Kaupthing Bank Acquires the Danish Bank FIH

FIH represents an excellent strategic fit with Kaupthing Bank. This acquisition will double the size of Kaupthing Bank and will give the bank a leading position in the Danish corporate banking sector. The acquisition will be funded through a combination of a subordinated bond issue and a rights issue. Excess capital and cash reserves in FIH amounting to DKK 2.4 billion (€ 320 million) will be distributed to the seller prior to closing. Shareholders with 52% ownership in Kaupthing Bank have expressed support for the acquisition and will fully participate in the rights issue. The board is expected to propose an issue price in line with current market price. FIH provides medium and long term financing to the full spectrum of Danish corporations. Through the strength and experience of its management team, FIH has built up a 17% share of the Danish corporate banking market. With around 5,000 clients, the bank has the widest range of large corporate and small and medium-sized enterprises in Denmark. FIH also has a strong capital structure and a proven track record in minimizing losses in its credit portfolio. The combined entity will provide a platform for growth in corporate finance, acquisition finance and private equity investments. The cross-selling opportunities arising from this acquisition will enable FIHs wide range of clients to benefit from Kaupthing Banks broader product portfolio. The management team of FIH and the strong local brand will remain unchanged and there will be no need for a reorganisation of the FIH business. On a proforma basis this acquisition will increase Kaupthing Banks total assets from ISK 601 billion (€ 6.9 billion) to ISK 1,470 billion (€15.9 billion). Net earnings for 2003 and Q1 2004 will increase from ISK 7,520 million (€ 86.4 million) to ISK 14,163 million (€ 162.8 million) and ISK 2,650 million (€30.5 million) to ISK 4,816 million (€55.4 million) respectively. The acquisition will have a significantly positive impact on earnings per share. The target for the combined group would be to keep the Capital Adequacy Directive (CAD) ratio in excess of 11.0% and the Tier 1 Capital ratio at 8.0% or higher.