Kvika banki hf. – Valuation as of 1 Jan 2025

Key assumptions

• A net interest margin of 3.3% on total capital is assumed throughout the forecast period.
• Net fee and commission income grows by an average of 5.6% per year during the forecast period.
• The average return on bonds is 8% per year for 2025–2026, and then 6.5% for the remainder of the forecast period, of which 1–2% is recognized as a fair value change under net financial income for the years 2025–2026, and 0.5% per year thereafter. The interest component of bonds is recognized under net interest income.
• The average return on equities amounts to 12% per year over the forecast period.
• The cost-to-income ratio decreases over time, averaging 61.2% per year over the forecast period.
• Impairment on loans amounts to 0.4% 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.
• Income tax is 20% per year during the forecast period and is calculated on profit excluding income from associates and equity holdings. In addition, a special financial activity tax of 6.0% is levied on taxable profits exceeding ISK 1 billion.
• Loans to customers grow by an average of 6.9% per year during the forecast period.
• Securities holdings grow by an average of 5.6% per year during the forecast period.
• Dividend payments are estimated at ISK 37 billion in 2025 following the sale of TM, with settlement assumed at the beginning of the year. Thereafter, dividends are set at 70% of the previous year’s owners’ total comprehensive income, consistent with the bank’s dividend policy and capital ratio targets.
• Terminal growth at the end of the forecast period is 4%, equivalent to 1% real growth.
• 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 20.1, as of 1 January 2025.