High leverage ratios and very strong capital, despite planned capital optimization. Stable franchise and market position across all domestic business lines. Ample liquidity buffers despite recent deposit outflows. Limited risk diversification opportunities in Iceland. Uncertainty related to eventual sale and change from 100% government ownership in the next few years. The stable outlook on Islandsbanki hf reflects S&P Global Ratings' expectation that the bank's risk-adjusted capital (RAC) ratio will remain sustainably above 16%, even while the bank prepares for an eventual sale over the next two years, and optimizes its capital base by paying extraordinary dividends and issuing capital instruments. We view the bank's asset quality as in line with the risks in the Icelandic market and commensurate with domestic
