Financial highlights for the second quarter of 2025

• Arion Bank reports net earnings attributable to shareholders of Arion Bank of ISK 9.8bn in Q2 2025, compared with ISK 5.5bn in Q2 2024
• Return on equity attributable to shareholders of Arion Bank was 19.7%, compared with 11.5% in Q2 2024
• Earnings per share in ISK of 6.59, compared with 3.86 in Q2 2024
• Net interest margin of 3.5%, compared with 3.2% in Q2 2024
• Net commission income was ISK 4.6bn, compared with ISK 4.0bn in Q2 2024
• Operation of Vördur contributed a standalone profit of ISK 0.8bn in the second quarter of 2025, compared with ISK 0.4bn in the previous year
• Other operating income was ISK 1.3bn due to a valuation increase in development assets
• Core income, defined as net interest income, net commission income and insurance service results (excluding opex of the insurance operation), increased by 19.8%, compared with Q2 2024
• Operating expenses remained relatively stable if one-off items in Q2 2024 are taken into account
• Effective tax rate was 28.0%
• Total cost-to-core income ratio was 36.6%, compared with 46.2% in Q2 2024
• Cost-to-income ratio was 31.4%, compared with 43.1% Q2 2024
• The balance sheet increased by 1.6% during the quarter
• Loans to customers increased by ISK 38.5bn or 3.1% during the quarter
• Share buybacks totalled ISK 3.0bn in the quarter
• The Bank’s capital ratio was 22.0% and the CET1 ratio was 18.0% at the end of June. The ratios take into account the deduction of 50% of net earnings as foreseeable dividend in line with the Bank’s dividend policy. These ratios comfortably exceed the requirements made by the FSA and Icelandic law

Financial highlights for the first 6 months of 2025

• Arion Bank reports net earnings of ISK 16.2bn for 6M 2025, compared with ISK 9.9bn in 6M 2024
• Return on equity was 16.1%, compared with 10.3% in 6M 2024
• Earnings per share in ISK of 11.22, compared with 6.92 in 6M 2024
• Net interest margin of 3.3%, compared with 3.1% 6M 2024
• Net commission income of ISK 9.1bn for the first half of the year, compared with ISK 7.3bn in 6M 2024
• Core income, defined as net interest income, net commission income and insurance service results (excluding opex of the insurance operation), increased by 17.8% compared with 6M 2024
• Operating expenses have remained relatively stable
• The effective tax rate was high, 29.9%, due to an unfavorable combination of income
• Total cost-to-core income ratio was 39.4%, compared with 47.2% in 6M 2024
• Cost-to-income ratio was 32.9%, compared with 44.1% in 6M 2024
• The balance sheet increased by 5.9% from year-end 2024
• Dividend payment and share buybacks of ISK 19.1bn in total in 6M 2025

Benedikt Gíslason, CEO of Arion Bank
“Earnings for the second quarter were good and exceeded our expectations. These solid financial results build on a range of factors, but the fact that virtually all the diverse businesses comprising the Group performed strongly was key to success. The market funding has also been positive for the Bank. As for corporate services, it was one of the busiest quarters on record, both in terms of loans and corporate advisory, with falling interest rates providing the incentive for increased investment in the economy. Changes in the valuation of Arion’s shareholding in the Arnarland development site, currently in the process of being sold, also had a positive impact on the Bank’s results. The Bank’s capital and liquidity positions remain robust.

The headline news was the letter of intent signed on 6 July concerning a proposed merger between Arion Bank and Kvika Bank. Under the terms outlined in the letter of intent, shareholders in Kvika will receive a 26% stake in the merged company should the merger go ahead. The aim is to create a solid financial institution which offers a comprehensive range of services for its customers. If the merger is completed, it will significantly enhance the financial services the merged company can offer retail and corporate customers and investors. The merger will create opportunities for more diverse revenue streams and risk distribution, thus creating a more effective business and bringing greater efficiency to the Icelandic financial market.

The Arion app is by far our most popular service channel and we constantly strive to develop and improve it to meet the ever-evolving needs of our customers. We were therefore delighted that the Arion app was voted the best banking app in Iceland in a survey by Maskína for the ninth year in a row. In addition to being able to conduct all your main banking in the app, parents can monitor activity on their children’s accounts and both open savings accounts and take out debit cards for them. Users can also trade with securities, invest in Stefnir funds and get a clear overview of their pensions as well as insurance at our subsidiary Vörður. The app also enables customers to sign up for the Arion Reward programme as we want them to reap every benefit of being an Arion customer.

During the quarter we formally completed the acquisition of the advisory firm Arngrimsson Advisors Ltd. The services offered by the company have now been integrated into the Bank’s service offering. The company provides asset advisory services to institutional investors, with a focus on international institutional investor funds and alternative investments. Arion customers will benefit from the international connections and extensive experience of investing for individual pension funds, instance and investment companies which have been developed over years. This augments the partnerships that Arion Bank has nurtured with international financial institutions in recent years and adds to the options available to our customers, particularly when it comes to investing in international alternative investment funds.”

Investor meeting / webcast in English on 31 July at 10:30 CEST (8:30 GMT)
Arion Bank will be hosting a meeting at the Bank’s headquarters in Borgartún 19, Reykjavík, on Thursday 31 July at 10:30 CEST (8:30 GMT) where CEO Benedikt Gíslason and Deputy CEO Ida Brá Benediktsdóttir will present the results and give an update on the economic environment. The meeting will take place in English and will also be streamed live.

The webcast will be accessible live on Lumiconnect and a link is also available on the Bank’s website under Investor Relations.

Participants attending virtually will be able to ask questions during the meeting through a message board on the same site. Answers will be provided by presenters at the end of the webcast.

Financial calendar
Arion Bank’s financial calendar is available on the Bank’s website.