Icebank - Financial Statement Release

2007

Total assets almost triple and interest income nearly doubles
- after-tax profit of ISK 1,616 million


Icebank's pre-tax profit in 2007 amounted to ISK 1,720 million, compared with
ISK 6,840 million in the preceding year. After-tax profit was ISK 1,616 million
and return on equity after taxes was 13.5%. Net interest income was up 87% in
the year to ISK 2,341 million. Total assets almost tripled to ISK 252.5 billion
at the end of the year. The capital adequacy ratio (CAD) stood at 11.0% at
year-end. 

Highlights from the 2007 financial statements:

•  After-tax profit amounted to ISK 1,616 million and pre-tax profit to ISK
   1,720   million. Return on equity after taxes was 13.5%. 

•  Net interest income was ISK 2,341 million, compared with 1,253 million in
   2006, up 87% year-on-year. Net interest income was substantially higher than
   operating expenses.
•  Total assets were up 190% to ISK 252.5 billion at year-end 2007, compared
   with ISK 86.9 billion at the beginning of the year. 

•  Exposure to structured credit obligations (such as CDOs, SIVs and CLOs) is
   within 3% of total assets. These assets are not related to sub-prime loans. 

•  The capital adequacy ratio (CAD) stood at 11.0% at year-end. The Tier 1
   capital ratio was 15.2%. 


Highlights from Q4 of 2007:

•  After-tax loss in the fourth quarter of 2007 amounted to ISK 2,646 million.

•  Net operating income for the fourth quarter was negative by ISK 2,747
   million. 

•  Net interest income was ISK 510 million, compared with ISK 675 million in the
   third quarter.
•  The Bank's capital loss in the fourth quarter amounted to ISK 3,505 million.

This was largely owing to its holding in Exista, whose share price was down
42.5% in the period. The Bank has entered into derivative contracts which
provided hedging positions against unfavourable price development. Income of
nearly ISK 600 million was recognised as a result of these hedging positions. 

A year of major changes at Icebank 

In May the Bank raised a syndicated loan amounting to EUR 217.5 million, its
largest syndicated loan facility to date. The loan amount was EUR 117.5 million
higher than the initial launch amount. The loan had a very positive impact on
Icebank's liquidity position, as the Bank had no need to turn to the credit
market in the latter half of the year when markets tightened. 

In line with Icebank's strategy unveiled in 2006, its owners decided to expand
its shareholder base in order to facilitate the Bank's growth. The Bank is now
more than 43% owned by parties other than savings banks. Of this percentage 12%
are owned by the senior management.  In the wake of these changes, new parties
joined the Bank's management, and at year-end 2007 a new CEO took over the
reins. However, the Bank's strategic mission remains unchanged. Icebank is a
commercial bank focusing on wholesale and investment banking services to
savings banks, Icelandic and foreign financial institutions and other large
entities. 

In 2007 Icebank continued to underpin its further growth through internal and
external investments: 

•  A new profit centre was added through the purchase of Behrens Corporate
   Finance. 

•  An extensive effort was made to strengthen the Risk Management, IT and the
   Legal Affairs division. 

•  The number of full-time equivalent positions was increased by 42% from 74 to
   102. 
Icebank was not immune to the turmoil in stock markets, being a shareholder in
Exista. The Bank divested one-fourth of its holding in the company in the first
quarter of the year. At year-end its stake in Exista was down to 2.5%. The Bank
has also entered into derivative contracts which provided hedging positions
against unfavourable price development. 

Total assets were up by 190% in 2007 to ISK 252.5 billion at year-end, compared
with ISK 86.9 billion a year earlier. This growth was largely driven by
increased interbank trading with other financial institutions and repo
transactions with the Central Bank. 

Agnar Hansson, CEO:
“Icebank's 2007 performance was satisfactory given the market conditions.
Encouragingly, the Bank's net interest income exceeded its total operating
costs by a substantial margin. The Bank's role in the domestic market has been
extended. We have fostered good relations with other Icelandic financial
institutions, with a view to providing them with services equivalent to those
we have supplied to the savings banks over the past decades. The primary driver
in tripling the Bank's balance sheet was our participation in interbank market
and repo transactions, which were caused by special market conditions. 

The recent turmoil in the financial markets underscores the need to contain the
risks of equity investment. In the past few years, the Bank's performance has
been overly dependent on Exista's share price. We aim to continue scaling down
our stake in the company when conditions permit. Extensive effort has gone into
reinforcing the Bank's core activities. We have strengthened the Treasury and
Capital Markets division, added new investment strategies in Corporate Banking
and launched a new profit centre, Investment Banking. These efforts will serve
to broaden the Bank's service range and increase its fee and commission income.
We took the first step in our overseas expansion with the purchase of Behrens
Corporate Finance, which includes offices in the Baltic countries for which
high hopes are held. 

We acknowledge that the financial markets remain in a delicate condition and
the next few months could prove challenging. However, the Bank is prepared to
react swiftly and utilise opportunities presented each time.”


For further information, please contact:
Agnar Hansson, CEO, tel. +354 540 4000.
Breki Karlsson, Senior Manager of Funding and Investor Relations, tel. +354 540
4000.

Attachments:

icebank - news 12 2007.pdf