Arion Bank hf. - Financial Statement Release

Arion Bank´s H1 2014 Financial Results

Arion Bank reported net earnings of ISK 17.4 billion for the first six months
of 2014, compared with ISK 5.9 billion for the same period in 2013. Return on
equity was 23.4%, compared with 8.9% in the same period of 2013. Total assets
amounted to ISK 949.0 billion, compared with ISK 938.9 billion at the end of
2013. 

The Bank's capital ratio at the end of the period was 25.6%, compared with
23.6% at the end of 2013. 

Highlights of the interim financial statement:

  -- Net earnings of ISK 17.4 billion, compared with ISK 5.9 billion during the
     same period of 2013.
  -- Earnings during the second quarter of 2014 of ISK 14.5 billion, compared
     with ISK 4.5 billion during the second quarter of 2013.
  -- Operating income increased between years to ISK 25.7 billion, compared with
     ISK 20.7 billion in the same period of 2013. All types of income grew
     except net interest income, the largest increase being in net financial
     income.
  -- Net interest income of ISK 12.0 billion, compared with ISK 12.7 billion
     during the same period of 2013.
  -- Net commission income of ISK 6.6 billion, compared with ISK 5.3 billion
     during the same period of 2013. The increase is largely attributable to
     higher commission income on cards and to activities in Investment Banking.
  -- Income tax and the bank levy amounted to ISK 3.8 billion, compared with ISK
     1.9 billion during the same period of 2013.
  -- Earnings from discontinued operations of ISK 6.5 billion, compared with a
     loss of ISK 65 million in the same period of 2013. These earnings relate
     almost entirely to the sale of the Bank's 18.8% shareholding in HB Grandi
     hf.
  -- Operating expenses of ISK 13.0 billion, compared with ISK 12.9 billion
     during the same period of 2013.
  -- The net valuation change during the period is positive, amounting to ISK
     2.0 billion, compared with a negative figure of ISK 134 million in the same
     period last year. The net valuation change on loans to companies totalled
     ISK 2.3 billion during the first half and retail loan write-downs amounted
     to ISK 0.9 billion. The valuation increase of other assets totalled ISK 0.7
     billion.
  -- Return on equity was 23.4%, compared with 8.9% in the same period of 2013.
  -- The net interest margin as a percentage of the average interest-bearing
     assets was 2.8%, compared with 3.1% in the same period of 2013.
  -- The cost-to-income ratio was 50.5%, compared with 62.4% in the same period
     of 2013.
  -- Total assets of ISK 949.0 billion, compared with ISK 938.9 billion at the
     end of 2013.
  -- Total equity amounted to ISK 154.5 billion, compared with ISK 144.9 billion
     at the end of 2013. The Bank paid a dividend of ISK 7.8 billion to its
     shareholders during the period.
  -- The capital ratio was 25.6% at the end of the period, compared with 23.6%
     at the end of 2013.


Höskuldur H. Ólafsson, CEO of Arion Bank:

“Arion Bank's financial results for the first six months of 2014 are excellent
and in line with our expectations. Core operations remain stable and the Bank
continues to build on its financial strength. We have made a focused effort to
increase the contribution of commission to overall income and we are pleased to
see results in this respect in the latest figures. The Bank's sale of the
majority of its shareholding in HB Grandi hf. had a positive impact on the
financial results. The sale of HB Grandi and the company's flotation on the
Main List of NASDAQ OMX Iceland was not only a significant step for us but it
was also important for the Icelandic stock market to have a robust fisheries
company join its ranks. These strong results have further reinforced the Bank's
capital ratio, which now stands at 25.6%, comfortably above the requirements
made of the Bank. The Bank also paid its shareholders a dividend during the
first half of the year. 

We are especially pleased to have been involved in two major investment
projects in Iceland in recent months, namely projects for United Silicon and
Silicor Materials. The United Silicon project is in the execution phase while
Silicor is still in the development phase. Both are hugely exciting projects
and they will add to the diversity of the Icelandic business sector by
generating new jobs and foreign exchange revenue in the future. Each requires
significant investment in Iceland, a lack of which in recent years has held
back the Icelandic economy. We are therefore delighted that Arion Bank can use
its strength to support these investment projects.” 



Conference call in English:

Arion Bank will be hosting a conference call in English tomorrow, Thursday 28
August at 13:00 GMT (15:00 CET), where Stefán Pétursson, CFO, will present the
financial results. 
Those who would like to participate in the conference call can send an e-mail
to ir@arionbanki.is and will then receive instructions with dial in details. 


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

Attachments:

Press Release Arion Bank H1 2014 Financial Results.pdf

Arion Bank Consolidated Interim Financial Statements 30 June 2014.pdf

Investor Presentation Arion Banks H1 2014 Financial Results.pdf