Arion Bank hf. - Financial Statement Release

Arion Bank's Financial Results for 2012

Arion Bank reported net earnings of ISK 17.1 billion in 2012, compared with ISK
11.1 billion in 2011. Return on equity was 13.8%, compared with 10.5% in 2011.
Return on equity from regular operations was 10.6%, compared with 11.2% in
2011. Total assets amounted to ISK 900.7 billion, compared with ISK 892.1
billion at the end of 2011. The Consolidated Financial Statements of Arion Bank
have been audited by the Bank's auditor, Ernst & Young ehf. 

The Bank's capital ratio at the end of the period was 24.3%, compared with
21.2% at the end of 2011. 


Highlights of the annual financial statements:

  -- Net earnings of ISK 17.1 billion, compared with ISK 11.1 billion in 2011.
  -- Earnings from regular operations of ISK 13.1 billion, compared with ISK
     12.9 billion in 2011.
  -- Net operating income of ISK 44.8 billion in 2012, compared with ISK 33.3
     billion in 2011. There are several factors behind this increase, the key
     ones being higher net interest income, lower impairment on loans and a rise
     in income from associate companies, and other income.
  -- Net interest income of ISK 27.1 billion, compared with ISK 23.4 billion in
     2011. The increase is largely due to the growth of the loan portfolio
     following the Bank's acquisition of a mortgage portfolio from Kaupthing.
  -- Write-downs of currency-linked loans following judgments by the Supreme
     Court amounted to ISK 5.7 billion in 2012, compared with ISK 13.8 billion
     in 2011.
  -- Return on equity was 13.8%, compared with 10.5% in 2011. Return on equity
     based on regular operations was 10.6%, compared with 11.2% in 2011.
  -- The interest-rate differential as a percentage of the average
     interest-bearing assets was 3.4% in 2012, the same as for 2011.
  -- Cost-to-income ratio of 49.8% in 2012, compared with 52.5% in 2011.
     Cost-income-ratio from regular operations of 53.6% in 2012 compared with
     53.9% in 2011.
  -- Salary expenses increased by 11% between years, a significant factor being
     the new 5.45% tax on the salaries of employees of financial companies.
  -- Calculated income tax of ISK 3.6 billion, compared with ISK 1.9 billion in
     2011.
  -- Capital ratio of 24.3%, compared with 21.2% at the end of 2011.
  -- Liquidity ratio of 33%, which is well over the 20% statutory minimum.
  -- Cash ratio of 31%, above the statutory minimum of 5%.
  -- Loans to customers of ISK 566.6 billion at the end of the year, which is
     virtually the same as the previous year.
  -- Total assets of ISK 900.7 billion at the end of 2012, compared with ISK
     892.1 billion at the end of 2011.
  -- Total equity at the end 2012 of ISK 130.9 billion, compared with ISK 114.6
     billion at the end of 2011.


Höskuldur H. Ólafsson, CEO of Arion Bank:


“These annual results are satisfactory. Earnings from our core activities are
pleasing and in line with our expectations. Operations continue to be stable
and stability makes developments more predictable, which is crucial in our line
of business. We sense increased confidence in the Bank which is a clear sign
that our efforts to build our business during the last three years are paying
off. Our bond issue in Iceland in 2012 and the recent international bond issue
are clear signs of this growing faith. The bond issue in Norway represented an
important step towards opening up the international markets to Icelandic
companies. This is a step towards creating conditions in Iceland conducive to
lifting the capital controls and to stimulating the economy. 

In 2012 we focused on improving in several key areas. We began the year by
thanking our customers for their patience and cooperation in recent years by
repaying some of the previous year's interest payments. Some 33,000 customers
benefited from this. We also consolidated our range of goods and services by
offering a wider range of non-indexed and indexed home loans, new options for
buying cars, innovative savings options and expanding our financial advisory
services. With a more diverse range of products and services we are better
equipped to meet our customers' demands and to make a difference. Our goal is
to constantly improve ourselves and the services we offer and a concerted
effort is under way at the Bank to achieve this.” 


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 Consolidated Financial Statements 31.12.2012.pdf

PRESS RELEASE - Consolidated Financial Statements 31.12.2012.pdf