Arion Bank reported net earnings of ISK 9.8 billion for the first six months of 2016, compared with ISK 19.3 billion for the same period of 2015. Return on equity was 9.5%, compared with 22.8% for the first six months of 2015. Normalized earnings amounted to ISK 2.8 billion, compared with ISK 7.8 billion in the first half of 2015. Return on equity from normalized operations was 2.8%, compared with 9.8% for the same period last year.
Total assets amounted to ISK 1,035.0 billion at the end of June, compared with ISK 1,011.0 billion at the end of 2015. Shareholders’ equity totaled ISK 199.2 billion at the end of June, compared with ISK 192.8 billion at the end of 2015. The Bank enjoys a strong financial position and there has been a focus on maintaining solid liquidity as the time for lifting the capital controls approaches.
The Bank’s capital ratio at the end of the period was 27.8%, compared with 24.2% at the end of 2015. Tier 1 Capital increased during the year to 26.8%, compared with 23.4% at the end of 2015.
Highlights of the income statement and key performance indicators:
| In ISK million | H1 2016 | H1 2015 | Q2 2016 | Q2 2015 |
| Net interest income | 14,626 | 13,175 | 7,353 | 7,392 |
| Net commission income | 6,747 | 7,434 | 3,528 | 3,677 |
| Net financial income | 3,495 | 9,723 | 3,796 | 2,184 |
| Share of profit of associates | 694 | 4,217 | 17 | 6 |
| Other operating income | 1,861 | 1,523 | 626 | 1,032 |
| Operating income | 27,423 | 36,072 | 15,320 | 14,291 |
| Salaries and related expense | (8,426) | (7,167) | (4,318) | (3,675) |
| Other operating expenses | (6,970) | (6,004) | (3,736) | (3,108) |
| Bank levy | (1,485) | (1,389) | (743) | (659) |
| Net impairment | 945 | (81) | 1,448 | (1,863) |
| Net earnings before taxes | 11,487 | 21,431 | 7,971 | 4,986 |
| Income tax | (2,091) | (2,367) | (1,354) | (647) |
| Net gain from disc. operations | 363 | 262 | 259 | 79 |
| Net earnings | 9,759 | 19,326 | 6,876 | 4,418 |
| KPI's: | ||||
| Return on equity (ROE) | 9.5% | 22.8% | 13.3% | 10.2% |
| Net interest margin (int. bearing assets) | 3.1% | 3.0% | 3.1% | 3.3% |
| Cost-to-income ratio | 56.1% | 36.5% | 52.6% | 47.5% |
| Tier 1 ratio | 26.8% | 21.8% | 26.8% | 21.8% |
Höskuldur H. Ólafsson, CEO of Arion Bank:
“Arion Bank’s financial results for the first half of 2016 did not meet expectations. The Bank nevertheless performed satisfactorily in its regular operations but external conditions had a negative impact. There was strong growth in loans, particularly to corporate clients. Corporate loans grew 8% during the first half of 2016 and net interest income was up 11%. Arion Bank is well prepared for the changes which the lifting of the capital controls will bring, being financially robust and with strong liquidity.
The conditions on the financial markets were negative for the Bank during the period. As a result, with the exception of Valitor's sale of its shareholding in Visa Europe, financial income was below expectations and the Bank recorded a substantial loss on its shareholdings in listed companies. Arion Bank arranged all IPOs in Iceland in 2015 but no new stock market listings have taken place this year and this affects the Bank's commission income. Operating expenses have increased. The main factor in this respect is higher salary expenses, particularly as a consequence of new collective wage agreements. A second reason is the growth in the number of employees, not least at the new branch at Keflavík International Airport which was opened in May and is now open round the clock every day of the year. The new branch represents a great opportunity for us. More employees were also hired at Valitor, which continues to invest in expanding its business internationally.
Arion Bank has been the leading Icelandic bank in terms of new funding on the international financial markets. In April Arion Bank issued its second bond in euros to a diverse group of investors at better terms than the bond issued a year earlier. These issues have met with great success and their performance on the secondary market has demonstrated that there is strong demand for bonds issued by Arion Bank. The Bank has also issued covered bonds and commercial paper on the Icelandic market and this has had a positive response.”
Conference call in English
Arion Bank will be hosting a conference call in English on Thursday 1 September at 1:00 pm GMT, where Stefán Pétursson, Chief Financial Officer, will discuss the highlights of the Bank’s financial results. People interested in participating can contact ir@arionbanki.is to obtain dial-in information.
For further information please contact Haraldur Gudni Eidsson of Arion Bank's Communications division at haraldur.eidsson@arionbanki.is, or tel. +354 444 7108.
