Iceland takes step to curbing state ownership of banks after 2008 collapse (updated)
27/05/2021 09:07
(Adds background, quote)
By Jacob Gronholt-Pedersen and Abhinav Ramnarayan
COPENHAGEN, May 27 (Reuters) - Iceland intends to launch an
initial public offering (IPO) of Islandsbanki by next month, in
a first step to curbing the state's ownership of the banking
sector well over a decade after it imploded during the 2008
financial crisis.
The North Atlantic nation, whose banking collapse was an
extreme example of the greed and mismanagement of the global
financial system, said on Thursday it would begin to normalise
its financial sector by selling at least 25% of the bank's
existing shares by next month.
Islandsbanki, formerly Glitnir, was one of the three lenders
that failed within days of each other in 2008, prompting a state
takeover that resulted in the restructuring of existing banks
and creation of new ones.
Islandsbanki, which became the country's first listed
company in 1904, saw its share price fall by 75% in just a month
in September 2008 before it was nationalised. At the time, the
Icelandic government paid 600 million euros ($732.24 million)
for a 75% stake, which included the issuance of new capital.
Today, Islandsbanki could be valued upwards of $1.1 billion
in the IPO, a source familiar with the transaction said, asking
not to be named.
Citing successful capital raises by banks, including NatWest
NWG.L and Greece's Alpha Bank ACBr.AT , he said there was
renewed interest in financial institutions across Europe as the
COVID-19 crisis is not primarily a financial crisis, banks are
generally well capitalised and most are heavily provisioned.
OVERLY EXPOSED
Iceland began in the early 2000s to promote itself as a
low-tax island economy that could serve as a base for offshore
investment and finance.
At one point, the country's banks held assets worth ten
times the nation's gross domestic product, including large
assets abroad, making them overly exposed when the financial
crisis hit.
Capital controls and a subsequent fall in the Icelandic
currency helped to restore Iceland's competitiveness.
It began lifting capital controls in 2015, bringing it out
of financial isolation, while a tourism boom fuelled economic
growth.
"The listing of Islandsbanki on Nasdaq Iceland is an
important first step to reduce the Icelandic state's significant
ownership in the banking sector," Finance Minister Bjarni
Benediktsson said in a statement.
"Thereby we move one step closer to a healthier environment
in our banking sector, such as those of our neighbouring
countries in the Nordics," he said.
Arion Bank ARION.IC , one of the other three large banks
that collapsed in 2008, was the first to list in 2018. Arion was
taken over by the state in 2008, but its creditors took control
of the bank in 2010.
Islandsbanki has a domestic market share of around
one-third, around 740 employees and last year posted pretax
profit of 9.32 billion Icelandic crowns ($77 million).
The bank, which has a BBB/A-2 credit rating at S&P Global
Ratings, aims to deliver a return on equity of between 8% and
10% by 2023 and above 10% in the long term.
The state holding company has hired Citigroup, J.P. Morgan,
Barclays and HSBC to help coordinate the IPO.
($1 = 121.0400 Icelandic Crowns)
($1 = 0.8194 euros)
(Reporting by Jacob Gronholt-Pedersen; editing by Jan Harvey,
Jason Neely and Barbara Lewis)
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