Arion Banki hf · OMXICE:ARION
Arion Banki hf — Arion Bank — 9M 2015 Earnings Presentation
26 slides from Arion Banki hf's earnings presentation, Nov 11, 2015
Slide 1: Financial Statements 30 September 2015 Investor Presentation
FINANCIAL STATEMENTS 30 SEPTEMBER 2015 INVESTOR PRESENTATION 11 NOVEMBER 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: Highlights of the third quarter of 2015
HIGHLIGHTS OF THE THIRD QUARTER OF 2015 INCREASED ACTIVITY IN THE ECONOMY AND AT THE BANK Icelandic economic environment Arion Bank • Government’s plans to lift capital controls have • Growth in loans to companies and demand for loans generally been well received has generally increased • The touris
Slide 5: Highlights of the third quarter of 2015
HIGHLIGHTS OF THE THIRD QUARTER OF 2015 CREDIT RATING UPGRADED TO INVESTMENT GRADE – ANNUAL STARTUP REYKJAVÍK INVESTOR DAY Funding Innovation • Arion Bank’s credit rating was upgraded from BB+ • Startup Reykjavík was held for the fourth time by (with positive outlook) to BBB- (with stable outlook) A
Slide 6: Headline figures for 9M 2015
HEADLINE FIGURES FOR 9M 2015 Profitability Strength Efficiency Asset quality Return on Cost-to- Problem equity Tier 1 ratio income ratio loans 19.8% 22.2% 38.4% 3.2% 9M 2014: 31.12.2014: 9M 2014: 31.12.2014: 19.9% 21.8% 48.7% 4.4% Leverage Number of Mortgages/ Net earnings ratio Employees Total loan
Slide 7: Income statement
INCOME STATEMENT « Arion Bank
Slide 8: Income statement
INCOME STATEMENT GOOD PROFITABILITY IN THIRD QUARTER Strong net interest income Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014 Slight decrease in net Net interest income 7,112 7,392 5,783 5,911 6,343 commission income Net commission income 3,292 3,677 3,757 3,192 3,526 due to less Net financial income 453
Slide 9: Income statement
INCOME STATEMENT POSITIVE DEVELOPEMENT IN MOST ITEMS Net interest income increase from last year, mainly related to 9M 2015 9M 2014 Diff Diff% higher inflation and Net interest income 20,287 18,309 1,978 11% more favourable terms Net commission income 10,726 10,119 607 6% in funding Net financial in
Slide 10: Net interest income
NET INTEREST INCOME INCREASE IN NET INTEREST INCOME RESULTING FROM TREASURY ACTIVITIES AND HIGHER INFLATION Inflation increased 7.5 7.4 Interest income from loans 7.1 during Q2 and Q3 2015 14.8 15 13.8 resulting in higher net 12.0 6.3 interest income 10.5 5.9 9.6 compared to previous 5.8 10 quarters
Slide 11: Net commission income
NET COMMISSION INCOME STABILITY AFTER A THREE YEAR GROWTH PERIOD Cards and Asset 5.0 management a stable source of commission Breakdown of Net commission income income 9M 2015 Commission income in 3.8 3.7 investment banking 3.5 0.4 3.3 1.1 contingent on IPO’s 3.2 0.8 0.6 0.8 Lending and 0.8 1.2 ISK
Slide 12: Net financial income
NET FINANCIAL INCOME MAJOR EFFECT ON NET EARNINGS Bonds (ISK bn.) and return on bonds (%) (returns include interest income) 100 Low return on shares in Q3 compared to Q1 80 73.2 70.7 and Q2 67.8 69.7 68.5 8 Good returns on bond 60 9.3% holdings 7.2% 40 6.5% 5.8% 5.9% High income in Q1 mainly related
Slide 13: Total operating expense
TOTAL OPERATING EXPENSE OPERATING EXPENSE IN LINE WITH EXPECTATIONS Cost-to-income ratio (%) Increase in total 80 10 salaries and other 53.5 operating expenses 45.0 47.5 43.1 mainly related to 8.4 increased activities at 40 29.3 Valitor in foreign operation 6.8 6.4 0 Slight increase in 6.2 number of
Slide 14: Balance sheet
BALANCE SHEET / / / / / _ — - > L— /~
Slide 15: Balance sheet
BALANCE SHEET NEW BORROWINGS AND INCREASED LENDING HAVE EFFECT ON THE BALANCE SHEET Managed growth in Assets 30.09.2015 30.06.2015 2014 2013 2012 2011 lending activities Cash & balances with CB 73 33 21 38 30 29 Very good liquidity Loans to credit institutions 93 104 109 102 101 69 position Loans to
Slide 16: Loans to customers
LOANS TO CUSTOMERS INCREASE IN DEMAND FOR LOANS TO CORPORATES Continued good Loans to corporates by sector (%) 700 679 balance in loans to 648 Real Estate & Construction corporates and 636 54 individuals 50 Fishing 52 7 600 567 6 Wholesale & Retail 562 27 Mortgage loans 7 Finance & Insurance decreas
Slide 17: Funding
FUNDING INCREASED DIVERSIFICATION IN FUNDING The Bank issued 3 year Maturity of long-term funding EUR 300 million bond 98 1,010 in March and a 5 year 1,000 NOK 500 million bond 939 934 62 ISK FX 892 901 10 in June. Those bonds 58 61 62 are trading favourably 52 59 32 32 116 32 34 71 71 46 on the mar
Slide 18: Capital base
CAPITAL BASE VERY STRONG CAPITAL BASE Decrease in Tier 2 due Total capital base (ISK bn.) Total capital ratio (%) and RWA (ISK bn.) to ISK 20 billion 200 prepayment of 184 30 subordinated liabilities 171 174 32 10 26.3 159 Dividend payment of 32 24.3 ISK 12.8 billion during 150 23.6 4.5 23.5 141 H1
Slide 19: Key financial indicators and outlook
KEY FINANCIAL INDICATORS AND OUTLOOK 19
Slide 20: Key financial indicators
KEY FINANCIAL INDICATORS Return on equity (%) Cost-to-income ratio (%) Net interest margin (%) Problem loans* (%) 48.4 45.0 43.1 8.2 12.2 13.3 14.2 2.7 2.9 3.1 4.6 3.2 Q3-13 Q3-14 Q3-15 Q3-13 Q3-14 Q3-15 Q3-13 Q3-14 Q3-15 Q3-13 Q3-14 Q3-15 Loans-to-deposits ratio (%) Tier 1 ratio (%) Liquidity cover
Slide 21: 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 38,4 2,9 2,8 3,0 18,6 19,8 13,8 10,5 9,2 2011 2012 2013 2014 9M 2015 2011 2012 2013 2014 9M 2015 2011 2012 2013 2014 9M 2015 CPI Imbalance – ISK bn. FX Imbalance – ISK bn. Risk
Slide 22: Outlook
OUTLOOK PLANS TO LIFT CAPITAL CONTROLS AN IMPORTANT STEP • In early October it was announced that Arion Bank • The lifting of the capital controls will create new had acquired 51% in the insurance company Vörður opportunities for Arion Bank from BankNordik. The acquisition is subject to the • Increa
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Slide 24: Additional information: income statement in EUR
ADDITIONAL INFORMATION INCOME STATEMENT – EUR (MILLION) Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014 Net interest income 49 50 38 38 41 Net commission income 23 25 25 21 23 Net financial income 3 15 50 9 13 Other income 24 7 31 34 4 Operating income 98 97 145 102 82 Salaries and related expense (22) (25)
Slide 25: Additional information: balance sheet in EUR
ADDITIONAL INFORMATION BALANCE SHEET – EUR (MILLION) Assets 30.09.2015 2014 2013 2012 2011 Cash & balances with CB 514 143 246 188 173 Loans to credit institutions 654 739 663 637 409 Loans to customers 4.759 4.399 4.121 3.575 3.325 Financial assets 779 692 561 869 934 Investment property 55 46 185
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