STOCKHOLM (Dow Jones)--Icelandic banking group Islandsbanki Hf (ISB.IC) will use its latest capital increase to expand abroad, with a special focus on Norway, Chief Executive Bjarni Armannsson said Tuesday.

"Obviously we're looking for interesting businesses within our field," Armannsson told Dow Jones Newswires.

Earlier Tuesday, the bank said it would issue one billion new shares to institutional investors, raising some EUR252 million in new equity.

The new issue, representing a 7.6% increase in the bank's equity base, gives the bank room for growth and a chance to grow at a faster pace, Armannsson said.

The identities of the institutional investors weren't disclosed, but Armannsson called them "all Icelandic."

The bank's own documentation shows its leading institutional shareholders include Straumur-Burdaras Investment Bank hf. (BURD.IC) and FL Group (FL.IC).

On Monday, however, Straumur-Burdaras sold 21.05% of its Islandbanki stake to FL Group among others, reducing its Islandsbanki share capital to 4.89%.

Armannsson said the funds weren't raised for any particular acquisition plans, but he said the bank was interested in broadening its new base in Norway.

"A larger and larger part of our business is outside of Iceland and (is) in Norway. Norway is now one of our two home markets. We're interested in investing more," Armannsson said.

Armannsson also said the bank is currently building up private equity in Luxembourg to focus on the Scandinavian market.

In the past two years, Islandsbanki has expanded its presence outside of Iceland, purchasing both BNBank and Kredittbanken in Norway; in November it purchased the Norwegian brokerage firm Norse.

The bank, which offers universal banking services, already has offices in Copenhagen, Luxembourg and a branch in London. It will shortly also open an office in Shanghai.

Company Web site: http://www.islandsbanki.is

-By Louise Nordstrom, Dow Jones Newswires; +46 8 545 130 97; [email protected]

(END) Dow Jones Newswires

January 11, 2006 01:45 ET (06:45 GMT)

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