Íslandsbanki hf. - Interim report (Q1 and Q3)

Islandsbanki hf. : Consolidated Interim Financial Results Q1 2012

Highlights:

  * Profit after tax, was ISK 5.6bn compared to ISK 3.6bn in 1Q11.
  * 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 4.8bn, compared to ISK 3.8bn in 1Q11 and
    ISK 13.9bn in FY11. Earnings from regular operations is
  * Net valuation change on the loan portfolio resulted in a loss of ISK 1.5bn
    in 1Q12, compared to a loss of ISK 664m in 1Q11.
  * Return on equity was 17.7%, compared to 11.7% in 1Q11. Return on equity from
    regular operations was 15.1% in 1Q12, compared to 12.4% in 1Q11.
  * Around 18,200 individuals and 3,000 corporates have received write offs,
    debt forgiveness or some form of debt correction since the Bank's
    establishment, totaling ISK 370bn to date.
  * Total assets were ISK 792.4bn at the end of March 2012, compared to ISK
    795.9bn at year-end 2011.
  * Total deposits were ISK 509.3bn at the end of March 2012, compared to ISK
    525.8bn at year-end 2011.
  * The net interest margin was 4.4% in 1Q12, compared to 4.5% in FY11.
  * Funding diversification continued with two new domestic covered bond
    issuances listed in Mar 2012 amounting to ISK 3.3bn.
  * Equity was ISK 129.4bn having increased by 5% throughout the first quarter.
    The total capital ratio was 23.3%, which is well above the 16% regulatory
    minimum set by the Icelandic Financial Services Authority.
  * For the full financial results announcement, please see attachment. Also
    attached is the 1Q12 Consolidated Interim Financal Statements and 1Q12
    Financial Results Presentation.



Birna Einarsdóttir, Chief Executive Officer of Íslandsbanki"The first quarter in 2012 sends a strong signal for the rest of the year. The
Bank's capital is well above the minimum regulatory requirements and earnings
from regular operations continue to grow. This quarter will always be notable in
the history of the Bank as the merger of Íslandsbanki and Byr was completed. I
am immensely proud of our employees for their dedication and positive attitude
shown in this great task.

Another Supreme Court ruling on loans in foreign currency was passed in
February, inevitable delaying the restructuring process. Not only is it
inconvenient for customers but also for the Bank and the community as a whole,
especially as the final interpretation of the ruling will not be available until
later this Autumn.

We saw an increase in loan growth during the quarter, in particular at Ergo, the
Bank's asset based financing division. This suggests that companies are starting
to take cautious steps in their investments. However, we also clearly note that
the seafood industry and related companies are holding back on new investments
while uncertainty remains on new legislation and fishing fees.

The Bank's covered bonds have been well received by investors, who welcomed two
new issuances in March and tap issuances in May. This diversifies the Bank's
funding profile and enables us to provide our customers with better business
terms."

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#1616116]

Attachments:

ÍSB - 1Q12 Condensed Consolidated Interim Financial Statements.pdf

ÍSB 1Q12 Financial Results Announcement.pdf

ÍSB - 1Q12 Financial Results Presentation.pdf