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Iceland’s Islandsbanki Reports Nine-Month Profit of $114 Million

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Dec. 1 (Bloomberg) -- Islandsbanki hf, the state-created successor to failed Glitnir Bank hf, reported a profit after tax of 13.2 billion kronur ($113.7 million) in the first nine months.

The bank, which didn’t report results in the same period last year, said operating income in the period was 10.9 billion kronur, according to a statement on its website today. Islandsbanki’s capital-adequacy ratio was 22.6 percent, compared with 19.8 percent at the end of last year, it said.

Iceland’s banks were saddled with krona losses after the Supreme Court in June banned mortgages and car loans indexed to foreign currencies, freeing borrowers of any exchange-rate liabilities. Lenders are still waiting for the government to announce a debt relief plan designed to help struggling households cope with growing mortgages. Proposals under consideration include cutting home loans by 155 billion kronur.

“There is still substantial uncertainty as to which foreign currency loans will be deemed to be illegally linked,” the bank said in the unaudited statement. If all foreign currency denominated loans are deemed illegal, “repayments to customers could be up to 15.6 billion kronur” and “the bank’s total capital ratio would remain well above 16 percent,” the level currently demanded by the island’s Financial Supervisory Authority.

Glitnir creditors have brought a total of $58.9 billion in claims against the bank, a creditor report published Aug. 9 showed. Investors who bought bonds in the bank can expect 30 cents back on the euro, data provided by brokerage H.F. Verdbref hf show.

Glitnir was the first of Iceland’s biggest banks to fail, in October 2008, precipitating the collapse of the island’s financial system and sending the krona down as much as 80 percent against the euro on the offshore market. Kaupthing Bank hf, Landsbanki Islands hf and Glitnir together left an $86 billion debt mountain in their wake, compared with Iceland’s 2009 gross domestic product of $12 billion.

To contact the reporter on this story: Omar R. Valdimarsson in London at

To contact the editor responsible for this story: Tasneem Brogger at

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