2017-02-13 18:54:18 CET
2017-02-13 18:54:18 CET
REGULATED INFORMATION
Arion Bank hf. - Financial Statement Release
Arion Bank’s financial results for 2016
Arion Bank reported net earnings of ISK 21.7 billion, compared with ISK 49.7
billion in 2015. Return on equity was 10.5%, compared with 28.1% in 2015.
Adjusted earnings amounted to ISK 9.7 billion, compared with ISK 14.1 billion
in 2015. Adjusted return on equity was 4.7%, compared with 8.7% in 2015.
Total assets amounted to ISK 1,036.0 billion at the end of 2016, compared with
ISK 1,011.0 billion at the end of 2015. Shareholders’ equity totalled ISK 211.2
billion at the end of 2016, compared with ISK 192.8 billion at the end of 2015.
The Bank enjoys a strong financial position and the focus in 2016 has been on
maintaining good liquidity during the period leading up to the lifting of the
capital controls.
The Bank’s capital ratio at the end of the year was 27.1%, compared with 24.2%
at the end of 2015. Tier 1 Capital increased during the year to 26.5%, compared
with 23.4% at the end of 2015.
Highlights of the income statement and key performance indicators:
In ISK million 2016 2015 Q4 2016 Q4 2015
Net interest income 29,900 26,992 7,842 6,705
Net commission income 13,977 14,484 3,765 3,757
Net financial income 5,162 12,844 823 2,669
Net insurance income 1,395 761 731 216
Share of profit of associates 908 29,466 198 22,510
Other operating income 2,096 1,622 431 200
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Operating income 53,438 86,169 13,790 36,057
Salaries and related expense (16,659) (14,891) (4,407) (4,571)
Other operating expenses (13,881) (12,917) (3,803) (4,169)
Bank levy (2,872) (2,818) (682) (650)
Net impairment 7,236 (3,086) 409 (2,972)
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Net earnings before taxes 27,263 52,457 5,307 23,695
Income tax (6,410) (3,135) (1,149) 504
Net gain from disc. operations 886 360 317 83
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Net earnings 21,739 49,682 4,475 24,282
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KPI's:
Return on equity (ROE) 10.5% 28.1% 8.6% 51.6%
Net interest margin (int. bearing assets) 3.1% 3.0% 3.2% 2.9%
Cost-to-income ratio 57.2% 32.3% 59.5% 24.2%
Tier 1 ratio 26.5% 23.4% 26.5% 23.4%
Höskuldur H. Ólafsson, CEO of Arion Bank:
“Arion Bank’s financial results for 2016 were satisfactory and matched our
expectations. The Bank performed well in its core operations and continued to
consolidate its financial position. The capital ratio is 27.1% and the
liquidity ratio is 171.3%, which is well above the regulatory requirements and
very strong by international standards. Arion Bank is a universal financial
institution, occupying a strong position on the retail and corporate markets,
which is reflected by the structure of the Bank's loan portfolio. The Bank’s
strong standing on our chosen markets and the diverse service offering result
in effective risk distribution. Furthermore, the Bank’s robust capital position
gives the Bank a broad authority to pay dividends or other disbursement of
equity.
A key feature of 2016 was investing for the future in services demanded by our
customers. The Bank’s acquisition of the insurance company Vördur, which was
completed during the year, is a prime example of this. Vördur enjoys a strong
position on the insurance market, has a 10% market share and is popular among
its customers. The insurance services offered by Vördur are therefore key to
Arion Bank’s strategy of offering universal financial services to its
customers.
Information technology played a central role during the year. We focused on the
IT set-up at the Bank and in January 2017 an agreement to outsource some
services to Nýherji was reached. Nýherji is one of Iceland’s leading IT
companies and is now responsible for operating the Bank’s IT systems. We
continue to have a dedicated team in the Bank's IT division, the majority of
whom are engaged in software development, and Arion Bank introduced a range of
new digital solutions for its customers during the year. For example,
customers can now obtain a confirmed credit appraisal via the Bank’s website in
just a few minutes. We will continue in this direction as our customers want to
be able to attend to their finances whenever and wherever it suits them and we
will continue to do our utmost to meet their needs. Demand for financial
services is thus evolving and we strive to develop alongside these changes.
During the spring Arion Bank opened a branch at Keflavík International Airport
and in doing so took over all financial services at the airport, one of
Iceland’s largest market places. Tourism has undergone enormous growth in
Iceland and so this represents an exciting opportunity for us.
Our subsidiaries are integral to the Bank's strategy and product offering. Key
subsidiaries besides Vördur are Iceland’s largest fund management company
Stefnir and the payment services company Valitor. Valitor is vigorously
expanding its operations in Denmark and the United Kingdom. Income from
Valitor’s international operation grew by 50% in 2016 and now represents more
than 60% of total revenue. The company has had a presence on these markets for
many years and is now firmly establishing itself. By acquiring Vördur and
investing in Valitor’s overseas business Arion Bank is laying stronger
foundations for the Group and preparing for the future.
The Bank issued bonds in euros to a broad group of investors on two occasions
during the year. At the beginning of 2017 the Bank tapped the second issue
which now amounts to €500 million. The Bank’s terms on the international credit
market have improved markedly recently, clear testament to the growing
confidence of bond investors in the Bank and the Icelandic economy. Standard &
Poor’s also upgraded the Bank’s credit rating from BBB-/A-3 to BBB/A-2 during
the year.
It is disappointing that the authorities have decided to extend the bank levy,
which was supposed to be a temporary measure but is now part of the long-term
fiscal policy. The bank levy is a tax on banks’ funding. Other sectors in
Iceland or international banks with operations in Iceland and which lend to
Icelandic companies are not subject to such tax. This is a special tax which
makes it difficult for banks to be competitive, both on the domestic market and
also with international financial institutions on the Icelandic market. It
means that banks are competing domestically with pension funds to provide
mortgages, yet pension funds do not pay income tax, financial sector tax or the
bank levy. It is clear that there is not a level playing field on this market
with this kind of government intervention. In 2016 Arion Bank paid ISK 5
billion in taxes which other sectors are not subject to. The bank levy has had
a limited impact on the banks’ pricing so far as it was only designed to be a
temporary measure. As the bank levy is placed on the banks' funding, it results
in higher costs for customers and eventually leads to higher interest rates in
Iceland. It is important that this form of taxation be reviewed.
Last summer Kaupthing hf, which owns 87% of Arion Bank, and Arion Bank issued a
joint statement in which it was announced that Arion Bank and Kaupthing were
examining the options regarding Kaupthing’s shareholding in the Bank. An IPO
was cited as one of the options being examined. We and Kaupthing continue to
explore all options with respect to its shareholdings.”
Conference call in English
Arion Bank will be hosting a conference call in English on Tuesday 14 February
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.
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