Arion Banki Hf · OMXICE:ARION
Arion Banki Hf — Q1 2019 Earnings Presentation
33 slides from Arion Banki Hf's earnings presentation, May 8, 2019
Slide 1: First quarter results 2019
First quarter results 2019 Investor presentation 8 May 2019
Slide 2: Highlights during the quarter
Q1 2019 Highlights during the quarter Core earnings improved compared with Q1 2018 Irregular items such as WOW air bankruptcy and the Valitor legal case verdict affect net earnings negatively. Sale of the Banks share in Farice has a positive effect Digital journey continues with the launch of the bi
Slide 3: CEO of Arion Bank steps down after nine years in the job
CEO of Arion Bank steps down after nine years in the job New Chairman of the Board and two new Directors elected at the 2019 AGM Stefán Pétursson, CFO, Key decisions made at 2019 appointed as acting CEO AGM • Höskuldur H. Ólafsson, CEO of Arion Bank • Brynjólfur Bjarnason elected Chairman of Board s
Slide 4: Digital journey has produced outstanding results
FY 2018 Digital journey has produced outstanding results Total number Percentage of Video conference Digital car loans – YoY of customer touchpoints digital service touchpoint meetings with customers increase 34 million 97% 20,000 20% Percentage of digital credit Mortgages applied for Digital consum
Slide 5: Digital services and the change in customer behavior
Digital services and the change in customer behavior Number of Arion app users increasing at steady pace and new digital branches are very popular • The growth in active Arion Bank Active Arion App users1 Active online bank users1 app users continues to grow at a 000s 000s steady pace (6% in Q1) • N
Slide 6: Macroeconomic environment
Macroeconomic environment
Slide 7: Temporary contraction in GDP expected
Temporary contraction in GDP expected After strong 4.6% GDP growth in 2018, economic activity looks set to slow down in the short term • Falling exports are expected to bring an end to GDP per capita in 2018 GDP growth one of the longest growth - USD thousands 6.6% periods the Icelandic 74 economy h
Slide 8: New wage agreements reduce uncertainty
New wage agreements reduce uncertainty Inflation is expected to pick up again and household consumption is wavering • Wage agreement partly concluded in March at The ISK against major trade The labor market 150 currencies 10% 85% reasonable levels 140 84% 8% • WOW air’s bankruptcy 83% and the signin
Slide 9: Positive core earnings, but impact from weaker macro
Q1 2019 Positive core earnings, but impact from weaker macro Growing NII compared with Q1 2018, but NIM stable as inflation temporarily slowed down and positive effects of liability management have not materialized yet Slowing economy puts pressure on revenue growth and impairments Stable commission
Slide 10: Headline Figures
Q1 2019 Headline Figures Net earnings CET 1 Cost-to-income ratio Share of stage 3 loans, gross* ISK 1.0 bn. 21.3% 58.6% 2.5% Q1 2018: 31.12.2018: Q1 2018: 31.12.2018: ISK 1.9 bn. 21.2% 62.5% 2.6% Return on equity Leverage ratio Number of employees Mortgages/Total loans 2.1% 13.5% 917 41.2% Q1 2018:
Slide 11: Income statement
Income statement
Slide 12: Income statement Q1 2019
Income statement Q1 2019 Core earnings improve, but increased impairments and Valitor legal case have negative effects • Top line development strong compared with both Q1 and Q4 2018 Q1 2019 Q1 2018 Diff% Q4 2018 Diff% − Operating income up 8% vs Q1 2018 Net interest income 7,434 6,827 9% 7,969 (7%)
Slide 13: Net interest income
Net interest income Net interest income increased compared with Q1 last year in line with strategy • Net interest income increased Net interest income Effective inflation from Q1 2018 due to loan growth (6% Y0Y), increased focus on return and 8.0 management of liabilities. 7.3 7.2 7.4 4.2% Decrease
Slide 14: Net commission and net insurance income
Net commission and net insurance income Seasonality in net commission income and net insurance income Net commission income Net insurance income 1.0 2.7 2.7 2.7 0.3 0.3 0.8 0.4 2.2 2.2 0.7 0.3 0.3 0.3 0.2 0.2 0.2 0.3 111.9% 109.6% 1.1 1.3 0.9 1.2 1.0 90.0% 88.4% 79.4% 0.3 0.9 0.9 0.1 0.9 0.8 0.8 Q1
Slide 15: Net financial income
Net financial income NFI back to normal levels in Q1 compared with Q4 2018 • Bond holdings are mainly part of liquidity management Net financial income Bond holdings 91.3 • Equity holdings are mainly 81.5 strategic positions, largely 73.4 10.3 legacy holdings 63.8 10.0 59.2 9.2 22.9 7.1 22.3 • Marke
Slide 16: Total operating expenses
Total operating expenses Cost-to-income ratio improved compared with Q1 and Q4 2018 • FTE decreased by 2.2% from Q1 2018 Cost-to-income ratio (%)* • Wage inflation continues to put pressure on salary expenses, but salary expenses are stable due to reduction in FTE • Other operating expenses remain s
Slide 17: Balance sheet
Balance sheet
Slide 18: Balance sheet - Assets
Balance sheet - Assets Stable loan book – other interest bearing assets increasing • The balance sheet has grown by 31.03.2019 6.4% compared with year-end 31.12.2018 2018, mostly due to surplus ISK 1,223 billion ISK 1,164 billion liquidity • Loans to customers decreased Other1 79 by 0.5% from year-e
Slide 19: Loans to customers
Loans to customers Returns prioritized over loan growth • Loans to customers relatively stable Loans to customers Loans to customers by sector (%) − Slight reduction in loans to individuals 834 829 Individuals − Good diversification in the 58 58 12 Real Estate & Construction corporate loan book 765
Slide 20: Balance sheet – Liabilities and equity
Balance sheet – Liabilities and equity Strong equity position and well balanced funding • Net dividend payment in Q1 31.03.2019 totalling ISK 9.1 billion reduced 31.12.2018 the equity of the Bank ISK 1,223 billion ISK 1,164 billion − Strong equity position and a very high leverage ratio despite capi
Slide 21: Deposits
Deposits Continued focus on deposits both from individuals and corporates • Deposits represent 42% of the Bank’s funding Deposits and due to credit institutions and Maturity of deposits (%) Central Bank • Deposits from individuals have grown significantly in the last few 5 On demand years 9 500 • Mo
Slide 22: Borrowings
Borrowings Strong credit rating and well balanced maturity schedule • The Bank did several EMTN private placements in Q1 Borrowings Maturities of borrowings 445 including NOK 750 million 3 year 13 96.5 bond 418 16 82.0 • The Bank issued covered bonds 385 66.3 to finance mortgages in the 13 Icelandic
Slide 23: Own funds
Own funds Release of surplus capital continued in Q1 with a dividend payment • Capital ratio remains stable, increased Tier 2 with due to Capital ratio (%) Leverage ratio (%) issue of Subordinated loan of EUR 5 million (ISK 681 million) during Q1 26.7 16.7 17.8 • Arion Bank monitors the debt 15.4 14
Slide 24: Capital adequacy
Capital adequacy Own funds and capital requirements • The Bank’s total capital adequacy ratio is 22.3% as at 31 March Own funds and capital requirements (%) 2019. The ratio increased by 30 bps in the first quarter, partly due to a reduction of the Bank‘s loan book. • In October 2018, FME’s concluded
Slide 25: Going forward
Q1 2019 Going forward Continued focus on Net interest income and Net interest margin. The Bank will seek ways to reduce capital employed in its operations Cost control continues to be one of the key focus points supported by cost cutting initiatives and the digital strategy The intended divestment o
Slide 26: Arion Bank is committed to its medium term targets
Arion Bank is committed to its medium term targets Return on Equity Loan Growth Exceed 10% Prudent lending in line with economic growth CET 1 Ratio (Subject to regulatory requirements) Cost to Income Ratio Decrease to circa 17% Decrease to circa 50% Dividend Policy / Share buy-back Pay-out ratio of
Slide 27: KFI’s and other information
KFI’s and other information
Slide 28: Key financial indicators - annual
Key financial indicators - annual Return on equity (%) Cost-to-income ratio (%) Net interest margin (%) 28.1 56.0 56.9 58.6 48.9 3.0 3.1 2.9 2.8 2.7 32.4 10.5 6.6 3.7 2.1 2015 2016 2017 2018 Q1 2019 2015 2016 2017 2018 Q1 2019 2015 2016 2017 2018 Q1 2019 CPI Imbalance – ISK bn. FX Imbalance – ISK bn
Slide 29: Key financial indicators - quarterly
Key financial indicators - quarterly Return on equity (%) Cost-to-income ratio (%) Net interest margin (%) 62.5 56.8 58.6 6.3 2.8 2.7 2.7 3.6 2.1 Q1-17 Q1-18 Q1-19 Q1-17 Q1-18 Q1-19 Q1-17 Q1-18 Q1-19 Loans-to-deposits ratio (%) Tier 1 ratio (%) Liquidity coverage ratio (LCR) (%) without loans financ
Slide 30: Key figures
Key figures Operations Q1 2019 Q1 2018 Q1 2017 Q1 2016 Q1 2015 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018 Net interest income 7,434 6,827 6,904 7,273 5,783 7,434 7,969 7,209 7,314 6,827 Net commission income 2,218 2,205 2,198 3,219 3,757 2,218 2,746 2,687 2,712 2,205 Operating income 11,708 10,810 11,4
Slide 31: Balance sheet
Balance sheet Assets 31.03.2019 2018 2017 2016 2015 Cash & balances with CB 94 83 140 88 48 Loans to credit institutions 85 56 87 80 87 Loans to customers 829 834 765 712 680 Financial assets 128 115 109 117 133 Investment property 7 7 7 5 8 Investments in associates 1 1 1 1 27 Other assets 78 69 39
Slide 32: 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
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