2016-02-24 18:39:14 CET
2016-02-24 18:39:14 CET
REGULATED INFORMATION
Arion Bank hf. - Financial Statement Release
Arion Bank’s financial results for 2015
Arion Bank’s financial results for 2015 were influenced by the completion of
several major corporate recovery cases in which significant interests were at
stake for the Bank, namely the sale of the Bank’s shareholdings in five
companies: Reitir fasteignafélag hf., Eik fasteignafélag hf., Síminn hf.,
Refresco Gerber and Bakkavor Group Ltd. All these companies were listed on the
stock market in Iceland or markets overseas, with the exception of the holding
in Bakkavor Group, which was sold following a sale process arranged by Barclays
in the UK. Arion Bank reported net earnings of ISK 49.7 billion in 2015,
compared with ISK 28.7 billion in 2014. Return on equity was 28.1%, compared
with 18.6% in 2014.
Earnings from regular operations amounted to ISK 16.8 billion, compared with
ISK 12.7 billion in 2014. Return on equity from regular operations was 10.4%,
compared with 10.7% in 2014. Total assets at the end of 2015 amounted to ISK
1,011.0 billion, compared with ISK 933.7 billion at the end of 2014.
Shareholders’ equity totalled ISK 192.8 billion at the end of 2015, a 20%
increase from the previous year.
Net earnings in the fourth quarter amounted to ISK 24.3 billion, a substantial
increase from the previous year. The main reason for this is the valuation
increase in the shareholding in Bakkavor Group Ltd.
There were significant valuation changes in the Bank’s loan book during the
year. Impairment was primarily recognized in connection with loans to
international service companies in the oil and gas industry and loans acquired
from AFL Savings Bank. Valuation increases are mostly attributable to the
prepayment of loans, both by retail customers and corporate clients, following
government debt relief measures and corporate restructuring.
The Bank’s capital ratio at the end of 2015 was 24.2%, compared with 26.3% at
the end of 2014. The decrease is mainly a consequence of a dividend payment of
ISK 12.8 billion and the prepayment of a subordinated loan from the government
of ISK 20 billion. Tier 1 Capital increased during the year to 23.4%, compared
with 21.8% at the end of 2014.
Highlights of the income statement and key performance indicators:
Income Statement
In ISK million 2015 2014 Q4 2015 Q4 2014
Net interest income 26.992 24.220 6.705 5.911
Net commission income 14.484 13.309 3.758 3.190
Net financial income 12.844 7.290 2.668 1.429
Share of profit of associates 29.466 3.498 22.510 3.525
Other income 2.769 5.673 537 1.683
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Operating income 86.555 53.990 36.178 15.738
Salaries and related expense (14.892) (13.979) (4.572) (3.953)
Other operating expenses (13.304) (13.063) (4.288) (4.465)
Bank levy (2.818) (2.643) (650) (635)
Net impairment (3.087) 2.135 (2.973) (742)
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Net earnings before taxes 52.454 26.440 23.695 5.943
Income tax (3.135) (4.679) 504 (223)
Net gain from disc. operations 360 6.833 83 241
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Net earnings 49.679 28.594 24.282 5.961
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KPI's:
Return on equity (ROE) 28,1% 18,6% 51,6% 14,8%
Net interest margin (int. bearing assets) 3,0% 2,8% 2,9% 2,8%
Cost-to-income ratio 32,6% 50,1% 24,5% 53,5%
Tier 1 ratio 23,4% 21,8% 23,4% 21,8%
Höskuldur H. Ólafsson, CEO of Arion Bank:
“The full-year financial results were excellent but strongly influenced by
irregular items. The year marked a certain turning point in the operations of
Arion Bank as several major debt recovery cases were brought to a conclusion,
cases which the Bank has been engaged in for several years. These were the sale
by Arion Bank of shares in three Icelandic companies prior to flotation on the
stock market; and also the sale of stakes in two international companies. The
conclusion of these cases has had a highly positive effect on the annual
financial results and represented a key milestone for the Bank as all the main
debt recovery cases have now been completed.
The IPOs of Reitir fasteignafélag, Eik fasteignafélag and Síminn were arranged
by Arion Bank and they were the only new listings on Nasdaq Iceland in 2015. It
has been Arion Bank’s strategy to encourage IPOs in Iceland and thereby give
the general public the opportunity to participate in the growth of the economy
via an active equity market.
Core operations continued to gain strength and the Bank consolidated its
position on all its key markets. Assets under management and corporate loans
have both demonstrated strong growth. Arion Bank won the tender to provide
financial services at Keflavík International Airport and will open for business
there this spring. This is a really exciting prospect, especially given the
huge growth in tourism in Iceland. It was an unusually eventful year in many
ways. The Banker, which is published by The Financial Times, named Arion Bank
as the bank of the year in Iceland for 2015.
We saw excellent results from startups which have participated in Startup
Reykjavik and Startup Energy Reykjavik. Access to capital has improved
enormously, and the 54 companies invested in by the Bank have raised a total of
ISK 1.7 billion. Two thirds of this amount is in the form of risk capital, the
remainder in grants. This is, in our opinion, a positive and important
development in the startup environment in Iceland.
Our main task in recent years has been to create a good bank which provides its
customers with quality financial services in a responsible manner; a bank which
is financially robust, prepared to cope with the lifting of the capital
controls and which is an attractive investment option. We have done well in all
these areas. At the beginning of the year we reached a funding agreement with
Kaupthing which is in fulfilment of the government's stability conditions for
lifting the capital controls. We have also sensed interest from potential
investors in the impending sale of the Bank. The future will certainly be
interesting.”
Highlights of 2015
-- The year was characterized by corporate recovery cases and the completion
of several important cases for the Bank.
-- In March the drinks manufacturer Refresco Gerber was listed on the Euronext
market in Amsterdam. Arion Bank Group, through direct and indirect
holdings, owned a 9% stake in the company and approximately half of this
interest was sold when the company was listed. Proceeds from the sale and
the valuation change in the remaining holding following the listing
totalled ISK 6,306 million in the first quarter.
-- In March Arion Bank became the first Icelandic bank since 2008 to undertake
a euro benchmark bond issue to a broad group of investors on the
international markets. The Bank issued €300 million with a term of 3-years
to around 100 international investors. Demand for the bonds far outstripped
supply.
-- At the beginning of April the real estate company Reitir fasteignafélag hf.
was listed on Nasdaq Iceland. Arion Bank arranged the listing and also sold
a significant proportion of its holding in a public offering. Proceeds from
the sale and the valuation change in the remaining holding amounted to ISK
4,224 million in the first half of the year.
-- The real estate company Eik hf. was listed on Nasdaq Iceland at the end of
April. Arion Bank arranged the listing and also sold 14% of its holding in
a public offering. Capital gains amounted to approximately ISK 600 million.
-- In April Arion Bank paid a dividend of ISK 12.8 billion to shareholders.
-- The Bank used new funding in euros to prepay subordinated loans from the
government, equivalent to ISK 20 billion. Interest on the loans had
increased at the beginning of 2015 and this provided the incentive to pay
off the loans ahead of schedule.
-- During the year Arion Bank acquired the entire capital of AFL Savings Bank
and in the autumn the savings bank was merged with Arion Bank. Arion Bank
opened a new branch at Siglufjördur in northern Iceland and continued to
build up its operation in the region.
-- In October the telecommunications company Síminn hf. was listed on Nasdaq
Iceland. Arion Bank sold 10% in the company in a private placement before
the company was listed and then a further 20% in a public offering. Arion
Bank arranged the listing. Proceeds from the sale and the valuation change
in the remaining holding amounted to ISK 4,185 million.
-- In 2015 the Bank prepared the sale of a 46% holding owned by the subsidiary
BG12 slhf. in Bakkavor Group Ltd in collaboration with other shareholders
in the company. The shareholding was sold at the beginning of the 2016 and
the value of the stake at the end of 2015 was recognized at the sale value.
The valuation change in BG12’s shareholding amounted to ISK 20,845 million.
Arion Bank owns 62% of BG12 slhf.
-- Arion Bank continued to issue covered bonds in accordance with the Covered
Bonds Act No. 11/2008. The Bank issued a total of ISK 23.6 billion in
covered bonds in 2015. Market making was increased under agreements with
three market makers in order to improve liquidity.
-- A stronger focus on liquidity management resulted in a higher net interest
margin than in 2014.
-- The quality of the Bank’s loan portfolio continued to improve in 2015. The
ratio of problem loans, which are defined as loans which have been in
default for more than 90 days and loans for which special provisions for
losses have been made, decreased from 4.4% at the end of 2014 to 2.5% at
the end of 2015. There was a turnaround in the valuation change in loans to
customers through the income statement in 2015, compared to last year.
There were substantial valuation increases in connection with the
prepayment of loans by retail and corporate customers. Moreover there were
considerable loan impairments, both in connection with the acquisition of
the AFL loan portfolio and impairments on loans to service companies in the
international oil and gas industry. Loans to these companies are less than
1% of total loans to customers and have been adequately provisioned for in
the Bank’s accounts.
-- In mid-year the government announced its plans to lift the capital controls
which have been in force since 2008. The estates of the failed banks
subsequently announced their plans on stability contributions, with Arion
Bank playing a key role in respect of Kaupthing ehf.’s contribution. Arion
Bank prepared thoroughly for these changes in 2015. It concluded agreements
with Kaupthing at the beginning of 2016 which will secure the Bank’s
long-term interests through funding in foreign currency for the next years.
-- The Bank reached an agreement on the acquisition of a majority stake in the
insurance company Vördur hf. The acquisition is contingent on the approval
of the competition authorities but the transaction is expected to be
completed in the next few months.
Conference call in English
Arion Bank will be hosting a conference call in English on Thursday 25 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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