Arion Banki Hf · OMXICE:ARION
Arion Banki Hf — Q1 2024 Earnings Presentation
33 slides from Arion Banki Hf's earnings presentation, Apr 30, 2024
Slide 1: Q1 Results 2024
Q1 Results 2024 Investor presentation 30 April 2024
Slide 2: Key results in Q1
Key results Medium-term targets Q1 2024 Key results in Q1 • Return on equity Exceed 13% 9.1% Core operating income5 / REA Exceed 7.2% • 6.6% Net results in the quarter below target ‒ 9.1% ROE vs. target of 13% ‒ High effective tax rate and subdued fee income Insurance revenue growth (YoY)1 In excess
Slide 3: Key milestones in Q1 2024
Key milestones in Q1 2024 Successful Capital Credit rating Commitment to Stefnir launched Markets Day review finalized capital optimization SRE III • Operating in an attractive • Going forward, the Bank will • Dividend of ISK 9 per share • Largest Icelandic real estate market operate with one intern
Slide 4: Stefnir launches the largest Icelandic real estate fund to date
Stefnir launches the largest Icelandic real estate fund to date The acquisition of Heimstaden’s residential portfolio in Stefnir is a key player in the Icelandic private equity and credit arena Iceland by SRE III Over ISK 225bn raised for private investments since 2009 • Heimstaden Iceland is the la
Slide 5: Arion Refund
Arion Refund Reward system for customers of the Arion Group with diverse financial services was launched in April Our bancassurance journey continues with a new refund program focused on families. Arion Refund is created to increase loyalty and satisfaction and highlight the value of being customer
Slide 6: Tight monetary stance curbs economic growth
Tight monetary stance curbs economic growth GDP increased by 4.1% in 2023, a result that was in line with Arion Research’s expectations. Growth was mainly driven by exports, as domestic demand lost pace quickly in the second half of the year following hefty rate hikes. This development is expected t
Slide 7: Iceland's economy on track for more balanced growth
Iceland's economy on Economic growth forecast -% Tourist arrivals via Keflavik International Airport - millions annually track for more balanced 5.0% 3 growth 4.0% 4.1% 2.5 2.5% 2 - After tremendous economic growth over the 3.0% 2.7% past two years, the Icelandic economy is 1.5% 1.5 2.0% expected to
Slide 8: Demand for labour still remarkably strong
Demand for labour still Key interest rates Wages and real wages - YoY %-change remarkably strong 10% 9% 12% Forecast 8% - The Icelandic economy has once again 10% 7% demonstrated its flexibility and resilience, as 8% 6% households have managed to withstand high 5% interest rates without significant
Slide 9: While tourism is thriving, innovative sectors are driving export growth
While tourism is thriving, Exports Other exports innovative sectors are - growth contribution of components - excl. tourism, seafood, aluminium, ships and aircrafts, bn. ISK at 2023 prices 8% driving export growth 7% 6% 700 Forecast 4.8% 600 5% 4.3% 3.7% 3.8% - While tourism has fully rebounded and
Slide 10: Housing dynamics: immigration influx vs mortgage constraints
Housing dynamics: Number of new housing units and change in the number of individuals aged 22 and over immigration influx vs 10,000 8,000 Fore cast mortgage constraints 6,000 4,000 2,000 - A significant influx of immigrants and - demographic shifts have escalated the demand for housing. Although the
Slide 11: Small economy, strong foundations
Small economy, strong foundations Net international investment position Total exports composition - % of GDP - index, total in 2012=100 50% 160 140 0% 120 100 (50%) 80 (100%) 60 40 (150%) 20 0 (200%) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2000 2001 2002 2003 2004 2005 2006 2007
Slide 12: Key takeaways from Q1 2024
Key takeaways from Q1 2024 ‣ Solid operational momentum while ROE of 9.1% in the quarter is below expectations Operational performance ‣ Subdued fee income and high effective tax rate negative drivers in the first quarter results ‣ Loss on equity holdings held against forward contracts leads to a ve
Slide 13: Income statement Q1 2024
Income statement Q1 2024 Q1 2023 Diff Q4 2023 Diff Q1 2024 Net interest income Net commission income 11,245 3,365 10,993 4,444 2% (24%) 11,347 3,903 (1%) (14%) - Net profit of ISK 4.4bn resulting in ROE of 9.1% Insurance service results (215) (736) 71% (284) 24% - Core income* decrease by 2% YoY, ma
Slide 14: Net interest income
Net interest income Net interest income (ISK bn) Main interests (%) Margin holding at robust level 11.0 11.4 10. 11.3 11.2 - Net interest income in Q1 increased by 2.3% from Q1 2023 but decreased by 0.9% from Q4 2023 3.1 3.2 3.0 3.1 3.1 - Despite lower inflation in Q1 2024 compared with Q1 2023 the
Slide 15: Net fee and commission income
Net fee and Net fee and commission income (ISK m) Change in net fee and commission income commission income Q4 23 vs Q1 24 (ISK m) 4,444 Net fee and commission Subdued quarter 13 income Q4 23 3, 01 4,1 133 30 3, 01 - Slow quarter in terms of deal related activity lowers 3, 4 4 Transferred to insuran
Slide 16: Insurance results
Insurance service result* (ISK m) Combined ratio (%) 11 .4 04 Insurance results 0 22. 10 .4 103. . 20.0 1 . 22 - The start of 2024 has seen a considerable .2 1 .0 improvement in insurance service results compared 1 .4 with the same quarter last year 133 2. - Q1 resulted in 13% revenue growth and 13%
Slide 17: Net financial income
Net financial income Net financial income (ISK m) Bond holdings (ISK bn) Challenging market environment 1 .2 1 .2 1 1. 1,3 0 14. 20.0 13 . 1 13 .2 1 . 1 . 20. 02 4 - Net financial income in the quarter muted or ISK 1.4 . 3 .4 43. 29m 22 2 - Total investment portfolio of Vördur is ISK 2 1 110.3 29.9b
Slide 18: Operating expenses
Operating expenses* Cost-to-Core income ratio (%) Total operating expenses (ISK bn) Continued cost discipline while inflationary . 4. pressure remains .3 1.4 .4 . .0 - Total operating expenses outlined here include 4 . 3.2 4 .4 3.2 3.3 2. costs related to insurance business which is 2. accounted for
Slide 19: Balance sheet
Balance sheet Robust and relatively simple balance Assets 31.03.2024 31.12.2023 Diff. 31.03.2023 Diff. 31.12.2022 Diff. sheet Cash & balances with CB 102 102 0% 80 28% 114 (10%) Loans to credit institutions 34 29 17% 63 (46%) 46 (26%) - Loans to customers increased by 2.2% in Q1 Loans to customers 1
Slide 20: Loans to customers
Loans to customers Loans to customers (ISK bn) Loans to customers by sector (%) Balanced portfolio 1,1 3 1,1 1,0 11. 12.3 ther sectors 3. 3. inancial and 3 . .0 insurance activities 23 44 1 02 .2 .0 holesale and - Loans to customers increased by ISK 25.9bn or retail trade 410 . .0 2.2% during the qu
Slide 21: Residential mortgages
Residential mortgages Residential mortgages by interest rate type (ISK bn) Indexed mortgages were 53% of the portfolio at year-end. Interest rate reset profile for fixed rate mortgages (ISK bn) The bulk of fixed nominal rate loans are reset in 2024 and 2025. Currently, most mortgage applications are
Slide 22: 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 to customers and 1.0% relate to office buildings Well diversified collateral in terms of real estate type 12% - Overall real estate related lendi
Slide 23: Risk profile
Risk profile Development of non-performing loans, moratoria and Development of problem loans ratio for loan portfolios (% of relevant loan book) forbearance (% of total loan book) Strong credit quality indicators while a . . 2. slight trend towards higher rate of 1. 2.3 2. payments past due observed
Slide 24: 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 Deteriorating economic outlook is captured in a movement of weights during the past quarters from the base Loans to customers are 0.76% provisioned at
Slide 25: Deposits from customers
Deposits from Deposits (ISK bn) Deposit growth by LCR outflow category (ISK bn) customers 34 24 3 2 02 3 (including due to credit institutions) Diversified deposit base supports strong 2 2 24 .2 0 .3 40 4 3.2 40.2 4 . position in competitive environment 1 2 14 . .3 3 21 2 2 1 0 1 .0 11 1 .2 - Deposi
Slide 26: Borrowings
Borrowings Borrowings by type (ISK bn) Maturities of borrowings and call dates on Balanced maturity profile and improved subordinated liabilities (ISK bn) 433 420 spread development 3 3 14 .4 12 . 3 - Covered bonds issued in the domestic market in 44 the quarter ISK 11.5 bn 2 . 1 1 - Funding spreads
Slide 27: Own funds
Own funds Capital ratio (%) Leverage ratio (%) Strong capital position 1 .1 12. 12.4 11. 12.0 - Capital position remains strong and above medium- 2 .0 term targets 2. - CET1 position is 350bps above regulatory 23. 24.0 24.1 1. 23.2 requirement 2. 2. 3. 2. - Leverage ratio of 12.0% significantly abov
Slide 28: Own funds
Own funds Own funds and capital requirements (%) The capital ratios continue to be strong while capital optimization 23.2 efforts are slowing 21.4-22.4 2. 1 . 1 . 1 . 2. 1. - Unaudited Q1 profits of ISK 4.4bn and corresponding foreseeable dividends of ISK 2. 1. 2.2bn included in the capital ratios s
Slide 29: Going forward
Going forward Positive general outlook while policy rate and inflationary outlook remains a key external consideration Overall positive The first quarter The Group is in a Very strong capital, The Icelandic outlook for the group results are however strong position liquidity and funding economy is ro
Slide 30: Key figures
Key figures* Operations Q1 2024 Q1 2023 Q1 2022 Q1 2021 Q1 2020 Q1 2024 Q4 2023 Q3 2023 Q2 2023 Q1 2023 Net interest income 11,245 10,993 9,476 7,342 7,253 11,245 11,347 10,918 11,426 10,993 Net commission income 3,365 4,444 3,556 3,277 3,076 3,365 3,903 3,848 4,187 4,444 Operating income 14,474 15,
Slide 31: Key financial indicators - quarterly
Key financial indicators - quarterly Return on equity (%) Cost-to-Core income ratio (%) Net interest margin (%) 22. 3. 4. 3.1 3.1 3.2 3.1 3.1 3.2 3.1 3.1 3.0 4 .4 4 . 4 .4 42.0 1 . 3 . 3 .4 3 .2 12. 13. 12. 12. 10. 10. .1 1 22 1 23 1 24 1 22 1 23 1 24 1 22 1 23 1 24 Loans to deposits ratio (%) (with
Slide 32: Key financial indicators - annual
Key financial indicators - annual Return on equity (%) Cost-to-Core income ratio (%) Net interest margin (%) 14. 3.3 1. 3.1 3.1 3.1 14.1 13. 2. 4 .4 2. 4 .0 44. .1 . 2020 2021 2022 2023 1 2024 2020 2021 2022 2023 1 2024 2020 2021 2022 2023 1 2024 CPI imbalance (ISK bn) Core operating income / REA (%
Slide 33: 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