Íslandsbanki (ISB) Q4 2023 earnings summary

Executive summary

• FY2023 profit was ISK 24,585m, broadly unchanged YoY, as 12% operating-income growth was offset by higher operating expenses and impairment charges.

• Return on equity was 11.3%, above the >10% target; the cost-to-income ratio was 41.6%, below the <45% target.

• Asset quality and capital remained strong, while seismic activity increased Stage 2 loans and impairment allowances.

Financial highlights

• FY2023 total operating income rose 12% to ISK 64,237m; net interest income rose 13% to ISK 48,611m and net fee and commission income rose 1% to ISK 14,234m.

• Q4 profit was ISK 6,228m, up 4% YoY; Q4 total operating income was ISK 16,329m, up 2% YoY.

• FY2023 operating expenses increased 14% to ISK 29,474m; net impairment was ISK 1,015m, versus a net release of ISK 1,576m in 2022.

• Net financial income was ISK 455m in Q4, with liquidity-portfolio income benefiting from a considerable decline in the interest-rate curve.

Outlook and guidance

• For 2024, customer loans and revenues are expected to generally grow in line with nominal GDP through the business cycle.

• 2024 ROE is expected to be ~10%, assuming normalized through-the-cycle impairment levels of ~25bp; cost-to-income ratio is expected below 45%.

• A 50% earnings dividend is proposed for the AGM; ISK 10bn of excess CET1 capital is planned for distribution through buybacks during 2024.