Arion Bank hf. - Financial Statement Release

ARION BANK’S 9M 2015 FINANCIAL RESULTS

Arion Bank reported net earnings of ISK 25.4 billion for the first nine months
of 2015, compared with ISK 22.6 billion for the same period of 2014. Arion
Bank's net earnings for the first nine months of 2015 were affected by
irregular items, as in the first nine months of 2014. The main factors were
one-off events such as the Bank's sale of shares in the real estate company
Reitir, the international drinks manufacturer Refresco Gerber and the
telecommunications company Síminn in connection with stock market listing of
these companies. Return on equity was 19.8%, compared with 19.9% in the same
period of 2014. Net earnings from regular operations amounted to ISK 13.5
billion for the first nine months of 2015, compared with ISK 11.4 billion for
the same period last year. Return on equity from regular operations was 11.2%,
compared with 10.1% for the first nine months of 2014. Total assets amounted to
ISK 1,009.5 billion, compared with ISK 933.7 billion at the end of 2014. 

The Bank's capital ratio at the end of the period was 23.5%, compared with
26.3% at the end of 2014. The decrease is mainly related to a dividend payment
of ISK 12.8 billion and the prepayment of a subordinated loan of ISK 20 billion
during the period. Tier 1 was 22.2%, compared with 21.8% at the end of 2014. 

Highlights of the Interim Financial Statements

  -- Net earnings of ISK 25.4 billion, compared with ISK 22.6 billion during the
     same period of 2014.
  -- Net earnings from regular operations amounted to ISK 13.5 billion, compared
     with ISK 11.4 billion for the same period last year.
  -- The capital ratio was 23.5% at the end of the period, compared with 26.3%
     at the end of 2014.
  -- Return on equity was 19.8%, compared with 19.9% in the same period of 2014.
     Return on equity from regular operations was 11.2% during the first nine
     months of 2015, compared with 10.1% during the same period last year.
  -- Net interest income of ISK 20.3 billion, compared with ISK 18.3 billion
     during the same period of 2014.
  -- Net commission income of ISK 10.7 billion, compared with ISK 10.1 billion
     during the same period of 2014.
  -- Operating income increased considerably between years and amounted to ISK
     50.4 billion, compared with ISK 38.3 billion during the same period of
     2014. This sharp increase is related to the profit from the sale and
     valuation change of shareholdings in the real estate company Reitir
     fasteignafélag hf., Refresco Gerber and the telecommunications company
     Síminn hf. in connection with the listing of the companies in 2015.
  -- Net valuation change during the period was negative, amounting to ISK 0.1
     billion, compared with a positive valuation change of ISK 2.9 billion
     during the same period of 2014. Net valuation change was negatively
     affected during the period by an additional impairment of the loan
     portfolio of the subsidiary AFL - sparisjóður amounting to ISK 1.7 billion,
     as reported in the Financial Statements for the first six months of 2015.
     Net valuation change of other loans in the Group was positive by a similar
     amount.
  -- Income tax amounted to ISK 3.6 billion, compared with ISK 4.4 billion
     during the same period of 2014.
  -- The cost-to-income ratio was 38.4%, compared with 48.7% in the same period
     of 2014. The cost-to-income ratio for regular operations was 49.7%,
     compared with 54.6% during the same period of 2014.
  -- Total equity amounted to ISK 174.8 billion, compared with ISK 162.2 billion
     at the end of 2014.

Höskuldur H. Ólafsson, CEO of Arion Bank:

“Arion Bank's financial results for the first nine months of 2015 were most
satisfactory. The Bank's sale of legacy holdings prior to their IPOs had a
significant impact on the financial results. One-off events such as this will
have less of an effect on earnings in the future and the Bank's financial
results will be increasingly driven by regular banking activities. The strong
recent focus on reinforcing its core business makes the Bank well prepared to
do this. 

Many exciting projects have been completed during the first nine months of the
year. The Bank has arranged all three IPOs on the Icelandic stock market this
year, thereby helping to strengthen the market and bring a diverse group of
investors on board as shareholders of the restructured companies. There has
been considerable public interest in recent share offerings. We take note of
constructive debate on this subject and will adjust our procedures where
appropriate. The Bank has been involved in plans to construct a 5 star hotel in
central Reykjavík, and in October we signed an agreement to acquire the
insurance company Vörður, subject to approval from the regulators. 

The Bank has successfully managed to diversify its sources of funding over the
last couple of years.  The Bank's public bonds have been performing well in the
secondary market and the upgrading of the credit rating by S&P to investment
grade will further improve access to the international credit markets.” 



Conference call in English

Arion Bank will be hosting a conference call in English on Thursday 12 November
at 13:00 GMT (14:00 CET), where Stefán Pétursson CFO, will present the 9M 2015
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 of Arion Bank's
Communications division at haraldur.eidsson@arionbanki.is, or tel.

Attachments:

Arion Bank - Interim Consolidated Financial Statements 30 September 2015.pdf

Press release Arion Bank 9 M 2015.pdf

Investor presentation Arion Bank 9 M 2015.pdf