The biggest IPO in Iceland’s history has been completed after the Icelandic state sold a one-third chunk of state-controlled Islandsbanki, valuing the lender at $1.3 billion. The offering was oversubscribed “with substantial interest” from retail and institutional investors. Trading on Nasdaq starts on 22 June.
Bjarni Benediktsson, Minister of Finance and Economic Affairs, said Íslandsbanki's shareholder base will now be the largest of all listed Icelandic companies. “This is not least due to the decision to allow subscriptions down to ISK 50,000 [$412] and [to] guarantee a minimum allocation of up to ISK 1 million [$8,258],” he said in a statement.
State risk cut post banking crisis
Benediktsson says the sale is profitable for the Treasury. “This is the first step,” he said, “in reducing the state's risk in the banking sector and with that we move closer to a healthier environment, similar to the Nordic countries and other neighbouring countries of ours.”
Lárus Blöndal, chairman of the Board of Directors of ISFI, the state holding company created after the financial crash of 2008, says the sale paves the way “for the government‘s policy of fully disposing the bank to private ownership when market conditions are favourable and acceptable”.
Islandsbanki has around 31% market share in personal banking, a 35% market share in business banking and a 35% market share in corporate and investment banking, according to Icelandmonitor.
Encouraged to go bust
Much of the Icelandic economy has seen a boom since the crash with technology and renewable energy increasingly replacing the ultimately disastrous banking emphasis. At one point the assets of Icelandic banks were valued at 10 times the value of the Icelandic economy.
Drastic tax cutting in the early 2000s saw much Icelandic private investment but inflation surged and interest rates peaked at more than 15% before the financial crash. The key difference between the treatment of US and UK banks and the Icelandic operations was that the Icelandic banking sector was encouraged to go bust, despite massive protests.
Bankers behind bars
It was also the only country that sent bankers to prison – a necessary move in order to re-build public trust. While Iceland’s currency quickly tumbled, it also spawned a tourism spree. However Iceland’s economy has not been able to avoid the COVID-19 crisis; GDP contracted 5.20% in the first quarter of 2021 compared to the previous quarter.
Iceland’s economy is also still heavily dependent on fish – around 40% of export earnings and more than 12% of GDP, according to Trading Economics. May also saw a current record trade deficit of ISK 15.5bn, up from ISK 4.2bn in the same month a year ago.