Comment on the half-year results of the Icelandic Commercial Banks.
"The half-year results of the Icelandic commercial banks show in general strong operations and that their revenue base is becoming more diversified" says Jónas Fr. Jónsson, Director General of the Financial Supervisory Authority in Iceland (FME).
Mr. Jónsson says that the banks need to be observant regarding their cost ratios, which have increased and the banks Return on Equity (ROE) is slightly lower during the first half of 2007 compared to the same period in 2006.
Mr. Jónsson says that the ROE of the three commercial banks in the first six months is quite good, ranging between 22%-39%. "If we look at ROE before taxes, excluding trading gains and irregular income it is between 15%-19%". He says that the banks capital ratio is solid ranging between 12.5%-13.4%, and thereof the Tier 1 ratio is between 9.3% -11.1%. "These are important factors for the commercial banks in light of recent turbulence in international markets as well as regarding possible further expansion abroad".
The Director of the FME says noteworthy that an increased share of the banks total income comes from foreign operations or around 54%. "Deposits from customers relative to loans to customers have been increasing which strengthens their overall financing profile. In the end of June 2007, deposits from customers relative to loans to customers was 51% compared to 34% in the end of 2006". He adds that credit growth has eased in the first half of 2007 compared to 2006.
"Due to the foreign expansion of the Icelandic Commercial Banks and increase in credit growth during recent years the banks must be observant regarding asset quality. It is furthermore important that the banks focus on the integration of entities which they have acquired abroad".
Source: Markaðurinn, 8. August, 2007.
For further information contact Már Másson, Head of Communications, mar@fme.is, telephone: +354 896-1399