Íslandsbanki (ISB) Q3 2024 earnings summary

Executive summary

• Q3 2024 delivered strong earnings with net profit of ISK 7.3bn, ROE at 13.2% for the quarter and 10.9% for the first nine months, exceeding the >10% target.

• Profit before tax in Q3 was up 17% year-over-year, driven by impairment reversals, property revaluation, and growth in net fee and commission income.

• Cost-to-income ratio was 41.4% in Q3 and 44.2% for nine months, below the <45% target, but expected to slightly exceed target for the full year due to inflation and IT investments.

• Asset quality remains strong, with Stage 3/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

• Q3 profit was ISK 7,280m–7.3bn, up 21% year-over-year, with net interest margin at 2.9%.

• Net interest income for Q3 was ISK 11,777m; net fee and commission income grew 4.9% in Q3 and 5% year-over-year.

• Net financial income turned positive at ISK 228m versus a loss in Q3 2023.

• Operating expenses rose 6.7% year-over-year, mainly due to higher salaries and IT costs.

• Loans to customers totaled ISK 1,274bn and deposits ISK 927bn at quarter-end, with customer deposits up 9% from year-end.

Outlook and guidance

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

• Inflation is forecast to continue declining, reaching 4.7–4.9% by year-end, supporting further policy rate cuts.

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

• Capital optimisation planned before end of 2025, with further shareholder distributions via buybacks or extraordinary dividends.