Íslandsbanki hf. - Company Announcement

Islandsbanki hf. : Íslandsbanki's S&PGR rating raised to BBB/A-2 with positive outlook

Today, S&P Global Ratings (S&PGR) upgraded Íslandsbanki to BBB/A-2 from BBB-/A-
3 with positive outlook.

According to S&PGR the upgrade primarily reflects improving operating conditions
for Iceland's banking sector, with falling private sector leverage and improved
access to foreign debt capital markets. Thus, S&PGR revised upward their anchor
for banks operating in Iceland, the starting point in assigning a rating to
Islandsbanki, to 'bbb-' from 'bb+'.

The positive outlook reflects positive trends in the Icelandic economy and the
banking sector, and that capital ratios remain strong while it prepares for a
potential ownership change.

S&PGR further note that Íslandsbanki's capital levels are high by comparison.
Thus, the rating score for 'Capital and earnings' was moved to 'very strong'
from 'strong' resulting in a stand-alone credit profile (SACP) of 'bbb+', or a
two-notch improvement from the 'bbb-' anchor.  However, due to uncertainty as to
future capitalisation levels in preparation for a possible sale or IPO, S&PGR
apply a one-notch negative adjustment to the SACP resulting in a 'BBB' issuer
credit rating. Rationale being that given Íslandsbanki's very high leverage
ratios versus international peers, the Bank may optimise its capital base in
preparation for a possible sales process in the near future.

Jón Guðni Ómarsson, CFO

"There has been significant progress in the past 12 months to the benefit of
Íslandsbanki and its operating environment. The debt levels of the Icelandic
sovereign, as well as for individuals and corporates in Iceland, have been
greatly reduced and the long awaited steps towards the lifting of capital
controls passed into law. Íslandsbanki recently issued a benchmark bond issue of
EUR 500m making us fully market funded. The Bond was well received by investors
and has performed well in the secondary market. The rating upgrade is well
aligned with these developments.

From a stand-alone point of view, we continue to report solid returns based on
very high capital levels, which together with our prudent liquidity management
measures ensures Íslandsbanki is fully prepared for any effects that may stem
from the full lifting of capital controls."

For further information:



  * Investor Relations - Tinna Molphy, tinna.molphy@islandsbanki.is,  tel
    +354 440 3187.
  * Media Relations - Edda Hermannsdottir, edda.hermannsdottir@islandsbanki.is
    and tel: +354 440 4005.


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Attachments:

S&PGR upgrades ÍSB to BBB/A-2 on positive outlook.pdf