Arion Banki Hf · OMXICE:ARION
Arion Banki Hf — Q2 2025 Earnings Presentation
30 slides from Arion Banki Hf's earnings presentation, Jul 30, 2025
Slide 1: Investor presentation
Investor presentation 30 July 2025
Slide 2: Key results
Key results Medium-term targets Q2 2025 H1 2025 Key results Return on equity1 Exceed 13% 19.7% 16.1% Core operating income2 / Exceed 7.2% 8.1% 7.6% REA Strong quarter and positive first half of the year Insurance revenue growth In excess of market 19.7% ROE vs medium-term target of above 13% (YoY)3
Slide 3: Strong operational momentum in Q2 2025
Strong operational momentum in Q2 2025 Funding and capital milestones Bancassurance initiatives advancing • Subordinated Tier 2 issuance of ISK 10bn Strong growth in both individual and corporate • Successful Green Senior Preferred issuance in SEK/NOK bancassurance in H1 2025 amounting to ISK 20bn B
Slide 4: Merger discussions between Arion Bank and Kvika Bank
Merger discussions between Arion Bank and Kvika Bank The merger represents a unique opportunity to create a leading financial institution in Iceland with diversified income streams and strong growth opportunities Overview Solid rational for Arion-Kvika combination While creating value for all stakeh
Slide 5: Indicative timeline suggests completion of the merger within 9-12 months
Indicative timeline suggests completion of the merger within 9-12 months Phase I ✓ Letter of intent signed on 6th of July Completed ✓ Agreement on heads of terms including exchange ratios Phase II ▪ Due Diligence process ▪ Pre-notification discussions with the ICA Ongoing Phase III ▪ Merger agreemen
Slide 6: The economic outlook: gradual recovery driven by domestic demand
The economic outlook: Economic growth forecasts for 2024-2027 Private consumption per capita - M. ISK per quarter and 4 quarter rolling average, 2025 gradual recovery driven by 6.0% prices 5.0% 1.6 domestic demand 4.0% 3.0% 1.5 - Economic growth stalled in 2024, restrained by 2.0% tight monetary pol
Slide 7: Inflation plateau keeps further rate cuts on hold
Inflation plateau keeps CPI by expenditure groups Disposable income and consumption expenditure of further rate cuts on hold 12% households -Bn. ISK per quarter, 4q rolling mean, 2025 prices 700 - The disinflation trend has hit a wall at around 10% 650 4% and is unlikely to resume before Q1 2026, ef
Slide 8: Small economy, strong foundations
Small economy, strong foundations CBI's FX reserves Net international investment position Total exports composition - bn. EUR - % of GDP - index, total in 2012=100 160 8 50% 140 6 0% 120 4 100 -50% 80 2 60 -100% 0 40 -2 20 -150% 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 -4 -
Slide 9: Key takeaways from Q2 2025
Key takeaways from Q2 2025 ‣ Very strong quarter across businesses, resulting in a ROE to shareholders of 19.7% Operational performance ‣ Diversified pillars of the Group continue to support earnings momentum through the cycle ‣ Strong growth in corporate loan book in Q2 ‣ High net interest margin p
Slide 10: Income statement Q2 2025
Income statement Q2 2025 Net interest income Q2 2025 14,200 Q2 2024 11,948 Diff 19% Q1 2025 12,166 Diff 17% − Net earnings attributable to shareholders of ISK Net fee and commission income 4,553 3,979 14% 4,536 0% 9.8bn, resulting in a return on equity (ROE) of Insurance service results 1,066 522 10
Slide 11: Income statement H1 2025
Income statement H1 2025 Net interest income H1 2025 26,366 H1 2024 23,193 Diff 14% − Net earnings attributable to shareholders of ISK Net fee and commission income 9,089 7,344 24% 16.2bn, achieving a return on equity (ROE) of Insurance service results 1,035 307 237% 16.1% Net financial income (772)
Slide 12: Net interest income
Net interest income Net interest income (ISK bn) Credit risk (ISK bn) Strong quarter driven by CPI impact and . ongoing reduction in funding cost . . . . . . . . . − In Q2, net interest income reached ISK 14.2bn, . . . . . reflecting an 18.8% annual increase − NIM was 3.5% in Q2 vs. 3.2% in Q2 2024.
Slide 13: Net fee and commission income
Net fee and Net fee and commission income (ISK m) Net fee and commission income (ISK m) commission income Fees remain diversified and robust − The CIB operation remains robust, particularly in terms of fees generated from lending and corporate finance due to increased activity and focused fee strate
Slide 14: Continued momentum in the insurance business in Q2
* Combined ratio (%) Insurance service result (ISK m) Continued momentum in the insurance . . . business in Q2 . . . . . . . . . . . . . . - Net result in the quarter ISK 839m compared with . ISK 407m in Q2 2024 . . - Favorable claims and reinsurance development from . . . . Q2 2024 which was affect
Slide 15: Net financial income
Net financial income Net financial income (ISK m) Bond holdings (ISK bn) Challenging equity markets . . . − Vördur's total investment portfolio stands at ISK . . . . 34.5bn, generating a profit of ISK 120m for the . . . . quarter, which includes adverse net impacts from . . insurance contracts . . −
Slide 16: Operating expenses
Operating expenses* Cost ratios (%) Total operating expenses (ISK bn) Stable cost base . . . . . . . . . . - Total operating expenses outlined here encompass . . . . . . . . costs associated with the insurance business which . . is reflected through insurance service results post . IFRS17 . . . . .
Slide 17: Balance sheet
Balance sheet Robust lending growth Assets 30.06.2025 31.03.2025 Diff. 30.06.2024 31.12.2023 31.12.2022 Cash & balances with CB 114 125 (9%) 136 102 114 - Loans to customers increased by ISK 38bn or Loans to credit institutions 35 27 28% 33 29 46 3.1% in Q2 Loans to customers 1,272 1,234 3% 1,203 1,
Slide 18: Loans to customers
Loans to customers Loans to customers (ISK bn) Loans to customers by sector (%) Balanced loan portfolio Other sectors . . . . inancial and - Loans to customers total ISK 1,272bn at the end of . . insurance activities . . the quarter, increasing by ISK 38.5bn or 3.1% ndustry energy . . and manufactur
Slide 19: Residential mortgages
Residential mortgages Residential mortgages by interest rate type (ISK bn) Indexed mortgages were 65% of the portfolio at 30.06.2025 Household debt to GDP (%) Relatively low household debt Low default rates and comfortable LTV levels, but the interest rate level impacts portfolio growth and composit
Slide 20: Risk profile
Risk profile Development of non-performing loans, moratoria and Development of NPL ratio between segments forbearance (% of total loan book) (% of relevant loan book) Strong credit quality indicators while the . . NPL ratio has recently trended upwards . . . . . . . . . . - The development of non-pe
Slide 21: Loss allowance by IFRS 9 stages
Loss allowance by IFRS 9 stages On loans to customers total (ISK bn) On loans to corporates (ISK bn) IFRS 9 economic scenarios and assumptions Loans to customers are 0.76% provisioned at Loans to corporates are 1.16% provisioned at Expected normalization of economic conditions on the back of high re
Slide 22: Deposits from customers
Deposits from Deposits from customers (ISK bn) Deposit growth by LCR outflow category (ISK bn) customers Continued momentum in stable deposits - Deposits from customers of ISK 899bn represent of the Bank’s total liabilities - Stable deposits consist of deposits from individuals, ’s and corporates wi
Slide 23: Funding and rating
Funding and rating Borrowings by type (ISK bn) Maturities of borrowings and call dates on Robust funding profile and stable ratings subordinated liabilities (ISK bn) - Successful issuance of ISK Tier 2 subordinated bonds totaling ISK 10bn finalized in May - Issuance of green senior preferred bonds i
Slide 24: Own funds
Own funds Capital ratio (%) Leverage ratio (%) Strong capital position . . . . . - CET1 position is 259bps above regulatory . . requirement . . . . . - Due to exchange rate changes, AT1 is slightly . below the optimized value. T1 and total capital . . . positions are 230bps and 233bps above regulato
Slide 25: Own funds
Own funds Own funds and capital requirements (%) The capital ratios continue to be strong 21.2 – 22.2 . . . - H1 net earnings of ISK 16.2bn and foreseeable dividends of 50% thereof are . . . included in the capital ratios presented . . . - Total buy-back of ISK 6bn concluded during the first half of
Slide 26: Going forward
Going forward Operational momentum External environment Strategic development • Strong first half of the year • Cautious stance as to evolving • Proposed merger with Kvika a demonstrates good momentum in external rate and economic natural step in our strategic core earnings and the strategic environ
Slide 27: Key figures
Key figures* Operations H1 2025 H1 2024 H1 2023 H1 2022 H1 2021 Q2 2025 Q1 2025 Q4 2024 Q3 2024 Q2 2024 Net interest income 26,366 23,193 22,420 19,221 15,358 14,200 12,166 11,246 11,863 11,948 Net commission income 9,089 7,344 8,638 8,138 6,839 4,553 4,536 4,136 3,880 3,979 Operating income 40,363
Slide 28: Key financial indicators - quarterly
Key financial indicators - quarterly Return on equity (%) Total cost-to-Core income ratio (%) Net interest margin (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans to deposits ratio (%) Core operating income / REA (%) Capital ratio (%) (without loans financed by covered bonds) . . . .
Slide 29: Key financial indicators - annual
Key financial indicators - annual Return on equity (%) Total cost-to-Core income ratio (%) Net interest margin (%) . . . . . . . . . . . . . . . CPI imbalance (ISK bn) Core operating income / REA (%) Risk exposure amount / Total assets (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Slide 30: 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