Arion Bank hf. - Financial Statement Release

Arion Bank’s financial results for the first nine months of 2012

Arion Bank reported net earnings of ISK 14.5 billion for the first nine months
of 2012, compared with ISK 13.6 billion during the same period in 2011. Return
on equity was 15.9%, compared with 17.6% in the same period of 2011. Return on
equity from regular operations was 11.9%, compared with 11.3% a year ago. The
interim financial statement for the first nine months of 2012 has not been
audited. 

The Bank's capital ratio at the end of the period was 22.5%, compared with
21.2% at the end of 2011. 


Highlights of the interim financial statement:

  -- Net earnings in the first nine months of ISK 14.5 billion, compared with
     ISK 13.6 billion during the same period of 2011.
  -- Net earnings in third quarter of ISK 3.3 billion, compared with ISK 3.5
     billion during the same period of 2011.
  -- Earnings from regular operations of ISK 10.9 billion, compared with ISK 8.9
     billion during the same period of 2011.
  -- Net operating income of ISK 34.4 billion, compared with ISK 34.0 billion
     during the same period of 2011.
  -- Net interest income of ISK 20.1 billion, compared with ISK 16.8 billion in
     the same period of 2011. The increase is largely due to the increase in the
     size of the loan portfolio following the Bank's acquisition of a mortgage
     portfolio from Kaupthing.
  -- Return on equity was 15.9%, compared with 17.6% in the same period last
     year. Return on equity from regular operations was 11.9%, compared with
     11.3% in the same period last year.
  -- The interest-rate differential as a percentage of average interest-bearing
     assets was 3.3% during the period, compared with 3.2% during the same
     period of 2011.
  -- Salary expenses increased by 7% between years, partly as a result of the
     new 5.45% bank levy on the salaries of employees of financial companies.
  -- Deferred income tax of ISK 3.4 billion, compared with ISK 3.1 billion for
     the same period of 2011. The relatively higher income tax is partly due to
     a new 6% tax on the earnings of financial companies in excess of ISK 1
     billion.
  -- Capital ratio of 22.5%, compared with 21.2% at the end of 2011.
  -- Liquidity ratio of 31%, which is well over the 20% minimum stipulated by
     the FME.
  -- Cash ratio of 18%, well above the FME's minimum requirement of 5%.
  -- Loans to customers of ISK 572.5 billion at the end of the period, compared
     with ISK 561.6 billion at the end of 2011.
  -- Total assets of ISK 876.2 billion at the end of the period, compared with
     ISK 892.1 billion at the end of 2011.
  -- Shareholders' equity at the end of September 2012 of ISK 128.4 billion,
     compared with ISK 114.6 billion at the end of 2011.



Höskuldur H. Ólafsson, CEO of Arion Bank:

“The Bank's results for the first nine months of the year are most satisfactory
and in line with our projections. There are a number of positive signs in
operations. Return on equity from regular operations is close to 12% which is
pleasing. These results provide further confirmation of the stability achieved
in the Bank's operations in the last few years, something which is of great
importance to us. 

In the last few months the Bank has expanded its service offering, and our
customers have responded to this favourably. These new services include Startup
Reykjavík which is aimed at entrepreneurs and innovation companies; the Arion
Bank app; vehicle financing with FÍB; and new options for parents on parental
leave. We strive to ensure that we remain a leader in product development on
the financial market. 

It is vital that we maintain a strong capital ratio and at the end of September
it was 22.5%, clear testament to the financial strength of the Bank. The
external environment remains challenging. Uncertainty remains in the legal
environment although some issues have been clarified. There are also question
marks concerning the major industries in Iceland, and investment has still not
recovered properly. The government has yet to announce how and when the capital
controls will be lifted and there are clouds on the horizon internationally
too.  Nevertheless, great progress has been made in strengthening and
developing the Bank and indeed the Icelandic economy so that the basic
foundations have been laid for further growth”. 


For further information please contact Haraldur Gudni Eidsson of Arion Bank's
Communications division at haraldur.eidsson@arionbanki.is, or tel. +354 856
7108.

Attachments:

Press Release Financial Statements 9 months 2012.pdf

Interim Financial Statements 9 months 2012.pdf