English Icelandic
Published: 2022-07-27 18:53:00 CEST
Arion banki hf.
Half Year financial report

Arion Bank's Q2 2022 financial results

  • Arion Bank reports net earnings of ISK 9,712m in Q2 2022, compared with ISK 7,816m in Q2 2021
  • The sale of Valitor is fully accounted for in the second quarter results. The total consideration was ISK 14.6bn (USD 112.5m), resulting in a net gain of ISK 5.6bn
  • Return on equity in Q2 was 21.8%, compared with 16.3% in Q2 2021
  • Earnings per share in ISK of 6.47 in Q2, compared with 4.89 in Q2 2021
  • Net interest margin of 3.1%, compared with 2.9% in Q2 2021
  • Core income increased by 23.5%, compared with Q2 2021
  • Cost-to-income ratio in Q2 was 50.1%, compared with 42.5% in Q2 2021
  • The Bank’s total capital ratio was 23.5% and the CET1 ratio was 19.7% on 30 June 2022, including full effect of Valitor sale

Arion Bank reported net earnings of ISK 9,712m in the second quarter and 21.8% return on equity.

Total assets amounted to ISK 1,383bn at the end of the period, compared with ISK 1,314bn at the end of 2021. Loans to customers increased by 7.9% from year-end 2021. The increase is primarily in corporate lending, or an 12.5% increase from year-end 2021. Total equity amounted to ISK 183bn at period end. Total equity decreased from year-end due to a capital release of ISK 26.8bn which was partly offset by net earnings for the period.

The Bank’s total capital adequacy ratio was 23.5%, and the CET1 ratio was 19.7% at the end of June, including the full effect of the Valitor sale. The Group's capital ratio, as calculated under the Financial Undertakings Act No. 161/2002, was 23.1% and the CET1 ratio was 19.4%. These ratios comfortably exceed the requirements made by the Financial Supervisory Authority of the Central Bank of Iceland (FSA) and Icelandic law.

Benedikt Gíslason, CEO of Arion Bank
“Arion Bank has performed well in the first half of 2022, with the continued positive trajectory of the Bank’s core activities, and the completion of the sale of our subsidiary Valitor during the period, being key factors. The Bank’s core income grew by almost 24% from Q2 2021, with the main increase being in interest income. It was also an excellent quarter in terms of commission income, which reached record levels for a single quarter on the back of strong performances by corporate finance and asset management. However, challenging conditions on the financial markets have negatively impacted the Bank’s financial income. The Bank’s capital and liquidity positions remain robust, and the Bank’s new buyback program is awaiting regulatory approval.

A key milestone was reached on 1 July when Rapyd completed the acquisition of Valitor. The deal was in fact negotiated a year ago, and it has therefore taken longer than expected to complete the transaction. The approval of the Icelandic Competition Authority on 23 May, followed by the green light from the Financial Authority of the Central Bank of Iceland on 30 June meant that all conditions for the agreement had been met. The sale of Valitor simplifies the group structure at Arion Bank and refines our focus. However, our business continues to be built on diverse and solid foundations, as the Bank and our subsidiaries, Vörður and Stefnir, offer a comprehensive range of financial services. Such diversity is good for our customers, enabling them to obtain all the financial and insurance-related services they need, while also reducing volatility in the Bank’s financial results. Our role is to support our customers and help them achieve success in the tasks they undertake, and a modern and diverse service offering plays a critical part in this respect. It will be interesting to follow the journey awaiting Valitor, which is now part of the international fintech company Rapyd. I wish the company and its employees every success in their future endeavours.

Moody’s recently rated Arion Bank for the first time, and we are delighted with the results: A3 long-term bank deposit rating and Baa1 long-term issuer rating. Moody’s noted that the Bank had good profitability, founded on a broad revenue base from asset management, corporate finance and insurance, in addition to traditional banking services. Moody’s also listed the Bank’s robust capitalization, the low level of problem loans, and liquidity management as some of the Bank’s strengths. The Moody’s rating also has a positive outlook. Furthermore, S&P has affirmed Arion Bank’s long and short-term ratings with a stable outlook.

An integral part of our business is to have a positive impact on society and the environment. We therefore place great importance on operating sustainably and responsibly. Recently Arion Bank received the results of an ESG rating by the international ESG ratings company Sustainalytics. The rating shows that Arion Bank is among the top ranking European and global banks in this area and that there is considered to be low risk of ESG factors having a material financial impact at the Bank. It indicates that we have made significant achievements in terms of sustainability, and we are determined to go even further.

In recent quarters the Bank has significantly increased its share in the vehicle financing market, with a strong emphasis on competitive rates and outstanding service. We have long offered digital vehicle loans, and anyone can apply for a car loan online at any time of the day. The whole process, from submitting an application to having the loan paid out, is now 100% digital so that our customers can arrange a loan in just a few minutes, making our services more accessible and convenient for customers than ever before.”

Investor meeting / webcast in English on 28 July at 10:30 CEST (8:30 GMT)
Arion Bank will be hosting a meeting / webcast at the Bank’s headquarters in Borgartún 19, Reykjavík, on Thursday 28 July at 10:30 CEST (8:30 GMT) where deputy CEO and Managing Director of Retail Banking Ida Brá Benediktsdóttir 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.

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 Condensed Consolidated Interim Financial Statements 1 January 30 June 2022.pdf
Q2 2022 Arion Bank Presentation Investor.pdf
Q2 2022 Press Release Arion Bank.pdf