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Annual Results 2019

In 2019, we reviewed Íslandsbanki‘s strategy and defined a new role for the Bank as “Empowering our customers to succeed.” We approved a forward-looking sustainability strategy whose aim is to integrate the Bank’s commitment to sustainability into its profit objectives.

Íslandsbanki’s financial highlights 2019

  • Profit after tax was ISK 8.5bn in 2019 (2018: ISK 10.6bn) and annualised return on equity (after tax) was 4.8% in 2019 (2018: 6.1%).
  • Earnings from regular operations were ISK 10.5bn (2018: ISK 12.0bn) with 6.6% annualised return on equity from regular operations normalised for 16% CET1 (2018: 8.0%). Return on equity is below the long-term target. The goal is now based on risk free rate plus 4–6%. Based on the average risk-free rate in 2019, the target would be 7.7 - 9.7%. In order to improve returns, the Bank took several actions to optimise its operations under the framework of a revised strategy.
  • Net interest income was ISK 33.7bn (2018: ISK 31.9bn), an increase of 5.4% between years and the net interest margin was 2.8% (2018: 2.9%).
  • Net fee and commission income was ISK 13.4bn (2018: ISK 12.2bn), up by 9.3% from 2018.
  • Loan impairment charges and net valuation changes generated a loss of ISK 3,663m for 2019, compared to ISK 1,584m gain for 2018.
  • Administrative costs grew by approximately 1.7% between years and totalled ISK 28.1bn (2018: ISK 27.7bn). The raise is due to salary cost related to employment termination during 2019 and higher depreciations due to heavy investment in the core banking system.
  • The cost to income ratio for the Group for the period was 62.4% compared to 66.3% for the same period in 2018, while the same ratio for the parent company was 57.1% compared to 60.4% in 2018.
  • Loans to customers grew by 6.3% during 2019, to a total of ISK 900bn. Total new lending amounted to ISK 226bn, split across business segments.
  • Deposits from customers stood at ISK 618.3bn at year-end of, an increase of 6.8% in 2019.
  • The Bank’s liquidity position is strong in both the Icelandic króna and in foreign currencies and exceeds all internal and external requirements. Capital ratios are strong but slightly higher than the Bank’s total capital ratio target.
  • Leverage ratio was 14.2% at year-end 2019 compared to 14.6% year-end 2018, which is moderate in domestic and international comparison.
  • The Board of Directors proposes that a dividend of ISK 4.2bn on 2019 profits be paid to the Bank´s shareholders. The dividend equals about 50% of the profit for the year and is therefore in line with the Bank’s long-term policy of paying dividends in the 40-50% range.
  • The Bank´s Annual and Sustainability report and Pillar 3 report are published at the same time as the Consolidated Financial Statements for 2019.
  • They can be accessed here:

Fourth quarter 2019 financial highlights

  • Profit after tax was ISK 1.7bn (4Q18: 1.4bn), generating a 3.7% annualised return on equity (4Q18: 3.2%).
  • Earnings from regular operations were ISK 1.8bn (4Q18: 2.1bn) and annualised return on equity for regular operations normalised for 16% CET1 was 4.6% (4Q18: 5.3%).
  • Net interest income amounted to ISK 8.5bn (4Q18: ISK 8.3bn) with 2.8% net interest margin (4Q18: 3%).
  • Net fee and commission income was ISK 3.6bn (4Q18: ISK 3.5bn).

Birna Einarsdóttir, CEO of Íslandsbanki

In 2019, we reviewed Íslandsbanki‘s strategy and defined a new role for the Bank as “Empowering our customers to succeed.” We approved a forward-looking sustainability strategy whose aim is to integrate the Bank’s commitment to sustainability into its profit objectives.

The Bank’s operating performance in 2019 was acceptable, considering the slowdown in the economy during the year. The consolidated profit was ISK 8.5 billion. This is equivalent to a return on equity of 4.8%, which is well below our long-term target. The return on equity from regular operations based on a CET1 ratio of 16% was 6.6%.The Bank’s income rose by 7.8% during the year, and the parent company’s cost-to-income ratio declined to 62.4% from 57.1%. As in 2018, subsidiaries’ operations had a negative impact on the consolidated results. In order to improve returns, the Bank took several actions to optimise its operations under the framework of a new policy.

Growth in deposits and lending was strong during the year, at 6.8% and 6.3%, respectively. Conditions in the capital markets, both in Iceland and abroad, were favourable for the Bank, and our funding remained diverse and successful. The Bank’s liquidity and capital ratios remained strong, and well above both internal targets and regulatory requirements. As a result, Íslandsbanki remains well prepared to contribute to the growth and success of the domestic economy.

We led the market in securities brokerage, and assets under management grew markedly during the year, as did assets held in custody. Moreover, Iceland Funds had an excellent year, with funds in three out of four categories ranking first nationwide in terms of returns.

In 2019, we continued to invest in IT and reorganised our IT department as we shifted from a project-centred orientation to a product-driven model. This links our business units more closely with our digital product development, which is becoming increasingly important for our operations. We also introduced several digital solutions, among them the new Íslandsbanki banking app, automated credit score evaluation, and a mortgage application process that customers can use to apply for a loan in a matter of minutes.

As part of our strategy review, our employees have elected to emphasise four of the United Nations Global Goals for Sustainable Development: Quality Education; Gender Equality; Industry, Innovation, and Infrastructure; and Climate Action. We also decided during the year to apply the ESG criteria to the Bank’s operations. Through these efforts, the Bank aspires to be a positive force in society.

Exciting but demanding times lie ahead, and we look forward to continuing to implement our new strategy in cooperation with our customers and partner companies.

2019 Operational highlights

  • New digital onboarding solution for retail customers was launched in January as well as a fully automated in-app loan application for loans less than ISK 2m.
  • The Bank´s annual general meeting was held in March where the shareholders approved the board‘s proposal to pay a dividend of ISK 5.3bn of 2018 profits. Tómas Már Sigurðsson was elected to the Board to replace Helga Valfells, who did not seek re-election.
  • In March, Íslandabanki‘s governance practices were assessed to be in line with the recognised Guidelines on Corporate Governance.
  • In June, Íslandsbanki issued a SEK 500m 10NC5 Tier 2 bond. This was the Bank‘s third Tier 2 bond issue and with this transaction the Bank reached its Tier 2 target which is an important milestone in optimising its long-term capital composition.
  • Riaan Dreyer was appointed Managing director of Information Technology at the Bank in July, starting in September.
  • S&P Global Ratings affirmed Íslandsbanki's rating of BBB+/A2 in July but changed the outlook from stable to negative in line with other Icelandic banks.
  • In August, the Nordic CEOs for Sustainable Future, an alliance of the leaders of the Nordic region´s leading businesses, met in Reykjavik with the prime ministers of the five Nordic countries to discuss a collaborative approach to address sustainability challenges. Íslandsbanki is a proud member of the group.
  • The Íslandsbanki Reykjavík Marathon was held on 24 August. A high point in the calendar for the Bank for several years, the Bank´s sponsorship of the event helped the 15 thousand runners to raise ISK 167m for good causes and is the single largest charity event in Iceland.
  • A fully automated online mortgage application and evaluation procedure for individuals was introduced by the Bank in August.
  • In October 2019, the Icelandic Financial Supervisory Authority (hereafter the Central Bank) lowered the minimum requirement for total capital for Íslandsbanki from 19.3% to 18.8%. The decrease is credited to the Bank’s lower risk profile.
  • Íslandsbanki’s new banking app went live in November. The app was designed in close cooperation with customers and has been well received.
  • Íslandsbanki issued a senior unsecured ISK bond amounting to ISK 3.6bn in November. The bond was priced at 1m REIBOR+90bp.
  • Íslandsbanki published reports on the Icelandic tourism industry, housing market, entrepreneurs and innovation og the fishing industry during the year.
  • In December Íslandsbanki bought back in full a SEK 250 million Note due 27 February 2020 and EUR 142.7m out of EUR 200m Note due in September 2020.
  • Íslandsbanki was the overall volume leader in the Icelandic equity-and bond market in 2019 with over 700 billion in market value.

Investor relations

Investor call in English at 9.30 am (GMT).

On 13 February 2020 at 9.30 am (GMT), the Bank will hold an investor call. The call will begin with a short update on the Icelandic economy, followed by a review of the Bank’s financial results. The call will be in English.

Please register by sending an e-mail to: Dial-in details and presentations will be sent out to registered participants prior to the call.

Market participants meeting in Icelandic at 10.30 am (GMT).

A meeting with market participants in Icelandic will take place on 13 February 2020 at 10.30 am (GMT). The presentation will take place at the Íslandsbanki headquarters, Hagasmári 3, 9th floor, 201 Kópavogur. The presentation will be in Icelandic.

Please register by sending an e-mail to:

All materials relating to the Bank’s operating results, together with information on the financial calendar and silent periods, can be found here:

For further information

Margrét Lilja Hrafnkelsdóttir

Head of Investor Relations

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Edda Hermannsdóttir

Director of Marketing and Communications

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