 2021, when CEO Birna Einarsdóttir called in the first trade at a ceremony held at the Bank’s headquarters. By the end of 2021, the price of Íslandsbanki shares had risen by nearly 60%, which represents a marked increase in the Bank’s market value and is of considerable benefit to shareholders.

According to the current Government’s policy statement, the Government will continue to scale down its holdings in the financial system and use the proceeds for infrastructure development. This is a sensible stance, both in view of how successful the 2021 IPO was and how much the value of the Bank has increased: It can be assumed that the time is right to begin selling the remaining State holding in the Bank.

Public sector measures

Large policy rate cuts by the Central Bank in 2020 delivered better lending terms for the Bank’s customers. Naturally, this helped Icelandic companies to streamline and was a boon to households, many of which took advantage of the opportunity to refinance their mortgages. In fact, Icelanders have never enjoyed interest rate terms as attractive as those prevailing over the past 18 months. The Central Bank has begun raising the policy rate again, but rates are still lower than at the beginning of the pandemic. It is important that the social partners and the Government work together to keep inflation under control to obviate the need for steep rate hikes, with its associated costs for households and businesses.

The cut to the bank tax was approved by Parliament in 2019. At that time, the tax rate was 0.376% of the book value of commercial banks’ liabilities, and the plan was to lower it to 0.145% in three increments from 2021 to 2024. When the pandemic struck, the reduction was expedited, and the tax rate was immediately cut to 0.145% by the end of 2020. It will be unchanged in 2022. Even so, the bank tax is still high – about five times the rate in neighbouring countries. The tax is levied on the banks’ loans, thereby distorting market competition vis-à-vis other financial companies and pension funds, which grant loans but are exempt from the tax. Furthermore, the bank tax impedes foreign investment in Iceland, in so doing distorting Iceland’s competitive position. Lowering it would be more economical and provide further benefit to those that ultimately bear the cost of it.

Robust operations

Íslandsbanki works systematically towards its goal of being a force for good in Icelandic society. The Board of Directors is very proud of the goals the Bank has set in this area and in the Bank’s multifaceted services.

Íslandsbanki’s operations were strong in 2021 and returns exceeded financial targets and analysts’ forecasts. In parallel with rapid technological advances, the Bank’s service to customers – households and businesses alike – has taken great strides forward and general banking services are now much more accessible than before. This is consistent with the Bank’s increased emphasis on providing good, effective service to its customers. We are continuously working on new fintech solutions and we will make every effort to remain a leader in the field.


I would like to take this opportunity to thank the Board of Directors for their collaboration during the year. I would also like to thank Birna Einarsdóttir and other members of the management team for strong leadership, both throughout the IPO and in all of the Bank’s operations. In closing, I would like to thank the staff of Íslandsbanki for their dedication and outstanding performance in 2021. The year was an exciting one as we prepared and executed the IPO and market listing, but it was also challenging because of the pandemic and the measures we had to take throughout the Bank to guarantee our customers the best possible service. Both management and employees have shown immense resilience during these unsettled times. This shows that we can look forward to a bright future for Íslandsbanki as it grows and evolves.