Arion Banki hf · OMXICE:ARION
Arion Banki hf — Arion Bank — 9M 2016 Earnings Presentation
30 slides from Arion Banki hf's earnings presentation, Nov 16, 2016
Slide 1: Financial Statements 30 September 2016 Investor Presentation
FINANCIAL STATEMENTS 30 SEPTEMBER 2016 INVESTOR PRESENTATION 16 NOVEMBER 2016
Slide 2: Arion Bank provides comprehensive financial services
ARION BANK ARION BANK PROVIDES COMPREHENSIVE FINANCIAL SERVICES Asset Management Corporate Banking Market leader in asset Clients include many of management Iceland’s largest companies Assets under management Provides customized almost same size as Bank’s solutions balance sheet Lends to i
Slide 3: Subsidiaries perform vital role
SUBSIDIARIES PERFORM VITAL ROLE ARION BANK PROVIDES COMPREHENSIVE FINANCIAL SERVICES Market leader in acquiring Market leader in life services and card issuing insurance Operations in Iceland, Focus on customized Denmark and the UK services Member of VISA Europe Partnership with Arion an
Slide 4: Highlights of the first 9 months of 2016
HIGHLIGHTS OF THE FIRST 9 MONTHS OF 2016 SOLID PERFORMANCE Increased demand for credit Second major bond issue in euros • Interest income increased due to higher interest • Bond owned by Kaupthing issued in US dollars in rates and more interest-bearing assets January – equivalent of ISK 97 billion –
Slide 5: Highlights of the first 9 months of 2016
HIGHLIGHTS OF THE FIRST 9 MONTHS OF 2016 MORE DIVERSE PRODUCT OFFERING – CREDIT RATING CONTINUES TO IMPROVE Business accelerators moving at full speed Credit rating upgraded • Startup Reykjavík held for fifth time during the • Standard & Poor’s upgraded Arion Bank‘s credit summer and Startup Energy
Slide 6: Highlights of the first 9 months of 2016
HIGHLIGHTS OF THE FIRST 9 MONTHS OF 2016 NEW BRANCH AT KEFLAVÍK INTERNATIONAL AIRPORT New branch at Keflavík International Airport Digital services • Branch opened at Keflavík International Airport, • New and quick way of becoming Arion Bank where the focus is on foreign currency and VAT customer on
Slide 7: Highlights of Q3
HIGHLIGHTS OF Q3 HEALTHY UNDERLYING PERFORMANCE IN Q3 Net interest • Net change in valuation is positive due to revaluation of Return on acquired mortgages income equity • Net financial income was positive due to more favorable 14.4% ISK 7,432 market conditions for equities in the third quarter comp
Slide 8: Headline figures for 9M 2016
HEADLINE FIGURES FOR 9M 2016 Profitability Strength Operation Asset quality Cost-to- Problem Net earnings Tier 1 ratio income ratio loans ISK 17,262 25.5% 56.7% 2.0% million 9M 2015: 31.12.2015: 9M 2015: 31.12.2015: ISK 25,397 million 23.4% 38.4% 2.5% Return on Leverage Number of Mortgages/ equity r
Slide 9: Income Statement
INCOME STATEMENT « Arion Bank
Slide 10: Income Statement
INCOME STATEMENT All amounts in ISK million POSITIVE NET IMPAIRMENT ON LOANS TO CUSTOMERS • 9% increase in net interest income from 9M 2015 9M 2016 9M 2015 Diff Q3 2016 Q2 2016 Diff • Net commission income Net interest income 22,058 20,287 9% 7,432 7,353 1% decreases mainly due to less Net commissio
Slide 11: Adjusted Earnings
ADJUSTED EARNINGS All amounts in ISK million SIGNIFICANT ONE-OFF INCOME AND EXPENSE 9M 2016 Adjustment Adjusted 1) Interest income from non-core Net i nteres t i ncome 22,058 555 22,613 1) subsidiaries eliminated and interest Net commi s s i on i ncome 10,213 69 10,282 income calculated on book valu
Slide 12: Adjusted Earnings
ADJUSTED EARNINGS Amounts in ISK billion INCREASED EQUITY AFFECTING THE RETURN Return on equity (%) Operating income • Average equity used for calculation in adjusted 50.8 46.4 46.6 earnings has increased by 48% from 2013 7.9 2.7 6.2 7.0 41.5 5.3 3.4 4.1 3.8 1.7 • Lower Net earnings in 2016 is prima
Slide 13: Net Interest Income
NET INTEREST INCOME All amounts in ISK billion INCREASE IN INTEREST BEARING ASSETS • Responsible lending Net interest income Interest income activities and active liquidity 16.3 management have resulted in 15.0 14.7 14.7 0.9 1.0 11.5 1.3 1.2 stable net interest income 0.9 • Fluctuations in both inte
Slide 14: Net Commission Income
NET COMMISSION INCOME All amounts in ISK billion STRONG COMMISSION BASE IN ALL SEGMENTS • Stable net commission income, small increase from Q3 Net commission income 2015 3.8 • Retail bank performing well and the effects of the new 3.5 3.5 3.3 0.5 Keflavik airport branch are starting to impact other
Slide 15: Net Financial Income
NET FINANCIAL INCOME All amounts in ISK billion PROFIT FROM SALE OF VISA EUROPE HAS SIGNIFICANT EFFECT • Listed bonds and equity Bond holdings Net financial income holdings increased, mainly due 80.3 80.0 78.1 81.2 70.7 to assets from the acquisition 21.1 21.8 22.6 26.2 3.8 15.5 of Vörður at period
Slide 16: Total Operating Expense
TOTAL OPERATING EXPENSE All amounts in ISK billion INCREASED EXPENSE FOLLOWING NEW WAGE AGREEMENTS • Increase in salaries greatly affected by new wage Cost-to-income ratio (%)* agreements and expense in relation to redundancies 60.7 • Increase in professional services, marketing expenses and IT 52.6
Slide 17: Balance Sheet
BALANCE SHEET 17
Slide 18: Balance Sheet
BALANCE SHEET All amounts in ISK billion STRONG BALANCE SHEET • Increase in loans to Assets 30.09.2016 30.06.2016 2015 2014 2013 customers, partially offset by Cash & balances with CB 86 77 48 21 38 strengthening of the ISK Loans to credit institutions 68 86 87 109 102 Loans to customers 716 713 680
Slide 19: Loans to Customers
LOANS TO CUSTOMERS All amounts in ISK billion INCREASED QUALITY IN THE LOAN PORTFOLIO • Continued good balance in Loans to customers Loans to customers by sector (%) loans to corporates and individuals 713 716 Individuals 680 648 55 58 14 • Increase in loans to 636 57 Real Estate & Construction 5 cu
Slide 20: Liabilities and Equity
LIABILITIES AND EQUITY All amounts in ISK billion SUBORDINATED LOAN FULLY PREPAID Funding Maturity of long term funding • In January the Bank and 104.4 Kaupthing reached a funding ISK FX agreement with deposits in 770 768 736 747 10 foreign currency at Arion Bank 710 10 32 59.1 and foreign currency
Slide 21: Capital Base
CAPITAL BASE All amounts in ISK billion STRONG EQUITY POSITION • Solid level of capitalization Capital ratio (%) Leverage ratio (%) due to strong profit generation 27.8 • Decline in Tier 1 ratio due 16.7 18.1 17.4 26.3 1.0 26.1 15.4 14.5 to reduction of non-controlling 24.2 0.6 23.6 interest 4.5 0.8
Slide 22: Capital Base
CAPITAL BASE CAPITAL STRUCTURE AND CAPITAL NEEDS (%) • At Q4 of 2017, the combined capital buffer requirement reaches 8.4%. The Financial Stability Board has recommended to the 26.1 CET1 0.6 regulator that the countercyclical capital buffer be increased from 22.2 22.2 AT1 1.00% to 1.25%, taking effe
Slide 23: Cash Flow
CASH FLOW All amounts in ISK billion GOOD SOURCE OF FUNDING CONTRIBUTE INCREASED LENDING 21 (18) (11) (21) 125 36 43 110 (34) 1 Cash and Interest Interest Loans to Deposits Borrowings Investing Financing Other Cash and cash eq. received paid customers activities activities changes cash eq. 31.12.201
Slide 24: Outlook and Key Financial Indicators
OUTLOOK AND KEY FINANCIAL INDICATORS 24
Slide 25: Outlook
OUTLOOK • Exciting yet challenging times ahead in a positive • Arion Bank’s solid capital position makes it well economic environment placed to tackle future challenges • Following the acquisition of the insurance • Increased focus on digital future with the goal of company Vörður, the Arion Bank gr
Slide 26: Key Financial Indicators
KEY FINANCIAL INDICATORS Return on equity (%) Cost-to-income ratio (%) Net interest margin (%) Problem loans* (%) (Target >10.0%) (Target <50%) (Target >2.7%) (Target <3% (5%)) 57.8 45.0 43.1 2.9 3.1 3.1 4.6 13.3 14.2 14.4 3.2 2.0 Q3-14 Q3-15 Q3-16 Q3-14 Q3-15 Q3-16 Q3-14 Q3-15 Q3-16 Q3-14 Q3-15 Q3-
Slide 27: Key Financial Indicators
KEY FINANCIAL INDICATORS Return on equity (%) Cost-to-income ratio (%) Net interest margin (%) 57.3 56.7 49.8 50.1 28.1 3.4 2.9 2.8 3.0 3.1 18.6 32.6 13.8 9.2 11.2 2012 2013 2014 2015 9M 2016 2012 2013 2014 2015 9M 2016 2012 2013 2014 2015 9M 2016 CPI Imbalance – ISK bn. FX Imbalance – ISK bn. Risk
Slide 28: 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
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Slide 30: 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