Íslandsbanki reported a net profit of ISK 6.3 billion in the fourth quarter of 2024 and ISK 24.2 billion for the year as a whole.
RESULTS HIGHLIGHTS
Fourth quarter 2024 (4Q24) financial highlights
· Net profit amounted to ISK 6.3 billion in the fourth quarter of 2024 (4Q23: ISK 6.2 billion), generating an annualised return on equity (ROE) of 11.2% (4Q23: 11.2%).
· Net interest income (NII) amounted to ISK 10.9 billion and decreased by ISK 855 million in 4Q24 compared to 4Q23.
· The net interest margin (NIM) was 2.7% in 4Q24 compared to 2.9% in 4Q23.
· Net fee and commission income (NFCI) grew by 3.2% compared to 4Q23 and amounted to ISK 3.6 billion in 4Q24.
· Net financial income was ISK 169 million in 4Q24, compared to ISK 455 million in 4Q23.
· Other operating income was ISK 782 million in 4Q24, compared to ISK 258 million in 4Q23.
· Administrative expenses in the fourth quarter of 2024 amounted to ISK 7.1 billion, compared to ISK 6.6 billion in 4Q23, excluding an administrative fine of ISK 100 million, an increase of 7.7%.
· The cost-to-income ratio was 45.7% in 4Q24 compared to 41.1% in 4Q23.
· The net impairment on financial assets was a reversal of ISK 352 million in 4Q24, compared to a cost of ISK 1,002 million in 4Q23. The net impairment charge as a share of loans to customers, the annualised cost of risk, was -11bps in 4Q24, compared to 33bps in 4Q23.
· Loans to customers grew by ISK 21.3 billion from the third quarter of 2024, or by 1.7%, to ISK 1,295 billion at the end of 2024.
· Deposits from customers were broadly flat between the third and fourth quarters of 2024 and amounted to ISK 927 billion at the end of 4Q24.
· Total equity at period-end amounted to ISK 227.4 billion compared to ISK 224.7 billion at year-end 2023.
· The total capital ratio was 23.2% at the end of 4Q24, compared to 25.3% at year-end 2023. The corresponding CET1 ratio was 20.1%, compared to 21.4% at year-end 2023. The CET1 ratio at period-end was 470bps above regulatory requirements, and above the Bank's financial target of having a 100-300 bps capital buffer on top of CET1 regulatory requirements.
· The minimum requirement for own funds and eligible liabilities (MREL) for Íslandsbanki is 19.6% of total risk exposure amount, in addition to the combined buffer requirement. At the end of 2024, the Bank's MREL ratio was 33.4%, 390 bps on top of requirements.
2024 (FY24) financial highlights
· Net profit for 2024 was ISK 24.2 billion (2023: ISK 24.6 billion), with an annualised ROE for 2024 of 10.9%, compared to 11.3% in 2023.
· Net interest income totalled ISK 47.3 billion in 2024, a reduction of 2.8% year-on-year.
· Net fee and commission income (NFCI) fell by 1.2% year-on-year and amounted to ISK 13.1 billion in 2024, compared to ISK 13.3 billion in 2023.
· Net financial expense was ISK 338 million in 2024 compared to an income of ISK 241 million in 2023.
· Other operating income totalled ISK 2,282 million in 2024 compared to ISK 570 million in 2023.
· Administrative expenses were ISK 27.6 billion in 2024, excluding an administrative fine of ISK 470 million charged in the second quarter of 2024, compared to ISK 25.7 billion in 2023, which in turn, excluded an administrative fine of ISK 960 million charged in 2023.
· Cost-to-income ratio, adjusted for administrative fines, rose year-year from 40.6% in 2023 to 43.9% in 2024.
· Net impairment on financial assets was a reversal of ISK 645 million in 2024, compared to expenses of ISK 1,015 million in 2023.
Capital optimisation, dividend and further distribution of excess capital
· A dividend payment of ISK 12.1 billion, in line with the dividend policy of paying out around 50% of preceding year's profit, will be proposed by the Board of Directors of the Bank to the 2025 Annual General Meeting (AGM) to be held in March 2025.
· The Bank remains committed in its efforts to optimise its capital structure, subject to market conditions. As previously disclosed, this may entail both organic or external growth, as well as distributions to shareholders through extraordinary dividends and/or buyback of own shares.
· The Financial Supervisory Authority of the Central Bank of Iceland (FSA) has granted the Bank authorisation of an amount up to ISK 15 billion market value, to buy back own shares. The Bank will announce the timing and execution of the repurchase of own shares under the aforementioned authorisation once a decision to that effect has been made. The FSA has also granted the Bank authorisation to reduce its share capital in an amount equivalent to the own shares purchased based on authorisations granted by the FSA for buy back of own shares in 2023 and 2024. The total amount of those authorisations was ISK 15 billion, of which the Bank has to date purchased shares for around ISK 12.5 billion.
· The Board of Directors will seek a renewed authorisation to buy back own shares at the 2025 AGM to the legally allowed extent.
· Implementation of the third Capital Requirements Regulation (CRR3) in 2025 is expected to reduce the Bank's REA by up to 4-5% at implementation and grow slightly through 2025, thus providing additional capital distribution or growth capacity. CRR3 is therefore expected to increase total capital ratio by 110bps to 24.3%, while CET1 ratio is expected to grow by 100bps to 21.1%. The Bank has already prepared the necessary changes and is ready with updated product offering to make use of the changed regulatory framework.
Key figures and ratios
| 4Q24 | 3Q24 | 2Q24 | 1Q24 | 4Q23 | ||
| PROFITABILITY | Profit for the period, ISKm | 6,283 | 7,280 | 5,266 | 5,417 | 6,228 |
| Return on equity | 11.2% | 13.2% | 9.7% | 9.8% | 11.2% | |
| Net interest margin (of total assets) | 2.7% | 2.9% | 3.1% | 3.0% | 2.9% | |
| Cost-to-income ratio 1,2 | 45.7% | 40.4% | 45.7% | 43.9% | 41.1% | |
| Cost of risk 3 | (0.11%) | (0.27%) | (0.04%) | 0.23% | 0.33% | |
| 31.12.24 | 30.9.24 | 30.6.24 | 31.3.24 | 31.12.23 | ||
| BALANCE SHEET | Loans to customers, ISKm | 1,295,388 | 1,274,094 | 1,276,608 | 1,248,295 | 1,223,426 |
| Total assets, ISKm | 1,607,807 | 1,622,458 | 1,595,896 | 1,643,707 | 1,582,694 | |
| Risk exposure amount, ISKm | 1,040,972 | 1,021,243 | 1,019,494 | 1,015,161 | 977,032 | |
| Deposits from customers, ISKm | 926,846 | 927,011 | 916,127 | 879,554 | 850,709 | |
| Customer loans to customer deposits ratio | 140% | 137% | 139% | 142% | 144% | |
| Non-performing loans (NPL) ratio 4 | 1.6% | 1.6% | 1.8% | 1.9% | 1.8% | |
| LIQUIDITY | Net stable funding ratio (NSFR), for all currencies | 125% | 126% | 123% | 127% | 124% |
| Liquidity coverage ratio (LCR), for all currencies | 168% | 223% | 190% | 190% | 195% | |
| CAPITAL | Total equity, ISKm | 227,355 | 223,388 | 216,501 | 215,718 | 224,693 |
| CET1 ratio 5 | 20.1% | 20.2% | 19.9% | 19.9% | 21.4% | |
| Tier 1 ratio 5 | 21.0% | 21.2% | 20.9% | 20.9% | 22.5% | |
| Total capital ratio 5 | 23.2% | 23.4% | 23.1% | 23.6% | 25.3% | |
| Leverage ratio 5 | 13.2% | 13.0% | 13.0% | 12.6% | 13.4% | |
| MREL ratio 6 | 33.4% | 35.6% | 35.6% | 39.1% | 41.3% |
1. Calculated as (Administrative expenses - One-off items) / (Total operating income - One-off items).
2. C/I ratio for 2Q24 excludes a charge of ISK 470m and C/I ratio for 4Q23 excludes a charge of ISK 100m related to an administrative fine.
3. Negative cost of risk means that there is a net release of impairments.
4. Stage 3, loans to customers, gross carrying amount.
5. Including 1Q24 profit for 31.3.24.
6. MREL ratio includes the CET1 capital held to meet the combined buffer requirement.
Jón Guðni Ómarsson, CEO of Íslandsbanki:
The fourth quarter of 2024 was largely characterised by the Central Bank of Iceland (Central Bank) at last, after a long period of elevated interest rates, beginning to implement rate cuts. The impact of this was strongly felt in the securities market during the quarter, with the OMX Iceland 15 index rising by 15.8% during the period. Íslandsbanki's activities during the fourth quarter generated a profit of ISK 6.3 billion and an annualised return on equity for the period of 11.2%. The profit was in spite of an ISK 193 billion CPI imbalance at year-end. The Bank's good results for the period are further supported by an increase in the value of investment assets and a reversal of impairments in our loan portfolio. The Bank's overall profit for 2024 amounted to ISK 24.2 billion and the annualised return on equity was 10.9%, which is above our target. The cost-to-income ratio was 45.7% for the fourth quarter and 43.9% for the year as a whole. Lending grew by 5.9% for the year, which is slightly more growth than the year before. The Bank's capital position is extremely strong and at year-end 2024 the Bank's CET1 ratio was 20.1% which is 270 basis points in excess of the CET1 target, assuming the midpoint of the 100-300bps management buffer. Plans to optimise the Bank's capital structure are still a priority, subject to market conditions.
The Bank's new strategy "lighthouse" casts its spotlight on the financial health of our customers and the Bank will endeavour to empower its customers through financial education and good cooperation. The Bank is focusing more on progressive thinking and profitable growth. A partnership with VÍS tryggingar hf. (VÍS), has also been announced, where both companies will offer their respective customers special benefits through their loyalty programmes. The partnership will enhance service provided to customers of both companies together with brining around the possibility of offering better terms and a better overview over our customers' finances.
Íslandsbanki Research recently published a new macroeconomic forecast. According to the forecast, continued disinflation and further Central Bank rate cuts can be expected. The economy is therefore achieving a degree of balance and expectations are for increasing economic growth. Whilst publishing the new forecast, we held a meeting on infrastructure in healthcare services, as the Bank has recently been highlighting the accumulated investment need across the national infrastructure. The Bank monitors opportunities in this field and has encouraged dialogue between private parties and the public sectors in this field. Furthermore, the Bank's participation in infrastructure projects outside Iceland further enhances our experience and strengthens co-operation with foreign parties.
Sustainability has long been an integral part of the Bank's daily operations, and it is important that it continues to work to ambitious targets in that field. The Bank's newly published 2024 Annual and Sustainability Report, which is available on the Bank's website, covers the main sustainability milestones passed by the Bank as a whole last year, along with details of the operational highlights the business units and cost centres. Amongst the satisfying achievements in digitisation is the real-time update of savings information for debit cards in Fríða, the Bank's loyalty programme. Additionally, a new online bank will be launched during the first quarter of 2025 after significant changes to this important distribution channel of the Bank. It is gratifying to see how a strong team spirit leads to great results in developing new solutions.
Exciting times lie ahead with the implementation of a new strategy which focuses on providing excellent service to our customers and for the Bank to empower our customers to be a force for good. There is a strong focus on promoting our customers' financial health and the Bank will continue with its robust educational efforts. The collaboration between Íslandsbanki and VÍS opens new opportunities in customer service. We look forward to shaping this partnership and introducing it further in the coming weeks and months.
Investor Material
Full version of the Press Release is attached hereto.
In the event of discrepancy between the Icelandic and English version of the Press Release the English version prevails.
Disclaimer
This press release may contain "forward-looking statements" involving uncertainty and risks that could cause actual results to differ materially from results expressed or implied by the statements. Íslandsbanki hf. undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release. It is the investor's responsibility to not place undue reliance on these forward-looking statements which only reflect the date of this press release. Forward-looking statements should not be considered as guarantees or predictions of future events and all forward-looking statements are qualified in their entirety by this cautionary statement.
INVESTOR RELATIONS
An earnings conference call and webcast will take place on Friday 14 February 2025
Íslandsbanki will host a webcast in English for investors and market participants on Friday 14 February at 8.30 Reykjavík/GMT/London/BST, 9.30 CET. Jón Guðni Ómarsson, CEO, and Ellert Hlöðversson, CFO, will give an overview of the fourth quarter 2024 and full year 2024 financial results and operational highlights.
The webcast will be accessible live through a link on the Bank's Investor Relations website where a recording will also be available after the meeting. Participation and the ability to ask written question is accessible via this link. If you wish to participate in the webcast via teleconference and be able to ask questions verbally, please register via this link here. Information regarding the webcast is available here.
Further information is available through Íslandsbanki Investor Relations, ir@islandsbanki.is.
Financial calendar
Íslandsbanki plans to publish its financial statements according to the financial calendar below:
Annual General Meeting - 31 March 2025
First quarter results 2025 - 8 May 2025
Second quarter results 2025 - 31 July 2025
Third quarter results 2025 - 30 October 2025
Further information on the Bank's 2025 financial calendar is available here. Please note that the date is subject to change.
Additional investor material
All investor material will subsequently be available and archived on the Bank's Investor Relations website, where other information on the Bank's financial calendar and silent periods can also be found.
This announcement is released by Íslandsbanki hf. and contains information that qualified or may have qualified as inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR), encompassing information relating to the fourth quarter 2024 and full year 2024 financial results described above. For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is made by Ellert Hlöðversson, CFO of Íslandsbanki hf.
