Islandsbanki hf.: S&P Global Ratings changes Íslandsbanki’s rating to BBB/A-2 rating with a stable outlook

Today, S&P Global Ratings (S&P) has lowered Íslandsbanki’s rating to BBB/A-2 from BBB+/A-2 and has changed the outlook to stable from negative.In its report, S&P expects Íslandsbanki to enter this crisis on a more solid foothold than the 2008 financial crisis. The ‘BBB’ rating level and stable outlook factor in the solid market position of the bank in Iceland, which has a relatively advanced digitalized banking platform. In S&P’s view, the bank is well ahead of many other European banks in its preparation for technological disruption. S&P also notes the Bank’s funding and liquidity metrics are adequate for the Bank’s risk profile, with comfortable liquidity ratios and liquid assets covering more than 3x the average short-term funding in 2019. Moreover, S&P states that the wholesale funding needs are limited in 2020, which coupled with the additional central bank liquidity facilities announced recently by the Icelandic Central Bank, eases pressure on liquidity needs.S&P’s rational for the change is mostly derived from its view that economic activity will reduce in Iceland and Europe in 2020 and thus could impair Islandsbanki’s asset quality, increase credit losses, reduce business and revenue generation, and potentially erode its capital. S&P’s view is that Iceland’s operating environment will remain challenging, affected by the 2020 economic recession, declining interest rates, stiff competition from pension funds in mortgage lending and thus contributing to the declining profitability of the Bank.S&P notes that it could raise their ratings if Islandsbanki proves able to strengthen significantly the performance of its returns, efficiency, and risk profile above domestic peers, with no further widening of the gap it has with foreign peers. They could lower the ratings on Islandsbanki if the economic environment in Iceland becomes even more difficult, causing profitability prospects for banks to weaken for a prolonged period and the RAC ratio to decline below 15%.For further information:Head of Investor Relations – Margrét Lilja Hrafnkelsdottir, ir@islandsbanki.isHead of Communications – Edda Hermannsdottir, pr@islandsbanki.isÍslandsbanki press releases
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A leader in financial services in Iceland, Íslandsbanki is a universal bank with total assets of ISK 1,199bn, a total capital ratio of 22.4% and a 25-40% marke share across all domestic business segments at year-end 2019. Íslandsbanki’s purpose is to move Iceland forward by empowering our customers to succeed. Driven by the vision to be #1 for service, Íslandsbanki’s relationship banking business model is propelled by three business divisions that manage and build relationships with the Bank’s customers.
Íslandsbanki has developed a wide range of online services such as the Íslandsbanki and Kass apps, enabling customers to do their banking anywhere and anytime. At the same time, the Bank continues to operate the most efficient branch network in Iceland through its strategically located 14 branches. Íslandsbanki has a BBB/A-2 rating from S&P Global Ratings. www.islandsbanki.isDisclaimer
This press release may contain “forward-looking statements,” involving uncertainty and risks that could cause actual results to differ materially from results expressed or implied by the statements. Íslandsbanki hf. undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release. It is the investor’s responsibility to not place undue reliance on these forward-looking statements which only reflect the date of this press release. Forward-looking statements should not be considered as guarantees or predictions of future events and all forward-looking statements are qualified in their entirety by this cautionary statement.