Investor Relations

• Arion Bank reports net earnings of ISK 6,131m in Q3, compared with ISK 5,008m in Q3 2022
• Return on equity in Q3 was 12.9%, compared with 10.9% in Q3 2022
• Earnings per share in ISK of 4.19 in Q3, compared with 3.35 in Q3 2022
• Net interest margin of 3.0%, compared with 3.2% in Q3 2022
• Solid quarter for the fee generating businesses, with total fees of ISK 3.8bn
• 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 Q3 2022
• Cost-to-core income ratio in Q3 was 38.2%, compared with 37.5% in Q3 2022
• The balance sheet increased by 5.1% from year-end 2022
• The Bank’s capital ratio was 24.4% and the CET1 ratio was 19.4% at the end of September and increased by 50bps in the quarter

Arion Bank reported net earnings of ISK 6,131m in the third quarter of 2023 and ISK 19,513m during the first nine months of the year. Return on equity was 12.9% for the quarter and 13.9% for the first nine months.

Total assets amounted to ISK 1,541bn at the end of September, compared with ISK 1,466bn at the end of 2022. Loans to customers increased by 5.4% in the first nine months of 2023. The increase was 7.9% in corporate lending and 3.3% in loans to individuals, mainly mortgages. Deposits from customers increased by 6.7% during the first nine months. Total equity amounted to ISK 193bn at the end of September. Total equity increased from year-end due to net earnings for the first nine months of 2023 which was partly offset by capital release of ISK 15.6bn.

The Group's capital ratio was 24.4% and the CET1 ratio 19.4% at the end of September. The ratios are determined on the basis of the unaudited net earnings in the quarter and take into account the deduction of 50% of net earnings as foreseeable dividend in line with the Bank’s dividend policy. The Group's capital ratio, as calculated under the Financial Undertakings Act No. 161/2002, was 24.1% and the CET1 ratio was 19.0%. These ratios comfortably exceed the requirements made by the FSA and Icelandic law.

Benedikt Gíslason, CEO of Arion Bank:

“The Bank’s third quarter financial results were in line with expectations, and we achieved all our main operating targets in the first nine months of 2023. We offer an exceptionally broad range of services which generate diverse revenue streams, and this, combined with our focus on efficiency, delivers a stable and strong business. The Bank’s capital and liquidity positions continue to be robust, factors which contributed towards the Bank’s recent upgrade to an A-3 rating by Moody’s.

Moody’s also highlighted our shift towards the bancassurance model. Indeed, it has been pleasing to see how the partnership between Arion and Vörður has gone from strength to strength. Together we are constantly seeking ways to integrate our banking and insurance businesses so that our customers can get the most out of the services we offer. We are delighted to see an increasing number of customers, both retail and corporate, recognizing the benefits of doing business with both companies.

During the third quarter loan portfolio growth slowed down, reflecting easing economic growth in Iceland. Normally, we welcome healthy economic growth, but the task at hand now is to reduce inflation and interest rates, so a dip in economic growth is actually a step in the right direction. High interest rates impact households and companies in Iceland, and consumption and economic activity in general have declined in line with the Central Bank’s targets. Households who chose to fix mortgage rates when rates were low have benefited and enjoyed some level of protection. However, when the fixed mortgage rate period comes to an end, many households are likely to feel financial strain. Over the past few weeks, we have reached out to this group and discussed the options with them. We have various ways of reducing the debt service, and it is vital that people find out what’s on offer so they can decide what best suits them. We look into people’s circumstances on a case-by-case basis and seek to find a solution together. We encourage anyone with concerns to contact us so that we can discuss the available options.

In October we announced organizational changes at the Bank, involving the creation of a new division, Operation & Culture. The changes are designed to bring key units closer together, enhance operational efficiency, manage transformation projects more effectively, and bring a clearer focus to service and customer experience. The division will also play a pivotal role in the continued development and shaping of Arion Bank’s corporate culture and the division will be headed by Birna Hlín Káradóttir, who has served as the Bank’s general counsel since 2019 and has been a member of the executive committee since 2020. Culture and risk awareness are critical to financial institutions, and it was particularly pleasing to see that when Moody’s upgraded our credit rating, it also upgraded the Bank’s ESG rating, explicitly stating that governance risk was low due to the Bank’s financial strategy and risk management.”

Investor meeting/webcast in English on 27 October at 10:30 CEST / 9:30 BST / 8:30 GMT

Arion Bank will be hosting a meeting at the Bank’s headquarters in Borgartún 19, Reykjavík, on Friday 27 October at 10:30 CEST (8:30 GMT) where CEO Benedikt Gíslason and CFO Ólafur Hrafn Höskuldsson will present the results and give an update on the economic environment. Additionally, COO Birna Hlín Káradóttir will introduce the Bank’s recent organizational changes. The meeting will take place in English and will also be streamed live.

The webcast will be accessible live on financialhearings.com 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, located below the video feed. 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.

Q3 2023 - Press release Arion Bank

Arion Bank - Investor presentation Q3 2023

Arion Bank Condensed Consolidated Financial Statements 30 September 2023

Forward-looking statements
This release contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial performance. The information in the release is based on company data available at the time of the release. Although Arion Bank believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors. The most important factors that may cause such a difference for Arion Bank include, but are not limited to: a) the macroeconomic development, b) change in inflation, interest rate and foreign exchange rate levels, c) change in the competitive environment and d) change in the regulatory environment and other government actions. This release does not imply that Arion Bank has undertaken to revise any forward-looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes after the date when this release was made. Arion Bank assumes no responsibility or liability for any reliance on any of the information contained herein. It is prohibited to distribute or publish any information in this release without Arion Bank’s prior written consent.