Íslandsbanki hf. - Company Announcement

Islandsbanki hf. : Standard and Poor's affirms BBB-/A-3 rating with stable outlook

Standard & Poor's affirmed its rating on Íslandsbanki, BBB-/A-3 with stable
outlook, after Glitnir hf. creditor group submitted amendments to its previous
proposal concerning Glitnir's stability contributions.  As part of the changes,
Glitnir will relinquish to the government of Iceland all of its shares in ISB
Holding ehf., which owns 95% of shares in Íslandsbanki. With this proposed
change, Íslandsbanki will no longer pay dividends to Glitnir as was originally
planned.



In their research update S&P notes that although Íslandsbanki will not pay
dividends to Glitnir under the new agreement, they see the government's
ownership as accommodating Glitnir's owners' desire to simplify the agreement
and allow them to extract capital from Iceland by the end of the year.



S&P also notes that they do not see Íslandsbanki as a strategic investment for
the government and believe that the Bank will be up for sale from the government
of Iceland within two years. They believe that it is likely that capital levels
will be reduced in preparation for an eventual sale and, as such, project the
risk-adjusted capital (RAC) ratio at 12%-13% by the end of 2017, down from a pro
forma mid-year 2015 RAC ratio of 17.3%.



S&P's stable outlook on Íslandsbanki reflects their assumption that Íslandsbanki
will retain strong capital and liquidity buffers, even after expected deposit
outflows owing to the relaxation of Iceland's capital controls over the coming
months.



For further information:

Investor Relations - Guðbjörg Birna Björnsdóttir, ir@islandsbanki.is and tel:
+354 844 4752.
Media Relations - Edda Hermannsdóttir, pr@islandsbanki.is and tel: +354 844 4005





[HUG#1962476]

Attachments:

Íslandsbanki - S&P Research Update.pdf