Arion Banki Hf · OMXICE:ARION
Arion Banki Hf — Q4 2024 Earnings Presentation
36 slides from Arion Banki Hf's earnings presentation, Feb 12, 2025
Slide 1: Investor presentation
Investor presentation 12 February 2025
Slide 2: Arion Bank – business overview and strategy
Arion Bank – business overview and strategy Diversified financial institution in Iceland with strong market position Retail Banking Operating income 2024 Corporate & Investment Banking (including insurance) (including insurance) • Comprehensive financial services to individuals • Corporate banking,
Slide 3: Solid 13.2% ROE in 2024 and a dividend proposal of ISK 11.5 per share
Solid 13.2% ROE in 2024 and a dividend proposal of ISK 11.5 per share Ongoing track record of delivering on key financial targets Medium-term Historical performance – selected metrics 2024 targets ROE 13.2% Exceed 13% Return on Equity Cost-to-core income 47.2% Below 45% ratio1 Core income2 / REA 7.1
Slide 4: Key milestones of the year
Key milestones of the year 18.5% growth in Assets under Efficient Retail Bank Robust activity in Corporate & Management in 2024 • 71% of core products sold digitally 2024* Investment Banking Including 36% growth at Stefnir • 15.9% increase in household deposits CAGR • 60.5% increase in insurance sal
Slide 5: Ongoing digital investments increasing customer satisfaction and efficiency
Ongoing digital investments increasing customer satisfaction and efficiency Family Finances in the App Smart Self-Service for Corporates Guardians now have an automatic overview of their c ’ b c 70% +50% of deposit and savings YOY increase in custody accounts created E2E account creations for in app
Slide 6: Significant progress in sustainable lending and enhanced reporting
Significant progress in sustainable lending and enhanced reporting Strong ESG ratings and targets on greenhouse gas emission reduction Sustainable asset pool ESG ratings Financed emissions and reduction targets Morningstar Sustainalytics places Arion Arion Bank became a member of Science Based Targe
Slide 7: Women invest!
Women invest! Significant impact 2024 Why In all areas of investments women are doubling or tripling their engagement compared with men Women are underrepresented when it comes to investments and finance 8.5% increase in assets held by women in custody accounts Objective 19% increase in women regula
Slide 8: We anticipate that 2025 will be a pivotal year for our key development assets
We anticipate that 2025 will be a pivotal year for our key development assets Significant milestones near-term Arnarland Arnarland spans 9 hectares and encompasses 450 residential as well as some commercial properties. Arion holds a 51% stake in a portion of the project, which covers approximately 5
Slide 9: Economic activity stronger than implied by NAS
Economic activity stronger than implied by NAS* GDP decreased by 1% between years in the first nine months of 2024, a result analysts have called into question. A slight increase in tourist arrivals, but shorter stays and consequently lower spending, have put pressure on the tourism industry. Despit
Slide 10: The Economic Outlook: Bouncing Back?
Economic growth forecasts for 2024-2026 Tourist arrivals via Keflavik International Airport The Economic Outlook: (millions annually) Bouncing Back? 6.0% 3 5.0% 2.5 - Over the last few months analysts have revised 4.0% downwards their economic forecasts for 2024, with 3.0% 2 the latest forecast assu
Slide 11: Households' financial position could fuel consumption
Households’ financial position Payment card turnover and private consumption (Quarterly data, YoY-% growth, constant prices/exchange rate) Number of home purchase agreements and housing price nationwide could fuel consumption 20% 2000 30% 1800 1600 25% 15% - Although private consumption has remained
Slide 12: The rate-cutting cycle gains momentum
Taylor rule and interest rate forecasts Labour supply The rate-cutting cycle gains momentum 10% 9% 100% 90% 80% 8% - Despite some easing, inflation has proven to be 70% 7% 60% resistant, measuring 4.6% in January. Headline 6% 50% inflation, however, does not fully reflect underlying 40% 5% inflation
Slide 13: Small economy, strong foundations
Small economy, strong foundations CBI’s FX reserves (EUR bn) Net international investment position (% of GDP) Total exports composition (index, total in 2012=100) 8 50% 7 160 6 0% 140 5 120 4 100 -50% 3 80 2 60 -100% 1 40 0 20 -1 -150% 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 20
Slide 14: Key takeaways from Q4 2024 and full-year 2024
Key takeaways from Q4 2024 and full-year 2024 ‣ ROE of 16.3% in the quarter which results in 13.2% for the year Operational performance ‣ Diversified pillars of the Group continue to support earnings momentum through the cycle ‣ Solid fourth quarter which concludes the strongest year for the busines
Slide 15: Income statement Q4 2024
Income statement Q4 2024 Net interest income Q4 2024 11,246 Q4 2023 11,347 Diff (1%) Q3 2024 11,863 Diff (5%) - Net profit of ISK 8.3bn resulting in ROE of 16.3% Net fee and commission income 4,136 3,903 6% 3,880 7% Insurance service results 327 (284) - 1,532 (79%) - Core income* increase by 5.8% Yo
Slide 16: Income statement 2024
Income statement 2024 Net interest income 2024 46,302 2023 44,685 Diff 4% - Net profit of ISK 26.1bn resulting in ROE of 13.2% Net fee and commission income 15,360 16,389 (6%) - Core income* increase by 4.6% YoY Insurance service results 2,166 152 - Net financial income 2,845 1,366 108% - Net intere
Slide 17: Net interest income
Net interest income Net interest income (ISK bn) Credit risk (ISK bn) Reduced but solid margin in line with . . . 2 5 .2 .2 guidance - Net interest income of ISK 11.2bn in Q4 which is a decrease of 0.9% between years 5. 5. 5. 5. . . .2 . 5.2 2. - Fluctuations in the net interest margin anticipated a
Slide 18: Net fee and commission income
Net fee and Net fee and commission income (ISK m) Net fee and commission income (ISK m) commission income , , , 5, Strong quarter , , , , , ,25 , - Best quarter in terms of fees for over a year, which , , 2 continues to be broad-based and diversified , 5 5 , , , 5 - Comparison between years impacted
Slide 19: Best full year results for insurance business
* Combined ratio (%) Vördur net earnings (ISK m) Best full year results for insurance business 5. , 5 . 5.2 . 22.5 2 . . - Net profit in the quarter of ISK 1,698m compared 2 . . . . . 2, with ISK 457m in Q4 2023 . . 22. . 2, 2 . - Favorable claims and reinsurance compared with .5 Q4 2023 at 71.3% 2.
Slide 20: Net financial income
Net financial income Net financial income (ISK m) Bond holdings (ISK bn) Improving market sentiment supports solid . results 2, 5 . 5 .2 2 . 5 . . .2 2 . 22. - Good quarter for core investment business; .5 . 5 . insurance and market making , 5 . 5 . , . - Total investment portfolio of Vördur is ISK
Slide 21: Operating expenses
Operating expenses* Cost ratios (%) Total operating expenses (ISK bn) Stable cost base in continued inflationary . environment 5 . 5 . . . . . . .2 . - Total operating expenses outlined here include . 5. . . . costs related to insurance business which is . . . .2 2. . accounted for through insurance
Slide 22: Balance sheet
Balance sheet Robust and relatively simple Assets 31.12.2024 30.09.2024 Diff. 31.12.2023 31.12.2022 31.12.2021 Cash & balances with CB 124 96 29% 102 114 69 - Loans to customers increased by ISK 9.6bn Loans to credit institutions 26 33 (22%) 29 46 30 or 0.8% in Q4 Loans to customers 1,230 1,220 1% 1
Slide 23: Loans to customers
Loans to customers Loans to customers (ISK bn) Loans to customers by sector (%) Balanced loan portfolio ,22 ,2 c , 5 .2 . , 5 . . c - Loans to customers total ISK 1,230bn at the end of . 5. c c 5. . the year, increasing by ISK 9.6bn or 0.8% during 5 5 , 5 .2 . c 5 2 the quarter. Effect of FX and CPI
Slide 24: Residential mortgages
Residential mortgages Residential mortgages by interest rate type (ISK bn) Indexed mortgages were 62% of the portfolio at 31.12.2024 Household debt to GDP (%) Relatively low household debt Low default rates and comfortable LTV 5 5 levels, but rising costs for borrowers 5 5 2 2 5 - The average loan-t
Slide 25: Real estate sector
Real estate sector Loans to customers Real estate collateral by type1 Diversified portfolio Loans to real estate companies are approx. 9.6% of total loans Well diversified collateral in terms of real estate type to customers and 1.0% relate to office buildings - Overall real estate related lending i
Slide 26: Risk profile
Risk profile Development of problem loans, moratoria and forbearance (% of total loan book) Development of problem loans ratio for loan portfolios (% of relevant loan book) Strong credit quality indicators while the .2 . problem loans ratio has recently trended 2. .2 2. upwards . .2 2. 2. . . 2. 2.
Slide 27: Loss allowance by IFRS 9 stages
Loss allowance by IFRS 9 stages On loans to customers total (ISK bn) Thereof on loans to corporates (ISK bn) IFRS9 economic scenarios and assumptions Loans to customers are 0.75% provisioned at Loans to corporates are 1.15% provisioned at Scenario weights remained unchanged throughout the year, foll
Slide 28: Deposits from customers
Deposits from Deposits (ISK bn) Deposit growth by LCR outflow category (ISK bn) customers 55 2 5 5 5 2 2 Continued momentum in stable deposits 5 55 2 2 5 5 5 5 2 5 - Deposits from customers of ISK 864bn represent 52 5 ’ b - Y Y w b “ b ” 2 2 categories and term deposits, reflecting the 5 strategic f
Slide 29: Funding and rating
Funding and rating Borrowings by type (ISK bn) Maturities of borrowings and call dates on Balanced maturity profile and positive subordinated liabilities (ISK bn) 2 spread development 5 - Successful issuance of Green Senior preferred 5 notes in SEK and NOK in October 5 5 - Total issuance of SEK 500m
Slide 30: Own funds
Own funds Capital ratio (%) Leverage ratio (%) Strong capital position 2 . 2 . 2 . 2 .2 22. 2. 2. . 2. 2.2 2. . 2. 2. 2. . .5 .5 2. 2. - CET1 position is 293bps above regulatory requirement - AT1 position optimized with new USD issue during the year . . . . .2 - REA increased by ISK 18bn or 1.8% dur
Slide 31: Own funds
Own funds Own funds and capital requirements (%) The capital ratios continue to be strong while capital 22. optimization continues 21.1 – 22.1 2. . . . 2.5 2. - Full-year net earnings of ISK 26.1bn and foreseeable dividends and ongoing buy- 2.5 backs of ISK 19.0bn included in the capital ratios show
Slide 32: Going forward
Going forward Operational momentum External environment Balance sheet • Positive operational momentum • Cautious stance as to evolving • Very strong balance sheet across the Group provides external rate and economic position with ability to capture optimism for 2025 environment growth opportunities
Slide 33: Key figures
Key figures* Operations 2024 2023 2022 2021 2020 Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023 Net interest income 46,302 44,685 40,201 32,063 31,158 11,246 11,863 11,948 11,245 11,347 Net commission income 15,360 16,389 16,449 14,673 11,642 4,136 3,880 3,979 3,365 3,903 Operating income 66,451 64,181 55,
Slide 34: Key financial indicators - quarterly
Key financial indicators - quarterly Return on equity (%) Cost-to-Core income ratio (%) Net interest margin (%) . . 5 .5 . .2 .2 . 5.5 5 . 5 . . . . . 2. . . . 2. 2. .2 .5 . . .2 .5 . 22 2 2 22 2 2 22 2 2 Loans to deposits ratio (%) Core operating income / REA (%) Capital ratio (%) (without loans fi
Slide 35: Key financial indicators - annual
Key financial indicators - annual Return on equity (%) Cost-to-Core income ratio (%) Net interest margin (%) . 5 . 5 . . . . . . 2. .2 .2 2. 5. . .5 2 2 2 2 2 22 2 2 2 2 2 2 2 2 2 22 2 2 2 2 2 2 2 2 2 22 2 2 2 2 CPI imbalance (ISK bn) Core operating income / REA (%) Risk exposure amount / Total asse
Slide 36: 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