Íslandsbanki hf. - Decisions of extraordinary general meeting

Islandsbanki hf. : ISK 27bn extraordinary dividend payment to the Icelandic State

At the Annual General Meeting of Íslandsbanki on 19 April 2016, it was agreed
that the Board may convene a special shareholder meeting later in the year where
a proposal regarding payment of dividends for the previous fiscal years could be
suggested.

Extraordinary dividend
At the shareholder meeting held today, Wednesday 21 December 2016, it was agreed
that an extraordinary dividend of ISK 27bn would be paid out to its shareholder
before year-end 2016. The Icelandic state is the sole owner of Íslandsbanki and
the equity stake is managed by the Icelandic State Financial Investments (ISFI).

The Bank's dividend policy states that 40-50% of net profit shall be paid out as
dividend. In April, Íslandsbanki paid ISK 10bn in dividend to its sole
shareholder, corresponding to 50% of 2015 net profits. Including today's
dividend payment, a total of ISK 37bn will have been paid out to the Icelandic
State in 2016.

Normalisation of capital structure
A great emphasis has been placed on the asset side of Íslandsbanki's balance
sheet in recent years. Restructuring of the loan portfolio is now finalised, the
non-performing loan (NPL) ratio continues to decline and only a negligible share
of loans is non-performing after restructuring. This places Íslandsbanki's
credit quality securely in the top interquartile range of European banks.

Today's dividend payment marks a significant step in normalising the liability
side of Íslandsbanki's balance sheet. Íslandsbanki has maintained extraordinary
levels of capital and liquidity in preparation for possible adverse effects that
may stem from the full lifting of capital controls. 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.

Strong capital and liquidity
Following the dividend payment, the Bank's total capital ratio, consisting of
equity capital only, amounts to 24.0%, which is above the Bank's current total
capital ratio target of 23% and well above the 19.1% regulatory total capital
requirement. The leverage ratio will be 15.7%, which is significantly above the
levels of European banks. The liquidity position will remain robust and well
above both internal and regulatory requirements.

Birna Einarsdóttir, Chief Executive Officer:
"Íslandsbanki has maintained high capital ratios and liquidity levels in
preparation for the capital account liberalisation process and the possible
impact on the Bank's operating environment. Positive trends in the Icelandic
economy and prudent steps towards lifting of capital controls now present a
welcome opportunity to take steps to optimise the Bank's capital base.

Íslandsbanki continues to report solid returns from its underlying business
despite its very high capital levels. Access to international capital markets is
good and the Bank is now fully market funded. Restructuring of the loan
portfolio has been finalised. Prudent lending policies have resulted in improved
asset quality and a lower ratio of non-performing loans. The Icelandic operating
environment has remained resilient and the Bank's capital position remains very
strong. Íslandsbanki is therefore well positioned to pay a special dividend to
its shareholder."

INVESTOR RELATIONS - Investor call in English
On Wednesday 21 December, the Bank will host an investor call in English at
10.30 am to go over the dividend payment and the Bank's capital structure.

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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