Íslandsbanki (ISB) Q3 2024 earnings summary

Executive summary

• ROE for 3Q24 was 13.2%, with 9M24 at 10.9%, exceeding targets; strong capital and asset quality maintained.

• Net profit for 3Q24 was ISK 7.3 billion, up 21% year-over-year, driven by impairment reversals and fee income.

• Cost-to-income ratio was 41.4% in 3Q24 and 44.2% for 9M24, below target YTD but expected to slightly exceed 45% for the full year.

• Asset quality remains strong, with NPL ratio at 1.6% and high collateral coverage.

• Capital position is robust, with total capital ratio at 23.4% and CET1 at 20.2%, well above regulatory requirements.

Financial highlights

• Net interest margin was 2.9% in 3Q24, with net interest income at ISK 11.8 billion, down 1% year-over-year.

• Net fee and commission income grew 5% to ISK 3.6 billion in 3Q24.

• Net impairment reversals totaled ISK 860 million in 3Q24, with ISK 500 million from credit model recalibration.

• Loans to customers were ISK 1,274 billion and deposits ISK 927 billion at quarter-end.

• Liquidity coverage ratio at 223% and NSFR at 126% in 3Q24.

Outlook and guidance

• Full-year 2024 ROE expected around 10%, with cost-to-income ratio slightly above 45% due to inflation and IT investments.

• Capital optimisation planned before end of 2025, potentially via growth or shareholder distributions.

• Inflation is expected to continue declining, with further central bank rate cuts anticipated.

• Dividend payout policy remains at 50% of earnings; ISK 10 billion in share buybacks planned for 2024.

• Asset quality outlook remains strong, with limited impact from high rates and inflation.