Icelandic Bank Ratings Affirmed As Risks Shift Amid High House Prices And Rising Rates; Outlooks Stable

The economic risks facing Iceland's banks have increased rapidly as property prices have risen materially ahead of their fundamental determinants. We now see a higher risk of a disorderly correction that could have potentially severe consequences for the banks. At the same time, the firming tourism recovery continues to underpin improving corporate-sector loan performance. Consequently, we see the economic risk trend as stable. We believe that the industry risks affecting Iceland's banks have eased. Icelandic banks' profitability has shown resilience to the COVID-19 pandemic and strong returns are likely to persist. We expect this to provide a buffer against the emergence of significant competition from nonbank lenders, should it occur. The industry risk trend remains stable. We affirmed the 'BBB/A-2'

...July 13, 2022 - The economic risks facing Iceland's banks have increased rapidly as property prices have risen materially ahead of their fundamental determinants. We now see a higher risk of a disorderly correction that could have potentially severe consequences for the banks. At the same time, the firming tourism recovery continues to underpin improving corporate-sector loan performance. Consequently, we see the economic risk trend as stable. - We believe that the industry risks affecting Iceland's banks have eased. Icelandic banks' profitability has shown resilience to the COVID-19 pandemic and strong returns are likely to persist. We expect this to provide a buffer against the emergence of significant competition from nonbank lenders, should it occur. The industry risk trend remains stable. - We affirmed the '###/A-2' ratings on the Icelandic domestic systemically important banks (D-SIBs) Arion Bank hf., Islandsbanki hf., and Landsbankinn hf. - The stable outlooks reflect our view that...

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