Kvika banki : Interim Financial Statement 31.03.2024

Condensed Interim

Consolidated Financial Statements

31 March 2024

Condensed Interim

Consolidated Financial Statements

31 March 2024

Kvika banki hf. ∙ Katrínartún 2 ∙ 105 Reykjavík ∙ Iceland ∙ Reg. no. 540502‐2930

Kvika banki hf.

Table of Contents

	Page
Kvika highlights	1
Endorsement and Statement by the Board of Directors and the CEO	2
Condensed Interim Consolidated Income Statement	4
Condensed Interim Consolidated Statement of Comprehensive Income	5
Condensed Interim Consolidated Statement of Financial Position	6
Condensed Interim Consolidated Statement of Changes in Equity	7
Condensed Interim Consolidated Statement of Cash Flows	9
Notes to the Condensed Interim Consolidated Financial Statements	10
‐ General information	11
‐ Segment information	13
‐ Income statement	15
‐ Statement of Financial Position	18
‐ Risk management	27
‐ Financial assets and financial liabilities	42
‐ Other information	46

Condensed Interim Consolidated Financial Statements 31 March 2024 ‐ Unaudited

Kvika highlights

31.03.2024

Kvika

Kvika is a specialized financial institution strategically positioned to increase competition and transform financial services in Iceland. Kvika provides businesses, investors, and individuals with investment banking, insurance, asset management, payment, and banking services. The Bank is listed on Nasdaq Iceland.

Kvika operates in four business segments, Commercial banking and Corporate Banking & Capital Markets as well as Asset Management and UK operations through subsidiaries Kvika Asset Management and Kvika Securities Ltd. Kvika's insurance segment, operated through the subsidiary TM tryggingar hf., is currently in a divestment process.

Kvika operates several brands that are highly focused and excel in their field. The main brands are Kvika, Kvika Asset Management, Auður, Aur, Lykill, Netgíró, and Straumur, as well as Ortus Secured Finance in the UK.

Diversified operations

Revenues by segment / 3M 2024

15.0%

35.4%

16.3%

33.3%

Commercial Banking		Asset Management
Corporate Banking & Capital Markets		UK

Key figures

ISK m.	3M 2024	3M 2023
Net operating income	4,069	3,489
Profit before taxes	1,215	895
Profit before taxes incl.TM	1,345	1,412
RoTE	12.1%	13.1%
	31.03.2024	31.12.2023
Total Assets	350,887	335,397
Loans to customers	145,898	136,323
Deposits	137,143	133,773
LCR	286%	247%
NSFR	137%	141%
Group Solvency	1.16	1.25

	Net operating income									Loans to customers
	ISK bn.																	ISK bn.
													150														136		146
					4.3					4.0	4.1						110			119	124
	3.5				3.0
													100
																50			92.3%		91.5%		96.0%		101.9%	106.4%
																	0
				Q1 23		Q2 23	Q3 23	Q4 23	Q1 24			Q1 23		Q2 23			Q3 23			Q4 23		Q1 24
																									Loans to deposits
	Total capital ratio											LCR ratio
	(%)																	(%)
25	23.6%	23.1%	22.7%	22.6%	400 50				390%
													21.7%			45	327%
																350					301%						286%
20																			40
																300												247%
																35
15																250 30
			20.8%		20.9%														150%			145%
						20.4%		19.6%			19.0%		144%						141%				137%
									200 25
10																	150 20
5																100	15
																		10
																50 5
0																		0 0
				Q1 23		Q2 23			Q3 23		Q4 23		Q1 24			Q1 23		Q2 23			Q3 23			Q4 23		Q1 24
										CET1																		NSFR

240

220

200

180

160

140

120

100

80

60

40

20

0

350

300

250

200

150

100

50

0

Corporate Governance	Reitun ESG score	Stable

Following the classification of TM as a disposal group held for sale, the Group reports income from its insurance operations in a single line in the consolidated income statement as profit after tax from discontinued operations. The comparative figures from 2023 have been restated

Kvika banki hf.

Endorsement and Statement

by the Board of Directors and the CEO

These are the Condensed Interim Consolidated Financial Statements of Kvika banki hf. ("Kvika" or the "Bank") and its subsidiaries (together the "Group") for the period 1 January to 31 March 2024. The Condensed Interim Consolidated Financial Statements have not been audited or reviewed by the Bank's independent auditors.

About the Bank

Kvika is a specialized financial institution strategically positioned to increase competition and transform financial services in Iceland. Operating without a branch network, Kvika provides businesses, investors, and individuals with investment banking, insurance, asset management, payment, and banking services. The Bank is listed on the main list of Nasdaq OMX Iceland.

Kvika operates in four business segments, two which are operated under the Kvika Bank brand, Commercial banking, and Corporate Banking and Capital Markets, and two in own‐brand subsidiaries, Kvika Asset Management and Kvika Securities Ltd., the Group's operations in the UK. The insurance segment, operated through the subsidiary TM tryggingar hf. ("TM") has been discontinued as TM is currently in a sales process.

Kvika operates as well as a house of brands that are highly focused and excel in their field. The main brands are Kvika, Kvika Asset Management, Auður, Aur, Lykill, Netgíró, and Straumur, as well as Ortus Secured Finance in the UK.

Operations during the period in 2024

Profit before taxes for the period amounted to ISK 1,345 million (3m 2023: ISK 1,412 million), corresponding to an annualised 12.1% return on weighted tangible equity, based on the tangible equity position of Kvika and TM at the beginning of the year adjusted for changes in share capital and transactions with treasury shares during the period. Profit before taxes is composed of the pre‐tax profit from both the Group's continuing and discontinued operations.

The Group's net operating income during the period was ISK 4,069 million (3m 2023: ISK 3,489 million). Net interest income amounted to ISK 2,326

million (3m 2023: ISK 1,985 million). Net fee income amounted to ISK 1,633 million (3m 2023: ISK 1,488 million). Other operating income amounted to

ISK 110 million (3m 2023: ISK 16 million). Administrative expenses during the period amounted to ISK 2,666 million (3m 2023: ISK 2,635 million). During

the period, the Group had a net impairment charge of ISK 188 million (3m 2023: positive net impairment charge of ISK 41 million).

Financial position

According to the Consolidated Statement of Financial Position, equity at year‐end 2024 amounted to ISK 83,261 million (31.12.2023: ISK 81,958 million),

and total assets amounted to ISK 350,887 million (31.12.2023: ISK 335,397 million).

The Group's statement of financial position grew by ISK 14.4 billion or 4.3% during the period in 2024. Loans to customers grew by ISK 9.6 billion or 7.0% during the period. Liquid assets amounted to ISK 103.5 billion at end of March 2024, or 29.5% of total assets.

Offer for TM tryggingar hf. accepted

On 17 March 2024 the Bank announced that it had received binding offers for the purchase of the share capital of TM. The Bank furthermore announced that it had decided to accept an offer from Landsbankinn hf. with the aim to complete a confirmatory due diligence review, and sign a purchase agreement between the two banks for the purchase and sale of 100% of TM's shares as soon as possible, with standard conditions of approval from The Financial Supervisory Authority of the Central Bank of Iceland and the Competition Authority. The purchase price according to the offer is ISK

28.6 billion and Landsbankinn will pay for the share capital in cash. The purchase price is based on TM's balance sheet at the end of 2023. The final purchase price will be adjusted for changes in TM's tangible equity from the beginning of the year 2024 to the completion date, and the amount of the change will be added to or subtracted from the purchase price in the offer.

Capital adequacy and dividends

Kvika's total capital requirement at 31.03.2024, taking into account all capital buffers, amounted to 19.1%. Kvika's capital adequacy ratio was 21.7% at the end of March 2024 (31.12.2023: 22.6%). Kvika's CET1 requirement was 13.9% compared to a CET1 ratio of 19.0% at the end of March 2024.

The Group's solvency ratio at 31.03.2024 was 1.16 (31.12.2023: 1.25) with a regulatory minimum requirement of 1.0.

The Bank's 2024 Annual General Meeting ("AGM") approved a motion from the Board of Directors ("BOD") permitting the Bank to purchase up to 10% of own shares subject to regulatory approvals. This authorisation applies until the next annual general meeting in 2025.

The 2024 AGM also approved a motion from the BOD to, subject to approval from the Financial Supervisory Authority of the Central Bank of Iceland, decrease the share capital of the Bank by 58,952,375 shares by cancelling treasury shares held by the Bank. In March 2024, the share capital reduction was carried out.

Furthermore, the 2024 AGM approved a motion from the BOD that no dividend will be paid in the year 2024 on 2023 operations. The BOD intends, through the purchase of own shares, to meet the Bank's dividend policy, which states that the aim is for shareholders to be returned an annual dividend of at least 25% of last year's profit after taxes, whether in the form of dividends or through the purchase of own shares. The BOD has not ruled out that it might call to a meeting of shareholders later in the year 2024 to discuss potential dividend payments if the conditions arise, e.g. following the sale of TM.

Condensed Interim Consolidated Financial Statements 31 March 2024 ‐ Unaudited

2

Kvika banki hf.

Endorsement and Statement

by the Board of Directors and the CEO

Risk management

The objective of risk management is to promote a good and efficient culture of risk awareness within the Group and to increase the understanding of employees and management on the Group's risk taking, in addition to an assessment process related to risk and capital position. An emphasis is placed on being up to speed on the latest developments and adoption of rules related to risk management, such as regarding capital‐ and liquidity management. The Group faces various risks associated with its operations as a financial conglomerate that arise from its day‐to‐day operations. Active risk management entails analysing risk, measuring it and taking actions to limit it, as well as monitoring risk factors across the Group. The Group's risk management and main operations are described in the notes accompanying the Condensed Interim Consolidated Financial Statements. Refer to notes 39‐54 on the analysis of exposure to various types of risk.

Statement by the Board of Directors and the CEO

The Condensed Interim Consolidated Financial Statements of Kvika banki hf. for the period 1 January to 31 March 2024 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU, and additional requirements, as applicable, in the Act on Annual Accounts no. 3/2006, the Act on Financial Undertakings no. 161/2002 and rules on accounting for credit institutions no. 834/2003.

To the best of our knowledge these Condensed Interim Consolidated Financial Statements give a true and fair view of the Group's assets, liabilities and financial position as at 31 March 2024 and the financial performance of the Group and changes of cash flows for the period 1 January to 31 March 2024. Furthermore, in our opinion the Condensed Interim Consolidated Financial Statements and the Endorsement of the Board of Directors and the CEO give a fair view of the development and performance of the Group's operations and its position and describe the principal risks and uncertainties faced by the Group.

The Board of Directors and the CEO of the Bank have today discussed the Condensed Interim Consolidated Financial Statements for the period 1 January to 31 March 2024 and confirmed them by the means of their signatures.

Reykjavík, 2 May 2024.

Board of Directors

Sigurður Hannesson, Chairman

Guðmundur Þórðarson, Deputy Chairman

Helga Kristín Auðunsdóttir

Ingunn Svala Leifsdóttir

Guðjón Reynisson

Chief Executive Officer

Ármann Þorvaldsson

The Condensed Interim Consolidated Financial Statements of Kvika banki hf. for the period ended 31 March 2024 are electronically certificated by the Board of Directors and the CEO.

Condensed Interim Consolidated Financial Statements 31 March 2024 ‐ Unaudited

3

Kvika banki hf.

Amounts are in ISK thousands

Condensed Interim Consolidated Income Statement

For the period 1 January 2024 to 31 March 2024

	Notes	3m 2024	3m 2023 *
Interest income		7,105,791	5,043,148
Interest expense		(4,779,672)	(3,058,280)
Net interest income	5	2,326,118	1,984,867
Fee and commission income		1,795,429	1,605,305
Fee and commission expense		(162,530)	(117,072)
Net fee and commission income	6	1,632,900	1,488,234
Net financial income (expense)	7	23,822	(98,896)
Other operating income		85,711	114,562
Other net operating income		109,532	15,666
Net operating income		4,068,550	3,488,767
Administrative expenses	9	(2,665,797)	(2,634,637)
Net impairment	11	(187,950)	40,839
Profit before taxes from continuing operations		1,214,804	894,969
Income tax	12	(151,869)	(104,234)
Special tax on financial activity	13	(13,138)	0
Special tax on financial institutions	14	(62,600)	(52,039)
Profit for the period		987,197	738,696
Discontinued operations	3	96,183	428,485
Profit after tax for the period from discontinued operations
Profit for the period		1,083,379	1,167,180

	Notes	3m 2024	3m 2023
Attributable to the shareholders of Kvika banki hf		1,079,337	1,148,230
Attributable to non‐controlling interest	22	4,042	18,950
Profit for the period		1,083,379	1,167,180
Earnings per share	15	0.23	0.24
Basic earnings per share (ISK per share)
Diluted earnings per share (ISK per share)		0.23	0.24

* Comparative information has been restated, reference is made to note 3 for further information.

The notes on pages 11 to 47 are an integral part of these Condensed Interim Consolidated Financial Statements.

Condensed Interim Consolidated Financial Statements 31 March 2024 ‐ Unaudited

4

Kvika banki hf.Amounts are in ISK thousands

Condensed Interim Consolidated Statement of

Comprehensive Income

For the period 1 January 2024 to 31 March 2024

Notes	3m 2024	3m 2023
Profit for the period	1,083,379	1,167,180
Changes in fair value of financial assets through OCI, net of tax	190,233	(223,771)
Realized net loss transferred to the Income Statement, net of tax	10,079	7,230
Changes to reserve for financial assets at fair value through OCI	200,312	(216,541)
Exchange difference on translation of foreign operations	9,465	(14,903)
Other comprehensive income that is or may be reclassified subsequently to profit and loss	209,777	(231,444)
Total comprehensive income for the period	1,293,156	935,736

Notes	3m 2024	3m 2023
Attributable to the shareholders of Kvika banki hf	1,289,114	900,234
Attributable to non‐controlling interest	4,042	35,502
Total comprehensive income for the period	1,293,156	935,736

The notes on pages 11 to 47 are an integral part of these Condensed Interim Consolidated Financial Statements.

Condensed Interim Consolidated Financial Statements 31 March 2024 ‐ Unaudited

5

Kvika banki hf.

Amounts are in ISK thousands

Condensed Interim Consolidated Statement of Financial Position

As at 31 March 2024

Assets	Notes	31.3.2024	31.12.2023
Cash and balances with Central Bank	16	34,256,255	23,681,453
Fixed income securities	17	56,956,255	64,977,406
Shares and other variable income securities	18	4,314,083	3,857,480
Securities used for hedging	19	12,706,506	16,852,313
Loans to customers	20	145,898,190	136,323,481
Derivatives	21	3,065,234	2,497,877
Investment in associates	23	95,841	96,194
Intangible assets	24	21,908,315	21,906,363
Operating lease assets	25	455,445	530,144
Property and equipment		591,080	618,361
Deferred tax assets	12	2,780,478	2,902,580
Other assets	26	15,309,237	10,401,128
Assets classified as held for sale	3	52,550,213	50,752,652
Total assets		350,887,131	335,397,432
Liabilities
Deposits	27	137,143,138	133,772,941
Borrowings	28	37,558,062	23,817,062
Issued bonds	29	38,752,257	45,715,427
Subordinated liabilities	30	6,176,221	5,993,084
Short positions held for trading	31	653,560	131,745
Short positions used for hedging	32	113,800	4,230
Derivatives	21	2,339,572	2,196,904
Current tax liabilities		17	17
Deferred tax liabilities		308,797	272,615
Other liabilities	33	17,911,669	16,593,993
Liabilities associated with assets classified as held for sale	3	26,669,339	24,941,611
Total liabilities		267,626,432	253,439,628
Equity
Share capital	34	4,722,073	4,722,073
Share premium		47,661,777	47,661,777
Other reserves		5,090,040	4,330,081
Retained earnings		25,710,648	25,171,754
Total equity attributable to the shareholders of Kvika banki hf.		83,184,538	81,885,685
Non‐controlling interest	22	76,161	72,119
Total equity		83,260,699	81,957,804
Total liabilities and equity		350,887,131	335,397,432

The notes on pages 11 to 47 are an integral part of these Condensed Interim Consolidated Financial Statements.

Condensed Interim Consolidated Financial Statements 31 March 2024 ‐ Unaudited

6

Kvika banki hf.Amounts are in ISK thousands

Condensed Interim Consolidated Statement of Changes in Equity

For the period 1 January 2024 to 31 March 2024

						Other reserves				Total share‐	Non‐
					Deficit		Trans‐	Restricted
1 January 2024 to 31 March 2024		Share	Share	Option	reduction	Fair value	lation	retained	Retained	holders'	controlling	Total
Notes	capital	premium	reserve	reserve	reserve	reserve	earnings	earnings	equity	interest	equity
Equity as at 1 January 2024		4,722,073	47,661,777	173,605	1,203,697	(930,231)	86,145	3,796,865	25,171,754	81,885,685	72,119	81,957,804
Profit for the period									1,079,337	1,079,337	4,042	1,083,379
Changes in fair value of financial assets through OCI						190,233				190,233		190,233
Realized net loss transferred to the Income Statement						10,079				10,079		10,079
Translation of foreign operations
Exchange difference on translation of foreign operations							9,465			9,465	0	9,465
...............................................Total comprehensive income for the period		0	0	0	0	200,312	9,465	0	1,079,337	1,289,114	4,042	1,293,156
Restricted due to subsidiaries and associates								534,880	(534,880)	0		0
Restricted due to development costs								5,563	(5,563)	0		0
Stock options				9,740					0	9,740		9,740
Equity as at 31 March 2024		4,722,073	47,661,777	183,344	1,203,697	(729,919)	95,610	4,337,308	25,710,648	83,184,538	76,161	83,260,699

The notes on pages 11 to 47 are an integral part of these Condensed Interim Consolidated Financial Statements.

)

Condensed Interim Consolidated Financial Statements 31 March 2024 ‐ Unaudited

7