Announcement of Intention to Raise Equity

This announcement and the information contained herein is not for publication, distribution or release, in whole or in part, in, or into, directly or indirectly, the United States, Australia, Canada or Japan or any other jurisdiction where such publication, distribution or release would be unlawful.

This document is not an offer of securities for sale or a solicitation of an offer to purchase securities in the United States. The shares in Kaupthing Bank hf. ("Kaupthing") may not be offered or sold in the United States absent registration or an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"). The Shares have not been, nor will be, registered under the Securities Act and Kaupthing does not intend to offer publicly any securities in the United States.

6 November 2006

KAUPTHING BANK HF.

Announcement of Intention to Raise Equity

Kaupthing Bank hf. ("Kaupthing" or the "Company") announces its intention to proceed with an offer of new shares in the capital of the Company (the "Offer"), representing up to 10% of its total issued shares and to apply for the new ordinary shares to be issued pursuant to the Offer to be admitted to the Main List of the Iceland Stock Exchange ("ICEX") and on the O-list of the Stockholm Stock Exchange.

Rationale for the Offer Kaupthing's business has expanded considerably in recent years, particularly outside of Iceland, but the shareholder base still largely reflects Kaupthing's former position as a bank principally focused on Iceland. Kaupthing believes that a broader international investor base, building upon its stable base of Icelandic shareholders, will support the further expansion of the Company's business and increase trading liquidity in Kaupthing's shares. In line with this view, Kaupthing is undertaking the Offer primarily in order to diversify its shareholder base by increasing the proportion of international institutional investors. The Offer will also strengthen its capital base and support the Company's ongoing efforts for prudent capital management.

Background on Kaupthing

* Kaupthing is a northern European bank, headquartered in Iceland, with operations in ten countries. The Company defines the United Kingdom, Iceland and Denmark as its primary markets. For the year ended 31 December 2005, Iceland represented 30% of operating income while the UK represented 34% and Scandinavia (Denmark, the Faroe Islands, Finland, Norway and Sweden) 26%. * Kaupthing offers integrated financial services to small and mid-size companies ("SMEs"), institutional investors and individuals of high net worth. Services include corporate banking, investment banking, capital markets services, treasury services and asset management and comprehensive wealth management for private banking clients. In addition, Kaupthing operates a retail banking franchise in Iceland.

* Based on its market capitalization of ISK 553.6 billion (EUR 6.4 billion) as of 3 November 2006, Kaupthing is currently one of the eight largest banks in the Nordic region (including Denmark, the Faroe Islands, Finland, Iceland, Norway and Sweden).

* In the last five years Kaupthing has expanded rapidly through organic growth and strategic acquisitions. Between 2001 and 2005 it recorded an organic operating income compounded annual growth of 55%. The Company has also made two recent significant acquisitions - the acquisition in Denmark of FIH in July 2004 for ISK 85,868 million (EUR 980 million) and the more recent acquisition of the UK-based bank Singer & Friedlander Group plc in July 2005 for ISK 63,708 million (EUR 796 million).

* Kaupthing's net earnings for the nine months ended 30 September 2006 were ISK 67,806 million (EUR 767 million), an increase of 91% compared to the net earnings for the nine months ended 30 September 2005. The nine month results include significant net financial income of ISK 26.1 billion (pre-tax) (EUR 286 million), which reflects Kaupthing's sale of its stake in Exista, an Icelandic financial services company, and the subsequent listing of shares in Exista on the Iceland Stock Exchange (the "Exista Transaction"). Net earnings for 2005 were ISK 49,260 million, (EUR 659 million) an increase of 178% from 2004, reflecting both the effect of acquisitions referred to above and strong organic growth.

* Kaupthing currently has senior long-term debt ratings of 'A1' from Moody's Investor Services, Inc. ("Moody's") and 'A' from Fitch Ratings, Ltd. ("Fitch"). As of 30 September 2006 total assets were ISK 3,663 billion (EUR 41.3 billion), the Tier I capital ratio was 10.0% and the Capital Adequacy Directive (CAD) ratio was 14.1%.

Summary of the Offer

* Offer of new ordinary shares to international institutional investors.

* Kaupthing intends to issue new shares under the Offer representing up to 10% of its total issued shares. The Offer is expected to be completed before year end subject to market conditions.

* In deciding and effecting the increase of Kaupthing's equity, its board of directors will, to the extent necessary, rely on an authorisation which was granted to the board by the Company's shareholders at their annual meeting on March 17 2006. The shareholders then further agreed to waive their pre-emtipve right to subscribe to any new shares issued in respect of the increase.

* Citigroup Global Markets Limited and Morgan Stanley & Co. International Limited are acting as Joint Global Co-ordinators and Joint Bookrunners for the Offer. Fox-Pitt, Kelton N.V. is acting as a co-lead manager for the Offer.

Sigurdur Einarsson, Executive Chairman of Kaupthing Bank, comments on today's announcement: "We are excited at the prospect of accessing the international equity capital markets as we look to the next phase of Kaupthing's development. In recent years we have continued to develop Kaupthing as one of the fastest growing northern European banks and widened our footprint in northern Europe through a strategy of organic and acquisition-led growth. The fact that we now derive the majority of our revenues and income outside Iceland reflects the successful implementation of this strategy.

A broader international shareholder base will support the further expansion of our business as well as strengthen our capital base. Achieving these objectives should lower our cost of funding and provide a stronger platform in pursuing a successful long-term growth strategy."

Summary Financial Information

* Kaupthing reported Shareholders' net earnings of ISK 67.2 billion (EUR 767 million) for the first nine months of 2006, compared with ISK 34.5 billion (EUR 450 million) for first nine months of 2005. Excluding the Exista Transaction, net earnings would have amounted to ISK 45.8 billion (EUR 516 million).

* Annualised return on equity of 47.2% for the first nine months of 2006. Excluding the Exista Transaction annualised return on equity for the first nine months of 2006 would have been 32.1%.

* Operating income of ISK 126.3 billion (EUR 1,442 million), including the Exista Transaction, for the first nine months of 2006, an increase of 81.6% compared with the same period in 2005.

* Total assets of ISK 3,663 billion (EUR 41.3 billion) at the end of September 2006, increasing by 21% at a EUR since the beginning of the year and by 44% in ISK.

Enquiries

Kaupthing Bank +354 444 6000 Sigurdur Einarsson +44 20 7529 5222 Hreidar Már Sigurdsson +354 444 6101 Jónas Sigurgeirsson +354 444 6112

Citigroup +44 20 7986 4000 Michael Cunningham +44 20 7986 7220 Jolyon Luke +44 20 7986 7339 Tom Attenborough +44 20 7986 0440

Morgan Stanley +44 20 7425 5000 Jakob Lindquist +44 20 7425 5752 Dag Stromme +44 20 7425 5717 Henrik Gobel +44 20 7425 9069

Brunswick +44 20 7404 5959 Anita Scott +44 20 7396 7489 Nigel Prideaux +44 20 7396 7411

No offer nor invitation to purchase nor subscribe for securities of the Company is being made at this time. Any such offer or invitation will be made solely in or by reference to the prospectus proposed to be published in due course and any acquisition of securities of the Company should be made only on the basis of the information contained in the prospectus.

The contents of this announcement, which have been prepared by the Company, have been approved by Citigroup Global Markets Limited and Morgan Stanley & Co International Limited solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000. Citigroup Global Markets Limited and Morgan Stanley & Co International Limited, each of which is regulated in the United Kingdom by the Financial Services Authority, are acting for the Company and no one else in connection with the Global Offer and will not be responsible to anyone other than the Company for providing the protections afforded to the respective clients of Citigroup Global Markets Limited and Morgan Stanley & Co International Limited, nor for providing advice in relation to the Global Offer, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

This announcement does not constitute an offer to sell or the solicitation of an offer to buy securities of the Company in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities law of any such jurisdiction.

This announcement is not a prospectus but an advertisement. Investors should not purchase or subscribe for any transferable securities referred to in this announcement except on the basis of information in the prospectus which is expected to be published by Kaupthing Bank in due course. The prospectus, when published, will be available from Kaupthing Bank's registered office at Borgartún 19, IS-105 Reykjavík, Iceland.

Forward-looking statements The contents of this announcement include statements that are, or may be deemed to be "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should". By their nature, forward-looking statements involve risks and uncertainties and readers are cautioned that any such forward-looking statements are not guarantees of future performance. The Company's actual results and performance may differ materially from the impression created by the forward-looking statements. The Company undertakes no obligation to publicly update or revise forward-looking statements, except as may be required by applicable law and regulation.

Stabilisation In connection with the Offer,Citigroup Global Markets Limited (the Stabilising Manager), or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law, at its discretion over-allot and effect other transactions with a view to supporting the market price of the Ordinary Shares at a level higher than that which might otherwise prevail in the open market. The Stabilising Manager is not required to enter into such transactions and such transactions may be effected on any stock market, over-the-counter market or otherwise. Such stabilising measures, if commenced, may be discontinued at any time and may only be taken during the period of 30 days from publication of the prospectus. Save as required by law or regulation, neither the Stabilising Manager nor any of its agents intend to disclose the extent of any over-allotments and/or stabilisation transactions under the Offer.

This announcement does not constitute a recommendation concerning the Offer. The value of shares can go down as well as up.