Kaupþing banki hf. - Company Announcement

Negotiations between Kaupthing and SPRON continue

Kaupthing Bank hf. SPRON have decided to extend their negotiations on
a possible merger between the two companies. Negotiations are going
well and the outcome will be announced as soon as it has been
reached.

A merger is subject to the approval of SPRON shareholders,
Kaupthing's Board of Directors, the Icelandic Financial Supervisory
Authority, the Competition Authority and the companies' creditors.

For further information please contact Ingólfur Helgason, CEO of
Kaupthing in Iceland, tel: 444-6121