Kaupthing BankHreidar Már Sigurdsson, CEO
March 2008
March 2008 2
SMEs/smaller corporations not covered by larger financial institutions
Entrepreneurs and affluent private clients
Highly growth oriented client base
Proven ability to form close relationships and support clients through all stages of their development
Institutional investors
Full suite of products offered by large integrated investment banks
― Investment banking and corporate banking at the core of Kaupthing’s strategy
― Complemented by capital markets and asset management/private banking
Ability to cross-sell, that is to provide full and integrated product offering including equity co-investment, financing, advisory and capital markets solutions as well as wealth management
Our Strategy is Focused
Focused geographic platform
Comprehensive and tailored product offering
Clearly defined customer group
USA
Middle East
March 2008 3
Our Business Model is Diversified
By geography By business unit By income type
Note: Operating income specified by location of markets and customers
Iceland33%
Scandinavia26%
UK31%
Luxembourg8%
Other2%
Banking49%
InvestmentBanking17%
CapitalMarkets
21%
Treasury3%
Asset Management &Private Banking10%
Netinterest income48%
Net fee and commission income33%
Netfinancialincome
9%
Other Income10%
Operating income is well diversified both by geography, business units and income type
Operating income for 2007 was EUR 1891m
March 2008 4
Operating Income and Operating Expenses
¹ Operating income excludes the gain from Exista in Q3 2006. Operating expenses do not include ImpairmentsAll amounts in EURm
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
6M 2005 6M 2006¹ 6M¹ 2007
Operating expenses Operating income
Development of operating income and expenses –Trailing 12 months
Net interest income covers all cost
136 244438
595
913
(248) (316) (476)(683)
(897)
2003 2004 2005 2006 2007
Net interest income Operating expenses
March 2008 5
Maintaining Efficiency
60%
60%
59%
59%
59%
59%
58%
56%
56%
56%
56%
54%
54%
53%
53%
52%
52%
52%
51%
46%
45%
45%
44%
42%
39%
38%
Barclays
Jyske Bank
San Paolo
Sabadell
Unicredit
KBC Bank
Santander
UBI Banca
Raiffeisenb.
Nordea
OP Bank
DnB Nor
Danske Bank
Sampo Group
Dexia
Caja Madrid
Swedbank
Lloyds TSB
HSBC
BBVA
RBS
HBOS
Glitnir
SHB
Kaupthing
Banco Popular
¹ Arthur D. Little and company data
Second most efficient bank in Europe in 20061
79%
78%
70%
69%
67%
63%
63%
59%
58%
58%
57%
57%
51%
51%
51%
50%
47%
46%
Citigroup
Carnegie
Deutsche
Lehman
SEB
Credit Suisse
Goldman Sachs
Barclays
JP Morgan
RBS
Danske Bank
SEB
Nordea
DNB Nor
Swedbank
HSBC
Kaupthing
Santander
Continuing trend in 2007
March 2008 6
Individuals17%
Service18%
Real Estate21% Industry
17%
Holding Companies15%
Transport2%Trade
10%
Well Diversified Asset Base
Loans and receivables74%
Other financial assets
8%
Derivatives3%
Shares and instruments
3%
Bonds and debt instruments
7%
Other assets5%
Total assets by geography Total assets by type
Loans to Customers by Location Loans to Customers by Sectors
Iceland27%
Other6%
Luxembourg12%
UK20%
Scandinavia35%
Iceland32%
Other6%
Luxembourg 10%
UK17%
Scandinavia35%
Assets amounted to EUR 55.6bn and Loans to customers EUR 36,051m at 31 December 2007
March 2008 7
12,2% 11,5%
9,4%10,5%
9,6%
2,0%2,7%
2,8%
4,5%
2,2%
14,2% 14,1%
12,2%
15,0%
11,8%
2003 2004 2005 2006 2007
Tier 1 Tier 2
Conservative Capital Structure
CAD Ratio
All amounts in EURm
6,4%
7,0%
7,1%
7,3%
7,7%
7,8%
8,2%
8,4%
8,5%
8,6%
8,6%
8,8%
9,3%
9,6%
11,4%
Danske Bank
Nordea
Citigroup
RBS
Santander
Barclays
SEB
JP Morgan
Merrill Lynch
Anglo Irish Bank
Deutsche
UBS
HSBC
Kaupthing
Credit Suisse
Tier 1 ratio 2007
March 2008 8
23,5%
31,3%
34,0%
25,5%
23,0%
2003 2004 2005 2006¹ 2007
18,5
35,6
75,2
94,9 95,2
2003 2004 2005 2006¹ 2007
Conservative but Profitable
EPS Return on equity %
¹ Excluding the Exista gainAll amounts in ISK
March 2008 9
FME Stress Test – Strong Evidence
At year-end 2007, the effects of the aforementioned simultaneous shocks on capital ratio was as follows
0,6%
11,2%
9,6%
11,8%
Stress test effects
Capital ratio (CR) after stress test
Thereof Tier 1 ratio
Capital ratio (CR)
End of year 2007
Criteria for stress test
20% fall in value of non-performing / impaired loans and appropriated assets
25% fall in value of foreign shares at own risk of bank
35% fall in value of domestic shares at own risk of bank
7% fall in value of bonds owned by the bank ( less than one year maturity)
20% weakening of the ISK
Source: FME
March 2008 10
What Moody's says about our portfolio and liquidity
"Moody's conducted several stress tests on Kaupthing's loan portfolio subjecting it to different default, asset growth and revenue assumptions as well as scenarios in which problem loans increased sharply. These tests showed that Kaupthing can withstand substantial downward pressure and Moody's also notes the higher geographical diversification of Kaupthing's loan book, a supporting factor for the stress tests "
"After carrying out comprehensive stress tests, Moody's has concluded that Kaupthing'sliquidity profile is strong due to its debt maturity profile combined with a high level of available liquidity on balance sheet including a good cash position as a result of the cancelled acquisition of NIBC. The announced asset sale by Kaupthing Singer & Friedlander is also viewed positively in terms of liquidity"
March 2008 11
Transforming the Funding Profile
Funding Mix 31 December 2007 Funding Mix 31 December 2005
EMTN27%
Commercial Papers
3%
FI Deposits19%
International Loan Market6%
Structured Covered Bonds1%
Samurai & Kangaroo
1%
Subordinated Loans
6%
US Bond market
7%
Customer Deposits
30%
International loan market1%
Customer Deposits
22%
Commerc ial Papers
8%
FI Deposits12%
EMTN Market49%
Subordinated Loans
5%
US Bond market 3%
March 2008 12
30%
35%
46%43% 42%
50%
Q4 Q1 Q2 Q3 Q4 Q4 2008Target
Deposit Scheme – Making Deposits a Priority
Deposits as % Of Loans to customers Deposits
1,835 2,5684,075 4,509 4,888
1,2122,172 2,022
1,9202,680
4,1873,237 2,818
3,061
3,706
4,893 4,895 5,344
7,934
10,143
14,367 14,814 15,072
1,1881,118
Q4 Q1 Q2 Q3 Q4
Iceland Luxembourg Scandinavia UK
All amounts in EURm
90%
2006 2007 2006 2007
The target for deposits ratio of loans to customers raised to 50%
March 2008 13
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Sw
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Soc
Gen
SEB
All
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Com
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Cre
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Suis
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Ban
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Ban
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Ire
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Nor
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DnB N
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Cre
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Arg
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Dan
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Ban
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UBI
BN
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Inte
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Alli
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San
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Cap
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RBS
Sab
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HSBC
Angl
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Ban
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Post
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Mon
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KBC
Bar
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Deu
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ank
Dex
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Popu
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HBO
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Kau
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Lloy
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BBVA
ABN
Am
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St.
Char
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UniC
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UBS
Long term redemptions 2008 as percentage of total long term debt
Source: Bloomberg, FPK
Redemptions are Low
March 2008 14
KaupthingEDGE
Finland – October 2007
Sweden – October 2007
Norway –January 2008
Belgium – January 2008
UK – February 2008
Coverage
Population covered 170 million people
Population covered 380 millionpeople
Entering more new markets in 2008 -Total savings on deposit in target countries: €4.464 bn
Germany – March 2008
March 2008 15
Outlook for the Year Ahead
Expect a moderate growth of the bank
― We continue to emphasise organic growth
― Net interest income (now 48% of operating income) will continue to cover operating expenses
We will continue to emphasise on deposit gathering
Focus will be on operating efficiency
― We will continue to streamline the banks operations and consolidate
― We aim to decrease cost by around 15%
Outlook for corporate activity in the Bank's market niche to remain positive overall, despite some uncertainty in the short term