Íbúðalánasjóður - Financial Statement Release

Interim Financial Statement of the Housing Financing Fund for the first half of the year 2016

Turnaround in operations in the first six months of the year


  -- Surplus from the Housing Financing Fund's
 operations amounted to ISK 2.510 million.
  -- The Fund's equity base strengthens - equity ratio well above the long-term
     goal
  -- Quality of loan portfolio improves and arrears decrease significantly
  -- Strong return on assets outside the loan portfolio

                                        

The Housing Financing Fund's Interim Financial Statements for the first half of
the year 2016 were approved by the Fund´s Board of Directors today. Operating
results were positive amounting to ISK 2,510 million, compared to a loss
amounting to ISK 379 million in the previous year. The operational turnaround
amounts to nearly three billion ISK. 

The Fund's equity ratio is now 6.45% and was 5.46% in the beginning of the
year. The ratio is calculated the same way as the capital ratio of financial
institutions. The long term goal of the fund is a ratio above 5.0%. The Housing
Financing Fund's equity at end of period is ISK 21,781 million and was ISK
19,271 million at the end of 2015. 



Results from the Fund's operations continue to improve

Interest income amounted to ISK 28,048 million compared to interest income in
the amount of ISK 30,253 million for the same period in 2015. Net interest
income amounted to ISK 525 million during the period and was negative in the
amount of ISK 473 million for the same period 2015. The strengthening of the
Fund's economic position by its focus on sales of appropriated assets, and
investments in interest-bearing bonds account for the most part the increase in
net interest income. In the second half of the year a further increase in net
interest income can be expected due to, among other things, the sale of
Leigufélagið Klettur ehf. 

The Fund's operating expenses amounted to ISK 909 million, of which ISK 87
million is a one-time cost due to the Fund's streamlining measures and
preparations related to the new Act no. 52/2016 on General Housing. Excluding
one-time costs, the Fund's operating expenses decreased between years by 9.5%.
Operating expenses decrease despite substantial increases in wages as according
to collective agreements. 

Full-time equivalent positions decreased by 20% from the previous year and were
76 on 30 June 2016 compared to 95 in the same period in 2015. In the Fund's
budget it is expected that the reduction of positions will have an effect to a
certain degree in the second half of the year by decreasing expenses but will
be fully implemented in the year 2017. Operating expenses as a percentage of
total assets amounted to 0.23% on an annual basis. 

During the period, the Fund sold Leigufélagið Klettur ehf.  realizing capital
gains in the amount of ISK 1,427 million. 

Further reductions in arrears of both households and legal entities

On 30 June 2016, the Fund's loans amounted to ISK 614 billion, and have loans
decreased by ISK 34 billion from the beginning of the year. Of that amount, ISK
9.5 billion are due to the government´s actions. The Fund's borrowings amounted
to ISK 776 billion, decreasing by ISK 8.4 billion during the period. Total
assets amounted to ISK 798 billion. 

At the end of the period, 98% of households who are customers of HFF had
performing loans. Household arrears have decreased significantly between
periods. About 2.5% of households had three or more monthly payments in arrears
on 30 June 2016 compared to 4.3% of households during the same period 2015.
Impairment of loans amounted to ISK 8,033 million at the end of the period, a
decrease of ISK 8,115 million from the beginning of the year. 

Collateral status of the loan portfolio

Approximately 96% of the book value of HFF's loan portfolio have a
loan-to-value below 90% at the end of the period.  Real estate prices have
risen more than prices in the period and arrears decreased considerably,
therefore resulting in an improvement in the quality of the collateral status
underlying the loan portfolio.   An overwhelming portion of the Fund's loans
are first lien, furthermore the official property value is normally a prudent
valuation method for market value of an asset. 

Assets outside of the loan portfolio increased

Assets outside of the loan portfolio including liquid funds increased between
years and amount to ISK 161 billion. The increase is primarily due to positive
results from sales of appropriated assets and prepayments of loans. The real
return on assets outside the loan portfolio for the period was 3.39%. On 25 May
2016, the Fund's organisational chart was changed and a new division was
established, Treasury, which is responsible for the management of the Fund's
assets off the balance sheet. 

Reduction in properties owned by the Fund

At the end of the period 825 properties were owned by the Fund, a reduction of
523 properties the first half of the year. The book value of the Fund's
properties is ISK 12.3 billion, while the real estate value of the same
properties is ISK 15.7 billion. Funds tied in properties for sale decreased by
ISK 8.3 billion during the period and were transferred into interest-bearing
assets. During the period, the Fund sold 667 properties and repossessed 144
properties. About 47% of properties held for sale are rentals. A reduction in
the number of properties owned by the Fund and consequently the reduction in
funds tied up in properties as well as the sale of Leigufélagið Klettur ehf.
will have a positive impact on the Fund's net interest income in the coming
months. 



Further information provided by Hermann Jonasson CEO and Sigurdur Jon Bjornsson
CFO, telephone 569 6900.

Attachments:

HFF Press release - Financial Statements 30 June 2016.pdf

HFF Interim Financial Statements 30 June 2016.pdf