Íslandsbanki (ISB) Q4 2025 earnings summary

Executive summary

• ROE reached 11.2% for 2025, exceeding targets, with a cost-to-income ratio of 42.4% and net profit of ISK 25.2bn; new medium-term ROE target set at >13% and 2026 guidance at ~12%.

• Strong capital position with CET1 ratio at 20.1% and total capital ratio at 24.0%, well above regulatory requirements.

• Government completed full divestment, broadening the shareholder base to over 35,000 and increasing stock liquidity.

• Over 100% of 2024 profits distributed via dividends and buybacks in 2025; board proposes 50% payout of 2025 profit as ordinary dividend and ISK 15bn buyback for 2026.

• Merger discussions with Skagi/Sjóvá progressing, with due diligence and regulatory review underway.

Financial highlights

• Net interest income for 2025 was ISK 52.5bn, up 11% year-over-year; net interest margin at 3.1% for the year and 2.9% in Q4.

• Net fee and commission income grew 7.4% to ISK 14.1bn, with strong performance in asset management, investment banking, cards, and payments.

• Cost-to-income ratio improved to 42.4% for the year and 43.5% in Q4; operating expenses rose to ISK 31.6bn.

• Loan book grew 5.5% in 2025, with 2.5% growth in Q4; 94% of loans are collateralized, LTV at 54%.

• NPLs stable at 1.5%; Stage 2 loans increased to 4.6%, mainly in construction; Q4 impairments of ISK 1.1bn.

Outlook and guidance

• 2026 ROE expected around 12%, with cost-to-income ratio near 43%; medium-term ROE target raised to >13%.

• Net interest margin expected to remain near 3% in the medium term; loan and revenue growth to align with nominal GDP.

• Cost of risk guidance at 20-25 bps through the cycle; recent levels slightly above due to isolated cases.