The Boards of Directors of Kvika banki hf. and Virðing hf. have signed a Letter of Intent (LOI) concerning preparations for the merger of the two companies under the name Kvika.

Before the merger, Kvika's equity will be reduced by ISK 600 million and the reduction distributed to the Bank's shareholders. Following the merger, Kvika shareholders will own 70% in the merged company and Virðing shareholders 30%.

The Kvika-Virðing merger will create a strong financial institution that will play a leading role in the Icelandic investment banking market. The merged company will be one of Iceland's largest asset management firms, with about ISK 220 billion under management, including number of mutual funds, investment funds, private equity funds, real estate funds, credit funds, and various institutional investment funds. In addition, the merged company will provide strong capital markets, corporate finance, specialised lending, and private banking services.

In the coming weeks, an agreement will be prepared, laying down the main terms and conditions for the merger, including assumptions, due diligence, final contract preparation, and a dated action plan. If the merger is approved, it is expected to take effect in midyear 2017.