Íslandsbanki’s fourth quarter 2021 financial results

Profit in 4Q21 amounted to ISK 7.1bn


Fourth quarter 2021 (4Q21) financial highlights – ROE exceeds financial targets and market consensus

  • Íslandsbanki reported a profit of ISK 7.1bn in the fourth quarter (4Q20: ISK 3.5bn) generating an annualised return on equity (ROE) of 14.2% (4Q20: 7.6%) which is above both the Bank’s financial targets and market consensus. Main drivers were strong income generation, good cost control, positive net impairment and rise in profit from discontinued operations.
  • Net interest income (NII) grew by 4.7% YoY and totalled ISK 8.6bn in 4Q21 compared to ISK 8.3bn in 4Q20, mainly explained by growth in loans to customers during the year. Net interest margin was 2.4% in 4Q21 compared to 2.5% in 4Q20.
  • Net fee and commission income (NFCI) grew 27.5% YoY and amounted to ISK 3.7bn in 4Q21 compared to ISK 2.9bn in 4Q20. Cards and payment processing, investment banking and brokerage as well as asset management are primary drivers for the increase.
  • The Bank focuses on core banking operations with NII and NFCI accounting for around 94% of total operating income in 4Q21 compared to 92% in 4Q20. Combined, these two items grew 10.5% from 4Q20 to 4Q21.
  • Net financial income was ISK 646m in 4Q21 compared to ISK 783m in 4Q20. Fair value changes account for a considerable part of net financial income in 4Q21.
  • Administrative expenses were ISK 5.8bn, a decline of 5% YoY as a result of continued cost awareness.
  • Cost-to-income ratio (C/I ratio) was 45.3% in 4Q21, at the Bank’s revised target of 45.0%, down from 51.7% in 4Q20 due to strong revenue generation and cost reduction efforts.
  • A positive ISK 0.6bn net impairment on financial assets in 4Q21 is mainly attributable to a brighter outlook for the tourism industry. This is compared to an impairment charge of ISK 1.8bn in 4Q20. The net impairment charge over loans to customers, the annualised cost of risk, was -23bp in 4Q21 compared to +73bp in 4Q20.
  • Profit from discontinued operations amounted to ISK 1.1bn during the quarter compared with ISK 173m in 4Q20. The increase YoY is explained by a subsidiary’s sale of preferred shares and by a sale of land, which was classified as held for sale.
  • Loans to customers rose by ISK 4.9bn in the quarter, or by 0.5%, to ISK 1,086bn in which mortgage lending led the increase.
  • Deposits from customers decreased by ISK 10.4bn in the quarter, or by 1.4%, to ISK 744bn after a strong increase earlier in 2021.
  • The Bank´s liquidity position remains strong with all ratios well above regulatory requirements and internal thresholds.
  • Total equity amounted to ISK 203.7bn at the end of 2021 and the Bank’s total capital ratio was 25.3% compared to 23.0% at YE20. The corresponding CET1 ratio was 21.3%, up from 20.1% at YE20 This is considerably higher than the revised CET1 target of ~16.5%.

2021 (FY21) financial highlights – net profit turnaround led by higher income and positive net impairment

  • Íslandsbanki’s net profit for 2021 was ISK 23.7bn (FY20: ISK 6.8bn) with annualised return on equity for 2021 of 12.3% compared to a 3.7% in 2020.
  • Net interest income totalled ISK 34.0bn in 2021, a growth of 2.0% YoY which is explained by higher lending volumes. Net interest margin was at 2.4% throughout 2021, down from 2.6% in 2020 as average interest rates were lower in 2021.
  • Net fee and commission income rose by 22.1% from the previous year and totalled ISK 12.9bn for 2021. The rise is evenly distributed between income types, demonstrating strong income generating foundations.
  • Net financial income was ISK 2.5bn in 2021 compared to a loss of ISK 1.4bn for FY20 as markets were more benign in 2021 compared to 2020.
  • Administrative expenses increased by 2.0%, that includes an ISK 521m one-off cost in relation to the Bank’s IPO.  Salaries rose by 3.7% in 2021 mainly due to rise in general wage agreements, one-off cost resulting from the sale of the Bank and higher redundancy costs.
  • The cost-to-income ratio dropped significantly YoY from 54.3% in 2020 to 46.2% in 2021.
  • Net impairment on financial assets was positive by ISK 3.0bn in 2021, mainly due to the improving outlook for the tourism industry, compared to a charge of ISK 8.8bn in 2020 which reflected the economic situation following the start of the COVID-19 pandemic. The net impairment charge over loans to customers, cost of risk, was -28bp in 2021 compared to +91bp in 2020.
  • Loans to customers grew by 7.9% during 2021, mostly driven by mortgage lending.
  • At the end of the reporting period, the share of credit-impaired loans to customers was 2.0% (gross) down from 2.9% at YE20 following full repayment of exposures in Stage 3.
  • In 2021, deposits from customers grew by ISK 64.6bn, or 9.5%, mainly as a result of a strong increase from Business Banking but also from Personal Banking.
  • The leverage ratio was 13.6% at the end of 2021, same as at year-end 2020, indicating low leverage.
  • Directive 2014/59/EU on Bank Recovery and Resolution (BRRD I) was i.a. transposed into Icelandic law with Act No. 70/2020 on the resolution of credit institutions and investment firms (the Act). On 8th of December 2021, the Icelandic Resolution Authority published its policy on minimum requirements for own funds and eligible liabilities (MREL) according to Art. 17 of the Act. The policy does not yet fully specify the requirements that each bank will have to fulfil, but it does give an indication on the Resolution Authority’s methodology and timing of implementation. According to the policy, the Resolution Authority aims at publishing its decision on MREL for Icelandic banks early in 2022 and it would appear that Íslandsbanki will fulfil the MREL requirement by a good margin from the outset. The subordination requirement of Directive 2019/879/EU on Bank Recovery and Resolution (BRRD II) has not been defined, but the policy states that the requirement will be published once BRRD II has been transposed into Icelandic law. In any event, in common with most European jurisdictions, it is likely that Icelandic banks will have to comply with MREL requirements of BRRD II in January 2024.
  • Parallel to the publishing of the financial statements, the Bank publishes its Annual and Sustainability report and Pillar 3 report, along with an Impact and Allocation report for Íslandsbanki's Sustainable Financing Framework.

Revised financial targets

  • The Board of Directors approved revised financial targets in 4Q21 as strong historical performance and higher interest rate environment called for revised targets.
  • As the Icelandic economy picks up pace the Bank anticipates both the loan portfolio and fee income to grow in line with GDP and rising economic activity. Although it is expected that ROE will lie in the range of 8-10% in 2022, the strengthening economy, a rising interest rate environment and careful control of costs strongly support the Bank's target of an ROE in excess of 10% in the medium term. The cost-to-income ratio is expected to remain stable in the range of 45-50% in 2022. ROE is expected to be in the 8–10% range in 2022, but normalised cost of risk (CoR) of 30bp could push the ratio towards the lower end of the range.  

Capital optimisation, dividend and buyback

  • The Board of Directors will be proposing an ISK 11.9bn ordinary dividend to the Bank´s Annual General meeting (AGM), in line with the Bank’s dividend policy.
  • The Bank estimates that long-term excess CET1 capital of approximately ISK 40bn, taking into account the dividend payment, will be optimised in the next 12-24 months. The Board of Directors will propose to the AGM an ISK 15bn buyback of own shares, in the coming months, subject to the Central Bank´s approval, with three options to be considered: A share buyback programme, a tender offer or a block sale participation.

Birna Einarsdóttir, CEO of Íslandsbanki

Íslandsbanki´s fourth quarter result brought the year 2021 to a satisfying conclusion. In an eventful year, the Bank’s shares were admitted for trading on the exchange in June which marked a new beginning for the Bank. The Bank’s continuing response to the COVID-19 pandemic and our employees’ ingenuity in serving our customers, under demanding and constantly changing circumstances, were other highlights.

In 4Q21, the Bank made a profit of ISK 7.1bn and an annualised ROE of 14.2% which is well above both the Bank’s targets and market consensus. The profit for 2021 was ISK 23.7bn and ROE was 12.3%. Total operating income rose by 8.8% from 4Q20, with net fee and commission income up by 27.5% year-on-year. Continuous efforts to manage costs saw administrative expenses fall by 5.0% in 4Q21 compared to 4Q20 and in real terms by 9.4%. The cost-to-income ratio hit the Bank's revised target at 45%. A positive net impairment of ISK 0.6bn and a profit of ISK 1.1bn from discontinued operations lifted the results further. Retail lending helped boost loan growth by ISK 4.9bn in the quarter, with loans to customers up by 7.9% in 2021 as a whole. Mortgage customers enjoyed lower rates in 2021 as the Bank was able to offer even more competitive terms in the wake of Central Bank rate cuts in 2020. Deposits from customers grew strongly, by 9.5% in 2021.

Sustainable lending was up by 134% during 2021 and was 6% of total loans to customers at year-end. Giving support to our customers on their sustainability journey and funding the transition to a net zero future is our biggest opportunity to be a force for good. This is reflected in the fact that financed emissions in 2020 were 360x larger than emissions from the Bank’s operations. For 2022 we have set clear goals including increasing sustainable lending and setting science-based targets.

In 2021 we worked as hard as ever to empower our customers to succeed. This is evidenced by, amongst others, the Bank being 1st in fixed income brokerage, operating the best performing equity fund and leading the field in corporate finance. Customer satisfaction from our corporate customers measured at a record high and over 90% of our mortgage customers are happy with our services.

In recent years, we have been focusing on optimising the Bank´s balance sheet and therefore, at the AGM, in March 2022, we will seek approval to start paying out excess capital along with the ordinary dividend. I am excited by the prospects for 2022, a year that should see a further sell-down of the Government´s holding in the Bank and the opportunity to be of further service to our customers and stakeholders.

An earnings conference call and webcast will take place on Friday 11 February 2022

The Bank will host a webcast in English for investors and market participants on Friday 11 February at 8.30am Reykjavík/GMT/London, 9.30am 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: 97538113#

For further information:


Margrét Lilja Hrafnkelsdóttir

Investor Relations


Send email+354 8444033

Björn Berg Gunnarsson

Public Relations


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