Arion Banki hf · OMXICE:ARION
Arion Banki hf — Arion Bank — FY2014 Earnings Presentation
28 slides from Arion Banki hf's earnings presentation, February 2015
Slide 1: Financial Statements 31.12.2014 Investor Presentation
FINANCIAL STATEMENTS 31.12.2014 INVESTOR PRESENTATION FEBRUARY 2015
Slide 2: Headline Figures for 2014
HEADLINE FIGURES FOR 2014 A VERY GOOD YEAR FOR THE GROUP Profitability Strength Efficiency Asset quality Return on Cost-to- Problem equity CET 1 ratio income ratio loans 18.6% 21.8% 50.1 % 4.4% 2013: 9.2% 2013: 19.2% 2013: 57.3% 2013: 6.3% Net earnings Leverage Mortgages/ Employees ISK 28,594 ratio
Slide 3: Financial Highlights in 2014
FINANCIAL HIGHLIGHTS IN 2014 VERY GOOD PERFORMANCE IN 2014 Record net earnings ISK 28,594 million Net Net interest Net interest income up from 2013 earnings income Strong NIM of 2.8% ISK 28,594 ISK 24,220 19% increase in commission income million million Substantial one-off and FV gains rela
Slide 4: Financial Highlights in Q4 2014
FINANCIAL HIGHLIGHTS IN Q4 2014 SOLID PERFORMANCE IN Q4 2014 Net earnings for Q4 2014 ISK 5,961 million Net Net interest earnings income Net interest income up from Q4 2013 Healthy NIM of 2.8% despite low inflation ISK 5,961 ISK 5,911 Strong other income from valuation increases of million mil
Slide 5: Operational Highlights of 2014
OPERATIONAL HIGHLIGHTS OF 2014 The Group shows solid operating results At the forefront in digital banking Core subsidiaries add quality to the group Continued rise in popularity of the Arion App with 45% of customers using it – Valitor, leading in payment solutions – Stefnir, no. 1 fund managem
Slide 6: Operational Highlights of 2014
OPERATIONAL HIGHLIGHTS OF 2014 Increase in investment banking activities and Frjálsi Pension Fund managed by Arion Bank large scale lending projects highly successful in 2014 Successful listing of one of Iceland’s largest Named best pension fund in Europe in its fishing companies, HB Grandi clas
Slide 7: Operational Highlights of 2014
OPERATIONAL HIGHLIGHTS OF 2014 Arion Bank’s research team continues to have a A strong commitment to Icelandic startups leading role in Iceland The Bank’s startup accelerator Startup Published reports on the economy, the Reykjavik held for the third time tourism industry, the real estate market
Slide 8: Income Statement
INCOME STATEMENT 2 Arion Bank
Slide 9: Income Statement
INCOME STATEMENT STRONG GROWTH IN ALL INCOME ITEMS OVERSHADOW INCREASE IN OTHER OPEX Net interest income 2014 2013 Q4 2014 Q4 2013 increasing YoY Net interest income 24,220 23,800 5,911 5,487 Robust growth in Net commission income 13,309 11,223 3,192 2,939 commission income during the year Net finan
Slide 10: Net Interest Income
NET INTEREST INCOME STABLE NET INTEREST INCOME Interest income and expense Interest income from 30 60 loans and interest 27.1 8.8 6.6 expense from deposits 50 3.7 and borrowings 24.2 11.3 reducing mainly 23.8 40 7.7 23.4 because of low inflation 30 19.8 20 49.1 More focus on efficient 48.9 45.8 3.4%
Slide 11: Net Commission Income
NET COMMISSION INCOME GROWTH EXPECTATIONS MATERIALIZED IN ALL UNITS OF THE BANK Asset management 15 18.6% increase in and Cards remain 13.3 Net commission largest source of commission income income in 2014 Good performance in 11.2 10.7 10.7 investment banking as 4.5 well as retail and Breakdown of N
Slide 12: Net Financial Income
NET FINANCIAL INCOME STRONG CONTRIBUTION FROM LEGACY EQUITY HOLDINGS Bonds and return on bonds (%) (returns include interest income) Excellent return on 7.3 150 142.5 8 equity holdings during 123.3 118.7 the year The bond market was 4.9 100 6 0.3 difficult during most of 69.7 62.7 2014 but improved
Slide 13: Other Income
OTHER INCOME VALUATION CHANGES DOMINATE FV changes and realized gain on investment property 10 9.6 9.2 amounted to ISK 2 billion in 2014 1.1 1.1 Income from 0.9 7.7 1.0 associates in 2014, 0.7 mainly due to valuation changes 2.4 1.1 5.7 5.5 Insurance income from 3.5 5 2.0 Okkar Life Insurance 1.1 Re
Slide 14: Total Operating Expenses
TOTAL OPERATING EXPENSES CONTINUED FOCUS ON OPERATING EFFICIENCY Cost-to-income ratio (%) Settlement of Arion 30 Bank and Valitor with 60 57.3 the Icelandic 27.0 54.2 52.5 Competition Authority 25.4 49.8 50.1 24.7 of ISK 700 million 50 increases expenses and 22.0 affects cost to income ratio in Q4 2
Slide 15: Online Banking Changes the Retail Landscape
ONLINE BANKING CHANGES THE RETAIL LANDSCAPE THE ARION APP HAS BEEN A GREAT SUCCESS SINCE ITS LAUNCH IN 2013 Increasing number of Development of customer visits to branches, calls to call center, online banking and customers choose to the Arion App since the introduction of the app do their banking o
Slide 16: Tax Expense
TAX EXPENSE 16.1% EFFECTIVE TAX RATE Tax expense from 2010-2014 (ISK bn.) Income tax rate has increased from 18% to 20% on taxable income 8.0 7.0 from 2010 7.0 5.7 6.0 With the same tax 4.5 5.0 legislation as in 2010 3.8 3.4 taxes would have been 4.0 ISK 3.6 bn. lower in 3.0 2014 2.0 2010 2011 2012
Slide 17: Balance Sheet
BALANCE SHEET 17
Slide 18: Balance Sheet
BALANCE SHEET STRONGEST CAPITAL POSITION EVER Increase in loans in Assets 2014 mainly due to 2014 2013 2012 2011 2010 loans to individuals Cash & balances with CB 21 38 30 29 31 Decrease in investment Loans to credit institutions 109 102 101 69 68 property due to the Loans to customers 648 636 567 5
Slide 19: Loans to Customers
LOANS TO CUSTOMERS MORTGAGE LOANS COMPRISE 42% OF THE LOAN PORTFOLIO The Bank’s strong 700 Loans to corporates by sector (%) position in mortgage 648 636 Real Estate & Construction loans to individuals 50 Fishing reduces the risk of its 52 600 562 567 6 6 loan portfolio 7 25 Wholesale & Retail 46 52
Slide 20: Funding
FUNDING STRONG LONG-TERM FUNDING – LIMITED NEED FOR REFINANCING The Bank continues to Maturity of long-term funding 1000 91 diversify its funding. 939 934 Deposits remain the 892 901 58 61 ISK FX Bank’s largest source of 52 59 32 32 813 58 funding 32 34 71 71 58 69 70 The outlook on the 750 26 134 1
Slide 21: Capital Base
CAPITAL BASE SOLID CAPITAL BASE – PROPOSED DIVIDEND OF ISK 12.8 BILLION, 45% OF NET EARNINGS Solid level of 200 Total capital base Total capital ratio (%) capitalization due to 184 strong profit 30 171 generation 32 26.3 159 Dividend of ISK 7,811 32 24.3 150 23.6 million paid in Q2 141 4.5 34 131 21
Slide 22: Key Financial Indicators
KEY FINANCIAL INDICATORS 22
Slide 23: Key Financial Indicators
KEY FINANCIAL INDICATORS Return on equity (%) Cost-to-income ratio (%) Net interest margin (%) Problem loans* (%) 12.5 56.5 49.9 53.5 14.8 3.5 6.3 2.6 2.8 8.2 7.1 4.4 Q4-12 Q4-13 Q4-14 Q4-12 Q4-13 Q4-14 Q4-12 Q4-13 Q4-14 Q4-12 Q4-13 Q4-14 Loans-to-deposits ratio (%) Tier 1 ratio (%) Return on RWA (%
Slide 24: Key Financial Indicators
KEY FINANCIAL INDICATORS Return on equity (%) Cost-to-income ratio (%) Net interest margin (%) 54.2 57.3 52.5 49.8 50.1 18.6 3.4 3.4 2.7 2.9 2.8 13.4 13.8 10.5 9.2 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 CPI Imbalance – ISK bn. FX Imbalance – ISK bn. Risk weighted
Slide 25: Slide 25
Slide 26: Additional Information: Income Statement – EUR
ADDITIONAL INFORMATION INCOME STATEMENT – EUR (MILLION) 2014 2013 Q4 2014 Q4 2013 Net interest income 156 147 38 34 Net commission income 86 69 21 18 Net financial income 47 10 9 4 Other income 59 47 34 22 Operating income 349 273 102 78 Salaries and related expense (90) (83) (26) (25) Other operati
Slide 27: Additional Information: Balance Sheet – EUR
ADDITIONAL INFORMATION BALANCE SHEET – EUR (MILLION) Assets 2014 2013 2012 2011 2010 Cash & balances with CB 137 240 176 184 199 Loans to credit institutions 705 645 598 435 441 Loans to customers 4,197 4,011 3,355 3,536 2,933 Financial assets 660 546 816 993 876 Investment property 44 180 171 171 1
Slide 28: 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