Íslandsbanki hf. – Valuation as of 1 Jan 2025

Key assumptions

• The net interest margin on total capital is 2.9% in 2025, then decreases to 2.8% in 2026 and for the remainder of the forecast period.
• Net fee and commission income grows on average by 5.6% per year over the forecast period.
• The average return on bonds amounts to 8% per year in 2025–2026, then 6.5% for the remainder of the forecast period, of which 1–2% is recognised as a fair value change under net financial income in 2025–2056, and then 0.5% per year for the remainder of the forecast period. The interest component of bonds is recognised under net interest income.
• The average return on shares amounts to 12% per year over the forecast period.
• The cost ratio is 46% per year over the forecast period.
• A special tax on financial institutions is paid, amounting to 0.145% of total liabilities at year-end in excess of ISK 50 billion, less the tax liability.
• Loan impairment charges amount to 0.4% of loans per year during the forecast period.
• Income tax is 20% per year during the forecast period and is calculated on profit after excluding the share of profit from associates and equities. In addition, a special financial activity tax of 6.0% is levied on the bank’s taxable profit exceeding ISK 1 billion.
• Loans to customers grow on average by 5.6% per year during the forecast period.
• Dividend payments amount to 50% of total comprehensive income for the previous year in 2025 and 60% thereafter over the forecast period, in line with the bank’s dividend and capital ratio targets.
• The terminal growth rate at the end of the forecast period is 4.0%, corresponding to a 1.0% real growth rate.
• See other general assumptions under “Valuation.”
• A nominal required return on equity of 10% is assumed when discounting the forecasted results for 2025–2034.

Results

• Based on the above assumptions, the estimated share value is ISK 119.4 as of 1 January 2025.