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Financial results for first quarter 2022

Profit in 1Q22 amounted to ISK 5.2bn

First quarter 2022 (1Q22) financial highlights – satisfying results with ROE in line with financial targets

  • Íslandsbanki reported a profit of ISK 5.2bn in the first quarter (1Q21: ISK 3.6bn), generating an annualised return on equity (ROE) of 10.2% (1Q21: 7.7%), which is above both the Bank’s financial targets and market consensus. The main drivers were strong income generation, good cost control, and positive net impairment.
  • Net interest income (NII) grew by 12.4% YoY and totalled ISK 9.2bn in 1Q22, compared to ISK 8.2bn in 1Q21, owing mainly to growth in loans to customers and a higher interest rate environment. The net interest margin was 2.6% in 1Q22, compared to 2.4% in 1Q21.
  • Net fee and commission income (NFCI) grew 7.1% YoY and amounted to ISK 3.1bn in 1Q22, compared to ISK 2.9bn in 1Q21. Cards and payment processing, investment banking and brokerage, and asset management are primary drivers of the increase.
  • The Bank focuses on core banking operations, with NII and NFCI accounting for around 97% of total operating income in 1Q22, compared to 95% in 1Q21. These two items combined grew 11.0% from 1Q21 to 1Q22.
  • Net financial expenses were ISK 95m in 1Q22, compared to net financial income of ISK 293m in 1Q21.
  • Administrative expenses were ISK 5.8bn in 1Q22, a decline of 0.3% YoY, as a result of continued cost awareness.
  • The cost-to-income ratio (C/I ratio) was 47.6% in 1Q22, well within the guidance for 2022, down from 51.3% in 1Q21, due to strong revenue generation and cost reduction efforts.
  • Positive ISK 483m net impairment of financial assets in 1Q22 is mainly attributable to a brighter outlook for the tourism industry. This is compared to an impairment charge of ISK 518m in 1Q21. The net impairment charge as a share of loans to customers, the annualised cost of risk, was -17bp in 1Q22, compared to +20bp in 1Q21.
  • Loans to customers rose by ISK 21.6bn, or 2.0%, during the quarter, to ISK 1,108bn, led by mortgage lending.
  • Deposits from customers increased by ISK 17.4bn, or 2.3%, during the quarter, to ISK 761bn. The rise was mainly as a result of the cash settlement of the Icelandic Government’s sale of its holding in Íslandsbanki.
  • The Bank’s liquidity position remains strong, with all ratios well above regulatory requirements and internal thresholds.
  • Total equity amounted to ISK 197.2bn at the end of March 2022. The corresponding capital base, that includes the AT1 and Tier2 issuances, decreased from ISK 228bn to ISK 210bn due to an authorised ISK 15bn buyback of own shares. The Bank’s total capital ratio was 22.5%, including the 1Q22 profit, compared to 25.3% at YE21. The corresponding CET1 ratio was 18.8%, down from 21.3% at YE21. This is considerably above the long-term CET1 target of ~16.5%. The capital ratios are lower mostly due to the reduction in the capital base and an increase in the risk exposure amount (REA).
  • The Bank estimates that long-term excess CET1 capital equals approximately ISK 35-40bn.The Bank assumes that CET1 capital will be optimised in the next 12–24 months.
  • The leverage ratio was 12.4% at the end of March, including 1Q22 profit, compared to 13.6% at YE21, indicating low leverage.

Birna Einarsdóttir, CEO of Íslandsbanki

Íslandsbanki had a very satisfactory start to 2022, returning a profit of ISK 5.2bn for the first quarter. The return on equity was 10.2%, at our financial target and once again a solid result. Net interest income was 12.4% higher than for the same quarter of 2021, and the net interest margin rose to 2.6%. Net fee and commission income grew by 7.1% year-on-year in 1Q22, with the increase stemming from diverse sources. Cost awareness measures continue to deliver benefits, with administrative expenses remaining flat from the same quarter of 2021 despite 6.1% inflation in 1Q22. Loans to customers increased by 2% from year-end 2021, which is in line with our target of growing in tandem with nominal GDP.

During the quarter, the Icelandic Government continued the sale of its holding in Íslandsbanki following the IPO in 2021. It currently owns a 42.5% share in the Bank. The sale sparked a debate in Iceland regarding the process and its mechanism. Among other things, the participation of the Bank’s employees has been criticised. We take these criticisms seriously and have commenced the process of amending the Bank’s internal rules on this front.

As has often been said, technology has revolutionised banking in recent years, and it is gratifying to see how many have welcomed it. We recently launched a new sales platform that makes it easy for both retail and SME’s to join the Bank as a customer, add the Bank’s products, and explore our product offerings. Digital sales in the retail market now account for about 75% of all sales, and with this new sales platform we are sure to see that figure rise. Among product offerings is our new sustainable savings account, which has been well received by our customers.

Prospects for 2022 appear bright, as the economy is clearly in a growth phase and there are early signs that the tourism industry may quickly recoup its pre-pandemic level of activity.

An earnings conference call and webcast will take place on Friday 6 May 2022

The Bank will host a webcast in English for investors and market participants on Friday 6 May at 8.30 Reykjavík/GMT, 9.30 London/BST, 10.30 CET. Birna Einarsdóttir, CEO, and Jón Guðni Ómarsson, CFO, will give an overview of the fourth quarter financial results and operational highlights.

Participant registration is accessible via this link. A recording will be available after the meeting on the Investor Relations website. To participate in the webcast via telephone and to be able to ask questions please use the following dial-in details:

Iceland: +354 800 74 37

Denmark: +45 354 45 577

Sweden: +46 8 566 42 651

Norway: +47 235 00 243

United Kingdom: +44 33 330 00 804

United States: +1 631 913 1422

Confirmation Code: 11682344#

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

Investor Relations

Send email
+354 8444033

Edda Hermannsdóttir

Executive Director

Send email
+354 8444005