2017-02-24 09:18:43 CET

2017-02-24 09:18:43 CET


REGULATED INFORMATION

Islandic English
Íslandsbanki hf. - Annual Financial Report

Islandsbanki hf. : Annual Consolidated Statements 2016 


Íslandsbanki's 2016 Consolidated Annual Financial Statements

Highlights in 2016 were:

  * Profit after tax was ISK 20.2bn in 2016, compared to ISK 20.6bn in 2015. The
    profit in 2016 was driven by strong core income and the completion of the
    sale of Borgun's, the Bank's subsidiary, shares in Visa Europe, compared to
    a high net loan impairment gain in 2015.
  * Return on equity was 10.2% in 2016, compared to 10.8% in 2015.
  * Earnings from regular operations was ISK 15.1bn, compared to ISK 16.2bn in
    2015. Return on equity from regular operations on 15% CET1 was 10.7% in
    2016 compared to 12.4% in 2015.
  * Net interest income amounted to ISK 31.8bn in 2016 (2015 ISK 28.0bn) up
    14%. The net interest margin rose to 3.1% in 2016 (2015: 2.9%), in part due
    to a reversal of previously impaired interest, high interest rate
    environment and rising equity levels.
  * Net fee and commission income was ISK 13.7bn in 2016 compared to 13.2bn in
    2015.
  * A one-off loss of ISK 1.7bn was recognised due to building damages in former
    headquarters at Kirkjusandur and relocation to new headquarters.
  * Cost to income ratio was 56.9% in 2016 (2015: 56.2%), the cost to income
    ratio excludes the Bank tax and one-off cost items.  55% is the long term
    target.
  * Total assets amounted to ISK 1,048bn (Sep16: ISK 1,068bn), whereby loans to
    customers and liquidity portfolio account for 93% of balance sheet.
  * Loans to customers grew by 3.3% in 2016 to ISK 688bn. Total new lending was
    ISK 163bn across various lending divisions, but strengthening of the ISK had
    some dampening effect on the growth of the portfolio.
  * Ratio of loans more than 90 days past due and impaired was 1.8% (FY15:
    2.2%).
  * Deposits from customers closed at comparable levels to 2015. Expected
    outflows with the easing of the capital controls have not come to fruition.
  * Total capital ratio was 25.2% and CET1 ratio was 24.9% as a result of the
    subordinated loan of EUR 138m being prepaid in September.
  * The liquidity position is strong and exceeds internal and external
    requirements. At December 2016, the Bank's liquidity coverage ratio (LCR)
    was 187% (Sep16: 195%) and the total net stable funding ratio (NSFR) was
    123% (Sep16: 126%)
  * Leverage ratio was at 16.0% at  Dec16 compared to 18.1% at Dec15, indicating
    a moderate leverage
  * The Bank has issued three notes in FX over the period. Making the Bank fully
    market funded, Íslandsbanki issued a 4-year EUR 500m (ISK 65bn) 1.75% Fixed
    Rate Note, corresponding to a spread of 200 basis points over mid-swaps in
    August (now trading at Z+97bp). This followed a USD 35m private placement in
    January and EUR 75m tap issue in May.
  * Íslandsbanki is the only Icelandic bank to have two international credit
    ratings. In October 2016, S&P upgraded the Bank to BBB/A-2, with a positive
    outlook, and in January 2017 Fitch upgraded the Bank to BBB/F3, with stable
    outlook



Highlights in 4Q16 were:

  * Profit after tax was ISK 4.6bn in 4Q16 (4Q15: ISK 3.9bn).
  * Return on regular operations on 15% CET1 was 11.7% in the quarter (4Q15:
    12.8%).
  * Net interest income amounted to ISK 8.1bn in 4Q16 (4Q15: ISK 7.0bn).

  * Net fee and commission income was ISK 3.8bn in 4Q16 (4Q15: ISK 3.2bn).



 Birna Einarsdóttir, Chief Executive Officer:

Íslandsbanki returned another solid performance in 2016, a year that was marked
by several milestones in the Bank's development. Our core operations continued
to produce stable income and consistent returns. Loan portfolio restructuring
has been finalised, all holdings in non-related businesses have been divested,
and asset quality continues to improve.

The Bank successfully raised its profile in capital markets, at home and abroad,
with a EUR 500 million benchmark bond, which has performed very well in the
aftermarket. In December 2016 the Bank paid the Government an extraordinary
dividend of ISK 27bn, bringing the total dividends in 2016 to ISK 37bn, thereby
taking the first steps towards capital optimisation and eventual privatisation.

The Iceland sovereign ratings were all raised in the past year, to A-3/A-/BBB+,
reflecting the progress the country has made towards full capital account
liberalisation and declining debt levels. Indeed, Íslandsbanki, the only bank to
have two international ratings, also received upgrades to BBB by both Standard &
Poor's and Fitch Ratings.

For four years in a row, Íslandsbanki has been named Iceland's #1 bank in the
Icelandic Customer Satisfaction Index. For eight years running, we have been
voted Iceland's most professional bank and its best provider of financial

services to companies. The year culminated in the move to our new headquarters,
where the activity-based working environment will surely bring organisational
flexibility and greater support for our relationship banking model and our
vision to be #1 for service.

Investor Presentation in Icelandic

Today at 12.30 pm Icelandic time, Birna Einarsdóttir, CEO of Íslandsbanki, and
Jón Guðni Ómarsson, CFO, will present the financial results to market
participants, followed by a Q&A session. The meeting is conducted in Icelandic
and held on the ground floor of the Bank's new headquarters at Hagasmári 3.

Investor call in English

The Bank will also host an investor call in English to present the results at 2
pm Icelandic time. The call will start with a short macro update on the
Icelandic economy, followed by a review of the financial results and Q&A. Please
register by replying to ir@islandsbanki.is. Dial-in details and presentation
will be sent out two hours prior to the call.

All presentation material will subsequently be available and archived on
www.islandsbanki.is/ir.

For information on Íslandsbanki's financial calendar and silent periods see
http://www.islandsbanki.is/english/investor-relations/calendar/.



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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