Operating Income
A Strong Year of Continued Growth and Profit Kaupthing Bank’s – Q4 2006 Results Hreidar Már Sigurdsson, CEO
January 2007
Solid Performance in 2006 Solid performance in 2006: ― Net earnings EUR 986 million – up by 44.4% from last year ― Return on equity was 42.4% in 2006 ― Earnings per share ISK 127.1 – up by 69.0% ― Total assets were EUR 42,864 million – increase by 26.0% last year ― Strong capital ratios – or CAD ratio 15.0% and Tier 1 ratio 10.5% A strong fourth quarter: ― Net earnings of EUR 210 million ― Strong growth in net interest and net commission income ― Net interest income up by 29.7% year-on-year ― Net commission income EUR 133 million - up by 60.2% year-on-year
-3-
Summary of Operation in 2006 EURm 2006
2005
Chg
Net interest income
595
438
36%
Net commission income
426
300
42%
Net financial income
687
499
38%
Other income
194
131
49%
1,902
1,368
39%
Salaries and related cost
-383
-272
41%
Other administrative cost
-300
-204
47%
-68
-59
16%
1,151
834
38%
-165
-150
10%
Net earnings
986
683
44%
Shareholders of Kaupthing Bank
972
659
47%
14
24
-42%
Operating income
Impairment Profit before income tax Income tax
Minority interest
-4-
Summary of Operation in Q4 EURm Q4 2006
Q4 2005
Chg
Net interest income
166
128
30%
Net commission income
133
83
61%
Net financial income
135
187
-28%
25
40
-37%
460
437
5%
Salaries and related cost
-119
-92
30%
Other administrative cost
-93
-61
53%
Impairment
-18
-24
-23%
Profit before income tax
230
261
-12%
Income tax
-20
-54
-63%
Net earnings
210
207
1%
Shareholders of Kaupthing Bank
203
198
3%
6
9
-30%
Other income Operating income
Minority interest
-5-
Q4 2006 Compared to Q3 2006 EURm Q4 2006
Q3 2006
Chg
Net interest income
166
139
20%
Net commission income
133
84
60%
Net financial income
135
408
-67%
25
24
4%
460
655
-30%
Salaries and related cost
-119
-80
48%
Other administrative cost
-93
-71
31%
Impairment
-18
-31
-40%
Profit before income tax
230
473
-51%
Income tax
-20
-84
-76%
Net earnings
210
389
-46%
Shareholders of Kaupthing Bank
203
388
-48%
6
2
314%
Other income Operating income
Minority interest
-6-
Equity – 2006 Compared to 2005 EURm Changes in equity 2006: Equity 1 January 2006 Translation difference
Changes in equity in 2005: 2.600 -445
Equity 1 January 2005 Translation difference
Fair value changes in AFS financial assets
0
Fair value changes in AFS financial assets
Deferred pension reserve
5
Deferred pension reserve
Net earnings recognised directly in equity
-440
2.000 -5 0 -6
Net earnings recognised directly in equity
-12
Net earnings according to the Income Statement
972
Net earnings according to the Income Statement
659
Total recognised earnings for the year
532
Total recognised earnings for the year
648
Dividends paid to equity holders, ISK 10 per share
-44
Dividends paid to equity holders, ISK 37.6 per share
-282
Issued new capital
632
Issued new capital
Other changes
-62
Other changes
Equity 31 December 2006
3.419
Equity 31 December 2005
6 -9 2.600
-7-
Earnings per Share
Exista
EPS (ISK)
39.2
28.3 17.0
13.5 6.9
8.0
Q1
Q2
22.4
20.9
26.1 19.6
14.8
14.2
7.3 Q3
2004
Q4
Q1
Q2
Q3
2005
Q4
Q1
Q2
Q3
Q4
2006
-8-
Income Distribution and Operating Income vs Operating Expenses Income Distribution (EURm)
Operating Income vs. Operating Expenses (EURm)
Net interest income
Net commission income
Net financial income
Other income
Operating income
Total other operating expenses
700
650
600
550
500
450 400
350 300
250 200
150 50
100
(50)
0
Q3
Q4
2005
Q1
Q2
Q3
2006
Q4
Q3
Q4
2005
Q1
Q2
Q3
Q4
2006
-9-
Net Interest Income and Geographic Breakdown Geographic Breakdown(1)
Net Interest Income (EURm)
EUR 596m
166 155
128
127
17 56
139
134
Other
EUR 438m 6 50
138
Lux
103 197
UK
142
Scand 137
188
Iceland Q3
Q4
2005
Q1
Q2
Q3
Q4
2005
2006
2006 (1) By origin of clients
- 10 -
Net Commission Income and Geographic Breakdown Geographic Breakdown(1)
Net Commission Income (EURm) 133
EUR 424m 20
110
Other
50
99
EUR 300m
92 84
83
7 39 85
119
Lux
UK 68
51
Scand 167
120
Q3
Q4
2005
Q1
Q2
Q3
Q4
2005
Iceland 2006
2006 (1) By origin of clients
- 11 -
Net Financial Income and Other Income Net Financial Income (EURm)
Other Income (EURm)
450
120
400
300
VIS
100
Exista
350
80
250 200
60
150 40
100 50
20
0 0
(50) Q3
Q4
2005
Q1
Q2
Q3
2006
Q4
Q3
Q4
2005
Q1
Q2
Q3
Q4
2006
- 12 -
Breakdown of Net Gain on Financial Assets by Location 2006 (EURm) Iceland
Scandinavia
UK
Lux
Other
Total
Net gain from bonds and fixed income securities
-39.0
-16.4
-15.7
-0.2
0.0
-71.3
Net gain from equity and variable income securities
339.9
177.1
66.7
13.9
1.7
599.3
71.4
0.6
16.2
6.7
0.0
94.8
0.0
4.0
0.0
0.0
0.0
4.1
25.9
30.2
0.8
0.6
0.2
57.7
398.2
195.5
68.0
21.0
1.9
684.6
Net gain from derivatives Net gain from hedge accounting instruments Dividend income Total
- 13 -
Geographic Diversification – Operating Income EURm
EUR 1,902m 39 126
EUR 1,358m
% 40
Other countries 373
25
Luxembourg
114 471
EUR 669m 8 71 120
10
3%
456
354 893
184 286 2004
United Kingdom
409
2005
Scandinavia
Iceland 2006
(*) By origin of clients
- 14 -
Geographic Diversification – Operating Income Operating Income 2006
Luxembourg 7%
United Kingdom 20%
Operating Income without Exista Gain 2006
Other countries 2%
Iceland 46%
Other countries 2% Luxembourg 8%
United Kingdom 23%
Iceland 37%
Scandinavia 25% Scandinavia 30%
- 15 -
Operating Income by Division in 2006 Operating Income 2006
Operating Income without Exista Gain 2006
Asset Management & Private Banking 8% Treasury 14% Capital Markets 9%
Investment Banking 31%
Asset Management & Private Banking 10%
Banking 38%
Banking 45%
Treasury 17%
Capital Markets 10% Investment Banking 18%
- 16 -
Banking – Results Comments
EURm
Good quarter for Banking
Q4 2006
Q3 2006
Q2 2006
Q1 2006
Q4 2005
140.2
131.0
121.6
130.0
130.1
18.7
17.1
15.0
14.4
9.5
3.6
0.7
1.8
2.6
1.8
19.2
18.9
21.3
15.5
22.1
181.8
167.7
159.7
162.6
163.5
Expenses
51.7
39.8
37.1
42.1
50.3
Impairment
18.2
18.4
9.1
9.0
3.0
Impairment too high
Total expenses
70.0
58.2
46.1
51.1
53.3
Solid gross profit
Gross profit
111.8
109.5
113.6
111.5
110.2
Allocated cost
33.3
17.2
23.5
25.9
23.3
Pre-tax profit
78.5
92.3
90.0
85.6
86.9
Consistent and healthy growth in
Operating income Net commission income increase
by 96.8% from Q4 last year Expenses increased by 29.9%
from last quarter
Net interest income Net commission income Net financial income Other income Operating income
- 17 -
Banking – Gross Profit and Impairment Gross Profit (EURm)
Banking – Impairment
112
112
110
Impairment (EUR m)
20
114
109
Impairment % of Net interest income
18
14% 12%
16 10%
14 12
8%
10
97
6%
8 6
4%
4 2%
2
0%
0
Q3
Q4
2005
Q1
Q2
Q3
2006
Q4
Q4
(1)
2005
Q1
Q2
Q3
(2)
Q4
2006
(1) Extraordinary low impairment in Q4 2005 due to reverse impairment in FIH (2) Extraordinary high impairment in Q3 and Q4 2006 due to impairment in the UK
- 18 -
Banking – Well Diversified Portfolio Loans to Customers by Location
Luxembourg 11%
Loans to Customers by Sectors Transportation 2% Trade 8%
Other countries 4% Iceland 23%
Individuals 17%
Service 20%
United Kingdom 20%
Scandinavia 42%
Holding Companies 14%
Real Estate 15% Industry 24%
- 19 -
Acquisition and Leveraged Finance Portfolio 2006 Sector Concentration Pharmaceuticals 5.7%
2006 Geographical Spread Healthcare 5.5% Leisure 6.5% Property 4.2%
Telecom 6.5%
Technology 1.4% Service 1.3%
Wholesale 7.4%
Multinational 26%
UK 29%
Buildings 1.2%
Food Production 9.6%
Transport 1.0% IT 0.9%
Retail 21.4%
Manufacturing 27.5%
Pan-European 23%
Scandinavia 17% Iceland 5%
2006 Total: EUR 4,844m
2006 Total: EUR 4,844m
- 20 -
Investment Banking – Results Comments
EURm
Good quarter in Investment
Banking Record net commission income in
Q4 Net commission income increased
by 200.0% compared to Q3
Q4 2006
Q3 2006
Q2 2006
Q1 2006
Q4 2005
-10.3
-10.5
-6.7
-10.8
-12.1
Net commission income
42.6
14.2
26.7
25.7
17.1
Net financial income
51.6
346.8
27.0
53.9
106.2
0.1
-1.6
-0.9
3.3
-0.7
Operating income
84.1
348.9
46.1
72.2
110.5
Expenses
14.7
6.2
13.0
7.1
7.5
0.0
0.0
0.0
0.0
0.0
Net interest income
Other income
Increase in operating cost
Impairment
Strong sign of extended business
Total expenses
14.7
6.2
13.1
7.1
7.5
Gross profit
69.4
342.8
33.0
65.1
103.0
Allocated cost
1.4
2.2
3.7
2.8
2.4
Pre-tax profit
68.0
340.5
29.3
62.2
100.6
capacity in Investment Banking
- 21 -
Investment Banking Gross Profit (EURm)
Largest Unlisted Equity Exposures
343
Company
Country
Sector
Share
Síminn hf.
Iceland
Telecommunications
Somerfield
UK
Retail
Ferskur Holding 1 B.V
Holland
Consumer retail
SPRON Stofnfjárbréf
Iceland
Financial institution
5%
LD Equity I K/S
Denmark
Investment company
23%
27% 6% 26%
Net Commission Income (EURm)
69
65
53
20
26
25
Q4
2005
Q1
Q2
Q3
2006
Q4
Q1
27
17
33
Q3
43
39
103
Q2
Q3
2005
Q4
14
Q1
Q2
Q3
Q4
2006
- 22 -
Capital Markets Comments
EURm
Strong operating income in Q4 –
up by 81.1% from Q3 Record high net commission
income up 36.2% from Q3 Expenses increased by 87.4%
from last quarter Number of employees increased
by 92% from 2005
Q4 2006
Q3 2006
Q2 2006
Q1 2006
Q4 2005
Net interest income
-6.9
-5.8
0.2
-5.0
-5.8
Net commission income
25.2
18.5
17.2
23.9
20.2
Net financial income
49.5
24.9
-70.3
98.7
66.3
0.0
0.0
0.0
0.0
0.5
Operating income
67.9
37.5
-53.0
117.6
81.2
Expenses
28.3
15.1
14.3
12.6
13.7
0.0
0.0
1.3
0.0
0.0
Total expenses
28.3
15.1
15.7
12.6
13.7
Gross profit
39.7
22.5
-68.6
105.0
67.5
Allocated cost
11.5
7.0
9.7
8.1
7.8
Pre-tax profit
28.2
15.4
-78.4
96.9
59.6
Other income
Impairment
- 23 -
Capital Markets – Gross Profit and Largest Holdings Gross Profit (EURm)
Listed Equities by Stock Exchanges 31 December 2006
105
UK 4%
67
Iceland 35%
40
37
Other 6%
22
Scandinavia 55%
-69 Q3
2005
Q4
Q1
Q2
Q3
Q4
2006
- 24 -
Treasury – Results Comments
EURm
Record quarter and year for
Treasury Net interest income in Q4 59.9%
higher than in 3Q and 77.9% higher than 4Q last year Strong growth in net financial
income in Q4 – up by 135.5% from same quarter last year High growth in net commission
income – up 82.4% from 3Q Gross profit 108.5% higher than
4Q last year
Q4 2006
Q3 2006
Q2 2006
Q1 2006
Q4 2005
41.1
25.7
41.7
20.8
23.1
9.3
5.1
8.5
10.8
4.5
31.8
33.7
12.0
17.9
13.5
0.3
0.0
0.0
0.0
0.0
Operating income
82.4
64.4
62.2
49.5
41.2
Expenses
11.1
8.8
8.0
7.1
7.4
0.0
0.0
0.0
0.1
-0.4
Total expenses
11.1
8.8
8.0
7.1
6.9
Gross profit
71.3
55.7
54.2
42.3
34.2
Allocated cost
7.6
4.2
5.3
5.9
3.5
Pre-tax profit
63.8
51.4
48.9
36.5
30.7
Net interest income Net commission income Net financial income Other income
Impairment
- 25 -
Treasury – Gross Profit and Net Commission Income Gross Profit (EURm)
Net Commission Income (EURm) 11
71
9 9
56
54
42 34
5
5
5 5
4
22
Q3
Q4
2005
Q1
Q2
Q3
2006
Q4
Q1
Q2
Q3
2005
Q4
Q1
Q2
Q3
Q4
2006
- 26 -
Asset Management & Private Banking – Results Comments
EURm
Record quarter for Asset
Management Growth in net commission income
strong – 17.9% higher than 4Q last year Expenses increased by 25.8%
between quarters
Q4 2006
Q3 2006
Q2 2006
Q1 2006
Q4 2005
2.9
1.8
2.5
2.1
3.0
36.2
27.9
30.6
33.5
30.7
Net financial income
1.2
1.0
1.4
2.5
0.9
Other income
6.8
3.9
0.0
0.0
0.0
Operating income
47.1
34.6
34.6
38.0
34.6
Expenses
22.9
18.2
18.8
24.7
19.7
0.0
12.5
0.0
0.0
0.0
Total expenses
22.9
30.7
18.8
24.7
19.7
Gross profit
24.2
4.0
15.8
13.3
14.9
Allocated cost
9.3
8.4
9.4
12.3
11.2
Pre-tax profit
15.0
-4.4
6.3
1.1
3.7
Net interest income Net commission income
Impairment
Gross profit solid
- 27 -
Asset Management & Private Banking Gross Profit (EURm)
Assets Under Management (EURm) 15,711 24 15,247
14,833
16
15 13
14,373
14,327
4 2
Q3
Q4
2005
Q1
Q2
2006
Q3
Q4
Q4
2005
Q1
Q2
Q3
Q4
2006
- 28 -
Asset Management & Private Banking AuM as of 31 December 2006 – by Country
Sweden 7%
Other 6%
AuM Growth in 2006 (EURm)
14.373
708
14.833
Return
31.12.2006
-248
UK 30%
Finland 13%
Iceland 44%
31.12.2005
New Money
- 29 -
Balance Sheet – Assets 31 December 2006 (EURm) 31/12/2006 1,131 5,130 26,832 3,364 1,679 692 68 1,225 722 2,021 42,864
Cash and cash balances with central banks Loans to credit institutions Loans to customers Bonds and debt instruments Shares and equity instruments Derivatives Derivatives used for hedging Securities used for hedging Intangible assets Other assets Total assets
Total Assets (EURm) 30,921
Q3
2005
31/12/2005 467 2,618 20,665 5,229 1,529 282 60 1,099 736 1,330 34,014
Chg 142% 96% 30% -36% 10% 146% 14% 12% -2% 52% 26%
Loans to Customers (EURm)
34,014
35,787
Q4
Q1
36,478
41,256
42,864 18,179
Q2
Q3
2006
Q4
Q3
2005
21,790
22,814
24,444
26,832
20,665
Q4
Q1
Q2
Q3
Q4
2006
- 30 -
Balance Sheet – Liabilities and Equity 31 December 2006 (EURm)
Deposits Other liabilities Minority interest Subordinated loans Shareholders' equity
31/12/2006 7,934 29,107 120 2,283 3,419
31/12/2005 6,508 23,419 111 1,375 2,600
Chg 22% 24% 8% 66% 32%
42,864
34,014
26%
Total liabilities and equity
Deposits (EURm)
5,791
Q3
2005
Shareholders' Equity (EURm)
6,508
6,389
6,806
Q4
Q1
Q2
7,717
Q3
2006
7,934
Q4
2,322
2,600
2,494
2,451
Q3
Q4
Q1
Q2
2005
3,016
Q3
3,419
Q4
2006
- 31 -
Credit Reserves Comments
EURm
Total loans amounted to EUR
31,962m at the end of 2006 Total Credit Reserves are 0.42% of
181 157
total loans and granted guarantees
31-Mar
184 173
168 159
152
30-Jun
2005
30-Sep
31-Dec
31-Mar
151
30-Jun
30-Sep
30-Dec
2006
- 32 -
Asset Quality Loan Loss Reserve (EURm) 173
Q4
159
Q1
Non-performing Loans (EURm) 168
151
Q2
2005
Q3
184
Q4
2006
80%
71%
199
213
Q4
Q1
Q2
2005
Loan Loss Reserve % of Non-performing Loans 86%
202
68%
2005
Q1
Q2
Q3
2006
Q3
270
Q4
2006
Non-performing Loans / Loans to customers
65%
Q4
1.01%
1.00%
Q3
Q4
0.98% 0.91%
Q4
247
Q4
2005
Q1
0.93%
Q2
2006
- 33 -
Bond and Equity Exposure 2006 EURm 31/12/2006
31/12/2005
Change
%
Bonds and debt instruments
3,364
5,229
-1,865
-36%
Shares and equity instruments
1,681
1,531
150
10%
692
282
410
146%
68
60
9
14%
1,225
1,099
126
12%
56
186
-130
-70%
Derivatives Derivatives used for hedging Hedged securities Investment in associates and joint ventures
- 34 -
Equity Exposure Metrics VaR (10d 99%) % of Risk Capital
Equity Exposure as % of Risk Capital
1.5%
55% 47% 1.2% 1.1% 37% 32%
34%
0.8% 0.6%
Q4
2005
Q1
Q2
Q3
2006
Q4
Q4
2005
Q1
Q2
Q3
Q4
2006
- 35 -
CAD Ratio and Risk Capital CAD Ratio
Risk Capital (EURm) Tier 1
Tier 2
Tier 1
Tier 2
4,877
15.0% 14.1% 12.2%
12.1%
4.1%
11.4% 2.9% 2.8%
4,225 1,480
4.5% 3,368
1,221
3,117
3.5% 2,770
774
963
649
9.4%
8.5%
10.0%
8.7%
10.5%
3,004 2,121
Q4
2005
Q1
Q2
Q3
2006
Q4
Q4
2005
2,343
2,405
Q1
Q2
Q3
3,397
Q4
2006
- 36 -
Successful Implementation of a Global Funding Programme Funding overview 2006
Funding Mix 31 December 2006
Emphasis on diversifying funding sources - Four new
markets entered in 2006: US144A, Japan, Australia and a Covered bond programme in Europe Enhanced secured liquidity ― The group has secured liquidity of €12,730 m or 427
days, covering current long term funding redemptions for 2007, 2008 and 2009 ― The parent company has secured liquidity of 600
days
US Bond Market 13% Subordinated 6%
EMTN 37%
Customer deposits 22%
― Increased customer deposit base – up 35.4% in real
terms YOY ― FIH finalized a financial co-operation with ATP,
Denmark's largest pension fund Extended maturity profile by the parent company -
Average maturity of issued debt was 4.2 years in 2006 compared to 3.2 years in 2005
Structured Covered Bonds 1%
Commercial Papers 4% FI Deposits 11%
International loan market 6%
- 37 -
Successful Implementation of a Global Funding Programme Maturity of funding (€m) Kaupthing Bank (Parent)
Maturity of issued long term debt in 2006 vs 2005 (€m) FIH
8,098
3,500
1,967
3,000
4,056 2,791
1,877
2,000
4,042 365
1,583
6,057
500
2,094
810 2008
1,500 1,000
1,981 2,180
2007
Extended maturity profile by the parent company in 2006
2,500
1,407
Issued in 2006
4,000
73
5,366
3,959
Issued in 2005
Singer & Friedlander
0 2009
2010
>2011
0 to 1
1 to 3
3 to 5
>5
Maturity in Years
- 38 -
Successful Implementation of a Global Funding Programme Funding Strategy 2007 – Further Diversification
Kaupthing 5 yr CDS spread
Senior unsecured funding
100
― Due to last years successful diversification efforts,
the bank has access to and can issue unsecured bonds in several different markets in 2007 ― The Bank will continue exploring new markets
Ambitious deposits targets ― Continuing strong deposit growth ― Deposit growth plan put in place in the parent
company and in all subsidiaries Secured funding ― Further covered bond issuance ― Possible securitization in 2007
90 80 70 60 50 40 30 20 10 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
- 39 -
Key Ratios
2006
2005
CAD
15.0%
12.2%
75.2
Tier 1
10.5%
9.4%
36%
34%
Deposits / Loans to customers
29.6%
31.5%
6.6
9.9
Loans to customers / Assets
63%
61%
1.9
2.6
VaR (10d 99% ) % of Risk capital
1.2%
1.5%
Loan-loss ratio
0.19%
0.21%
Total equity exposure / Risk capital
34%
55%
NPL / Loans to customers
1.00%
0.98%
– Thereof unlisted
8%
13%
ROE
1
Earnings per share ISK Cost Income – Group Price / earnings Price / book
1
1
2006
2005
42.4%
34.0%
127.1
(1) Share price 31 December 2006: ISK 841. Share price 31 December 2005: ISK 746
- 40 -
Key ratios Dividend payments (per share) ISK
Return on equity % 42.4%
27.6
34.0%
25.5% 23.0%
14.0 18.7% 10.0
5.0 2.9
3.0
2002
2003
2004
2005
(1)
2006
2006
2002
2003
2004
2005
2006
(1) Extra dividend in October 2006
- 41 -
Five Integrated Business Segments in Ten Countries
Employees (31 Dec 06) Iceland
657
Sweden
336
Denmark
288
Finland
100
Luxembourg
154
Norway
64
Faroe Islands
17
Total
Capital Markets
Treasury
Banking
AM & PB
1,094
UK
US
Investment Banking
9 2,719
Note: Light blue boxes indicate new divisions in 2006
- 42 -
Number of Employees
Iceland
Other 2,719 2,568 2,368
1,606 1,282
1,276
352
361
930
915
30-Jun-03
31-Dec-03
1,360
1,707
1,322
1,463
1,625
613
703
979
993
1,004
1,046
1,105
1,094
30-Jun-04
31-Dec-04
30-Jun-05
31-Dec-05
30-Jun-06
31-Dec-06
381
- 43 -
Combination of Organic and Acquisition Growth Operating Income (EURbn) (EURm) Kaupthing
Bunadarbanki
Organic
Acquired
Share of total 2002-2006 growth Organic:
71%
183.5
Acquisitions: 29%
350.4
269.2 1,902
430.3 78.3
1,368
164.9
16.7 120.5
669 425
154 133 2002 Organic (1) Proforma
Acquired
2003
Organic
Acquired
2004
Organic
Acquired
2005
Organic
Acquired
2006
(1) Proforma combination of Búnadarbanki ISK11.5bn and Kaupthing ISK9.9bn
- 44 -
Conclusion Good diversification of income streams and geography Strong asset quality – no signs of deterioration Positive trend in interest income and commissions Efficient operations and high income per employee Strong capital base 2006 was another record year in Kaupthing Bank´s operations
- 45 -
Q&A Kaupthing Bank’s – Q4 2006 Results Hreidar Már Sigurdsson, CEO
January 2007
Disclaimer This material has been prepared for professional investors. Kaupthing Bank hf. (Kaupthing) when preparing this report has not taken into account any one customer’s particular investment objectives, financial resources or other relevant circumstances and the opinions and recommendations herein are not intended to represent recommendations of particular investments to particular customers. All securities' transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk. Due care and attention has been used in the preparation of this forecast information. However, actual results may vary from their forecasts, and any variation may be materially positive or negative. Forecasts, by their very nature, are subject to uncertainty and contingencies, many of which are outside the control of Kaupthing Bank. Kaupthing Bank can not guarantee that the information contained herein is without fault or entirely accurate. The information in this material is based on sources that Kaupthing bank believes to be reliable. Kaupthing bank can however not guarantee that all information is correct. Furthermore, information and opinions may change without notice. Kaupthing bank is under no obligation to make amendments or changes to this publication if errors are found or opinions or information change. Kaupthing bank accepts no responsibility for the accuracy of its sources. Kaupthing Bank is the owner of all works of authorship including, but not limited to, all design, text, sound recordings, images and trademarks in this material unless otherwise explicitly stated. The use of Kaupthing's material, works or trademarks is forbidden without written consent except were otherwise expressly stated. Furthermore, it is prohibited to publish material made or gathered by Kaupthing bank without written consent.
- 47 -
- 48 -
January 2007
Solid Performance in 2006 Solid performance in 2006: ― Net earnings EUR 986 million – up by 44.4% from last year ― Return on equity was 42.4% in 2006 ― Earnings per share ISK 127.1 – up by 69.0% ― Total assets were EUR 42,864 million – increase by 26.0% last year ― Strong capital ratios – or CAD ratio 15.0% and Tier 1 ratio 10.5% A strong fourth quarter: ― Net earnings of EUR 210 million ― Strong growth in net interest and net commission income ― Net interest income up by 29.7% year-on-year ― Net commission income EUR 133 million - up by 60.2% year-on-year
-3-
Summary of Operation in 2006 EURm 2006
2005
Chg
Net interest income
595
438
36%
Net commission income
426
300
42%
Net financial income
687
499
38%
Other income
194
131
49%
1,902
1,368
39%
Salaries and related cost
-383
-272
41%
Other administrative cost
-300
-204
47%
-68
-59
16%
1,151
834
38%
-165
-150
10%
Net earnings
986
683
44%
Shareholders of Kaupthing Bank
972
659
47%
14
24
-42%
Operating income
Impairment Profit before income tax Income tax
Minority interest
-4-
Summary of Operation in Q4 EURm Q4 2006
Q4 2005
Chg
Net interest income
166
128
30%
Net commission income
133
83
61%
Net financial income
135
187
-28%
25
40
-37%
460
437
5%
Salaries and related cost
-119
-92
30%
Other administrative cost
-93
-61
53%
Impairment
-18
-24
-23%
Profit before income tax
230
261
-12%
Income tax
-20
-54
-63%
Net earnings
210
207
1%
Shareholders of Kaupthing Bank
203
198
3%
6
9
-30%
Other income Operating income
Minority interest
-5-
Q4 2006 Compared to Q3 2006 EURm Q4 2006
Q3 2006
Chg
Net interest income
166
139
20%
Net commission income
133
84
60%
Net financial income
135
408
-67%
25
24
4%
460
655
-30%
Salaries and related cost
-119
-80
48%
Other administrative cost
-93
-71
31%
Impairment
-18
-31
-40%
Profit before income tax
230
473
-51%
Income tax
-20
-84
-76%
Net earnings
210
389
-46%
Shareholders of Kaupthing Bank
203
388
-48%
6
2
314%
Other income Operating income
Minority interest
-6-
Equity – 2006 Compared to 2005 EURm Changes in equity 2006: Equity 1 January 2006 Translation difference
Changes in equity in 2005: 2.600 -445
Equity 1 January 2005 Translation difference
Fair value changes in AFS financial assets
0
Fair value changes in AFS financial assets
Deferred pension reserve
5
Deferred pension reserve
Net earnings recognised directly in equity
-440
2.000 -5 0 -6
Net earnings recognised directly in equity
-12
Net earnings according to the Income Statement
972
Net earnings according to the Income Statement
659
Total recognised earnings for the year
532
Total recognised earnings for the year
648
Dividends paid to equity holders, ISK 10 per share
-44
Dividends paid to equity holders, ISK 37.6 per share
-282
Issued new capital
632
Issued new capital
Other changes
-62
Other changes
Equity 31 December 2006
3.419
Equity 31 December 2005
6 -9 2.600
-7-
Earnings per Share
Exista
EPS (ISK)
39.2
28.3 17.0
13.5 6.9
8.0
Q1
Q2
22.4
20.9
26.1 19.6
14.8
14.2
7.3 Q3
2004
Q4
Q1
Q2
Q3
2005
Q4
Q1
Q2
Q3
Q4
2006
-8-
Income Distribution and Operating Income vs Operating Expenses Income Distribution (EURm)
Operating Income vs. Operating Expenses (EURm)
Net interest income
Net commission income
Net financial income
Other income
Operating income
Total other operating expenses
700
650
600
550
500
450 400
350 300
250 200
150 50
100
(50)
0
Q3
Q4
2005
Q1
Q2
Q3
2006
Q4
Q3
Q4
2005
Q1
Q2
Q3
Q4
2006
-9-
Net Interest Income and Geographic Breakdown Geographic Breakdown(1)
Net Interest Income (EURm)
EUR 596m
166 155
128
127
17 56
139
134
Other
EUR 438m 6 50
138
Lux
103 197
UK
142
Scand 137
188
Iceland Q3
Q4
2005
Q1
Q2
Q3
Q4
2005
2006
2006 (1) By origin of clients
- 10 -
Net Commission Income and Geographic Breakdown Geographic Breakdown(1)
Net Commission Income (EURm) 133
EUR 424m 20
110
Other
50
99
EUR 300m
92 84
83
7 39 85
119
Lux
UK 68
51
Scand 167
120
Q3
Q4
2005
Q1
Q2
Q3
Q4
2005
Iceland 2006
2006 (1) By origin of clients
- 11 -
Net Financial Income and Other Income Net Financial Income (EURm)
Other Income (EURm)
450
120
400
300
VIS
100
Exista
350
80
250 200
60
150 40
100 50
20
0 0
(50) Q3
Q4
2005
Q1
Q2
Q3
2006
Q4
Q3
Q4
2005
Q1
Q2
Q3
Q4
2006
- 12 -
Breakdown of Net Gain on Financial Assets by Location 2006 (EURm) Iceland
Scandinavia
UK
Lux
Other
Total
Net gain from bonds and fixed income securities
-39.0
-16.4
-15.7
-0.2
0.0
-71.3
Net gain from equity and variable income securities
339.9
177.1
66.7
13.9
1.7
599.3
71.4
0.6
16.2
6.7
0.0
94.8
0.0
4.0
0.0
0.0
0.0
4.1
25.9
30.2
0.8
0.6
0.2
57.7
398.2
195.5
68.0
21.0
1.9
684.6
Net gain from derivatives Net gain from hedge accounting instruments Dividend income Total
- 13 -
Geographic Diversification – Operating Income EURm
EUR 1,902m 39 126
EUR 1,358m
% 40
Other countries 373
25
Luxembourg
114 471
EUR 669m 8 71 120
10
3%
456
354 893
184 286 2004
United Kingdom
409
2005
Scandinavia
Iceland 2006
(*) By origin of clients
- 14 -
Geographic Diversification – Operating Income Operating Income 2006
Luxembourg 7%
United Kingdom 20%
Operating Income without Exista Gain 2006
Other countries 2%
Iceland 46%
Other countries 2% Luxembourg 8%
United Kingdom 23%
Iceland 37%
Scandinavia 25% Scandinavia 30%
- 15 -
Operating Income by Division in 2006 Operating Income 2006
Operating Income without Exista Gain 2006
Asset Management & Private Banking 8% Treasury 14% Capital Markets 9%
Investment Banking 31%
Asset Management & Private Banking 10%
Banking 38%
Banking 45%
Treasury 17%
Capital Markets 10% Investment Banking 18%
- 16 -
Banking – Results Comments
EURm
Good quarter for Banking
Q4 2006
Q3 2006
Q2 2006
Q1 2006
Q4 2005
140.2
131.0
121.6
130.0
130.1
18.7
17.1
15.0
14.4
9.5
3.6
0.7
1.8
2.6
1.8
19.2
18.9
21.3
15.5
22.1
181.8
167.7
159.7
162.6
163.5
Expenses
51.7
39.8
37.1
42.1
50.3
Impairment
18.2
18.4
9.1
9.0
3.0
Impairment too high
Total expenses
70.0
58.2
46.1
51.1
53.3
Solid gross profit
Gross profit
111.8
109.5
113.6
111.5
110.2
Allocated cost
33.3
17.2
23.5
25.9
23.3
Pre-tax profit
78.5
92.3
90.0
85.6
86.9
Consistent and healthy growth in
Operating income Net commission income increase
by 96.8% from Q4 last year Expenses increased by 29.9%
from last quarter
Net interest income Net commission income Net financial income Other income Operating income
- 17 -
Banking – Gross Profit and Impairment Gross Profit (EURm)
Banking – Impairment
112
112
110
Impairment (EUR m)
20
114
109
Impairment % of Net interest income
18
14% 12%
16 10%
14 12
8%
10
97
6%
8 6
4%
4 2%
2
0%
0
Q3
Q4
2005
Q1
Q2
Q3
2006
Q4
Q4
(1)
2005
Q1
Q2
Q3
(2)
Q4
2006
(1) Extraordinary low impairment in Q4 2005 due to reverse impairment in FIH (2) Extraordinary high impairment in Q3 and Q4 2006 due to impairment in the UK
- 18 -
Banking – Well Diversified Portfolio Loans to Customers by Location
Luxembourg 11%
Loans to Customers by Sectors Transportation 2% Trade 8%
Other countries 4% Iceland 23%
Individuals 17%
Service 20%
United Kingdom 20%
Scandinavia 42%
Holding Companies 14%
Real Estate 15% Industry 24%
- 19 -
Acquisition and Leveraged Finance Portfolio 2006 Sector Concentration Pharmaceuticals 5.7%
2006 Geographical Spread Healthcare 5.5% Leisure 6.5% Property 4.2%
Telecom 6.5%
Technology 1.4% Service 1.3%
Wholesale 7.4%
Multinational 26%
UK 29%
Buildings 1.2%
Food Production 9.6%
Transport 1.0% IT 0.9%
Retail 21.4%
Manufacturing 27.5%
Pan-European 23%
Scandinavia 17% Iceland 5%
2006 Total: EUR 4,844m
2006 Total: EUR 4,844m
- 20 -
Investment Banking – Results Comments
EURm
Good quarter in Investment
Banking Record net commission income in
Q4 Net commission income increased
by 200.0% compared to Q3
Q4 2006
Q3 2006
Q2 2006
Q1 2006
Q4 2005
-10.3
-10.5
-6.7
-10.8
-12.1
Net commission income
42.6
14.2
26.7
25.7
17.1
Net financial income
51.6
346.8
27.0
53.9
106.2
0.1
-1.6
-0.9
3.3
-0.7
Operating income
84.1
348.9
46.1
72.2
110.5
Expenses
14.7
6.2
13.0
7.1
7.5
0.0
0.0
0.0
0.0
0.0
Net interest income
Other income
Increase in operating cost
Impairment
Strong sign of extended business
Total expenses
14.7
6.2
13.1
7.1
7.5
Gross profit
69.4
342.8
33.0
65.1
103.0
Allocated cost
1.4
2.2
3.7
2.8
2.4
Pre-tax profit
68.0
340.5
29.3
62.2
100.6
capacity in Investment Banking
- 21 -
Investment Banking Gross Profit (EURm)
Largest Unlisted Equity Exposures
343
Company
Country
Sector
Share
Síminn hf.
Iceland
Telecommunications
Somerfield
UK
Retail
Ferskur Holding 1 B.V
Holland
Consumer retail
SPRON Stofnfjárbréf
Iceland
Financial institution
5%
LD Equity I K/S
Denmark
Investment company
23%
27% 6% 26%
Net Commission Income (EURm)
69
65
53
20
26
25
Q4
2005
Q1
Q2
Q3
2006
Q4
Q1
27
17
33
Q3
43
39
103
Q2
Q3
2005
Q4
14
Q1
Q2
Q3
Q4
2006
- 22 -
Capital Markets Comments
EURm
Strong operating income in Q4 –
up by 81.1% from Q3 Record high net commission
income up 36.2% from Q3 Expenses increased by 87.4%
from last quarter Number of employees increased
by 92% from 2005
Q4 2006
Q3 2006
Q2 2006
Q1 2006
Q4 2005
Net interest income
-6.9
-5.8
0.2
-5.0
-5.8
Net commission income
25.2
18.5
17.2
23.9
20.2
Net financial income
49.5
24.9
-70.3
98.7
66.3
0.0
0.0
0.0
0.0
0.5
Operating income
67.9
37.5
-53.0
117.6
81.2
Expenses
28.3
15.1
14.3
12.6
13.7
0.0
0.0
1.3
0.0
0.0
Total expenses
28.3
15.1
15.7
12.6
13.7
Gross profit
39.7
22.5
-68.6
105.0
67.5
Allocated cost
11.5
7.0
9.7
8.1
7.8
Pre-tax profit
28.2
15.4
-78.4
96.9
59.6
Other income
Impairment
- 23 -
Capital Markets – Gross Profit and Largest Holdings Gross Profit (EURm)
Listed Equities by Stock Exchanges 31 December 2006
105
UK 4%
67
Iceland 35%
40
37
Other 6%
22
Scandinavia 55%
-69 Q3
2005
Q4
Q1
Q2
Q3
Q4
2006
- 24 -
Treasury – Results Comments
EURm
Record quarter and year for
Treasury Net interest income in Q4 59.9%
higher than in 3Q and 77.9% higher than 4Q last year Strong growth in net financial
income in Q4 – up by 135.5% from same quarter last year High growth in net commission
income – up 82.4% from 3Q Gross profit 108.5% higher than
4Q last year
Q4 2006
Q3 2006
Q2 2006
Q1 2006
Q4 2005
41.1
25.7
41.7
20.8
23.1
9.3
5.1
8.5
10.8
4.5
31.8
33.7
12.0
17.9
13.5
0.3
0.0
0.0
0.0
0.0
Operating income
82.4
64.4
62.2
49.5
41.2
Expenses
11.1
8.8
8.0
7.1
7.4
0.0
0.0
0.0
0.1
-0.4
Total expenses
11.1
8.8
8.0
7.1
6.9
Gross profit
71.3
55.7
54.2
42.3
34.2
Allocated cost
7.6
4.2
5.3
5.9
3.5
Pre-tax profit
63.8
51.4
48.9
36.5
30.7
Net interest income Net commission income Net financial income Other income
Impairment
- 25 -
Treasury – Gross Profit and Net Commission Income Gross Profit (EURm)
Net Commission Income (EURm) 11
71
9 9
56
54
42 34
5
5
5 5
4
22
Q3
Q4
2005
Q1
Q2
Q3
2006
Q4
Q1
Q2
Q3
2005
Q4
Q1
Q2
Q3
Q4
2006
- 26 -
Asset Management & Private Banking – Results Comments
EURm
Record quarter for Asset
Management Growth in net commission income
strong – 17.9% higher than 4Q last year Expenses increased by 25.8%
between quarters
Q4 2006
Q3 2006
Q2 2006
Q1 2006
Q4 2005
2.9
1.8
2.5
2.1
3.0
36.2
27.9
30.6
33.5
30.7
Net financial income
1.2
1.0
1.4
2.5
0.9
Other income
6.8
3.9
0.0
0.0
0.0
Operating income
47.1
34.6
34.6
38.0
34.6
Expenses
22.9
18.2
18.8
24.7
19.7
0.0
12.5
0.0
0.0
0.0
Total expenses
22.9
30.7
18.8
24.7
19.7
Gross profit
24.2
4.0
15.8
13.3
14.9
Allocated cost
9.3
8.4
9.4
12.3
11.2
Pre-tax profit
15.0
-4.4
6.3
1.1
3.7
Net interest income Net commission income
Impairment
Gross profit solid
- 27 -
Asset Management & Private Banking Gross Profit (EURm)
Assets Under Management (EURm) 15,711 24 15,247
14,833
16
15 13
14,373
14,327
4 2
Q3
Q4
2005
Q1
Q2
2006
Q3
Q4
Q4
2005
Q1
Q2
Q3
Q4
2006
- 28 -
Asset Management & Private Banking AuM as of 31 December 2006 – by Country
Sweden 7%
Other 6%
AuM Growth in 2006 (EURm)
14.373
708
14.833
Return
31.12.2006
-248
UK 30%
Finland 13%
Iceland 44%
31.12.2005
New Money
- 29 -
Balance Sheet – Assets 31 December 2006 (EURm) 31/12/2006 1,131 5,130 26,832 3,364 1,679 692 68 1,225 722 2,021 42,864
Cash and cash balances with central banks Loans to credit institutions Loans to customers Bonds and debt instruments Shares and equity instruments Derivatives Derivatives used for hedging Securities used for hedging Intangible assets Other assets Total assets
Total Assets (EURm) 30,921
Q3
2005
31/12/2005 467 2,618 20,665 5,229 1,529 282 60 1,099 736 1,330 34,014
Chg 142% 96% 30% -36% 10% 146% 14% 12% -2% 52% 26%
Loans to Customers (EURm)
34,014
35,787
Q4
Q1
36,478
41,256
42,864 18,179
Q2
Q3
2006
Q4
Q3
2005
21,790
22,814
24,444
26,832
20,665
Q4
Q1
Q2
Q3
Q4
2006
- 30 -
Balance Sheet – Liabilities and Equity 31 December 2006 (EURm)
Deposits Other liabilities Minority interest Subordinated loans Shareholders' equity
31/12/2006 7,934 29,107 120 2,283 3,419
31/12/2005 6,508 23,419 111 1,375 2,600
Chg 22% 24% 8% 66% 32%
42,864
34,014
26%
Total liabilities and equity
Deposits (EURm)
5,791
Q3
2005
Shareholders' Equity (EURm)
6,508
6,389
6,806
Q4
Q1
Q2
7,717
Q3
2006
7,934
Q4
2,322
2,600
2,494
2,451
Q3
Q4
Q1
Q2
2005
3,016
Q3
3,419
Q4
2006
- 31 -
Credit Reserves Comments
EURm
Total loans amounted to EUR
31,962m at the end of 2006 Total Credit Reserves are 0.42% of
181 157
total loans and granted guarantees
31-Mar
184 173
168 159
152
30-Jun
2005
30-Sep
31-Dec
31-Mar
151
30-Jun
30-Sep
30-Dec
2006
- 32 -
Asset Quality Loan Loss Reserve (EURm) 173
Q4
159
Q1
Non-performing Loans (EURm) 168
151
Q2
2005
Q3
184
Q4
2006
80%
71%
199
213
Q4
Q1
Q2
2005
Loan Loss Reserve % of Non-performing Loans 86%
202
68%
2005
Q1
Q2
Q3
2006
Q3
270
Q4
2006
Non-performing Loans / Loans to customers
65%
Q4
1.01%
1.00%
Q3
Q4
0.98% 0.91%
Q4
247
Q4
2005
Q1
0.93%
Q2
2006
- 33 -
Bond and Equity Exposure 2006 EURm 31/12/2006
31/12/2005
Change
%
Bonds and debt instruments
3,364
5,229
-1,865
-36%
Shares and equity instruments
1,681
1,531
150
10%
692
282
410
146%
68
60
9
14%
1,225
1,099
126
12%
56
186
-130
-70%
Derivatives Derivatives used for hedging Hedged securities Investment in associates and joint ventures
- 34 -
Equity Exposure Metrics VaR (10d 99%) % of Risk Capital
Equity Exposure as % of Risk Capital
1.5%
55% 47% 1.2% 1.1% 37% 32%
34%
0.8% 0.6%
Q4
2005
Q1
Q2
Q3
2006
Q4
Q4
2005
Q1
Q2
Q3
Q4
2006
- 35 -
CAD Ratio and Risk Capital CAD Ratio
Risk Capital (EURm) Tier 1
Tier 2
Tier 1
Tier 2
4,877
15.0% 14.1% 12.2%
12.1%
4.1%
11.4% 2.9% 2.8%
4,225 1,480
4.5% 3,368
1,221
3,117
3.5% 2,770
774
963
649
9.4%
8.5%
10.0%
8.7%
10.5%
3,004 2,121
Q4
2005
Q1
Q2
Q3
2006
Q4
Q4
2005
2,343
2,405
Q1
Q2
Q3
3,397
Q4
2006
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Successful Implementation of a Global Funding Programme Funding overview 2006
Funding Mix 31 December 2006
Emphasis on diversifying funding sources - Four new
markets entered in 2006: US144A, Japan, Australia and a Covered bond programme in Europe Enhanced secured liquidity ― The group has secured liquidity of €12,730 m or 427
days, covering current long term funding redemptions for 2007, 2008 and 2009 ― The parent company has secured liquidity of 600
days
US Bond Market 13% Subordinated 6%
EMTN 37%
Customer deposits 22%
― Increased customer deposit base – up 35.4% in real
terms YOY ― FIH finalized a financial co-operation with ATP,
Denmark's largest pension fund Extended maturity profile by the parent company -
Average maturity of issued debt was 4.2 years in 2006 compared to 3.2 years in 2005
Structured Covered Bonds 1%
Commercial Papers 4% FI Deposits 11%
International loan market 6%
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Successful Implementation of a Global Funding Programme Maturity of funding (€m) Kaupthing Bank (Parent)
Maturity of issued long term debt in 2006 vs 2005 (€m) FIH
8,098
3,500
1,967
3,000
4,056 2,791
1,877
2,000
4,042 365
1,583
6,057
500
2,094
810 2008
1,500 1,000
1,981 2,180
2007
Extended maturity profile by the parent company in 2006
2,500
1,407
Issued in 2006
4,000
73
5,366
3,959
Issued in 2005
Singer & Friedlander
0 2009
2010
>2011
0 to 1
1 to 3
3 to 5
>5
Maturity in Years
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Successful Implementation of a Global Funding Programme Funding Strategy 2007 – Further Diversification
Kaupthing 5 yr CDS spread
Senior unsecured funding
100
― Due to last years successful diversification efforts,
the bank has access to and can issue unsecured bonds in several different markets in 2007 ― The Bank will continue exploring new markets
Ambitious deposits targets ― Continuing strong deposit growth ― Deposit growth plan put in place in the parent
company and in all subsidiaries Secured funding ― Further covered bond issuance ― Possible securitization in 2007
90 80 70 60 50 40 30 20 10 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
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Key Ratios
2006
2005
CAD
15.0%
12.2%
75.2
Tier 1
10.5%
9.4%
36%
34%
Deposits / Loans to customers
29.6%
31.5%
6.6
9.9
Loans to customers / Assets
63%
61%
1.9
2.6
VaR (10d 99% ) % of Risk capital
1.2%
1.5%
Loan-loss ratio
0.19%
0.21%
Total equity exposure / Risk capital
34%
55%
NPL / Loans to customers
1.00%
0.98%
– Thereof unlisted
8%
13%
ROE
1
Earnings per share ISK Cost Income – Group Price / earnings Price / book
1
1
2006
2005
42.4%
34.0%
127.1
(1) Share price 31 December 2006: ISK 841. Share price 31 December 2005: ISK 746
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Key ratios Dividend payments (per share) ISK
Return on equity % 42.4%
27.6
34.0%
25.5% 23.0%
14.0 18.7% 10.0
5.0 2.9
3.0
2002
2003
2004
2005
(1)
2006
2006
2002
2003
2004
2005
2006
(1) Extra dividend in October 2006
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Five Integrated Business Segments in Ten Countries
Employees (31 Dec 06) Iceland
657
Sweden
336
Denmark
288
Finland
100
Luxembourg
154
Norway
64
Faroe Islands
17
Total
Capital Markets
Treasury
Banking
AM & PB
1,094
UK
US
Investment Banking
9 2,719
Note: Light blue boxes indicate new divisions in 2006
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Number of Employees
Iceland
Other 2,719 2,568 2,368
1,606 1,282
1,276
352
361
930
915
30-Jun-03
31-Dec-03
1,360
1,707
1,322
1,463
1,625
613
703
979
993
1,004
1,046
1,105
1,094
30-Jun-04
31-Dec-04
30-Jun-05
31-Dec-05
30-Jun-06
31-Dec-06
381
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Combination of Organic and Acquisition Growth Operating Income (EURbn) (EURm) Kaupthing
Bunadarbanki
Organic
Acquired
Share of total 2002-2006 growth Organic:
71%
183.5
Acquisitions: 29%
350.4
269.2 1,902
430.3 78.3
1,368
164.9
16.7 120.5
669 425
154 133 2002 Organic (1) Proforma
Acquired
2003
Organic
Acquired
2004
Organic
Acquired
2005
Organic
Acquired
2006
(1) Proforma combination of Búnadarbanki ISK11.5bn and Kaupthing ISK9.9bn
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Conclusion Good diversification of income streams and geography Strong asset quality – no signs of deterioration Positive trend in interest income and commissions Efficient operations and high income per employee Strong capital base 2006 was another record year in Kaupthing Bank´s operations
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Q&A Kaupthing Bank’s – Q4 2006 Results Hreidar Már Sigurdsson, CEO
January 2007
Disclaimer This material has been prepared for professional investors. Kaupthing Bank hf. (Kaupthing) when preparing this report has not taken into account any one customer’s particular investment objectives, financial resources or other relevant circumstances and the opinions and recommendations herein are not intended to represent recommendations of particular investments to particular customers. All securities' transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk. Due care and attention has been used in the preparation of this forecast information. However, actual results may vary from their forecasts, and any variation may be materially positive or negative. Forecasts, by their very nature, are subject to uncertainty and contingencies, many of which are outside the control of Kaupthing Bank. Kaupthing Bank can not guarantee that the information contained herein is without fault or entirely accurate. The information in this material is based on sources that Kaupthing bank believes to be reliable. Kaupthing bank can however not guarantee that all information is correct. Furthermore, information and opinions may change without notice. Kaupthing bank is under no obligation to make amendments or changes to this publication if errors are found or opinions or information change. Kaupthing bank accepts no responsibility for the accuracy of its sources. Kaupthing Bank is the owner of all works of authorship including, but not limited to, all design, text, sound recordings, images and trademarks in this material unless otherwise explicitly stated. The use of Kaupthing's material, works or trademarks is forbidden without written consent except were otherwise expressly stated. Furthermore, it is prohibited to publish material made or gathered by Kaupthing bank without written consent.
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