• Arion Bank reports net earnings of ISK 5,023m in Q4, compared with ISK 6,522m in Q4 2021
• Return on equity in Q4 was 10.7%, compared with 13.4% in Q4 2021
• Earnings per share in ISK of 3.44 in Q4, compared with ISK of 4.26 in Q4 2021
• Net interest margin of 3.1%, compared with 2.8% in Q4 2021
• Core income, defined as net interest income, net commission income and net insurance income, increased by 11.8% compared with Q4 2021
• Cost-to-core income ratio in Q4 was 53.8%, compared with 57.4% in Q4 2021
• ISK 1.6bn accrued in the quarter for employee incentive scheme based on performance metrics at year-end. This includes the overarching KPI of achieving higher ROE than the average ROE of the domestic competitors
• The balance sheet increased by 11.9% in 2022
• Dividend payment and share buybacks amounted to ISK 32.3bn in 2022
• The Board proposes a dividend payment of ISK 8.5 per share, equaling ISK 12.5bn, net of own shares
• The Bank’s total capital ratio was 24.0% and the CET1 ratio was 18.8% on 31 December 2022, assuming foreseeable capital release

Arion Bank reported net earnings of ISK 5,023m in the fourth quarter and ISK 25,416m for the year. Return on equity was 10.7% for the quarter and 13.7% for the year.

Total assets amounted to ISK 1,470bn at the end of the year, compared with ISK 1,314bn at the end of 2021. Loans to customers increased by 15.9% from year-end 2021. The increase was 22.6% in corporate lending and 10.6% in loans to individuals, mainly mortgages. Deposits from customers increased by 15.2% in 2022, with a 15.5% increase in core deposits, defined as deposits from individuals, SMEs and corporate customers. Total equity amounted to ISK 188bn at year end. Total equity decreased from year-end due to a capital release of ISK 32.3bn which was partly offset by net earnings for the year.

The Bank’s total capital adequacy ratio was 24.0%, and the CET1 ratio was 18.8% at the end of 2022. These ratios assume a dividend payment of ISK 12.5bn and the completion of the current buyback program amounting to ISK 3.3bn that had been authorized by the Financial Supervisory Authority of the Central Bank of Iceland (FSA). The Bank’s capital ratios comfortably exceed the requirements set by law and the FSA.

Benedikt Gíslason, CEO of Arion Bank
“Arion Bank performed well in 2022 despite challenging conditions in many areas. The economic impact of the war in Ukraine is complex and far-reaching. Energy prices have increased and inflation among many of Iceland’s neighbours has reached almost unprecedented levels. Iceland might be far removed from the war zone, but it has not been spared the uncertainty brought by the conflict. Nevertheless, the Icelandic economy proved resilient during the year and GDP growth is expected to be 6-7%, partly due to the fact that we are largely self-reliant in meeting our energy needs thanks to our eco-friendly hydropower and geothermal power. Return on equity at Arion Bank was good and exceeded our ROE targets. Interest and commission income and insurance income, which we define as core income, grew 17.5%, but the challenging markets meant that financial income was negative by ISK 3 billion. The Bank’s remains in robust health, with capital and liquidity ratios well above the Bank’s target levels. It has been proposed that dividends of ISK 12.5 billion be paid for 2022, and the Bank continues to buy back own shares in accordance with the Bank’s dividend policy.

The sale of Valitor was completed mid-year following a lengthy sale and approval process. The transaction has brought sharper definition to the Group’s focus. The employees of Vörður relocated to the headquarters of Arion Bank at the beginning of the year, deepening the partnership between the teams of Vörður, Stefnir and Arion Bank. Together the three companies can leverage their different strengths and offer our customers a comprehensive and accessible range of financial and insurance services. It is precisely this variety of services which gives the Group its competitive edge.

We strive to provide services which meet the needs of our customers. We see it as our role to help them reach their goals by providing our expertise, solutions and financial resources. At our headquarters we have a dedicated team of experts able to provide individuals, companies and investors with specialized advice and general financial services. We also offer diverse and personalized services and advice on insurance, pensions, savings and mortgages at our branches located throughout the country. The Arion app is our most popular service channel and in recent years we have released more than 30 innovations designed to make it easier for people to manage their finances. The convenience of the app has been a big hit with our customers, and on average they open the app more than once a day. Last year the Arion app was named the best banking app in Iceland for the sixth consecutive year by bank customers in a survey conducted by MMR. Studies of international banks indicate that Arion Bank is among the best performing banks globally in terms of digital services.

There was robust economic activity in Iceland in 2022 and the Bank was involved in a wide range of projects and engagements, including the stock market listings of Alvotech, Nova and Amaroq Minerals. The Bank also had the highest market share on Nasdaq Iceland, both in fixed income and equities and it was the seventh year in succession that the Bank has ranked number one in equities trading. There was also a strong influx of capital into the Bank’s asset management business and Stefnir funds, and investment returns were acceptable given the challenging market backdrop.

The international credit markets were not immune to the uncertainly unleashed by the conflict in Europe. However, Arion Bank is fortunate enough to be free of imminent funding needs in 2023. In fact the most important component of the Bank’s funding mix is customer deposits, which despite fierce competition grew 15% during the year. The Bank held two green bond issues in 2022, bringing the total to four since the publication of the Green Financing Framework. To consolidate our position on the international credit markets we added a credit rating from Moody’s during the year, and the Bank is now rated by both Moody’s and S&P Global Ratings.”

Investor meeting / webcast in English on 9 February at 9:30 CET / 8:30 GMT
Arion Bank will be hosting a meeting / webcast at the Bank’s headquarters in Borgartún 19, Reykjavík, on Thursday 9 February at 9:30 CET / 8:30 GMT where CEO Benedikt Gíslason and CFO Ólafur Hrafn Höskuldsson will present the results and Chief Economist Erna Björg Sverrisdóttir will give an update on the economic environment. The meeting will take place in English and will be streamed live.

The webcast will be accessible live on financialhearings.com 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, located below the video feed. Answers will be provided by presenters at the end of the webcast.

For any further information please contact Theodór Fridbertsson, Head of IR, tel.+354 856 6760, or Haraldur Gudni Eidsson, Head of Corporate Communications, tel. +354 856 7108.

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