2012-08-30 10:53:52 CEST

2012-08-30 10:55:43 CEST


REGULATED INFORMATION

English
Íslandsbanki hf. - Half Year financial report

Islandsbanki hf. : Consolidated interim financial results 1H2012 


Consolidated interim financial results 1H2012

Highlights (full release attached):

  * Profit after tax was ISK 11.6bn compared to ISK 8.1bn in 1H11.
  * Profit after tax from regular operations, defined as earnings excluding one-
    off items e.g. net valuation changes from the loan portfolio, fair value
    gain deriving from changes in accounting treatment, costs associated with
    the Byr merger and the impairment of goodwill, and net earnings from
    discontinued operations, was ISK 7.2bn, compared to ISK 7.7bn in 1H11.
  * Net valuation changes on the loan portfolio resulted in a gain of ISK 2.1bn
    in 1H12, compared to a loss of ISK 255m in 1H11.
  * Return on equity was 17.9%, compared to 12.9% in 1H11. Return on equity from
    regular operations was 11.1% in 1H12, compared to 12.4% in 1H11.
  * Around 18,700 individuals and 3,200 corporates have received write offs,
    debt forgiveness or some form of debt correction since the Bank's
    establishment, totaling ISK 394bn to date.
  * Total assets were ISK 789.9bn at end of June 2012, compared to ISK 792.4bn
    at the end of March 2012.
  * Total deposits were ISK 499.8bn at end of June 2012, compared to ISK
    509.3bn at the end of March 2012.
  * The net interest margin was 4.0% in 1H12, compared to 4.8% in 1H11.
  * Funding diversification continued with two new domestic covered bond
    issuances listed in Mar 2012 amounting to ISK 3.3bn and two tap issuances in
    May 2012. Total covered bond issuances now stand at ISK 8.8bn
  * Equity was ISK 135.5bn having increased by 10% throughout the first half of
    2012. The total capital ratio was 23.5%, which is well above the 16%
    regulatory minimum set by the Icelandic Financial Services Authority.

Birna Einarsdóttir, Chief Executive Officer of Íslandsbanki:"Íslandsbanki's financial strength is well reflected in the 1H12 financial
results. The Bank continues to deliver good return on equity, liquidity is
strong and the capital ratio is well above the minimum requirements of the
Icelandic FSA.

Net fee and commission income has increased by 47% from last year. This growth
is attributable to the merger of Íslandsbanki and Byr, solid performance from
the subsidiary Borgun and an increase in capital markets activities. However,
our cost-to-income ratios have also been affected by one off costs due to the
merger.  We expect that the full synergy effect of the merger will come through
by next year.

Demand for new loans is increasing and new lending to households and corporates
has risen during the period. Indeed, new lending in the first half of 2012 at
Ergo, the asset based financing division, has equaled the total for the entire
year 2011. Capital markets activities are increasing which will presumably have
a positive impact on the development and structure of the Icelandic financial
markets in the coming months.  Íslandsbanki sold a 10.29% share in Icelandair
Group hf. during this period. This is in line with the Bank's strategy to reduce
its holding in companies in unrelated business.

There are several positive developments in the Icelandic economy. However, the
recovery is fragile, both in terms of the uncertainties still present in here in
Iceland as well as in the general market environment internationally."

Later today, Birna Einarsdóttir, CEO of Íslandsbanki, and Jón Guðni Ómarsson,
CFO, will present the 2Q2012 financial results to market participants, followed
by a Q&A session.

The meeting starts at 4pm and will be conducted in Icelandic.

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

  * Time: 4 pm Icelandic time

  * Venue:  Íslandsbanki HQ, Kirkjusandur 2, 5th floor

  * Registration: Due to strict access controls, please make sure to complete
    your registration on: http://www.islandsbanki.is/um-
    islandsbanka/fjarfestatengsl/opinn-fjarfestafundur-2012

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 / mob:
    +354 844 3678.


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