SOURCE: Glitnir

December 20, 2006 15:25 ET

Glitnir Bank signs ISK 100 billion covered bond programme

REYKJAVIK, ICELAND -- (MARKET WIRE) -- December 20, 2006 --

Glitnir Bank has signed ISK 100 billion covered bond programme. The underlying assets are the Bank's mortgage loans in Iceland. The programme was arranged by Deutsche Bank.

Bonds that will be issued off the programme will be rated Aaa by Moody's Investors Service, which is the the highest possible rating.

Glitnir has also signed an agreement with Citigroup under which Citigroup undertakes to buy Glitnir's covered bonds for up to EUR 550 million over the next five years. This secures for Glitnir additional liquidity for that amount. The terms are undisclosed but they are more advantageous than the Bank has enjoyed recently due to the secured nature of the transaction. Glitnir will not be obliged to sell the covered bonds to Citigroup, i.e. it will be able to make use of any more attractive opportunities that may arise in the future.

Ingvar H. Ragnarsson, Executive Director of International Funding, underlines the importance both of the programme and the purchase agreement. "The agreement with Citigroup boosts the Bank's liquidity even further. The Bank has always put great emphasis on having access to various funding sources. The new covered bond programme is the latest development in this continuing effort. The programme gives flexibility to issue bonds when appropriate for the Bank and when market conditions are attractive."

Total funding close to EUR 5 billion In spite of abnormal trading conditions for much of the year, the Bank's funding operations have had a successful 2006. Total funding of the parent company amounts to close to EUR 5 billion this year. The funding operations got off to a good start and the Bank had raised EUR 1.4 billion when the first allegations of weakness in Iceland's banking sector were made. This lead to increased funding costs which peaked in the second quarter. During this period the Bank kept a low profile in the market but in the latter part of the year the Bank focused on strengthening the Bank's capital ratios and liquidity. The fourth quarter 2006 saw funding costs lowering again with EUR 1.6 billion raised in that quarter.

In March this year, Glitnir became the first Icelandic bank to receive a credit rating from Standard & Poor's and with that became a solid single-A rated bank by all the major rating agencies.

For further information, please contact:
Ingvar H. Ragnarsson, Executive Director of International Funding,
phone +354 844 4665, e-mail

Vala Pálsdóttir, Head of Investor Relations, +354 844 4989, e-mail

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