Arion Banki hf · OMXICE:ARION
Arion Banki hf — Arion Bank — H1 2015 Earnings Presentation
27 slides from Arion Banki hf's earnings presentation, Aug 26, 2015
Slide 1: Financial Statements 30 June 2015 Investor Presentation
FINANCIAL STATEMENTS 30 JUNE 2015 INVESTOR PRESENTATION 26 AUGUST 2015
Slide 2: Arion Bank is a universal relationship bank
ARION BANK IS A UNIVERSAL RELATIONSHIP BANK ARION BANK PROVIDES A FULL RANGE OF FINANCIAL SERVICES Asset Management Corporate Banking Leading player in the Leading lender to large Icelandic market corporates in Iceland AuM equal to Arion Bank’s Innovative and customized total assets solution
Slide 3: Strategic subsidiaries in the Arion Bank Group
STRATEGIC SUBSIDIARIES IN THE ARION BANK GROUP ARION BANK PROVIDES A FULL RANGE OF FINANCIAL SERVICES The largest online and e- Leading life insurance commerce payment company in Iceland services company in Iceland Focus on modern personal Operations in Iceland, insurance services Denmark an
Slide 4: Headline figures for H1 2015
HEADLINE FIGURES FOR H1 2015 Profitability Strength Efficiency Asset quality Return on Cost-to- Problem equity Tier 1 ratio income ratio loans 22.8% 21.8% 36.5% 3.3% H1 2014: 31.12.2014: H1 2014: 31.12.2014: 23.4% 21.8% 50.5% 4.4% Leverage Mortgages/ Net earnings Employees ratio Total loans ISK 19,3
Slide 5: Highlights of the first half of 2015
HIGHLIGHTS OF THE FIRST HALF OF 2015 SOUND OPERATIONS IN A FAVORABLE BUSINESS ENVIRONMENT Arion Bank Operating environment • Arion Bank managed both IPOs on NASDAQ Iceland The economic situation has been positive in Iceland. this year: the real estate companies Reitir and Eik and There is 3.6% eco
Slide 6: Highlights of the first half of 2015: bond issue in euros
HIGHLIGHTS OF THE FIRST HALF OF 2015 BOND ISSUE IN EUROS – BEST BUSINESS ACCELERATOR IN NORDIC REGION Funding Innovation Arion Bank’s credit rating was upgraded from BB+ • ISK 800 million invested in start-up fund Eyrir Sprotar (with positive outlook) to BBB- (with stable outlook) • Arion Bank hel
Slide 7: Highlights of the first half of 2015: equality
HIGHLIGHTS OF THE FIRST HALF OF 2015 STRONG EMPHASIS ON EQUALITY AT THE BANK Equality • Arion Bank was the first Icelandic bank to receive equal salaries certification from VR (Iceland’s largest commercial and office worker union) • This is designed to ensure no discrimination in terms of salaries b
Slide 8: Income Statement
INCOME STATEMENT « Arion Bank
Slide 9: Income Statement: solid performance in Q2 2015
INCOME STATEMENT SOLID PERFORMANCE IN Q2 2015 Net interest income increases from previous quarters, Q2 2015 Q1 2015 Q4 2014 Q3 2014 Q2 2014 mainly due to a slight Net interest income 7,392 5,783 5,911 6,343 6,483 increase in inflation Net commission income 3,677 3,757 3,192 3,526 3,445 Net financial
Slide 10: Income Statement: net earnings affected by value changes of equities
INCOME STATEMENT NET EARNINGS AFFECTED BY VALUE CHANGES OF EQUITIES RELATING TO IPO’S Increase in net interest income due to increase in inflation in H1 2015 H1 2015 H1 2014 Diff Diff% and changes in funding Net interest income 13,175 11,966 1,209 10% structure Net commission income 7,434 6,593 841
Slide 11: Net interest income
NET INTEREST INCOME NIM IS UNUSUALLY HIGH DURING THE QUARTER AT 3.3% Inflation increased 7.5 7.4 Interest income from loans during Q2 2015 14.8 15 resulting in higher net 6.5 12.7 12.0 6.3 interest income 10.5 5.9 9.6 compared to previous 5.8 10 quarters 7.7% 6.7% 6.2% Prepayment of a 5 5.1% 5.5% 5.
Slide 12: Net commission income
NET COMMISSION INCOME COMMISSION INCOME IS TRENDING UPWARDS Cards and Asset 5 management a Breakdown of Net commission income growing source of Q2 2015 commission income 3.8 3.7 Commission income in 3.4 3.5 0.2 investment banking 0.4 decreases from Q1 as 3.2 0.8 0.6 0.8 expected 0.6 0.4 1.4 - No IPO
Slide 13: Net financial income
NET FINANCIAL INCOME VERY GOOD RETURN ON LISTED AND UNLISTED EQUITY POSITIONS Bonds (ISK bn.) and return on bonds (%) (returns include interest income) 80.0 73.2 Good return on shares 67.8 67.8 69.7 68.5 during Q2 due to favourable stock 8 60.0 market 9% Return on bond 40.0 7% holdings improving 6%
Slide 14: Total operating expense
TOTAL OPERATING EXPENSE CONTINUED FOCUS ON OPERATING EFFICIENCY Cost-to-income ratio (%) Salaries in line with 80 10.0 previous quarters 53.5 45.0 47.5 Number of employees 8.4 40.5 continues to reduce at 40 29.3 the parent company during the period but an increased number 6.8 6.8 6.4 0 at Valitor 4.
Slide 15: Balance Sheet
BALANCE SHEET / / / / / _ — - > L— /~
Slide 16: Balance sheet: strong balance sheet offers various opportunities
BALANCE SHEET STRONG BALANCE SHEET OFFERS VARIOUS OPPORTUNITIES Controlled growth in lending activities Assets 30.06.2015 2014 2013 2012 2011 Cash & balances with CB 33 21 38 30 29 Very good liquidity position Loans to credit institutions 104 109 102 101 69 Loans to customers 667 648 636 567 562 Sta
Slide 17: Loans to customers
LOANS TO CUSTOMERS GOOD BALANCE BETWEEN INDIVIDUAL AND CORPORATE LENDING Mortgage loans Loans to corporates by sector (%) 700 667 decrease due to the 648 Real Estate & Construction debt forgiveness of CPI 636 55 Fishing indexed mortgage 52 50 7 600 567 6 25 Wholesale & Retail loans by the Icelandic
Slide 18: Funding
FUNDING THE BANK’S EUROBOND TRADES WELL IN THE SECONDARY MARKET The Bank issued 3 year Maturity of long-term funding 95 EUR 300 million bond 1,000 975 in March. Interest rate 939 934 892 901 67 ISK FX on the bond is 3.125% 58 61 11 52 59 32 61 or MS +310 bps at 32 32 34 71 71 119 48 issue date. The
Slide 19: Capital base
CAPITAL BASE STRONG CAPITAL BASE AFTER A DIVIDEND PAYMENT OF ISK 12.8 BILLION IN APRIL Decrease in Tier 2 due Total capital base (ISK bn.) Total capital ratio (%) and RWA (ISK bn.) to prepayment of 200 subordinated liabilities 184 30 171 169 Solid level of 26.3 159 32 capitalization due to 11 32 24.
Slide 20: Key financial indicators and outlook
KEY FINANCIAL INDICATORS AND OUTLOOK 20
Slide 21: Key financial indicators
KEY FINANCIAL INDICATORS Return on equity (%) Cost-to-income ratio (%) Net interest margin (%) Problem loans* (%) 38.5 54.4 40.5 47.5 8.5 13.4 3.1 3.1 3.3 5.4 10.2 3.3 Q2-13 Q2-14 Q2-15 Q2-13 Q2-14 Q2-15 Q2-13 Q2-14 Q2-15 Q2-13 Q2-14 Q2-15 Loans-to-deposits ratio (%) Tier 1 ratio (%) Liquidity cover
Slide 22: Key financial indicators
KEY FINANCIAL INDICATORS Return on equity (%) Cost-to-income ratio (%) Net interest margin (%) 57.3 52.5 49.8 50.1 3.4 3.4 22.8 36.5 2.9 2.8 3.0 18.6 13.8 10.5 9.2 2011 2012 2013 2014 H1 2015 2011 2012 2013 2014 H1 2015 2011 2012 2013 2014 H1 2015 CPI Imbalance – ISK bn. FX Imbalance – ISK bn. Risk
Slide 23: Outlook: lifting of the capital controls a major event
OUTLOOK LIFTING OF THE CAPITAL CONTROLS A MAJOR EVENT The Icelandic economy is expected to perform The letter of intent from the creditors of well in the near to medium term Kaupthing to the government in relation to the lifting of the capital controls stipulates that the The regular operation
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Slide 25: Additional information: income statement in EUR
ADDITIONAL INFORMATION INCOME STATEMENT – EUR (MILLION) Q2 2015 Q1 2015 Q4 2014 Q3 2014 Q2 2014 Net interest income 50 38 38 41 42 Net commission income 25 25 21 23 22 Net financial income 15 50 9 13 29 Other income 7 31 34 4 15 Operating income 97 145 102 82 108 Salaries and related expense (25) (2
Slide 26: Additional information: balance sheet in EUR
ADDITIONAL INFORMATION BALANCE SHEET – EUR (MILLION) Assets 30.06.2015 2014 2013 2012 2011 Cash & balances with CB 225 137 240 176 184 Loans to credit institutions 705 705 645 598 435 Loans to customers 4,532 4,197 4,011 3,355 3,536 Financial assets 757 660 546 816 993 Investment property 53 44 180
Slide 27: Disclaimer
DISCLAIMER This document has been prepared for information purposes only and should not be relied upon, or form the basis of any action or decision, by any person. Nothing in this document is, nor shall be relied on as, a promise or representation as to the future. In supplying this document, Ario