Arion Bank reported net earnings of ISK 10.5 billion for the first six months of 2017, compared with ISK 9.8 billion for the same period of 2016. Return on equity was 9.7%, compared with 9.5% for the first six months of 2016.
The Bank reported net earnings of ISK 7.1 billion during the second quarter of 2017, compared with ISK 6.9 billion for the same period of 2016. Return on equity during the quarter was 13.0%, compared with 13.3% in 2016.
Total assets amounted to ISK 1,126.4 billion at the end of June, compared with ISK 1,036.0 billion at the end of 2016. Shareholders’ equity totalled ISK 221.6 billion at the end of June 2017, compared with ISK 211.2 billion at the end of 2016. The Bank enjoys a strong financial position and the focus has been on maintaining good liquidity as the capital controls are lifted, a process which is now largely at an end.
The Bank’s capital ratio at the end of June was 28.4%, compared with 27.1% at the end of 2016. Tier 1 Capital increased during the period to 27.8%, compared with 26.5% at the end of 2016.
Highlights of the income statement and key income related performance indicators:
| Income Statement | ||||||
| In ISK million | H1 2017 | H1 2016 | Diff | Q2 2017 | Q2 2016 | Diff |
| Net interest income | 15,320 | 14,626 | 5% | 8,160 | 7,353 | 11% |
| Net commission income | 6,838 | 6,745 | 1% | 3,508 | 3,527 | (1%) |
| Other income | 5,174 | 5,812 | (11%) | 2,183 | 4,345 | (50%) |
| Operating income | 27,332 | 27,183 | 1% | 13,851 | 15,225 | (9%) |
| Operating expenses | (13,840) | (15,156) | (9%) | (8,210) | (7,958) | 3% |
| Bank levy | (1,574) | (1,485) | 6% | (777) | (743) | 5% |
| Net impairment | 1,289 | 945 | 36% | 408 | 1,448 | (72%) |
| Net earnings before taxes | 13,207 | 11,487 | 15% | 5,272 | 7,972 | (34%) |
| Income tax | (3,161) | (2,091) | 51% | (1,827) | (1,354) | 35% |
| Net gain from assets held for sale | 420 | 363 | 16% | 273 | 259 | 5% |
| Net earnings | 10,466 | 9,759 | 7% | 3,718 | 6,877 | (46%) |
| KPI's: | ||||||
| Return on equity (ROE) | 9.7% | 9.5% | 13.0% | 13.3% | ||
| Earnings per share (ISK) | 5.23 | 4.62 | 3.56 | 3.38 | ||
| Net interest margin (int. b. assets) | 3.0% | 3.1% | 3.1% | 3.1% | ||
| Cost-to-income ratio | 50.6% | 55.8% | 39.0% | 52.3% | ||
Highlights of the balance sheet and key performance indicators:
| In ISK million | 30.06.2017 | 31.12.2016 | Diff | Diff% | |
| Loans to customers | 733,649 | 712,422 | 21,226 | 3% | |
| Other assets | 392,762 | 323,602 | 69,160 | 21% | |
| Liabilities | 904,644 | 824,640 | 80,004 | 10% | |
| Equity | 221,767 | 211,384 | 10,383 | 5% | |
| Loans to Deposits ratio | 167.7% | 172.9% | |||
| RWA / Total assets | 67.0% | 72.7% | |||
| Tier 1 ratio | 27.8% | 26.5% |
For detailed information on the accounts please refer to Arion Bank’s Consolidated Interim Financial Statements for the period 1 January – 30 June 2017 on the Bank’s website, www.arionbanki.is.
Höskuldur H. Ólafsson, CEO of Arion Bank:
“Arion Bank’s financial results for the first six months of 2017 are good and exceed our expectations. The Bank is performing well in its core operations and one-off items have had a positive impact on the results. The Bank is robust financially, as underlined by the Bank's capital ratio of 28.4%. The Bank is well positioned to provide strong support to its customers and the Icelandic business sector.
We are determined to be the leading bank in Iceland as a provider of digital solutions. The goal is to make banking easy for our customers. We want our customers to be able to take care of their finances easily and conveniently, whether they are transferring money, getting an overdraft, spreading out credit card payments, attending to their savings or applying for a credit appraisal and a mortgage. Our focus on developing digital solutions in this area and the advent of electronic ID mean that our customers can now do all this and more through the Arion app and our online bank, whenever and wherever it suits them. We have also made it easy for people and companies to become customers of Arion Bank through a straightforward process on our website. We have a clear vision and we will continue in this direction and release even more digital products over the next few months.
In 2014 Arion Bank decided to participate in the funding process of United Silicon in relation to a project which had been in preparation for several years. The Bank lent a considerable amount of money to the project, as specified in the Bank's interim financial statement. The decision to participate in this project was made on the basis of several factors: all permits were in place, demand for the product was high and the market price was good, the technology had been thoroughly tested, the government and local authorities were supportive of the project, and Icelandic and international experts and investors were also on board. Furthermore, the experience of silicon plants had generally been positive and it was a project that would create much needed jobs and foreign currency revenue in an economy subject to capital controls. United Silicon commenced operations in November 2016, but unfortunately it has suffered repeated setbacks. The company has applied for a moratorium and is now seeking composition with creditors. Arion Bank is closely monitoring developments and, as its largest creditor, is assisting the company in the moratorium. The priority now is to complete the necessary improvements at the plant so that production is in order and environmental concerns are addressed and to ensure that the plant operates in harmony with the local community.
During the first half of the year the Bank has issued a total of €500 million in two international bond issues. An increasing number of investors are now looking at Arion Bank as an investment option as the Bank’s bond issues perform well on the secondary markets. The Bank also has good access to funding on the Icelandic market. During the period the Bank fully repaid the Kaupthing bond issued in connection with composition agreements with Kaupthing, and Arion Bank is now fully market funded.
In March, the future ownership of the Bank began to take shape when international investors acquired a 29% share in the Bank. Preparations for the sale of Kaupthing’s stake are ongoing and one of the options being examined is an IPO on the Icelandic and international markets, but no decision has been taken on this yet.”
Conference call in English
Arion Bank will be hosting a conference call in English on Thursday 24 August at 1:00 pm GMT (3:00 pm CEST), 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.
