Íslandsbanki 2005 Annual Results

ISK 19.1 Billion in Profit after Tax; 30% Return on Equity

The highlights of the financial statements of Íslandsbanki hf. for the year 2005 are as follows:

*  Íslandsbanki showed a record profit in 2005. After-tax profit
was ISK 19.1 billion, as compared to ISK 12.0 billion in 2004,
increasing by 60%.
*  After-tax profit for the fourth quarter was ISK 3.7 billion, up
from ISK 948 million in the fourth quarter of 2004, increasing by
295% from 2004.
*  Pre-tax profit was ISK 23.4 billion for the year 2005, as
compared to ISK 14.1 billion in 2004 increasing by 66%.
*  Earnings per share for the year were ISK 1.48, up from 1.18 for
2004.
*  The Board of Directors has decided to recommend to the Annual
General Meeting that dividend per share will be ISK 0.38, bringing
total dividend payment for the year to ISK 5.36 billion, which
amounts to 28% of after-tax profit.
*  After-tax ROE was 30% for the year 2005, as compared to 44% in
the previous year.
*  Net interest income increased by 83% from the previous year, to
ISK 23.4 billion. Net interest income for Q4 was ISK 6.6 billion,
as compared to ISK 4.0 billion in Q4 2004.
*  Fees and commissions increased by 33% in 2005 and were ISK 8.8
billion. Fees and commissions were ISK 2.9 billion in Q4 2005 as
compared to ISK 2.0 billion in Q3 2005.
*  Cost-income ratio was 38% for the year down from 48% in 2004.
*  Total assets grew from the previous year by ISK 795 billion, or
117%, to ISK 1,472 billion.
*  The parent's international long-term funding amounted to ISK
450 billion (EUR 6 billion) in over 100 transactions. Increased
diversification in the Bank's investor base was achieved with the
Bank's inaugural issues in Australia and in the US market.
*  Deposit growth was 88% over the year, bringing deposits up to
ISK 335 billion.
*  Assets under management grew by 36% over the year, bringing AUM
to ISK 345 billion.
*  Book equity was ISK 85 billion at the end of Q4. The CAD ratio
was 12.6% with Tier 1 ratio at 9.9%.

Bjarni Ármannsson, CEO: "The year 2005 was the best ever in Íslandsbanki's history. All areas of business showed profit, which reflect the strength of the Bank's foundations. The expansion into Norway, as well as internationally, marked the Bank's activities over the year, and this trend is set to continue with even greater force this year. Once again the Bank's staff has done an excellent job, and yet again the Bank's shareholders have demonstrated their support through their participation in the share offering earlier this year. In my view the Bank has never been in a better position to expand its business activities and we intend to take full advantage of that position in 2006."

For further information please contact:
Bjarni Ármannsson     Tómas Kristjánsson     Vala Pálsdóttir
CEO                   CFO                    Investor Relations
Tel: +354 440 4005    Tel: +354 440 4656     Tel: +354 844 4989
                                              or vp@isb.is

The accounts of the Bank are available on its website: www.isb.is.

Íslandsbanki hf. consolidated Financial Statements are available on the following link: http://hugin.info/133924/R/1032195/165919.pdf

Íslandsbanki 2005 Annual Results including tables are available on the following link: http://hugin.info/133924/R/1032196/165920.pdf

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