Arion Banki hf · OMXICE:ARION
Arion Banki hf — Arion Bank — Shareholder Meeting (March 2020)
27 slides from Arion Banki hf's shareholder meeting presentation, Mar 17, 2020
Slide 1: Aðalfundur Arion banka hf. 2019
Aðalfundur Arion banka hf. 2019 17. mars 2020
Slide 2: The Economic Environment
The Economic Environment Impact from COVID-19 and economic fundamentals
Slide 3: From stagnation to recession
From stagnation to recession Forecasts expected stagnation beforehand – the COVID-19 virus renders those forecasts obsolete Global growth forecasts for 2020 GDP growth forecasts for Iceland in 2020 • On March 11, the World Health Organization 3,3% 1,0% 3,5% defined the spread of COVID-19 as a 0,5% 0
Slide 4: Tourism in Iceland
Tourism in Iceland Tourism has become one of the basic industries of the economy Share in total exports No. of persons employed in tourism – thousands • In a short time, tourism has become the 100% 40 18% country's largest FX generating industry. In 90% 30% 29% 28% 27% 29% 27% 26% 25% 25% 30% 35 16%
Slide 5: Tourism is hard hit by COVID-19
Tourism is hard hit by COVID-19 A great number of companies may be forced to lay off employees Consumption of tourists – bn. ISK at 2019 prices EUR/ISK • It is impossible to quantify the impact of the 400 155 Coronavirus on the Icelandic economy at 350 this time. To the left is one possible 150 300
Slide 6: The foundations are strong
The foundations are strong Both fiscal and monetary policy are in a good position to support the economy • The Icelandic economy has seldom been as Central government debt - % of GDP Household and non-financial corporate debt - % of GDP well equipped to handle a downturn as at 100% 400% this time. T
Slide 7: Corporate sector overall equity ratio still high
Corporate sector overall equity ratio still high Slower growth in asset prices, growth in revenue and lower interest rates could lead to increased debt 2002 2004 2007 2008 2012 2015 2017 2018 Equity ratio 29% 31% 32% 13% 31% 42% 43% 43% Total debt / EBITDA 7,2 7,3 9,3 12,2 8,5 6,9 7,0 8,0 Long-term
Slide 8: Credit risk
Credit risk and credit exposure to tourism industry
Slide 9: Collateral for loans to customers
Collateral for loans to customers From Pillar III risk report 9
Slide 10: Real estate and construction exposure
Real estate and construction exposure Exposure in Real Estate and Construction decreased by 13.5% over the past 12 months • Around ISK 37,9 bn. or 10.7% Real Estate and Construction LTV for the Real Estate & Construction sector of the corporate loan portfolio is exposure, ISK bn 16.8% of total lendi
Slide 11: Tourism sector exposure
Tourism sector exposure Growth in the tourism sector is slowing down. Exposure has grown by 11.3% over the past 12 months • Growth in tourist arrivals has Tourism Overall bank lending to tourism sector declined markedly in 2019 after exposure, ISK bn - ISK bn 7.8% of Arion’s total lending portfolio
Slide 12: Improving asset quality
Improving asset quality Problem loans – gross (%) Pre-IFRS 9 implementation Post-IFRS 9 implementation • Problem loans is defined as 90 days past due but not impaired loans in Stage 3 and the 7.5 Individually impaired loans Individuals Problem loans ratio is 2.3 6.0 Corporates calculated based on th
Slide 13: Financials 2019
Financials 2019
Slide 14: Highlights of the year 2019
Highlights of the year 2019 Arion Bank is on a new trajectory after having undergone significant management and organizational changes and improvement measures in Q3 Earnings from continuing operations are ISK 14 billion and improve significantly. ROE from continuing operations improves YoY from 4.3
Slide 15: Arion Bank focuses on sustainable and responsible banking
Arion Bank focuses on sustainable and responsible banking International and domestic Arion Bank’s Environment Gender Equality Corporate Governance commitments and Climate Policy • A founding signatory of the UN PRB • Adopted in December 2019 • First bank in Iceland to gain the equal • Center for Cor
Slide 16: Arion Bank Group
Arion Bank Group Diversified business model and strong market position Retail Banking CIB Markets Insurance • Digital leader in the retail • Corporate banking and • Largest asset manager in the • The Bank’s subsidiary Vördur market strategic advisory Icelandic market is the largest life insurance •
Slide 17: World leader in digital sales
World leader in digital sales Digital sales as % of total sales - Arion Bank compared to international digital leaders Arion Bank 59% Digital leaders 50% Arion Bank Digital leaders 43% 43% Digital leaders 33% Arion Bank 22% 2017 2018 2019 Finalta reports 2017, 2018 and 2019
Slide 18: Market leader in digital banking
Market leader in digital banking Launched 7 customers facing products in 2019 Open App Personal Finance Management Launched in February 2019 Launched in July 2019 Everyone can use the Arion app by logging in through In the Arion app customers now have an insights option digital authentication, witho
Slide 19: Income statement 2019
Income statement 2019 The positive effect of the Bank’s revised strategy in Q3 is not fully reflected in the full year numbers • Strong growth in net interest income despite 2019 2018 Diff Diff% lower inflation mostly due to higher (average) Net interest income 30,317 29,319 998 3% interest bearing
Slide 20: Net interest income
Net interest income Revised strategy reflected in positive development in NIM as well as ratio of net interest income to credit risk Net interest income Credit risk • Net interest margin increases to 3% in Q4 in line with revised strategy of 8.0 7.8 7.7 694 increased focus on returns rather than 7.4
Slide 21: Total operating expenses
Total operating expenses Cost-to-income is trending towards target Cost-to-income ratio (%) Total operating expenses • Number of FTE’s reduced by 13.5% at the parent company from Q4 2018, mostly due to organizational changes at the end of Q3 with cost savings 6.6 6.9 6.6 6.9 6.5 materializing in Q4
Slide 22: Balance sheet - Assets
Balance sheet - Assets Balance sheet brought down in line with strategy as both loans and liquidity decrease • The Balance sheet decreases by 10.8% 31.12.2019 30.09.2019 31.12.2018 from 30.09.2019 ISK 1,082 billion ISK 1,213 billion ISK 1,164 billion • Loans to customers decrease by 4.7% from 30.09.
Slide 23: Loans to customers
Loans to customers Focus on profitability results in the loan book trending lower thus releasing RWA’s Loans to customers Loans to customers by sector (%) • Loans to customers decrease by 7.2% during 2019 • The loan book continues to be well Individuals balanced between individuals and corporates 13
Slide 24: Balance sheet – Liabilities and equity
Balance sheet – Liabilities and equity Deposits are increasing in the funding mix • Strong equity position and a very high 31.12.2019 30.09.2019 31.12.2018 leverage ratio despite capital release ISK 1,082 billion ISK 1,213 billion ISK 1,164 billion – Dividend payments of ISK 9.1 billion in Q1 2019 –
Slide 25: Funding and liquidity
Funding and liquidity No need for international funding in 2020 Maturity profile of Borrowing monthly to year end 2021 vs Liquid assets at YE2019 • Liquid assets cover all maturities in 2020 and 2021 Foreign currencies 162,7 • No need for international funding in Icelandic króna 2020 • The aim is to
Slide 26: Strong capital position further strenghtened with recent AT1
Strong capital position further strenghtened with recent AT1 Arion is well above any capital requirements – excess capital ISK 41-48 bn. • Arion finalized it’s inaugural AT1 in February, increasing capital by 1.7% 26,1% • SME supporting factor reduces RWA by 24,0% 2,8% Excess capital ISK 12bn (~0.4%
Slide 27: Disclaimer
Disclaimer • This document has been prepared for information purposes only and should not be relied upon, or form the basis of any action or decision, by any person. Nothing in this document is, nor shall be relied on as, a promise or representation as to the future. In supplying this document, Ario