Financial highlights for the fourth quarter of 2025

• Arion Bank reports net earnings attributable to shareholders of Arion Bank of ISK 6.2bn in Q4 2025, compared with ISK 8.3bn in Q4 2024
• Return on equity attributable to shareholders of Arion Bank was 11.6%, compared with 16.4% in Q4 2024
• Earnings per share were ISK 4.50, compared with ISK 6.01 in Q4 2024
• Net interest margin of 2.9%, unchanged from Q4 2024
• Net commission income was ISK 4.1bn, the same as for Q4 2024
• Vördur contributed a standalone profit of ISK 1.1bn in Q4 2025, compared with ISK 1.7bn in the previous year
• Core income, defined as net interest income, net commission income and insurance service results (excluding opex of the insurance operation), increased by 7.3%, compared with Q4 2024
• Operating expenses increased by 1.8%, equivalent to ISK 157m, compared with Q4 2024
• Effective tax rate was 22.6% during the quarter
• Total cost-to-core income ratio was 54.9%, compared with 57.5% in Q4 2024
• Cost-to-income ratio was 46.0%, compared with 48.0% Q4 2024
• The balance sheet increased by 1.1% during the quarter
• Loans to customers increased by ISK 27.3bn or 2.1% during the quarter, primarily driven by corporates

Financial highlights for the year 2025

• Arion Bank reports net earnings attributable to shareholders of Arion Bank of ISK 30.6bn for 2025, compared with ISK 26.1bn in 2024
• Return on equity attributable to shareholders of Arion Bank was 14.9%, compared with 13.2% in 2024
• Earnings per share in ISK of 22.05, compared with 18.31 in 2024
• Net interest margin of 3.2%, compared with 3.1% 2024
• Net commission income of ISK 17.1bn, compared with ISK 15.4bn in 2024
• Other operating income was ISK 5.5bn, derived from development assets
• Operation of Vördur contributed a standalone profit of ISK 2.0bn, compared with ISK 3.7bn in 2024
• Core income increased by 12.3% compared with 2024
• Operating expenses have remained relatively stable compared with 2024
• The effective tax rate was high, 27.7%, primarily due to subdued performance of equity holdings
• Total cost-to-core income ratio was 42.3%, compared with 47.2% in 2024
• Cost-to-income ratio was 36.0%, compared with 42.6% in 2024
• The balance sheet increased by 8.5% from year-end 2024
• The Bank’s capital ratio was 22.5%, and the CET1 ratio was 18.4% at the end of December. The ratios take into account the deduction of 50% of net earnings as foreseeable dividend and an ISK 5bn buyback program approved by the Board of Directors in 2025 and the FSA in January 2026
• The Board proposes a dividend payment of ISK 11.5 per share, equivalent to around ISK 15.3bn, net of own shares
• In relation to proposed dividend payments, Arion banki hf. and Kvika banki hf. have signed an addendum to the Letter of Intent regarding the merger of the companies executed in July 2025. The addendum provides that the merger exchange ratios will be adjusted to reflect the dividend payments, ensuring that the economic basis of the merger, as applied at the signing of the Letter of Intent, is not affected.

Benedikt Gíslason, CEO of Arion Bank
“Arion Group performed well in 2025 and return on equity exceeded our target. Income from the Bank’s core operations was in line with expectations, and as before, the strong results were driven by the diverse range of services we offer our customers. Capital and liquidity ratios remain well above regulatory requirements and statutory minimums. Arion’s Board of Directors will propose at the annual general meeting on 11 March that a dividend of ISK 11.5 per share be paid, corresponding to a dividend payment of around ISK 15 billion. 

In recent years we have highlighted the importance of structural reforms in the Icelandic financial market – strengthening the system and making it more efficient for the benefit of shareholders and customers. With this in mind, Arion sought to enter merger negotiations with Kvika, the country’s fourth largest bank. The companies’ boards agreed to initiate negotiations in midyear, and preliminary discussions with the Icelandic Competition Authority (ICA) are now underway. If those discussions yield a positive outcome, a formal submission will be made to the ICA. 

High interest rates and persistent inflation characterized the year and reduced demand for loans from retail customers. The situation was not helped by a Supreme Court ruling in October, in which an interest-rate adjustment clause on a nonindexed loan from Íslandsbanki was deemed partially unlawful. Many lenders, including Arion Bank, subsequently curtailed their supply of mortgage loans. In December, however, the Supreme Court ruled in a case against Arion Bank that the interest-rate adjustment clause on an indexed mortgage loan was lawful. 

Despite high interest rates, the Icelandic economy showed considerable resilience, and corporate demand for financing was substantial. Our business loans increased by ISK 90 billion during the year – one of the largest annual increases we have seen. It was also gratifying to see, when Gallup asked company executives at the end of the year which bank was leading the market in Iceland, that most named Arion Bank – something we are very proud of. 

A milestone was reached when we launched Arion’s new rewards programme, Arion Rewards. Customers of Arion Bank, Vörður, and Stefnir, as well as members of the Frjálsi Pension Fund, can now clearly see in the Arion app which rewards they currently enjoy and how they can move up a level. Alongside the programme, we introduced a new deposit account offering our best interest rate on demand deposits, contributing to strong deposit growth during the year – a trend that has continued into the new year. 

Stefnir set a strong example by lowering fees on fund transactions and eliminating the entry cost and minimum investment amounts. In addition, in collaboration with several housing developers, the company introduced a new co-ownership model designed to make it easier to buy residential property. 

The long-term initiative Women Invest has now been up and running for two years, and 8,000 women have attended one hundred educational events across the country. It is particularly gratifying to see tangible results, as the share of women in savings and fund subscriptions at Stefnir, and total assets in custody at Arion, has grown significantly faster than that of men over this two-year period. 

In recent years we have been working on the development of two major construction sites in the capital city region, in close collaboration with the local authorities. The goal has been to create attractive neighbourhoods that strengthen the surrounding community with strong connections to nearby natural areas. One of these projects, Arnarland in Gardabær, was completed during the year, and the detailed land-use plan for the first phase of Blikastadaland is now in the consultation process. We are therefore moving closer to beginning construction at Blikastadaland, one of the largest undeveloped areas in the capital city region.”

Investor meeting / webcast in English on 12 February at 9:30 CET (8:30 GMT)
Arion Bank will be hosting a meeting at the Bank’s headquarters in Borgartún 19, Reykjavík, on Thursday 12 February at 9:30 CET (8:30 GMT) where CEO Benedikt Gíslason and Deputy CFO Eggert Teitsson will present the financial results, and Chief Economist Erna Björg Sverrisdóttir will provide 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 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.