Íslandsbanki (ISB) Q4 2024 earnings summary

Executive summary

• Net profit for 2024 was ISK 24.2bn, with ROE at 10.9% and a cost-to-income ratio of 43.9%, meeting or exceeding all financial targets.

• The bank maintained a strong capital position, with CET1 ratio at 20.1% and total capital ratio at 23.2%, well above regulatory requirements.

• Asset quality remained robust, with Stage 3 loans at 1.6% and NPLs at 0.9%, aided by low impairments and customer shifts to inflation-linked loans.

• Strategic focus included digital transformation, sustainability, and new initiatives in AI and bancassurance, with a new insurance partnership launched.

• Inflation declined from 6.7% to 4.8% in 2024, and policy rates were cut from 9.25% to 8.5% by year-end.

Financial highlights

• Net interest income for 2024 was ISK 47.3bn, with a net interest margin of 2.9% for the year and 2.7% in Q4.

• Net fee and commission income was ISK 13.1bn, with growth in investment banking, asset management, and cards.

• Cost-to-income ratio was 43.9% for 2024, within target.

• Net impairment reversals totaled ISK 645m, with cost of risk at -0.05% and NPL ratio at 1.6%.

• Loans to customers grew to ISK 1,295bn, and deposits increased 9% year-over-year to ISK 927bn.

Outlook and guidance

• GDP is forecast to grow by 2.2% in 2025, with inflation expected to average 3.6% and further policy rate cuts anticipated.

• Guidance for 2025: ROE above 10%, cost-to-income below 45%, and 50% dividend payout ratio.

• Distribution of excess CET1 capital (ISK 15bn) through share buybacks planned for 2025, subject to market conditions.

• Implementation of CRR3 in 2025 expected to reduce REA by 4-5% and increase capital ratios by 100-110bps.