Margeir Petursson, the chairman and founder of MP Bank, the only commercial bank in Iceland that did not collapse last year when the worldwide economic crisis engulfed the country, saw the looming crisis long before others did. In 2005, he already thought that Iceland’s economy was growing too fast.

“It was quite clear that there was a runaway boom going on. The currency was overvalued,” he said. So, instead of seeking business in Iceland, MP Bank looked overseas. “It was a natural reaction to diversify abroad and to not participate in lending for takeovers and for companies that wanted to expand,” Petursson said.

By 2007, fearing that things were getting worse, the bank began selling assets, mostly stocks, and buying Icelandic government bonds, which are now the bulk of its portfolio. It also started hoarding cash. “Of course, you could say that we were too conservative. We didn’t participate in the boom,” Petursson said. “But, we were doing sufficiently well.”

He may have gotten the timing wrong, but he was right about the impending problems. When the worldwide financial turmoil struck last October, MP Bank escaped the worst. “Our impairments were $15 million which was quite high,” Petursson said. “Still, we managed to squeeze out a profit of about $7 million.” For the year, the bank’s net operating income was 3.97 billion Icelandic krona, or $31.3 million, up from 3.16 billion krona in 2007. Its profit fell to 860 million krona from 1.78 billion krona.

During an interview by phone, Steingrimur J Sigfusson, the minister of finance for Iceland, said about MP Bank, “It did very well last year. It was probably the only one that did.” Last October, as the three biggest banks in Iceland failed and were seized by the government, MP Bank applied for and received its commercial banking license. It is now the only independent commercial bank in the country.

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