Good morning, and welcome to this webcast presentation of Íslandsbanki second quarter. I'm Birna Einarsdóttir, and I'm presenting here today, and with me is Jón Guðni Ómarsson, the CFO. Thank you very much for taking the time to be with us this morning and joining us in the middle of the summer holiday season. I'm just telling you, if it is too hot where you are, come up to Iceland. Here we have a solid 10 degrees and lot of wind. Yesterday afternoon we did publish our result. We are very happy with the outcome, and I'm looking forward to take you through the highlights, and then Jón Guðni Ómarsson will tell you more about the finance, the details, in the finances. Like, before, following the presentation we will have a Q&A session. You can participate in the session via the conference call using the dial-in details, and the operator will give you the floor. You can also submit questions in writing using the webcast form. Moving over to the highlights. We are presenting here today a very strong result for the second quarter, with almost 12% return on equity, which is above our target. On the income side, we saw a strong growth, 21% growth year-on-year, and the main driver being the net interest income. We also saw a strong growth in our fee and commission income, rising by 18%. That growth is coming from investment banking, card, and payments, and lending fees. We also in the quarter we saw strong loan growth over 4%, coming equally from households and businesses. We are expecting the loan growth to slow down in the second half due to market condition. Our cost target this year is to keep the cost flat, the same cost as we had the year before. We have managed to do that this quarter, and we are very proud of that. Resulting in a cost-income ratio of 42.7%. The positive impairment of ISK 500 million is mainly due to favorable court ruling. During our last presentation, we mentioned that we still had ISK 2 billion COVID impairments. In the second quarter, we did release ISK 500 million, so we still have some reserves, and will watch carefully how the tourism industry will recover the rest of the year. The capital position remains strong, and the excess capital is now ISK 30 billion-ISK 35 billion. Jón Guðni Ómarsson will go into that in more details later in the presentation. In the light of the good financial result and prospects for the rest of the year, we have revised the 2022 financial guidance for return on equity up to over 10%, from previous 8%-10%. Also, we have revised the guidance for cost-income ratio to between 45%-47%, from previous 45%-50%. The economic recovery in Iceland is well underway as the pandemic impact fades, and consumption as well as investment continues growing, and we see a limited direct impact from the war in Ukraine. Our chief economist expects the economic growth this year to be around 5%, with tourism and other export taking over from domestic demand as the main driver of growth. The tourist sector has been enjoying a strong recovery as the number of tourists are, in this, high season, is now around 90%, the 2019 numbers. We are seeing a very strong summer for our tourist industry up here. Prices in the housing market have been increasing due to both limited supply of new housing and also a solid demand as the household financial position remains strong and unemployment has dropped. Unfortunately, recent indicators show a construction of new housing is increasing. We hope that we will see the increase in housing prices slow down. Along with house price increases, global inflation pressure has, as well as rising domestic cost, pushed the inflation up to 9.9%. Seðlabanki Íslands has reacted by raising the interest rate to 4.75%, and we are likely to see more action taken. This slide is giving you an overview of the performance of the business units in the second quarter. They did all perform very well. The personal banking did continue growing their mortgage book, and they also implemented a new online pension platform. We saw very strong return on equity in our business banking, and in the second quarter, 8% growth in the loan book, in the lending activity. The corporate and investment banking had a good quarter also and had the highest share of equity sales and second highest in the bond market during the quarter. We saw a good inflow into our fund management company, but total assets under management decreased, though, due to the market performance. On our sustainability front, the bank was rated, got a top score from Reitun, that is a Icelandic rating agency in 90 out of 100 the second year in a row, something we can surely be proud of. We are also proud that Íslandsbanki was awarded the Euromoney Award for Excellence in 2022 and named the best bank in Iceland, and one thing they mentioned was our outstanding digital solutions. We have been on the forefront when it comes to implementing solutions for our clients, online solutions, and now we see the main growth coming from the SME clients. In together with the second quarter result, we did publish a Allocation and Impact Report. We continue to focus on integrating the sustainability into the operation into all the operation. In 2021, sustainable lending more than doubled year on year, and we also saw a more diverse on the sustainable asset side. We are very proud of the progress already made. However, we realize there's still work to be done, and we will surely continue our effort here. The Íslandsbanki Reykjavík Marathon will be held on the 20th of August. The run is the biggest charity event of the year in Iceland and the key funding opportunity for many charities. The marathon is also another way to demonstrate in action the bank's objectives to be a force for good. The only question you are not allowed to ask during the Q&A session is how far I will run. Over to you, Jón Guðni. You are the marathon man, not right? Yes, thank you, Birna. I'm actually joining you here on this call from the South of France, thanks to technology, and I can tell you, for an Icelander to train for a marathon in thirty degrees, that's not easy. I'll do my best. Over to the financials. If we move on to the next page, like Birna said, we are very happy with the results in this quarter. Net Interest income is growing quite steadily, and we are also seeing quite a bit of good benefit in Net Fee and Commission income and, at the same time, seeing operating expenses coming down. That's mainly due to the fact that we had the one-off related costs last year due to the IPO. On page 11, you can see the details of the net interest income and, as we're seeing the same trend as in the first quarter, where lending volume is obviously providing some benefit and deposit volume as well, while lending margins are under a squeeze as rates go up. We are more than offsetting that by increasing margins on the deposit side. We have other interest and there we have obviously the impact in our liquidity book, where the interest rates obviously have a direct impact and we're obviously quite happy to see this development and seeing our margins overall moving upwards. On the next slide, you can see the Net Fee and Commission income and a similar picture there as we have seen before, a good growth, especially in Cards and Payment Processing. Icelanders obviously are traveling quite substantially abroad now. Asset Management is flat year on year and obviously had a brilliant record year last year, but we are very happy with the overall development. I think we can say that the outlook is quite favorable for the rest of the year as well. Onto the next one. These capital markets obviously have been extremely turbulent over the past few months, as all of you on this call know very well. As you can see here on the bottom left, we have quite a big impact on our Bond, especially the liquidity book and also some other bond trading. This is obviously a global phenomenon where interest rates have been coming up very steadily, long-term rates as well, and we have a big impact there. Offsetting that, however, we have had quite a bit of derivatives where we have fixed-rate legs, and we have basically been hedging against some of our fixed rate exposures in the loan book, and we see a very good benefit there offsetting most part of the losses from the bond book. We are obviously hoping that the markets will be a bit calmer in the second half of the year, but obviously hard to tell. On the top right side here, you can see that our position in unlisted shares have come down a bit in the quarter. The reason for this is that we are now accounting differently for our exposure to a company called Norðurturninn, and that is a company that holds our headquarters. We have now quite a large share, and therefore we are accounting for that basically through our earnings as the income from a company or our part of the income. That explains why we have shown a smaller part here in our unlisted shares. On the next page, we look at the cost base. We're obviously quite happy that we have managed to keep costs pretty much flat, and the decrease or the overall cost decrease year-on-year is obviously because we had the one-off costs relating to the IPO last year. We are now meeting our target in terms of cost income and doing better on that front than we expected, and that's mainly due to the revenue is higher than we had expected this year. The FTE numbers are still trending downwards, but in terms of the cost base, like Birna said, and we have seen still relatively modest impact from the global turmoil, and the inflation is obviously having some impact. Our biggest concern there is the wage agreements that we will have in the fall, and what the results will be there. That can have a big impact next year. There obviously, as elsewhere, workers are asking to be compensated for the high inflation numbers. If you do so entirely, then obviously you have the risk of feeding more into the inflation. Like I said, we will see hopefully towards the end of this year how the outlook is on that front for next year. Yeah. If we then move to the next page. In terms of the impairments, we have a positive impact in these accounts, as we have done in the past couple of quarters. We still have, after this, some ISK 1.5 billion-ISK 2 billion in that range of COVID-related impairments that we will hopefully be able to release later this year or early next year. Like Birna Einarsdóttir said, the tourism industry has been doing extremely well. They obviously had quite a bit of impact from COVID and especially on their both on operations and on the balance sheet as well. The outlook is good now and they are having a very good summer. The ISK 1.5 billion- ISK 2 billion is something that we hopefully will be able to release in the coming months or into next year. On the top right, you can see that in terms of non-performing loans, that ratio, the Stage 3 loans, this is pretty much flat between quarters. We see a very good decrease in Stage 2 loans, and this is mainly the loans to tourism companies, which are performing better and better each quarter, basically. We move to the next slide. Lending volume has been quite robust. As you can see here, we have the biggest one on the top left, we have the biggest increase in personal banking with very strong growth in terms of billions. Percentage-wise, we have the biggest increase in business banking. Part of that is seasonal. Our leasing arm called Ergo, they have often quite a big growth in the first half, but then get repayments after the summer months, where the car rentals obviously have strong cash flows. We don't expect maybe this much growth in the second half, and especially not on the mortgage side. The Seðlabanki Íslands obviously has now raised rates quite considerably, trying to cool down that market. We are expecting to see less demand there in the second half. In corporate investment banking, 2% growth, and as we have mentioned before, we are not focused on growing that book, but rather increasing the velocity of our balance sheet and helping our clients to list their shares or list their bonds in the capital markets. On the bottom left, in terms of the LTVs, no major change there. The commercial real estate market has been performing well, and we hear that there is becoming some shortage there of office space, for example. I think we can expect a bit more construction there in the coming couple of years. There's also a lot of activity in the residential front, and an increase in construction to meet the excess demand that we have in that sector. If we move to the next page. On the funding side, we have seen a good development in our core deposits, so deposits from individuals and SMEs. As you can see there is good growth between quarters. We have not been aggressive in terms of bidding for the deposits from large corporates and pension funds and the financial investors, and therefore the overall base went down a bit in the second quarter. If we move to the borrowings on the next slide. As you can see, we have very modest maturities left in 2022, only about ISK 23 billion there, and only domestically in covered bonds. We do, however, have in the second half of this year, we have in November, a callable Tier 2 bond, which we'll obviously be seeking to call. We obviously hope to see the market circumstances improve so we can issue at the same time. We obviously have quite a good capital position, so we can be a bit selective there and try to go find a good timing in terms of issuing that bond. We have also a callable senior bond in January, and obviously we'll be seeking to prefund that, when the markets improve. Onto the next one. In terms of the capital position, we now note that excess capital is ISK 30 billion-ISK 35 billion. We had ISK 35 billion-ISK 40 billion after the first quarter, but we have, as you have seen, been seeing a very strong loan growth, profitable growth, and therefore the excess capital has come down a bit. We still plan to release ISK 15 billion of capital in the coming months, either through buybacks or special dividends, but obviously subject to market conditions. We are a conservative bank, and we want to see the capital markets moving into the right direction before distributing too much capital. There is some uncertainty still regarding our largest shareholder, whether they will participate in a buyback. This is something that we're still looking into, and we'll hopefully have some news in the coming few weeks on that front. The capital position obviously still very strong and well above our internal targets and regulatory limits. We plan to obviously retain a very strong position with a CET1 target of 16.5%. Overall, a very good quarter and strong results. The outlook is still quite good, both in the tourism sector and the economy as a whole. The main risks are obviously the inflation and the impact on the cost base. Overall, we are very happy with the second quarter. Back over to you, Birna. Okay. We should now move over to the Q&A session. If you have any questions at all, you can participate, as I mentioned before, via the conference call using the dial-in details, and the operator will give you the floor. Or you can submit questions in writing, using the webcast form. Operator, are there any questions on the line? This is the conference operator who will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephones. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question from the conference call is from Maria Semikhatova of Citi. Please go ahead. Yes. Hello. Thank you for the presentation. I have a couple of questions. First of all, on margins, we saw such a strong performance over the quarter. Just want to get your thoughts on the, let's say, competition in the deposit market. You said that you're not bidding for deposits from large corporates, but how do you see other players acting, and do you expect some margin pressure going forward, if competition intensifies or let's say the funding conditions for the wholesale don't improve? Second, on real estate companies exposure, there's been, of course, a lot of focus on this specific sector. Maybe you could provide a little bit of details on your particular exposure. What's the average LTV for the property companies that you have? Do you see them prepared well for this very high interest rate environment? If there is, let's say fixed or floating rates used for these companies? Then the final is on excess capital. Out of this, let's say remaining ISK 15-ISK 20 billion after the ISK 15 billion distribution, do you expect this excess capital to be distributed before end of 2023, or you would rather keep some cushion in case you see another quarter or so of a very strong demand from your clients? Thank you. Well, thank you, Maria. If I start briefly on the Sure. The margin on the deposit, you are right, there is a pressure on the interest rate that we are offering on the deposits. We see there's a hard competition. We have seen the interest rate that we need to offer to our you know, the large clients going up. How that will develop, I think that will calm down. At the moment, there is a hard competition about the deposit. Jón Guðni might go into that in more details. I'm very happy with the real estate companies that we are doing business with. We have been careful in our lending processes. The sales price that our clients are able to gain have been very positive. I'm very happy with where we are. We of course monitor that very closely. Jón, you will then maybe add to that and take the last question. Sure. Yeah, a bit more on the margins. There have been increased competition on that front in terms of the deposits over the past few months. As a result, I think that's going to basically mean that the improvement that we have seen so far, we will have less of a trend going forward on that front, but rather retaining the margins or the margin increases that we have seen so far. Obviously there is still some uncertainty on how far the central bank will go in terms of the interest rates. Inflation is now moving about 10% and more than the central bank expected. Whether they will raise rates even more rapidly or use other tools as they have been doing, the macroprudential tools, maximum LTVs, for example, and other tools. In terms of the excess capital, our plan is still to fully basically finalize that before the end of 2023 to optimize the capital structure. Obviously a part of it is to distribute capital, but then also we obviously also use it when we see profitable growth, as we have been seeing in the first half of this year. The plan is still to optimize the capital. Is that okay, Maria? Yes. Thank you very much. Thank you. Any other que- The next question. Yeah. The next question is from Piers Brown of HSBC. Please go ahead. Yeah, good morning, Birna. Good morning, Jón. Just a couple of questions from me. On the commission income, I wonder if you could just talk to seasonality there. I mean, you mentioned on the lending side that second half could be a little bit weaker in some categories. Just on commissions, I mean, you've had a huge increase in cards and payments fees in the quarter. I think it's up about 37% or something, quarter on quarter. Is that just a, you know, summer effect that people are out spending and traveling, et cetera, and whether that might subside as we move into the second half? Then really just a similar question on lending demand. I mean, I know in the past, we've always talked about a gradual convergence on rates of nominal GDP growth. It does seem that, you know, the demand is still very robust. I think you're up 4% quarter-on-quarter across the, you know, various categories. Just if you're seeing any early signs that the policy rate increases we've seen in Iceland are starting to sap any of the sort of forward-looking indicators for lending growth that you may look at internally. Thanks very much. Thank you. Yes, you mentioned especially the card payments, how the income there has been increasing from the same quarter last year. We are now, I would say, recovering from the COVID when people were not traveling. Of course, summer is a high season, but we will continue though to see a strong income coming from the card business because we are recovering from COVID that we saw in the previous quarters. I'm optimistic that yes, the lending fee will probably go down in the second quarter on the commission side. But payment and asset management hopefully continue to be strong. Jón Guðni Ómarsson will add to that, but on the lending, as I mentioned, I think the second quarter we will see less increase in our loan book. As we have said, we would like to grow in line with the GDP. Of course, through the business cycle, you know, we see different results different years. The interest rate increases is already starting to slow down the demand on the market side. We see how that will develop on the corporate side. We have a strong pipeline, though, for example, on the SME side and on the corporate side too. The markets is absolutely will slow down in the second half. Yeah. Just to add a little bit on the fee income. We do expect to see strong growth in the third quarter as well in terms of the payments. In the fourth quarter, we actually saw the improvement there already in last year's numbers in the fourth quarter. We don't expect to see as much of a difference year on year in fourth quarter, but definitely in the third one. In terms of the lending, I agree with Birna. I think, I mean, things are slowing down. There's still a lot of interest in new investment both in commercial real estate and residential. We are still seeing quite a bit of. For For example, as one of the reasons for the increase in our Risk Exposure Amount, REA, is that we have an increase in undrawn facilities, and a lot of those are due to construction. We see quite a bit of growth on balance sheet ahead on that front going forward. Some of that we will then move into the capital markets, like I mentioned before. Mm-hmm. We can also note that SMEs they are now facing maybe with the margin from the bank you know the lending rates are maybe close to 8%. Obviously I mean that has an impact then on their willingness to invest and where they see an opportunity there. Is that okay? Yeah. No, that's very clear. I mean, where would you put? You mentioned the leasing impact on the business banking number. Can you sort of put a number on that? I mean, what would the underlying growth be in business banking if you took out that particular source of growth in the second quarter? Is that a material number? I thought that. I mean, it's somewhere in the range of ISK 5 billion-ISK 10 billion. We saw very strong growth there in the second quarter or first half. I think it was between around 15%. That will be much less in the second half. Mm-hmm. Does that fully reverse in the second half? I mean, is that a net reduction in the loan balances, or is it just you don't have a recurrence of that particular growth? No, we have, I think our target is that we will see some growth there overall. Yeah. For the year overall. Yeah. We expect to see growth. In the second half, we do expect to see the book being rather flat. The growth in the first half is ISK 16 billion in business banking. We would most likely expect it to be rather flat in the second half. Okay. That's very clear. Thanks very much. Thank you. Mm-hmm. Any further questions? There are no more questions registered at this time. Okay. There's one written question, and Johan is going to read it for us. There's a question on net financial income on page number 13, the graph on the bottom left. On other derivatives, how are these income derived? Can you explain that in further details? These are derivatives where basically we have put hedges in place to hedge against the fixed rate exposure. For example, in the mortgage book, we have quite a bit of fixed rate lending. Some of that we offset by issuing covered bonds with fixed rates as well. But we have also done some derivatives where basically we pay a fixed rate and receive floating. There obviously, when rates go up, as they have done substantially now in the first half of this year, we have a positive mark-to-market on the fixed rate leg of that derivative. We have also some CPI-linked derivatives where we have been paying CPI-linked and receiving floating nominal rate, and there's also some impact from there as well, but it's mainly from the fixed legs of the nominal rate derivatives. Okay. Any other written questions? Okay. Oh, we can conclude. Just a final note. As we have mentioned, we are very happy with the result, and we will continue to work hard to deliver despite difficult market conditions. Thank you very much for participating. Have a great weekend and enjoy the rest of the summer.