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2021-10-27

Arion Bank’s Q3 2021 financial results

  • Arion Bank reports net earnings of ISK 8,238 million in Q3 2021
  • Return on equity in Q3 was 17.0%, compared with 8.3% in Q3 2020
  • Net interest margin of 2.7% in a low interest rate environment, compared with 2.9% in Q3 2020
  • Best quarter since 2016 in Net fee and commission income, with 36% increase from Q3 2020
  • Core revenues increased by 7.5%, compared with Q3 2020
  • Cost-to-income ratio in Q3 was 37.5%, compared with 40.2% in Q3 2020
  • The Bank’s total assets increased by 14.8% from year-end 2020
  • Dividend payment and share buy-backs amounted to ISK 25.5 billion during the first nine months of 2021
  • The Bank will launch buy-back on 28 October for the total amount of ISK 5 billion, 50% of share buy-backs authorized by the Central Bank of Iceland
  • The Bank’s total capital ratio was 25.4% and the CET1 ratio was 20.9% on 30 September 2021
  • The Bank finalized a EUR 300 million covered bond in September – the first international covered bond issuance by an Icelandic bank
  • The Bank is very well positioned to distribute capital and meet the funding requirements of its customers
  • Bancassurance will be a key area at Arion Bank over the coming months when the insurance subsidiary Vördur moves into the Bank’s headquarters and will work closely with Retail Banking
  • On 1 July 2021 Arion Bank entered into a definitive agreement on the sale of Valitor hf.

Arion Bank reported net earnings of ISK 8,238 million in the third quarter with 17.0% return on equity. Return on equity, assuming 17% CET1 ratio, was 21.8% for the quarter.

Total assets amounted to ISK 1,346 billion at the end of the period, compared with ISK 1,173 billion at the end of 2020. Loans to customers increased by 9.0% from year-end 2020, with mortgage lending increasing by 16.4% during this period. Liquid assets increased by 15.3% despite share buy-backs and dividend payments during the first nine months of 2021. On the liability side, deposits increased by 12.8% from year-end 2020 and borrowings increased by 32.8%, mainly during the third quarter with new issues of green bonds and covered bonds in foreign currency. Total equity amounted to ISK 195 billion at the end of the period. Total equity increased due to the reported net earnings but decreased due to dividend paid and share buy-backs.

The Bank’s total capital adequacy ratio was 25.4% and the CET1 ratio was 20.9% at the end of September 2021, assuming 50% dividend payments of net earnings in line with the dividend policy and buy-backs of ISK 10 billion, compared with 27.0% and 22.3% respectively at year-end 2020. The Group's capital ratio, as calculated under the Financial Undertakings Act No. 161/2002, was 24.8% and the CET1 ratio was 20.3%. The Bank’s capital ratios comfortably exceed the requirements set by law and the Financial Supervisory Authority of the Central Bank.

Benedikt Gíslason, CEO of Arion Bank
“Arion Bank performed well during the third quarter, following on from its strong showing in the first half of the year. All the Bank’s key financial indicators have trended positively during the period and core revenues are up 7.5% from the same period last year. Commission income continues to increase, reflecting the diversity of the business. The positive performance of the Icelandic economy is mirrored by the 6% growth in the Bank’s loans to customers during the quarter. Arion Bank’s capital and liquidity ratios continue to be robust and remain among the highest in Europe.

A new division, Customer Experience, was created during the quarter, adding a new managing director to the executive committee. The division is designed to enhance our comprehensive sales and service channels, with a special focus on digital services. The new division plays a crucial role in developing the partnership between Arion Bank and our subsidiary, the insurance company Vördur, and creating integrated financial services which can be accessed through diverse and modern service channels. Vördur is currently relocating its business and services to the Bank’s headquarters in Reykjavík. Some of the people currently at Vördur will eventually be joining the Bank, while others will stay at Vördur, which remains an independent company.

Arion Bank recently issued its inaugural covered bond in euros, adding a new source of funding and opening up access to a new group of investors. The issue was received positively on the international markets. The issue had the tightest pricing achieved by any Icelandic entity, including the Icelandic treasury, on the international markets for 13 years and represents a crucial step in broadening the Bank’s future funding options.

Equality is of paramount importance to us at Arion Bank, and in recent years we have worked hard to ensure that people get equal pay for equally valuable jobs. The Bank first gained equal pay certification from the union VR six years ago and was awarded the Ministry of Welfare’s equal pay symbol three years later. In the last equal pay audit, the unexplained gender pay gap at the Bank was down to 0.1%. It is a fact that the average salaries of men, both at Arion Bank and in society in general, are higher than those of women, and men generally exercise their right to parental leave less than women. We have now decided to pay employees 80% of their salaries for six months during parental leave. The aim is to increase the number of men exercising their right to paternity leave, and we hope that in the long term it will contribute to pay equality and gender equality at management level and in other areas of the Bank. “

Investor meeting / webcast on 28 October at 10:30 CET (8:30 GMT)
Arion Bank will be hosting an investor meeting / webcast at the Bank’s headquarters in Borgartún 19, Reykjavík, on Thursday 28 October at 10:30 CET (8:30 GMT) where CEO Benedikt Gíslason and CFO Ólafur Hrafn Höskuldsson will present the results and answer questions from participants. The meeting will take place in English.

The webcast will be accessible live on financialhearings.com and a link will also be made available on the Bank’s website under Investor Relations.

To participate in the webcast via telephone and to ask questions, please call in using the relevant number indicated below before the start of the webcast:

Sweden+ 46 856 642 703
UK+ 44 333 300 9034
USA+1 646 722 4902
Iceland+354 800 7437 (PIN 34271325#)

Arion Bank’s financial calendar is accessible on the Bank’s website

For any further information please contact:


Theodór Friðbertsson, Head of Investor Relations at Arion Bank, ir@arionbanki.is, tel. +354 856 6760 or Haraldur Guðni Eiðsson, Head of Corporate Communications, haraldur.eidsson@arionbanki.is, tel. +354 856 7108.

This information is information that Arion Bank is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 2021-10-27 15:50 GMT.

Attachments


Arion Bank Condensed Consolidated Interim Financial Statements 30 September 2021
Q3 2021 Press Release Arion Bank
Q3 2021 Arion Bank Investor Presentation

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