Financial highlights for Q1 2024

• Arion Bank reports net earnings of ISK 4,432m in Q1 2024, compared with ISK 6,291m in Q1 2023
• Return on equity was 9.1%, compared with 13.7% in Q1 2023
• Earnings per share in ISK of 3.07 in Q1, compared with 4.32 in Q1 2023
• Net interest margin of 3.1%, the same as in Q1 2023
• Net commission income was ISK 3.4bn, lower than in previous quarters
• Core operating income, defined as net interest income, net commission income and insurance service results (excluding opex of the insurance operation), decreased by 2%, compared with Q1 2023, mainly due to fee income
• Effective tax ratio was unusually high, 37.8%, due to unfavorable combination of income
• Cost-to-core income ratio in Q1 was 48.4%, compared with 46.8% in Q1 2023
• The balance sheet increased by 1.2% from year-end 2023
• Dividend payment of ISK 9 per share or a total of ISK 13.1bn in Q1 2024
• Loans to customers increased by 2.2% during the quarter. The increase was 3.2% in corporate lending and 1.4% in loans to individuals, mainly mortgages
• Deposits from customers increased by 1.2% during the quarter
• The Bank’s capital ratio was 23.2% and the CET1 ratio was 18.8% at the end of March. The ratios are determined on the basis of the unaudited net earnings in the quarter and take into account the deduction of 50% of net earnings as foreseeable dividend in line with the Bank’s dividend policy and ISK 5bn approved buyback of own shares. The Group's capital ratio, as calculated under the Financial Undertakings Act No. 161/2002, was 22.9% and the CET1 ratio was 18.6%. These ratios comfortably exceed the requirements made by the FSA and Icelandic law

Benedikt Gíslason, CEO of Arion Bank
“Net earnings in the first quarter were below our target. Lower earnings during the quarter are mainly due to weaker fee income and a high effective tax rate since the loss on equities holdings held against forward contracts resulted in a 38% tax rate in the quarter. Capital and liquidity positions remain strong, as does the Bank’s funding. We are now working on reaching our target CET 1 ratio. At the end of the period this ratio was 18.8%, 3.5 points above the regulatory minimum, with our target being 1.5 to 2.5 points higher than this requirement. A share buyback program is currently in progress and forms part of our strategy to bring this ratio closer to our targets.

Economic activity has slowed down against a backdrop of higher interest rates and this is one of the factors which has resulted in subdued fee income during the period. Following an invitation to tender by ISAVIA, we also closed our branch at Keflavík International Airport after having had a presence at the airport since 2016. We are proud of the service we provided to visitors during these eventful years. Our employees did a brilliant job, in often challenging circumstances, at welcoming travellers passing through the airport.

A fund managed by our subsidiary Stefnir has recently acquired Heimstaden Iceland, the country’s largest apartment rental company which owns approximately 1,600 properties in Iceland. The majority of Icelandic pension funds participated in the fund and total committed equity capital amounts to ISK 40 billion. The fund aims to drive the development of new housing and to double the number of units owned by the company by 2030. We are delighted to see how positively the fund has started and how many pension funds committed to this key project.”

Investor meeting / webcast in English on 2 May 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 2 May at 10:30 CEST (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 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.