2016-08-31 19:09:14 CEST

2016-08-31 19:09:14 CEST


REGULATED INFORMATION

Islandic English
Arion Bank hf. - Financial Statement Release

Arion Bank’s H1 2016 financial results 


Arion Bank reported net earnings of ISK 9.8 billion for the first six months of
2016, compared with ISK 19.3 billion for the same period of 2015. Return on
equity was 9.5%, compared with 22.8% for the first six months of 2015.
Normalized earnings amounted to ISK 2.8 billion, compared with ISK 7.8 billion
in the first half of 2015. Return on equity from normalized operations was
2.8%, compared with 9.8% for the same period last year. 

Total assets amounted to ISK 1,035.0 billion at the end of June, compared with
ISK 1,011.0 billion at the end of 2015. Shareholders’ equity totaled ISK 199.2
billion at the end of June, compared with ISK 192.8 billion at the end of 2015.
The Bank enjoys a strong financial position and there has been a focus on
maintaining solid liquidity as the time for lifting the capital controls
approaches. 

The Bank’s capital ratio at the end of the period was 27.8%, compared with
24.2% at the end of 2015. Tier 1 Capital increased during the year to 26.8%,
compared with 23.4% at the end of 2015. 

Highlights of the income statement and key performance indicators:

In ISK million                             H1 2016  H1 2015  Q2 2016  Q2 2015
Net interest income                         14,626   13,175    7,353    7,392
Net commission income                        6,747    7,434    3,528    3,677
Net financial income                         3,495    9,723    3,796    2,184
Share of profit of associates                  694    4,217       17        6
Other operating income                       1,861    1,523      626    1,032
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Operating income                            27,423   36,072   15,320   14,291
Salaries and related expense               (8,426)  (7,167)  (4,318)  (3,675)
Other operating expenses                   (6,970)  (6,004)  (3,736)  (3,108)
Bank levy                                  (1,485)  (1,389)    (743)    (659)
Net impairment                                 945     (81)    1,448  (1,863)
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Net earnings before taxes                   11,487   21,431    7,971    4,986
Income tax                                 (2,091)  (2,367)  (1,354)    (647)
Net gain from disc. operations                 363      262      259       79
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Net earnings                                 9,759   19,326    6,876    4,418
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KPI's:                                                                       
Return on equity (ROE)                        9.5%    22.8%    13.3%    10.2%
Net interest margin (int. bearing assets)     3.1%     3.0%     3.1%     3.3%
Cost-to-income ratio                         56.1%    36.5%    52.6%    47.5%
Tier 1 ratio                                 26.8%    21.8%    26.8%    21.8%



Höskuldur H. Ólafsson, CEO of Arion Bank:

“Arion Bank’s financial results for the first half of 2016 did not meet
expectations. The Bank nevertheless performed satisfactorily in its regular
operations but external conditions had a negative impact. There was strong
growth in loans, particularly to corporate clients. Corporate loans grew 8%
during the first half of 2016 and net interest income was up 11%. Arion Bank is
well prepared for the changes which the lifting of the capital controls will
bring, being financially robust and with strong liquidity. 

The conditions on the financial markets were negative for the Bank during the
period. As a result, with the exception of Valitor's sale of its shareholding
in Visa Europe, financial income was below expectations and the Bank recorded a
substantial loss on its shareholdings in listed companies. Arion Bank arranged
all IPOs in Iceland in 2015 but no new stock market listings have taken place
this year and this affects the Bank's commission income. Operating expenses
have increased. The main factor in this respect is higher salary expenses,
particularly as a consequence of new collective wage agreements. A second
reason is the growth in the number of employees, not least at the new branch at
Keflavík International Airport which was opened in May and is now open round
the clock every day of the year. The new branch represents a great opportunity
for us. More employees were also hired at Valitor, which continues to invest in
expanding its business internationally. 

Arion Bank has been the leading Icelandic bank in terms of new funding on the
international financial markets. In April Arion Bank issued its second bond in
euros to a diverse group of investors at better terms than the bond issued a
year earlier. These issues have met with great success and their performance on
the secondary market has demonstrated that there is strong demand for bonds
issued by Arion Bank. The Bank has also issued covered bonds and commercial
paper on the Icelandic market and this has had a positive response.” 



Conference call in English

Arion Bank will be hosting a conference call in English on Thursday 1 September
at 1:00 pm GMT, where Stefán Pétursson, Chief Financial Officer, will discuss
the highlights of the Bank’s financial results. People interested in
participating can contact ir@arionbanki.is to obtain dial-in information. 



For further information please contact Haraldur Gudni Eidsson of Arion Bank's
Communications division at haraldur.eidsson@arionbanki.is, or tel. +354 444
7108.