Íslandsbanki (ISB) investor relations material

Executive summary

• Q1 2026 delivered strong results with net profit of ISK 7.5bn, ROE at 13.6%, and cost-to-income ratio at 38.5%, all outperforming guidance and targets.

• Core operating income grew 27% year-over-year, driven by inflation-boosted net interest income and robust loan growth across all business units.

• Capital position remains strong, with CET1 ratio at 18.6% and total capital ratio at 22.5%, both well above targets.

• Significant organizational restructuring underway, including a 7% reduction in FTEs, management simplification, and new loyalty services launched.

• Share buybacks and dividends distributed ISK 19.5bn to shareholders, with distribution capacity at ISK 29bn.

Financial highlights

• Net interest income reached ISK 17.1bn, up 32% year-over-year, with NIM at 3.9% (up 73bps YoY, mainly due to inflation).

• Net fee and commission income increased 6.6–7% year-over-year, with strong growth in lending and guarantee fees.

• Cost-to-income ratio improved to 38.5%, with 60% of costs from salaries and 40% from other expenses.

• Net impairments were ISK 1.2bn, annualized cost of risk at 35bps, mainly due to specific credit cases in construction.

• Stage 3 loans at 2%, up from 1.5% at year-end 2025.

Outlook and guidance

• Full-year 2026 ROE guidance maintained at 12%, with cost-to-income ratio expected at 43%.

• Loan book growth expected to be slow domestically and in line with nominal GDP internationally.

• Interest rates anticipated to remain high or rise further before stabilizing late 2026 or early 2027.

• NIM expected to normalize around 3% as inflation and policy rates stabilize.

• Dividend payout ratio maintained at 50%.