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Islandsbanki hf.: Financial results for second quarter 2021

Second quarter 2021 (2Q21) financial highlights – prosperous quarter with positive net impairment

  • Íslandsbanki reported a net profit of ISK 5.4bn in the second quarter (2Q20: ISK 1.2bn) generating an annualised return on equity of 11.6% (2Q20: 2.8%) which is above the Bank’s financial targets.
  • Growth in loans to customers led an increase in net interest income YoY which totalled ISK 8.4bn in 2Q21 compared to ISK 8.2bn in 2Q20.
  • Net fee and commission income grew 26% YoY and amounted to ISK 2.9bn in 2Q21. Fees from asset management, investment banking and brokerage as well as from loans contributed to the increase.
  • Strong domestic equity market performance led to a net financial income of ISK 619m in 2Q21 compared to a loss of ISK 181m in 2Q20.
  • Administrative expenses rose by 10.5% YoY totalling ISK 6.5bn in the 2Q21. Administrative expenses include an ISK 588m one-off cost in relation to the Bank’s initial public offering (IPO), explaining the increase YoY.
  • Cost-to-income ratio (C/I ratio) was 49.9% in 2Q21, down from 57.5% in 2Q20.
  • The brighter outlook for the tourism industry contributed to a positive ISK 1.1bn net impairment on financial assets in 2Q21, in comparison to a net impairment charge, shaped by COVID-19, of ISK 2.4bn in 2Q20. The net impairment charge over loans to customers, the annualised cost of risk, was -0.42% in 2Q21 compared to 1.03% in 2Q20.
  • Loans to customers grew 5.9% from end of March to ISK 1,090bn, and 8.2% for 1H21, driven in most part by mortgage lending but also by growth in loans to companies.
  • At the end of the reporting period, the share of credit-impaired loans to customers was 2.1% (gross) down from 2.9% at year-end following full repayment of exposures in Stage 3.
  • Deposits from customers grew ISK 67bn in the second quarter, and ISK 86bn for 1H21, large part of the increase is related to settlement of the Bank’s IPO and thus temporary.
  • The liquidity position remains strong with all ratios well above regulatory requirements and internal thresholds.
  • Total equity amounted to ISK 190bn at the end of June and the Bank’s capital ratio was 22.9%, up from 21.9% at 1Q21, considerably higher than the total capital ratio target which is currently at 18.3-19.8%. The leverage ratio was 12.4% at the end of June compared to 12.6% for 1Q21, indicating low leverage.

First half 2021 (1H21) financial highlights – net profit turnaround

  • The Bank’s net profit for the first half of year 2021 was ISK 9.0bn (1H20: ISK -131m) with annualised return on equity for 1H21 of 9.7% compared to a -0.1% in 1H20.
  • Net interest income totalled ISK 16.6bn in 1H21, a fall of 1.2% YoY which is explained by lower interest rate environment between periods.
  • Several factors contributed to a 20.2% increase in net fee and commission between years including fees from asset management, investment banking and brokerage as well as fees from loans. Net fee and commission income totalled ISK 5.8bn for the first half of the year.
  • Net financial income was ISK 912m compared to a loss of ISK 1.9bn for 1H20.
  • Administrative expenses rose between years, mostly explained by a one-off cost in relation to the Bank’s IPO.
  • Cost-to-income ratio dropped significantly YoY from 60.1% in 1H20 to 50.6% in 1H21.
  • Net impairment on financial assets was a positive ISK 622m in the first half of 2021, due to brighter outlook for the tourism industry, compared to a charge of ISK 5.9bn in 1H20 which reflected the economic situation following the start of COVID-19.

Key figures and ratios

PROFITABILITYAfter tax profit (loss), ISKm 5,431 1,245 9,046 (131) 6,755
 Return on equity11.6%2.8%9.7%(0.1%)3.7%
 Net interest margin (of total assets)2.4%2.6%2.4%2.7%2.6%
 Cost-to-income ratio¹49.9%57.5%50.6%60.1%54.3%
 Cost of risk(0.42%)1.03%(0.12%)1.28%0.91%
BALANCE SHEETLoans to customers, ISKm1,089,7231,029,4151,006,717970,309933,320
 Total assets, ISKm1,446,8601,385,2351,344,1911,328,7241,303,256
 Risk exposure amount, ISKm924,375954,712933,521942,339923,133<...
Författare GlobeNewswire