Íslandsbanki hf. - Interim report (Q1 and Q3)

Islandsbanki hf. : Interim consolidated financial statements 1Q2013

HIGHLIGHTS

  * Profit after tax was ISK 4.6bn in 1Q13, compared to ISK 5.6bn for the same
    period in 2012. The difference is primarily driven by lower net interest
    income and fluctuations in the ISK.
  * Return on equity decreased to 12.2% (1Q2012: 17.7%). The YoY decrease in ROE
    is primarily driven by higher equity which has increased by 18% YoY, from
    ISK 129bn to ISK 152bn.
  * Total taxes and levies paid to government institutions amounted to ISK
    2.1bn in 1Q2013, compared to ISK 2.2bn in 1Q2012.
  * Around 35,900 individuals and 3,900 corporates have received write-offs,
    debt forgiveness or some form of debt correction since the Bank's
    establishment, totalling ISK 490bn to date.
  * Total assets remained on par at ISK 829bn (FY2012: ISK 823), with loans to
    customers down 3% to ISK 543bn (FY2012: ISK 558bn).
  * The net interest margin was 3.6% (FY2012: 3.9% and 1Q2012: 4.4%) and is
    decreasing in line with expectations as deep discount following the
    acquisition of Glitnir loan book is being amortized.
  * Net fee and commission income increased to ISK 2.5bn (1Q2012: ISK 2.1bn), a
    YoY increase of 17% which can mainly be attributed to markets, retail
    banking, wealth management and fee generating subsidiaries.
  * Net valuation changes on the loan portfolio resulted in a gain of ISK
    3.1bn, compared to a loss of ISK 1.5bn during the same period in 2012.
  * Total deposits reduced to ISK 492bn (FY2012: ISK 509bn). As deposits to
    customers remained on par, the decrease is primarily due to movements in
    deposits from credit institutions.
  * Equity was ISK 152bn, up 3% from year-end 2012 and 18% YoY. Total capital
    ratio strengthened to 26.2% (2012: 25.5%), and Tier 1 ratio was 23.2%
    (FY2012: 22.0%).
  * The Bank's liquidity position is strong and  is well above both the FME and
    Central Bank's regulatory requirements.



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



Birna Einarsdóttir, Chief Executive Officer of Íslandsbanki:"Net income from core operations in the first quarter of 2013 was in line with
expectations. The effort to drive efficiencies is beginning to show results with
costs declining 3% year-on-year. Net fee and commission income is up 17% from
the previous year partly as a result of increasing market activity in Iceland.
Íslandsbanki is the largest issuer of covered bonds in the country, and it began
issuing commercial paper this quarter - the first bank to do so in Iceland since
2008.

20,000 of the Bank's customers received a rebate on interest charges in February
amounting to a total of ISK 2.5bn. Customers had these rebates deposited into a
new term deposit product to encourage savings, and it is gratifying to see that
50% of that refund is still held on deposit with us.

Capital levels remain robust at 26.2% - well over the Icelandic FSA's
requirement - but this high number is affecting the Bank's return on equity."

Investor call in English

Later today, the Bank will host an investor call in English at 1pm Icelandic
time. The call will start with a short macro update on the Icelandic economy,
followed by a review of the 1Q2013 interim financial results and Q&A. To
register for the conference call, please e-mail:  ir@islandsbanki.is. Dial-in
details and presentation will be sent out two hours prior to the call.

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#1705810]

Attachments:

Íslandsbanki Consolidated Financial Statements 1Q2013.pdf

Íslandsbanki 1Q2013 Press release.pdf

Íslandsbanki 1Q2013 Results presentation.pdf