Second quarter (2Q24) financial highlights

• Íslandsbanki reported a net profit of ISK 5.3 billion in the second quarter of 2024 (2Q23: ISK 6.1 billion), generating an annualised return on equity (ROE) of 9.7% (2Q23: 11.5%).
• Net interest income (NII) was ahead of analysts' estimates and amounted to ISK 12.5 billion and fell by 1.0% in 2Q24 compared to ISK 12.6 billion for 2Q23.
• The net interest margin (NIM) was 3.1% in 2Q24, compared to 3.2% in 2Q23.
• Net fee and commission income (NFCI) fell by 4.8% compared to 2Q23 and amounted to ISK 3.4 billion in 2Q24.
• Net financial expense was ISK 499 million in 2Q24, compared to an expense of ISK 559 million in 2Q23.
• Administrative expenses in the second quarter of 2024 were ISK 7.3 billion in 2Q24, compared to ISK 6.7 billion in 2Q23, an increase of 8.4%. Charges in each quarter related to administrative fines, amounting to ISK 470 million for 2Q24 and ISK 860 million for 2Q23 respectively, are excluded.
• The cost-to-income ratio was 46.4% in 2Q24 but was 42.6% in 2Q23. The ratios exclude, in both instances charges, due to administrative fines.
• The net impairment on financial assets was a reversal of ISK 137 million in 2Q24, compared to a reversal of ISK 1,245 million in 2Q23. The net impairment charge as a share of loans to customers, the annualised cost of risk, was -4bp in 2Q24, compared to -40bp in 2Q23.
• Loans to customers grew by ISK 28.3 billion from the first quarter of 2024, or by 2.3%, to ISK 1,277 billion at the end of second quarter 2024.
• Deposits from customers grew during the second quarter by ISK 36.6 billion, or 4.2%, up to ISK 916 billion at the end of 2Q24.
• Total equity at period-end amounted to ISK 216.5 billion compared to ISK 224.7 billion at year-end 2023.
• The total capital ratio was 23.1% at the end of 2Q24, compared to 25.3% at year-end 2023. The corresponding CET1 ratio was 19.9%, compared to 21.4% at year-end 2023, which is 450bps above regulatory requirements, and above the Bank's financial target of having a 100-300bps capital buffer on top of CET1 regulatory requirements.

First half 2024 (1H24) financial highlights

• Íslandsbanki's net profit for the first half of 2024 was ISK 10.7 billion (1H23: ISK 12.4 billion), with an annualised return on equity for 1H24 of 9.8%, compared to 11.4% in 1H23.
• Net interest income totalled ISK 24.6 billion in 1H24, a reduction of 1.7% YoY.
• Net fee and commission income (NFCI) fell by 4.9% YoY and amounted to ISK 6.7 billion in 1H24, compared to ISK 7.1 billion in 1H23.
• Net financial expense was ISK 735 million in 1H24 compared to an expense of ISK 21 million in 1H23.
• Administrative expenses were ISK 14.7 billion in 1H24, excluding an administrative fine of ISK 470 million charged in the second quarter of 2024, compared to ISK 13.7 billion in 1H23, which in turn, excluded an administrative fine of ISK 860 million.
• Cost-to-income ratio rose YoY from 42.3% in 1H23 to 45.6% in 1H24.
• Net impairment on financial assets amounted to ISK 567 million in the first half of 2024, as compared to a reversal of ISK 570 million for the first half of 2023.

Key figures and ratios

1. Calculated as (Administrative expenses – One-off items) / (Total operating income – One-off items).
2. C/I ratio for 2Q24 excludes a charge of ISK 470m and C/I ratio 2Q23 excludes a charge of ISK 860m due to an administrative fine. C/I ratio for 4Q23 included a provision of ISK 100m made in connection with an administrative fine, the C/I ratio has been restated so it excludes the provision.
3. Negative cost of risk means that there is a net release of impairments.
4. Stage 3, loans to customers, gross carrying amount.
5. Including 1Q24 profit for 31.3.24 and 3Q23 profit for 30.9.23.
6. MREL ratio includes the CET1 capital held to meet the combined buffer requirement.

Jón Guðni Ómarsson, CEO of Íslandsbanki:
The second quarter of 2024 profit from Íslandsbanki's operations amounted to ISK 5.3 billion with an annualised return on equity of 9.7%, both of which are in line with analysts' estimates. Operating expenses rose year-on-year and the cost-to-income ratio was 46.4% for the second quarter, which is slightly above the Bank's target of remaining below 45%. Inflation has remained persistent but expectations are for it to decline in the coming months. Rates are still elevated. There are some signs that private consumption has started to contract and there are certain indications that the current environment has started to have an effect on the ability of businesses to meet their financial obligations. The Bank will keep a close eye on developments during the second half of the year, both with regards to the general macroeconomic outlook as well as the standing of our customers.
The Bank's foundations remain strong, both when looking at its capital and liquidity positions. The programme of buybacks of its own shares continued during the quarter, both through regular repurchases as well as by means of a reverse auction. The share buybacks are steps taken toward capital optimisation, to be concluded before year-end 2025, subject to market conditions. Funding has also been strong. The Bank's decision to repurchase the entirety of the EUR 300 million May 2026 senior bonds was an important step in lowering the Bank's interest expense. This issue was launched in 2Q23 at a time when foreign currency issuances of the Icelandic banks were at historically wide levels. The FSA also announced its decision on the Bank's capital requirements, decreasing the additional capital requirement under Pillar 2 by 0.6 percentage points from the previous assessment, to 1.8% of risk-weighted assets. This reflects the Bank's strong balance sheet, both with regards to its loan portfolio and moderate market risk.
Both international rating agencies, that assign credit ratings to the Bank, have carried out a ratings action after their annual review of the Bank's operations this year, as S&P Global Ratings raised the Bank's long term issuer rating to BBB+ from BBB in April and Moody's Ratings (Moody's) affirmed the Bank's A3 issuer rating beginning of July. Both ratings are on a stable outlook.
Preparations are underway for this year's Íslandsbanki Reykjavík Marathon and registration for the event and the collection of pledges for charities has been even better than last year. Íslandsbanki is the proud main sponsor of the event and we look forward to celebrating the 40-year anniversary of the event in downtown Reykjavík on 24 August.

Investor Material
Full version of the Press Release is attached hereto. In the event of discrepancy between the Icelandic and English version of the Press Release the English version prevails.

Disclaimer
This press release may contain "forward-looking statements" involving uncertainty and risks that could cause actual results to differ materially from results expressed or implied by the statements. Íslandsbanki hf. undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release. It is the investor's responsibility to not place undue reliance on these forward-looking statements which only reflect the date of this press release. Forward-looking statements should not be considered as guarantees or predictions of future events and all forward-looking statements are qualified in their entirety by this cautionary statement.

INVESTOR RELATIONS
An earnings conference call and webcast will take place on Friday 26 July 2024
Íslandsbanki will host a webcast in English for investors and market participants on Friday 26 July at 8.30 Reykjavík/GMT/9.30 London/BST, 10.30 CET. Jón Guðni Ómarsson, CEO, and Ellert Hlöðversson, CFO, will give an overview of the second quarter 2024 financial results and operational highlights.

The webcast will be accessible live through a link on the Bank's Investor Relations website where a recording will also be available after the meeting. Participation and the ability to ask written question is accessible via this link. If you wish to participate in the webcast via teleconference and be able to ask questions verbally, please register via this link here. Information regarding the webcast is available here.

Further information is available through Íslandsbanki Investor Relations, ir@islandsbanki.is.

Financial calendar
Íslandsbanki plans to publish its 3Q23 results on 23 October. Please note that the date is subject to change.

Additional investor material
All investor material will subsequently be available and archived on the Bank's Investor Relations website, where other information on the Bank's financial calendar and silent periods can also be found.

This announcement is released by Íslandsbanki hf. and contains information that qualified or may have qualified as inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR), encompassing information relating to the second quarter 2024 financial results described above. For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is made by Ellert Hlöðversson, CFO of Íslandsbanki hf.