Íslandsbanki hf. - Annual Financial Report

Islandsbanki hf. : Consolidated financial statements 2012

Annual consolidated financial statements 2012

Highlights:

  * Profit after tax was ISK 23.4bn in 2012 compared to ISK 1.9bn in 2011. The
    entire goodwill from the acquisition of Byr was impaired at year end 2011
    which resulted in a one off charge of ISK 17.9bn.
  * Profit after tax in 4Q12 was ISK 7.2bn, compared to a loss of ISK 9.5bn in
    4Q11.
  * Profit after tax from regular operations, defined as earnings excluding one-
    off items was ISK 15.7bn in 2012, compared to ISK 13.9bn in 2011.
  * Return on equity was 17.2% compared to 1.5% in 2011. Return on equity from
    regular operations was 11.6% compared to 11.0% in 2011.
  * Tax and levies paid to government institutions amounted to ISK 9.3bn in
    2012 compared to ISK 2.0bn in 2011.
  * Around 20,900 individuals and 3,660 corporates have received write-offs,
    debt forgiveness or some form of debt correction since the Bank's
    establishment, totalling ISK 463bn to date.
  * Total assets were ISK 823bn at year-end 2012, compared to ISK 796bn in 2011.
  * The net interest margin was 3.9% at year-end 2012, compared to 4.8% in 2011.
  * Net valuation changes on the loan portfolio resulted in a gain of ISK 6.5bn
    in 2012, compared to a loss of ISK 1.3bn during the same period in 2011.
  * Total deposits were ISK 509bn at year-end  2012, compared to ISK 526bn in
    2011.
  * Equity was ISK 148bn, up 19.4% from last year.
  * At year-end, the total capital ratio was 25.5% compared to 22.6% at year end
    2011.

For a more detailed review of the financial accounts, please refer to the
attached press release.



Birna Einarsdóttir, Chief Executive Officer of Íslandsbanki:"The year 2012 will always be notable in the Bank's history marking the year
when the merger of Íslandsbanki and Byr was completed. The merger increased the
Bank's market share significantly and set the scene for future income generation
and synergy effects. This is clearly illustrated in the 2012 financial results,
where core earnings continue to strengthen and 75% of operating income was
generated by net interest income and net fee and commission income.

Important milestones were reached in the reconstruction of the Icelandic
financial market in 2012. Íslandsbanki's role was instrumental in that regard,
e.g. by further issuance of the Bank's covered bonds and managing the IPO of
Eimskip hf. and Fjarskipti hf. (Vodafone) on NASDAQ OMX Iceland. Furthermore,
the Bank managed the bond offering of real-estate company Eik, which was the
largest private sector bond offering since late 2008 and marked a breakthrough
in market funding for corporates. More projects are in the pipeline which will
continue to contribute to a more vibrant capital market in Iceland.

Remarkable progress was made in financial restructuring during the year with
several large projects being completed. Recalculation of FX loans is also
drawing to a close. In order to speed up the process, the Bank dropped three
court cases, and will now recalculate the 15,000 remaining transactions. As a
result, loan portfolio performance has improved significantly, whereby the
proportion of loans in restructuring decreased from 22.6% to 13.7%. Furthermore,
the three positive ESA conclusions on measures taken in 2008 marked important
milestones in removing uncertainties in the Bank's operations. All of the above,
along with more activity in financial markets, indicate a new turning point for
Íslandsbanki and our operational environment."



Later today, Birna Einarsdóttir, CEO of Íslandsbanki, and Jón Guðni Ómarsson,
CFO, will present the 2012 financial results to market participants, followed by
a Q&A session. The meeting starts at 4pm and will be conducted in Icelandic.
The Bank will host a conference call in English to present the results at 2 pm
Icelandic time. To register for the conference call, please e-mail:
ir@islandsbanki.is.

All presentation material will subsequently be available and archived on
www.islandsbanki.is/ir.



For further information:

  * Investor Relations - Tinna Molphy, tinna.molphy@islandsbanki.is  and tel:
    +354 440 3187.
  * Media Relations - Guðný Helga Herbertsdóttir,
    gudny.helga.herbertsdottir@islandsbanki.is and tel: +354 440 3678.


[HUG#1681928]

Attachments:

ÍSB 2012 Consolidated annual financial statements.pdf

ÍSB - 2012 Annual results presentation.pdf

ÍSB - 2012 Financial results press release.pdf