Arion Bank reported net earnings of ISK 19.3 billion for the first six months of 2015, compared with ISK 17.4 billion for the same period of 2014. Arion Bank’s net earnings for the first half of 2015 were significantly affected by irregular items, as in the first half of 2014. The main factors were one-off events such as the Bank’s sale of shares in the real estate company Reitir and the international drinks manufacturer Refresco Gerber and the subsequent stock market listing of these companies. Return on equity was 22.8%, compared with 23.4% in the same period of 2014. Net earnings from regular operations amounted to ISK 8.7 billion for the first six months of 2015, compared with ISK 6.0 billion for the same period last year. Return on equity from regular operations was 10.8%, compared with 8.1% for the first half of 2014. Total assets amounted to ISK 974.8 billion, compared with ISK 933.7 billion at the end of 2014.
The Bank’s capital ratio at the end of the period was 23.2%, compared with 26.3% at the end of 2014. The decrease is mainly related to a dividend payment of ISK 12.8 billion and the prepayment of a subordinated loan of ISK 20 billion during the period. Tier 1 was 21.8%, the same as at the end of 2014.
Highlights of the Interim Financial Statements
- Net earnings of ISK 19.3 billion, compared with ISK 17.4 billion during the same period of 2014.
- Net earnings from regular operations amounted to ISK 8.7 billion, compared with ISK 6.0 billion for the same period last year.
- The capital ratio was 23.2% at the end of the period, compared with 26.3% at the end of 2014.
- Return on equity was 22.8%, compared with 23.4% in the same period of 2014. Return on equity from regular operations was 10.8% during the first six months of 2015, compared with 8.1% during the same period last year.
- Net interest income of ISK 13.2 billion, compared with ISK 12.2 billion during the same period of 2014.
- Net commission income of ISK 7.4 billion, compared with ISK 6.6 billion during the same period of 2014.
- Operating income increased between years and amounted to ISK 36.1 billion, compared with ISK 25.7 billion during the same period of 2014. This sharp increase is related to the profit from the sale and valuation change of shareholdings in the real estate company Reitir fasteignafélag hf. and in Refresco Gerber in connection with the listing of the companies.
- Net valuation change during the period was negative, amounting to ISK 0.1 billion, compared with a positive valuation change of ISK 2.0 billion during the same period of 2014. Net valuation change was negatively affected during the period by an additional impairment of the loan portfolio of the subsidiary AFL – sparisjóður amounting to ISK 1.7 billion. Net valuation change of other loans in the Group was positive by a similar amount.
- Income tax amounted to ISK 2.4 billion, compared with ISK 2.5 billion during the same period of 2014.
- The cost-to-income ratio was 36.5%, compared with 50.5% in the same period of 2014. The cost-to-income ratio for regular operations was 50.3%, compared with 60.2% during the same period of 2014.
- Total equity amounted to ISK 168.4 billion, compared with ISK 162.2 billion at the end of 2014.
Höskuldur H. Ólafsson, CEO of Arion Bank:
“Arion Bank’s financial results for the first six months of the year were good. One-off events from the first quarter, when the Bank sold holdings in Reitir and the international soft drinks manufacturer Refresco Gerber and the companies were subsequently listed, continue to have a positive effect on the results. The strong results in the second quarter were primarily driven by the Bank’s regular operations. The Bank’s operations continue to gain strength and commission income, chiefly from the corporate sector, grew 13% between years. We are also seeing the effects of the improved economic situation and greater economic activity reflected in the growth in corporate loans, particularly to property developers, the transportation and tourism industries, and the fishing sector, which is very positive.
Standard & Poor’s recently raised Arion Bank’s credit rating and the Bank is now in an investment grade which further improves access to the international funding markets. This followed the upgrade by Standard & Poor’s of the Icelandic sovereign rating after the government announced its plans to lift the capital controls. The agreement made by the authorities and the creditors will result in changes to Arion Bank’s financial position, but it has long been clear that we are well positioned to deal with changes resulting from the lifting of the capital controls.
Since Arion Bank gained control of AFL – sparisjóður, it has come as a surprise to see what a serious situation the savings bank finds itself in. Independent advisors were brought in to evaluate a major segment of its loan portfolio and it has proven necessary to make additional impairments of ISK 1.7 billion in the first half of the year. However, other valuation changes in the Group’s loans are positive by a similar amount and the combined effect of valuation changes has a limited effect on the financial results."
Conference call in English
Arion Bank will be hosting a conference call in English on Thursday 27 August at 14:00 BST (15:00 CET), where Stefán Pétursson CFO, will present the 2015 first half results. Those who would like to participate in the conference call can send an e-mail to ir@arionbanki.is and will then receive instructions with dial in details.
For further information please contact Haraldur Gudni Eidsson of Arion Bank’s Communications division at haraldur.eidsson@arionbanki.is, or tel. +354 444 7108.
