Íslandsbanki hf. - Financial Statement Release

Islandsbanki hf. : Results for the period ended 30 September 2011

Íslandsbanki results for the period ended 30 September 2011

-          Annualised return on equity was 11.9%, which is in line with the
return targets of the Icelandic State Financial Investments and the Bank's other
owner
-          The total capital ratio at the end of the period was 28.8%, well
above the Financial Supervisory Authority minimum requirements
-          Tax charges and National Insurance for the period estimated to be ISK
4,143m
-          Total cumulative write-offs and debt adjustments for individuals and
households, since the Bank's establishment, amount to ISK 280bn
-     Around 17,700 individuals and 2,700 companies have received some form of
write-offs or debt relief at the Bank

Highlights:

  * Profit after tax was ISK 11,346m compared to 13,151m for the first nine
    months of 2010.
  * Net interest income was ISK 24,151m compared to ISK 25,747m in 2010. The
    year on year decrease is mainly due to decreasing interest rates.
  * Net fee and commission income was ISK 4,366m compared to ISK 5,234m in
    2010. The decrease is due to changes in ownership of Borgun, a former
    subsidiary of the bank.
  * Total assets at 30 September 2011 were ISK 679bn which represents little
    change from year-end 2010.
  * Annualised return on equity for the period was 11.9% compared to 17.8% for
    the same period in 2010. This reduction is due, amongst other things, to
    higher equity and lower interest rates.  The return on equity is in line
    with the return targets of the Icelandic State Financial Investments and the
    Bank's other owner.
  * The total capital ratio at the end of the period was 28.8%, well above the
    16% regulatory requirement imposed by The Financial Supervisory Authority.
    At year-end 2010 the ratio was 26.6%.
  * The Bank´s liquidity ratios were 43% and 27% at the end of the period which
    is well above The Financial Supervisory Authority minimum requirements of
    20% and 5%.
  * Loans to customers and credit institutions totalled ISK 526bn and total
    deposits amounted to ISK 428bn at the end of the period. Loans to customers
    and credit institutions were ISK 546bn at year-end 2010 and total deposits
    totalled ISK 423bn at the same time.
  * The deposit/loan ratio was 81.4% at the end of the period compared to 77.5%
    at year-end 2010.
  * Equity as at 30 September 2011 amounted to ISK 132bn compared to 121bn at
    year-end 2010.

Birna Einarsdóttir, CEO of Íslandsbanki says:
"These  results reflect an  increased balance in  the Bank's operations and that
its  core business  is strengthening.  The year  2011 has been  dedicated to the
financial   restructuring   of   both   individuals  and  companies.  Since  the
establishment of the new bank around ISK 280bn has been written off or otherwise
used towards debt relief for over 17,700 individuals and 2,700 companies that as
a  result  can  start  looking  to  their  plans for the future. Íslandsbanki is
exerting  itself  to  make  a  positive  contribution  to  the rebuilding of the
Icelandic  financial market. For the past months  the Bank has been preparing to
issue  covered bonds on the NASDAQ OMX Iceland  hf. and in so doing becoming the
first financial institution in Iceland to issue securities after the collapse of
2008.

Additionally  an important milestone was reached when the merger of Íslandsbanki
and  Byr was  granted approval.  The merger  represents a  step in the important
process  of increasing efficiency in the financial sector, and it will result in
unquestionably one of the country's strongest financial services companies being
born."
For further information please contact:

Guðný Helga Herbertsdóttir, Public Relations Officer on +354 844 3678

Sigrún Hjartardóttir, Head of Investor Relations on +354 844 4748

For the full version of this press release please refer to the attachment
Íslandsbanki's accounts are available at the Bank's website www.islandsbanki.is

Attachments:

islandsbanki_condensed_consolidated_interim_financial_statements.pdf

islandsbanki_9m_results_press_release.docx