Arion Bank hf. - Financial Statement Release

Arion Bank’s Q1 2012 financial results

Arion Bank reported net earnings of ISK 4.5 billion for the first quarter of
2012, compared with ISK 3.0 billion during the same period in 2011. Return on
equity was 16.5% in Q1 2012, compared with 11.3% in Q1 2011. The interim
financial statement for the first quarter of 2012 has not been audited. 

The Bank's capital ratio at the end of the period was 20.2%, compared with
19.2% at the end of Q1 2011. The Financial Supervisory Authority (FME)
stipulates a minimum capital ratio of 16%. 

Highlights of the interim financial statement:

  -- Net earnings of ISK 4.5 billion, compared with ISK 3.0 billion during the
     same period of 2011.
  -- Earnings on regular operations of ISK 2.5 billion, compared with ISK 3.1
     billion during the same period last year.
  -- Operating income of ISK 10.9 billion in Q1 2012, compared with ISK 9.5
     billion in Q1 2011.
  -- Net interest income of ISK 6.2 billion in Q1 2012, compared with ISK 5.9
     billion in Q1 2011.
  -- Return on equity was 16.5% in Q1 2012, compared with 11.3% in Q1 2011.
     Return on equity based on regular operations was 9.1% in Q1 2012, compared
     with 12.7% in Q1 2011.
  -- The interest-rate differential as a percentage of the average
     interest-bearing assets was 3.1% in Q1 2012, compared with 3.4% in Q1 2011.
  -- The capital ratio was 20.2%, compared with 19.2% during the same period of
     2011 and 21.2% on 31 December 2011. The FME requires a capital ratio of at
     least 16%.
  -- The Bank's liquidity ratio was 30.2%, which is well over the 20% minimum
     stipulated by the FME.
  -- The Bank's cash ratio was 13.9%, above the FME's minimum requirement of 5%.
  -- Loans to customers totalled ISK 584.2 billion at the end of the period,
     compared with ISK 432.5 billion at the same time in 2011. This increase is
     primarily a result of the acquisition of Kaupthing Bank's mortgage
     portfolio at the end of 2011.
  -- Total assets amounted to ISK 899.4 billion at the end of Q1 2012, compared
     with ISK 802.7 billion at the end of Q1 2011.
  -- Total equity at the end of Q1 2012 amounted to ISK 119.0 billion, compared
     with ISK 112.7 billion at the end of Q1 2011.



Höskuldur H. Ólafsson, CEO of Arion Bank:

“The financial results for the first quarter of 2012 are pleasing and bear
testament to the stability of the Bank's core operations. It is also satisfying
to see the positive response from investors to the Bank's covered bond issues,
both the indexed and nominal series. The bond issues are vitally important for
helping to diversify the Bank's funding base. However, the uncertainty
surrounding currency-linked loans and Supreme Court rulings on these cases has
greatly reduced the speed at which we can resolve our customers' debt problems.
This ambiguity causes our customers inconvenience and in order to eliminate
further uncertainty the Supreme Court needs to issue further rulings as quickly
as possible. Nevertheless these results show that the Bank is financially
robust and is in prime position to meet the demands of our personal and
corporate clients."

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:

Arion Bank Interim Financial Statements 31 March 2012.pdf

Financial Results Q1 2012.pdf