Today, S&P Global Ratings (S&P) has affirmed Íslandsbanki's rating at BBB/A-2 with a stable outlook.
In its report, S&P views economic risks facing Icelandic financial institutions as elevated, as the tourism and some commercial real estate segments continue to recover from the pandemic hit. S&P believes these risks are showing early signs of receding, though there remain hurdles in the first half of 2022.
S&P states that the stable outlook reflects the still elevated economic risks emanating from sector-wide loan underperformance in tourism and its dependent sectors following the large pandemic shock, offset by the Icelandic banks’ very strong capitalisation and its expectation for earnings resilience.
S&P notes that the agency could raise ratings of the Icelandic banks if they believe that the strength and resilience of the bank’s earning capacity has improved significantly and sustainably. In S&P´s opinion this is likely to be consistent with the ongoing decline in non-bank participation in the Icelandic mortgage market. In addition, S&P would look for stable asset quality prospects, with loan underperformance continuing to abate.
S&P further notes that the Icelandic authorities are in the process of establishing the resolution regime and setting MREL requirements. In time, the agency could raise the Icelandic bank’s ratings if they see the resolution framework as effective and believe the banks will build and maintain meaningful loss-absorbing buffers that lower the risk to senior preferred creditors.
S&P states that they could lower the ratings on the Icelandic banks if there is a large and disorderly adjustment in the economy, likely due to a slower or weaker than anticipated tourism recovery. According to S&P, this scenario would likely be consistent with a broader and significant economic slowdown in Iceland, large credit impairments, and deteriorating profitability of the Icelandic banks.
For further information:
Investor Relations – Margrét Lilja Hrafnkelsdóttir, email@example.com and tel: +354 844 4033.
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With a history that dates from 1875, Íslandsbanki is an Icelandic universal bank with a strong customer focus. The Bank believes in moving Iceland forward by empowering its customers to succeed - reflecting a commitment to run a solid business that is a force for good in society. Driven by the ambition to be #1 for service, Íslandsbanki’s banking model is led by three business divisions that build and manage relationships with its customers. Íslandsbanki maintains a strong market share with the most efficient branch network in the country, supporting at the same time its customers’ move to more digital services. The Bank operates in a highly attractive market and, with its technically strong foundations and robust balance sheet, is well positioned for the opportunities that lie ahead. Íslandsbanki has a BBB/A-2 rating from S&P Global Ratings. The Bank’s shares are listed on Nasdaq Iceland Main Market.
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.
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