Financial results for first quarter 2025

The first quarter of 2025 saw considerable volatility in global markets and a level of uncertainty persists with regards to the announced tariff increases. This heightened uncertainty globally has also impacted the stock market domestically, visible by the 7.7% drop in the OMXI15GI during the first quarter of 2025.

Profit from Íslandsbanki's operations during the first quarter of 2025 amounted to ISK 5.2 billion, about 3% above analyst consensus. Net interest income rose by almost 7%, compared to the first quarter of 2024 and net fee and commission income grew by almost 2%. Net interest margin was 3.2% for the quarter. Both annualised return on equity and cost-to-income ratio were outside of our targets, landing at 9.4% and 47.6%, respectively. A net financial expense of ISK 986 million adversely affects the Bank's financial results for the first quarter.

Despite tumultuous times on the world stage, Íslandsbanki demonstrated good market access in March when the Bank issued EUR 300 million green senior preferred notes, which have a maturity of 5.5 year. The coupon corresponded to a spread of 140 bps over mid-swaps in EUR. Orders were received from more than 100 investors and the final order book stood at around EUR 1.1 billion. It is the longest-dated bond that the Bank has issued since 2018. Following the issuance, the Bank has to a large degree been pre-funded throughout the year making it less subject to the current market volatility.

Digital product development continues at Íslandsbanki. We recently launched a new and improved app. New features include "Safe to spend" option and a search option, both of which promote the financial health of our customers. We also launched a new online bank in February. These updated solutions have been very well received by our customers and we see great potential in delivering even better services through them.
With our partnership with VÍS being formally launched, VÍS insurance products are now available to the Bank's customers in our app. Our customers will also have the opportunity to meet VÍS insurance advisers in some of the Bank's branches. Mutual customers of both companies will enjoy special benefits from both companies. This partnership allows us to offer better terms to our customers and at the same time promote their financial health.

A proposal on the payment of a dividend to shareholders of ISK 12.1 billion was approved at Íslandsbanki's Annual General Meeting (AGM) held at the end of March. The dividend amount is in accordance with our dividend policy of paying out 50% of the preceding year's profit. The AGM further approved a renewal of the authorisation to buy back its own shares for up to 10% of the Bank's share capital as well as a proposal reducing the share capital by cancelling own shares. When the amount of dividend paid for 2024 is reviewed together with the buybacks carried out in 2024 the ratio of distribution to shareholders is close to 100% of the Bank's profit for 2024. Plans to optimise the Bank's capital structure are still at the forefront, subject to market conditions. As has already been stated, these plans may entail both internal and external growth opportunities, as well as through distribution to shareholders, whether by means of extraordinary dividends and/or through buybacks. The Bank's purchase of its own shares and distributions to shareholders are important elements of the optimisation of the Bank's capital structure.

The Parliament of Iceland recently passed a bill amending the law on the disposal of the Government of Iceland's holding in Íslandsbanki. Work has been ongoing for the last few months amongst the Government's advisers and the joint global coordinators preparing a further sell-down of the Government's remaining stake in Íslandsbanki. We have been fully involved in this work. We have undertaken much marketing work, promoting the Bank and its robust operations to current shareholders as well as other interested parties.
   
Jón Guðni Ómarsson, CEO of Íslandsbanki