Arion Banki

Financial highlights for Q4 2023

• Arion Bank reports net earnings of ISK 6,224m in Q4 2023, compared with ISK 4,965m in Q4 2022
• Return on equity was 12.7%, compared with 10.6% in Q4 2022
• Earnings per share in ISK of 4.28 in Q4, compared with 3.37 in Q4 2022
• Net interest margin of 3.1%, the same as in Q4 2022
• Solid quarter for the fee generating businesses, with total fees of ISK 3.9bn
• Core operating income, defined as net interest income, net commission income and insurance service results (excluding opex of the insurance operation), increased by 2%, compared with Q4 2022
• Cost-to-core income ratio in Q4 was 54.9%, compared with 53.7% in Q4 2022

Financial highlights for the year 2023

• Arion Bank reports net earnings of ISK 25,737m in 2023, compared with ISK 25,958m in 2022
• Return on equity in 2023 was 13.6%, compared with 14.1% in 2022
• Earnings per share in ISK of 17.8 in 2023, compared with 17.4 in 2022
• Net interest margin of 3.1%, the same as in 2022
• Solid year for the fee generating businesses, with total fees of ISK 16.4bn
• Core operating income, defined as net interest income, net commission income and insurance service results (excluding opex of the insurance operation), increased by 7%, compared with 2022
• Cost-to-core income ratio was 44.7%, compared with 45.0% in 2022
• The balance sheet increased by 4.1% from year-end 2022
• Loans to customers increased by 6.3% during the year. The increase was 8.2% in corporate lending and 4.6% in loans to individuals, mainly mortgages
• Deposits from customers increased by 4.9% in 2023
• The Bank’s capital ratio was 24.1% and the CET1 ratio was 19.7% at the end of December
• The Board proposes a dividend payment of ISK 9.0 per share, equaling around ISK 13bn, net of own shares

Benedikt Gíslason, CEO of Arion Bank
“Arion Group posted solid financial results for 2023 which were in line with our targets. For the third year in succession, we reached all our key financial targets. Our unique and diverse service offering lays the foundations for a stable business. In fact, no other financial institution in Iceland offers its customers such a broad spectrum of financial services as Arion Group. The Bank remains financially robust, and the capital ratio and CET1 ratio are well above the requirements made by the Financial Supervisory Authority of the Central Bank of Iceland and Icelandic law. Liquidity was also very strong at year-end and well above the regulatory minimum. The board of directors of Arion Bank will propose at the AGM on 13 March that a dividend be paid in accordance with the Bank’s dividend policy amounting to ISK 9 a share.

The two dominant stories domestically in 2023 were the struggle against high inflation and the seismic activity on the Reykjanes Peninsula which has created uncertainty around the future of the town of Grindavík. The people of Grindavík face a great challenge, not knowing when or even whether it will be possible to move back to their town. In response to this uncertainty, we decided with other financial institutions in November to freeze mortgages in Grindavík for three months and to waive interest and indexation on the loans for this period. In early 2024, we extended these measures for a further three months, or until the end of April. By doing this we hope to help alleviate the concerns the people of Grindavík are experiencing at the moment.

During the year we introduced two new measures to accommodate customers who are experiencing higher loan repayments as the fixed mortgage rate period comes to an end. Firstly, there is a payment holiday for one month a year, and secondly there is a so-called payment limit which means that we reduce the interest paid by up to 4 percentage points. The deferred interest payment is then added to the loan principal. This option is ideal for people who want to lower their monthly repayments but still want non-indexed loans. We have also made a concerted effort to reach out to this group of customers so we can discuss with them what the available options are.

In 2023 we placed a special focus on gender equality when it comes to investment and wealth. We carefully analyzed the investment market, and unfortunately it came as no surprise to discover that there is a great disparity between the men and women in terms of savings, pensions and engagement in the financial market. We have therefore launched the long-term initiative Women invest whose aim is to promote investment by women. We have set targets on what we want to achieve over the next few years. The initiative has got off to excellent start and there has been a full house at the events we have organized so far.

Moody’s Investors Service rated Arion Bank’s covered bonds for the first time. Arion Bank was assigned an Aa2 long-term rating for its euro-denominated covered bonds. Arion was the first Icelandic bank to issue such bonds which today are a vital source of funding in the Icelandic financial system. This is the highest rating assigned to an Icelandic issuer and it is three notches higher than the Icelandic government. This represents an important milestone which will help to attract new investors in the Bank’s covered bonds.

Brynjólfur Bjarnason, who was first elected to the Board of Directors at a shareholders’ meeting in November 2014, and went on to be elected as chairman of the board in March 2019, has decided not to stand for re-election to the Board of Directors. This brings to a close an important chapter, and on behalf of the employees of Arion I would like to thank Brynjólfur for his outstanding and invaluable contribution.”

Brynjólfur Bjarnason, outgoing Chairman of the Board of Directors:
“After having served on the Board of Directors of Arion Bank for a decade, the last five years of which as chairman, I feel it is the right time to step back. It has been a great privilege to have joined the Bank on its journey, which has been most eventful over these past 10 years.

Arion Bank has been at the very forefront of introducing digital and convenient financial services in Iceland. The Bank has greatly expanded its service offering, and there are few banks in Europe which offer as diverse a range of financial services as Arion Bank and its subsidiaries after insurance became an integral part of the Group’s services. The Bank has performed well and its balance sheet is robust. Given these strong foundations, I am convinced that Arion Bank is well equipped to tackle the challenges on the road ahead. I am grateful to the Bank’s shareholders for their support. I would also like to thank the employees of Arion Bank, the Board of Directors and our customers for making our time together such a success.”

The nomination committee of Arion Bank advertised for candidates for the Board of Directors on 4 January and has extended the deadline for submitting candidacies, if candidates wish to get an assessment from the nomination committee, until 21 February. The general deadline for candidacies is 5 days before the AGM, 4:00 p.m. GMT on 8 March 2024.

Investor meeting in English on Thursday 8 February at 9:30 CET (8:30 GMT)
Arion Bank will be hosting a meeting at the Bank’s headquarters in Borgartún 19, Reykjavík, on Thursday 8 February at 9:30 CET (8:30 GMT) where CEO Benedikt Gíslason and CFO Ólafur Hrafn Höskuldsson will present the results and give an update on the economic environment. The meeting will take place in English and will also be streamed live.

The webcast will be accessible live on Lumiconnect and a link is also available on the Bank’s website under Investor Relations.

Participants attending virtually will be able to ask questions during the meeting through a message board on the same site. Answers will be provided by presenters at the end of the webcast.

Financial calendar
Arion Bank’s financial calendar is available on the Bank’s website.

Arion Bank will host its Capital Markets Day 1 March and the AGM on 13 March.