Íslandsbanki (ISB) Q1 2025 earnings summary

Executive summary

• Core operating income grew 5.8% year-on-year, with net profit for Q1 2025 at ISK 5.2bn and ROE at 9.4%, slightly below the >10% target but above analyst consensus.

• Market volatility and higher effective tax rate impacted profits, though all business units exceeded the 10% ROE target, with business banking achieving close to 18%.

• Asset quality remained strong, with NPL ratio at 1.8% and over 93% of loans collateralized.

• Significant digital investments included new internet bank, app enhancements, and a new insurance partnership with VEES/VÍS.

• Dividend of ISK 12.1bn declared, representing 50% of 2024 profit; treasury shares cancelled.

Financial highlights

• Net interest income rose 7% year-on-year to ISK 12,939m; NIM at 3.2% (up from 3.0%).

• Net fee and commission income increased by 1.9% year-on-year; net financial income loss widened to ISK 986m due to market volatility.

• Cost-to-income ratio was 47.6%, up from 43.9% in Q1 2024, mainly due to lower financial income.

• Net impairment charge on financial assets was ISK 3m, reflecting minimal impairments and strong asset quality.

• Loans to customers totaled ISK 1,299bn; customer deposits increased 1.1% over the quarter.

Outlook and guidance

• Guidance for above 10% return on equity for the full year is reaffirmed, with cost-to-income ratio targeted below 45%.

• NIMs for 2025 expected to be similar to 2024, with some quarter-to-quarter fluctuation due to inflation seasonality.

• GDP growth of 2.2% expected for 2025; inflation forecast to fall to 3.5–3.8% by year-end.

• Lower rates anticipated to support corporate investment and asset quality, though short-term margin pressure is possible.

• Loans and revenue expected to grow in line with nominal GDP.