English Icelandic
Published: 2022-02-09 18:20:00 CET
Arion banki hf.
Annual Financial Report

Arion Bank’s financial results for Q4 2021 and for the year 2021

Investor meeting / webcast on 10 February at 9:30 CET (8:30 GMT)

  • Arion Bank reports net earnings of ISK 6,522m in Q4 2021
  • Return on equity in Q4 was 13.4%, compared with 11.8% in Q4 2020
  • Net interest margin of 2.8%, compared with 2.9% in Q4 2020
  • Increase in net fee and commission income for sixth quarter in a row
  • Core income increased by 14.8%, compared with Q4 2020
  • Cost-to-income ratio in Q4 was 51.6%, compared with 44.9% in Q4 2020
  • ISK 1.5bn accrued in the quarter due to employee incentive scheme based on performance metrics at year-end. This includes the overarching KPI of achieving higher ROE than domestic competitors on average
  • The Bank’s total assets increased by 12.0% from year-end 2020
  • Dividend payment and share buy-backs amounted to ISK 31.5bn in 2021
  • The Bank’s total capital ratio was 23.8% and the CET1 ratio was 19.6% on 31 December 2021, taking into account the Board’s dividend proposal of ISK 15 per share, equaling ISK 22.5bn dividend payment, and ISK 4.3bn outstanding buyback of own shares. The dividend payout ratio is 79%
  • The Bank is very well positioned to distribute capital and meet the funding requirements of its customers
  • On 1 July 2021 Arion Bank entered into a definitive agreement on the sale of Valitor hf., subject to the approval of the ICA

Arion Bank reported net earnings of ISK 6,522m in the fourth quarter and ISK 28,615m during the year. Return on equity was 13.4% for the quarter and 14.7% for the year.

Total assets amounted to ISK 1,314bn at the end of the year, compared with ISK 1,173bn at the end of 2020. Loans to customers increased by 13.8% from year-end 2020, with mortgage lending increasing by 22.6% and corporate lending by 5.2%, especially in the fourth quarter. Liquid assets increased by 9.9% despite share buy-backs and dividend payments of ISK 31.5bn in 2021. On the liability side, deposits from customers increased by 15.3% from year-end 2020 and borrowings increased by 19.3%, mainly with new issues of green bonds and covered bonds in euros. Total equity amounted to ISK 195bn at the end of the year. Total equity increased due to net earnings but decreased due to dividend paid and share buybacks.

The Bank’s total capital adequacy ratio was 23.8% and the CET1 ratio was 19.6% at the end of the year. These ratios assume a dividend payment of ISK 22.5bn and the remainder of the current buyback program amounting to ISK 4.3bn based on permission from the Financial Supervisory Authority of the Central Bank of Iceland (FSA) from October 2021. 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 2021 despite the fact that the global pandemic and resulting restrictions left their mark on the year. The Bank reached all of its operating targets, and we teamed up with our customers on a wide range of stimulating projects and endeavours. The balance sheet remains strong and the capital ratio is 23.8%. The CET 1 ratio was 19.6% at year-end, despite share buybacks and dividends during the year. The Bank’s target CET 1 ratio is 17% and the board of directors’ proposal on dividends in 2022 is a step in that direction and in line with the Bank’s dividend policy. At year-end Icelandic pension funds held close to 47% of shares in Arion Bank and more than 90% of the Bank‘s shareholders were Icelandic. The number of shareholders were around 11,300 at year end and increased more than 50% during the year.

We strive to be a committed partner delivering shared progress. During the year we worked with numerous companies on exciting engagements such as the IPOs of Arctic Fish, Play, Íslandsbanki and Solid Clouds. The Bank also participated in various loan and advisory transactions with major companies in the pharma, retail, telecom and construction sectors. It was a record year in terms of mortgage lending, with a total of ISK 211bn in mortgages, and the Bank’s mortgage portfolio grew by ISK 85bn over the year. Assets under management increased by almost 20% to ISK 1,352bn at year-end. Arion Bank had the highest market share in equities trading on Nasdaq Iceland for the sixth year in a row.

Banks perform a key role in all societies by financing those projects which companies, investors and homes want to undertake. In keeping with the Bank’s environment and climate policy, we place a special emphasis on green financing, and during the year we released our first Green Financing Framework which applies to both lending and funding at Arion Bank. The Bank subsequently issued green bonds in Icelandic krónur and euros for a total of ISK 48bn. The first new green loan granted under the framework was a loan of ISK 16bn for Norðurál’s investment in a new production line, which will substantially reduce energy consumption when manufacturing aluminium rods and which has a far lower carbon footprint than if the product was manufactured overseas.

We have long been a market leader in Iceland in digital financial services. During the year investing in shares and funds became possible using the Arion app, and the number of equities trades via Arion online banking and the app more than trebled from the previous year. Using the app to manage one’s pensions continues to be a highly popular feature of the app, and sales of pension agreements have increased massively. The response to these innovations underlines how our customers appreciate it when we are able to simplify a service which initially appears complex and daunting to many people.

In 2021 Arion Bank ramped up the partnership with our subsidiary Vördur, with Vördur moving into Arion Bank’s headquarters at Borgartún 19. Our outstanding digital sales and service channels and shared infrastructure are integral to this partnership. Implementing the bancassurance model enhances and diversifies the range of financial services customers can obtain from Arion Bank, making us the leading one-stop shop on the Icelandic financial services market.”

Investor meeting / webcast on 10 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 10 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 webcast 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 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.

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

Forward-looking statements
This release contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial performance. The information in the release is based on company data available at the time of the release. Although Arion Bank believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors. The most important factors that may cause such a difference for Arion Bank include, but are not limited to: a) the macroeconomic development, b) change in inflation, interest rate and foreign exchange rate levels, c) change in the competitive environment and d) change in the regulatory environment and other government actions. This release does not imply that Arion Bank has undertaken to revise any forward-looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes after the date when this release was made. Arion Bank assumes no responsibility or liability for any reliance on any of the information contained herein. It is prohibited to distribute or publish any information in this release without Arion Bank’s prior written consent.

Arion Bank Consolidated Financial Statements 2021.pdf
Arion Bank Presentation Investor Q4 2021.pdf
Q4 2021 Press Release Arion Bank.pdf
RIL4VBPDB0M7Z3KXSF19 2021 12 31 En.zip