Arion Bank’s financial Q3 2020 financial results
- Arion Bank reports net earnings of ISK 3,966 million, a significant improvement from Q3 2019
- Net earnings of ISK 4,961 million from continuing operations, an improvement of 31% from Q3 2019
- Return on equity was 8.3%, compared with 1.6% in Q3 2019
- Net interest margin was 2.9% and improves between years despite low interest rate environment
- Core revenues increased by 6.2% between years
- Operating expenses decreased significantly, mainly due to organizational changes in Q3 2019
- Impairments on loans increased, mainly as a result of more negative assumptions due to Covid-19
- Financial restructuring of Valitor has significantly reduced the negative financial effect on the Group
- The Bank’s total assets increased by 14% from year-end 2019 where the loan book increased by 7% and deposits by 22%
- The Bank’s capital ratio was 27.6% and the CET1 ratio was 22.5% at the end of September, assuming 50% dividend payments of net earnings in line with the dividend policy
Arion Bank reported net earnings of ISK 4,961 million from continuing operations in the third quarter and ISK 8,637 million from continuing operations during the first nine months of the year. Net earnings amounted to ISK 3,966 million for the quarter and ISK 6,708 million for the first nine months. Return on equity was 8.3% for the quarter and 4.7% for the first nine months of the year. Return on equity, assuming 17% CET1 ratio, was 10.4% for the quarter.
Total assets amounted to ISK 1,236 billion at the end of September 2020, compared with ISK 1,082 billion at the end of 2019. Liquid assets increased as the proposed ISK 10 billion dividend payment did not materialize, the Bank issued AT1 in February and deposits increased. Loans to customers increased slightly from year-end 2019, mainly due to mortgage lending. Deposits increased by 22% from year-end 2019. Total equity amounted to ISK 192 billion at the end of September, compared with ISK 190 billion at the end of 2019.
The Bank’s capital ratio was 27.6% at the end of September 2020, assuming 50% dividend payments of net earnings, compared with 24.0% at the end of 2019. The CET 1 ratio was 22.5% at the end of September 2020, assuming 50% dividend payments of net earnings, compared with 21.2% at the end of 2019. The Group's capital ratio, as calculated under the Financial Undertakings Act No. 161/2002, was 27.3% and the CET1 ratio was 22.2%. The Bank’s capital ratios comfortably exceed the requirements set by law and the Financial Supervisory Authority of the Central Bank. The Group's own funds increased by ISK 29.9 billion from year-end 2019.
The Bank is committed to its medium-term targets.
Benedikt Gíslason, CEO of Arion Bank:
“It’s pleasing to see a strong performance from the Bank’s continuing operations during the third quarter and solid net earnings. Income has increased by more than 6%, while expenses are down almost 11% compared with last year, a trend which is line with the focuses in the business over the last year and which will continue in the future. An integral component of our strategy is to offer our customers a wide range of financial services. Our business is therefore highly diverse and income is generated from numerous sources, which is advantageous in the current economic environment. Demand for mortgages in the quarter has been unusually strong, which is one of the reasons for the growth of the Bank’s loan portfolio. The Bank’s liquidity and capital position continues to gain strength and is stronger than ever. In fact the Bank has excess capital on which it is almost impossible to generate returns in line with our targets.
The winter ahead is filled with uncertainty, a situation clearly indicated by the impairments in our loan portfolio and impairments of the Bank’s assets held for sale in the third quarter. This is simply a reflection of the reality we are currently facing. We will work with our customers and make every effort to support them through this period.
In the past few months we have successfully helped companies raise equity and debt on the markets, underlining our belief that thriving Icelandic companies should be able to get the best available financing at any given time from various sources. We will continue on this path to the benefit of our customers.
Our business, how we develop products, manage capital and make decisions increasingly take into account environmental and social factors. This is clearly reflected in the ESG rating given to the Bank recently by the Icelandic ratings company Reitun. We received an outstanding rating, scoring 86 of out of a possible 100 points. The rating is based on the Bank’s performance in terms of environmental, social and governance factors and we are proud to have received such positive testimony to our progress in this area from Reitun. We are developing a green framework around our lending business and our green deposits have been welcomed by our customers. We also launched green mortgages recently, and we are committed to further developing our product and service offering in this direction.”
Investor webcast on 29 October at 9:30 CET (8:30 GMT)
Arion Bank will be hosting a webcast on Thursday 29 October at 9:30 CET (8:30 GMT) where CEO Benedikt Gíslason, CFO Stefán Pétursson, Deputy CFO Eggert Teitsson and Head of Investor Relations Theodor Fridbertsson will present the results and answer questions from participants. The webcast will take place in English and will be streamed live.
The webcast will be accessible live on financialhearings.com and a link will also be made available on the Bank’s website under Investor Relations.
To participate in the webcast via telephone and ask questions please call in using the relevant number indicated below before the start of the webcast:
Sweden: +46 850 558 375
UK: +44 333 300 9269
Iceland: +354 800 7520
USA: +1 833 249 8405
The financial calendar of Arion Bank is available on the Bank’s website.
Arion Bank Press Release Q3 2020
Arion Bank Investor Presentation Q3 2020
Arion Bank - Condensed Consolidated Interim Financial Statements 1 January - 30 September 2020