Arion Banki hf · OMXICE:ARION
Arion Banki hf — Arion Bank — H1 2016 Earnings Presentation
26 slides from Arion Banki hf's earnings presentation, Aug 31, 2016
Slide 1: Financial Statements 30 June 2016 Investor Presentation
FINANCIAL STATEMENTS 30 JUNE 2016 INVESTOR PRESENTATION 31 AUGUST 2016
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: Highlights of H1 2016
HIGHLIGHTS OF H1 2016 FINANCIAL RESULTS INFLUENCED BY CONDITIONS ON MARKET Increased corporate lending Second major bond issue in euros • Significant rise in interest income due to higher • In April the Bank held its second major bond issue interest rates and increase in interest-bearing in euros to
Slide 5: Highlights of H1 2016: New branch at Keflavík Airport
HIGHLIGHTS OF H1 2016 NEW BRANCH AT KEFLAVÍK INTERNATIONAL AIRPORT – FIRST CLASS SERVICES FOR TRAVELLERS New branch at Keflavík International Airport Products and services • Branch opened at Keflavík International Airport • Customers of Arion Bank have been issued with a with a focus on currency exc
Slide 6: Highlights of H1 2016: Supporting innovation
HIGHLIGHTS OF H1 2016 SUPPORTING INNOVATION EVERY STEP OF THE WAY Startup Reykjavík best business accelerator Supporting young innovators • Startup Reykjavík held for the 5th time during the • Partnership agreement reached with Junior summer Achievement (JA) • Ten companies selected to take part fro
Slide 7: Headline figures for H1 2016
HEADLINE FIGURES FOR H1 2016 Profitability Strength Operations Asset quality Cost-to- Problem Net earnings Tier 1 ratio income ratio loans ISK 9,759 26.8% 56.1% 1.9% million H1 2015: 31.12.2015: H1 2015: 31.12.2015: ISK 19,326 million 23.4% 36.5% 2.5% Return on Leverage Number of Mortgages/ equity r
Slide 8: Income statement
INCOME STATEMENT *« Arion Bank
Slide 9: Income statement
INCOME STATEMENT All amounts in ISK million POSITIVE NET CHANGE IN VALUATION ON LOANS TO CUSTOMERS • Increase in net interest income due to larger loan H1 2016 H1 2015 Diff Q2 2016 Q1 2016 Diff portfolio and increase in other Net interest income 14.626 13.175 11% 7.353 7.273 1% interest bearing asse
Slide 10: Net interest income
NET INTEREST INCOME All amounts in ISK billion INCREASE IN INTEREST BEARING ASSETS • Increase in both interest Net interest income Interest income income and expenses from Q1 due to increased inflation in 15.7 16.3 15.0 14.7 Q2 0.8 0.9 1.0 11.5 1.3 0.9 • Increase in interest bearing 15.4 7.4 7.3 7.4
Slide 11: Net commission income
NET COMMISSION INCOME All amounts in ISK billion STRONG BASE FOR COMMISSION INCOME • Net commission increases in Q2 mainly due to increased Net commission income activity in investment banking • The Group is investing in the international growth model of Valitor • Net commission income from cards ex
Slide 12: Net financial income
NET FINANCIAL INCOME All amounts in ISK billion PROFIT FROM THE SALE OF VISA EUROPE HAS MAJOR EFFECT ON Q2 • The sale of Visa Europe to Bond holdings Visa Inc. was finalised in June Net financial income 80.3 80.0 78.1 73.2 70.7 with net effect of ISK 5.3 21.1 21.8 22.6 billion profit for the group 1
Slide 13: Total operating expense
TOTAL OPERATING EXPENSE All amounts in ISK billion NEW WAGE AGREEMENTS AFFECT COST BOTH DIRECTLY AND INDIRECTLY • Increase in salaries greatly affected by new wage Cost-to-income ratio (%)* agreements and increase in full time employees 60.7 • Increase in professional services, marketing expenses an
Slide 14: Balance sheet
BALANCE SHEET 14
Slide 15: Balance sheet
BALANCE SHEET All amounts in ISK billion LOANS TO CUSTOMERS CONTINUE TO GROW • Strong liquidity position Assets 30.06.2016 31.03.2016 2015 2014 2013 • Loans to customers Cash & balances with CB 77 70 48 21 38 increased by ISK 33 billion or Loans to credit institutions 86 92 87 109 102 4.9% during th
Slide 16: Loans to customers
LOANS TO CUSTOMERS All amounts in ISK billion WELL DIVERSIFIED LOAN PORTFOLIO – PROBLEM LOANS CONTINUE TO DECREASE • Continued good balance in loans to corporates and Loans to customers Loans to customers by sector (%) individuals 713 680 694 Individuals • Increase in loans to 648 55 14 636 55 Real
Slide 17: Funding
FUNDING All amounts in ISK billion GOOD BALANCE IN FUNDING Funding Maturity of long term funding • In January the Bank and 1,028 1,035 Kaupthing reached a funding 1,011 ISK FX 101,0 agreement with deposits in 59 56 939 934 62 foreign currency at Arion Bank 58 61 64,0 and foreign currency loan at 52,
Slide 18: Cash flow
CASH FLOW All amounts in ISK billion NEW LENDING FUNDED WITH NEW LONG-TERM BORROWINGS • Increase in cash and cash equivalents mostly due to sale of Bakkavor Group Ltd. ISK 27 (9) 138 billion, included in investing activities 26 (8) • Large non-cash changes due 24 to funding agreement with 110 Kaupth
Slide 19: Capital base
CAPITAL BASE All amounts in ISK billion STRONG CAPITAL BASE • No dividend payment in Capital ratio (%) Leverage ratio (%) 2016 27.8 • Solid level of capitalization 27.0 16.7 17.3 18.1 26.3 1.0 15.4 due to strong profit generation 0.8 14.5 24.2 in previous years 23.6 4.5 0.8 • The Bank uses standardi
Slide 20: Outlook and key financial indicators
OUTLOOK AND KEY FINANCIAL INDICATORS 20
Slide 21: Outlook
OUTLOOK STRONGER DEMAND IN THE ECONOMY GIVES PROMISING SIGNS FOR THE FUTURE • Exciting times ahead in a favorable and growing • Credit rating is expected to be upgraded as the economy sovereign rating is revised upwards, opening up more funding opportunities for the Bank • The liberalization of the
Slide 22: Key financial indicators
KEY FINANCIAL INDICATORS Return on equity (%) Cost-to-income ratio (%) Net interest margin (%) Problem loans* (%) 52,6 47,5 38,5 40,5 3,1 3,3 3,1 5,4 10,2 13,3 3,3 1,9 Q2-14 Q2-15 Q2-16 Q2-14 Q2-15 Q2-16 Q2-14 Q2-15 Q2-16 Q2-14 Q2-15 Q2-16 Loans-to-deposits ratio (%) Tier 1 ratio (%) Liquidity cover
Slide 23: Key financial indicators
KEY FINANCIAL INDICATORS Return on equity (%) Cost-to-income ratio (%) Net interest margin (%) 57.3 56.1 49.8 50.1 28.1 3.4 2.9 2.8 3.0 3.1 18.6 32.6 13.8 9.2 9.5 2012 2013 2014 2015 H1 2016 2012 2013 2014 2015 H1 2016 2012 2013 2014 2015 H1 2016 CPI Imbalance – ISK bn. FX Imbalance – ISK bn. Risk w
Slide 24: Development of key figures
DEVELOPMENT OF KEY FIGURES All amounts in ISK billion Net interest income Net commission income 9.0 4.0 8.0 3.5 7.0 3.0 6.0 2.5 5.0 2.0 4.0 1.5 3.0 2.0 1.0 1.0 0.5 - - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Total operating expenses Net earnings 10.0 30.0 8.0 25.0 2
Slide 25: Arion Bank
“« Arion Bank
Slide 26: 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