Íslandsbanki (ISB) investor relations material

Executive summary

• Net profit for Q2 was ISK 7.1bn, with H1 profit at ISK 14.5bn, and ROE at 13.3% for Q2 and 13.4% for H1, exceeding guidance.

• Net interest income grew 10% year-over-year in Q2 and reached ISK 32.4bn for H1, driven by high inflation and margin control.

• Cost-to-income ratio was 43.1% for Q2 and improved to 40.7% for H1, in line with targets despite one-off expenses.

• Asset quality remains robust, though Stage 3/NPL loans rose to 2.6%, mainly in the construction sector due to high rates and inflation.

• Launched digital initiatives and loyalty services, with organizational changes expected to reduce FTEs by 7% and annual salary expenses by ISK 1bn by 2027.

Financial highlights

• Net interest margin increased to 3.7% for H1 and 3.4% for Q2, up from 3.2% and 3.3% year-over-year, respectively.

• Net fee and commission income was ISK 6.5bn for H1, stable year-over-year, but declined 10% in Q2 due to lower capital markets activity.

• Cost of risk was 0.13% in Q2, with impairments at ISK 500m for the quarter and ISK 1.7bn for H1.

• Customer loans grew 3.6% YTD to ISK 1,416bn, with deposits up 7.5% to ISK 1,038bn.

• Cost-to-income ratio improved to 40.7% for H1, down from 44.1% year-over-year.

Outlook and guidance

• ROE guidance for 2026 raised to above 12.5%, with a medium-term target above 13%.

• Cost-to-income ratio expected between 41%-43% for the year.

• Loan growth for 2026 anticipated to be mid-single digits, with international lending as a growth driver.

• Cost of risk expected to average 20-25bps over the cycle.

• Capital optimization and further distributions planned, subject to market and regulatory conditions.