This article first appeared on GuruFocus .
Release Date: May 08, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Islandsbanki hf ( OISE:ISB ) reported a strong return on equity of 13.6% for Q1 2026, surpassing their target.
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The bank achieved a cost-income ratio of 38.5%, which is well below their target, indicating efficient cost management.
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Core operating income grew by 27% year-on-year, driven by higher inflation and growth in fees.
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The bank's capital remains robust, with a capital ratio of 22.5%, exceeding their target of 21.1%.
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Islandsbanki hf ( OISE:ISB ) has seen a 30% increase in deposits over the past two years, indicating strong liquidity.
Negative Points
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High inflation rates have significantly impacted the bank's results, with 250 basis points of inflation in Q1 2026.
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The economy is slowing down, and high central bank rates are affecting some borrowers, leading to potential impairments.
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The housing market is facing challenges, particularly in the sale of new apartments, affecting contractors.
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There is an expectation of slow loan book growth for the rest of the year, below GDP growth.
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The bank is experiencing borrower-specific impairments in sectors like construction and commerce, reflecting the high rate and inflation environment.
Q & A Highlights
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Q: Beyond the 7% headcount reductions by year-end 2026, do you expect further reductions or is the aim to hold flat from 2027? A: Yes, we will see further reductions going forward. With newer technologies, we expect further efficiency gains, supporting fewer employees and new services. However, no specific numbers have been set for future reductions.
Q: Once the loyalty services are fully ramped, can you quantify the cumulative BPS impact on the group's NIM from the preferential rates on mortgages and deposits? A: On a normalized level, where policy rates and inflation align with a long-term view, we expect NIMs to be around 3%, and we still expect that to be the case.
Q: What is the average ticket size in the international loan book and how diversified is it across borrowers and geographies? A: The average ticket size is around EUR 25 million, ranging from EUR 10 million to EUR 50 million. The book consists of about 15 borrowers, with the largest being around 10% of the international book. It is diversified across North America and the Nordics, with some exposure in mainland Europe.
Q: Can you provide further information on your visibility of the loan book growth over the next few quarters and how is that growth expected to develop within different business segments? A: We expect relatively slow growth throughout this year due to high interest rates. However, we saw strong growth in mortgages in Q1, and expect good growth there in the coming months. Overall, loan growth is expected to be below GDP growth this year, with domestic growth in low single-digits and international growth in middle single-digits.
Q: Can you provide more insight into the company-specific impairments? In what sector is the company, and do you expect more borrower-specific cases in the near term? A: The impairments relate to three to four borrower-specific cases across various sectors, including construction and commerce. These are borrower-specific issues rather than structural sector issues. We have impaired these cases to a level deemed suitable, considering the high rate and inflation environment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
