Arion Banki hf · OMXICE:ARION
Arion Banki hf — Arion Bank — Q3 2014 Earnings Presentation
32 slides from Arion Banki hf's earnings presentation, 2014
Slide 1: Arion Bank Q3 2014
ARION BANK Q3 2014 CONFIDENTIAL
Slide 2: 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
Slide 3: Executive Summary
CONFIDENTIAL EXECUTIVE SUMMARY 3
Slide 4: Introduction
INTRODUCTION After several years of Five years after establishment Arion Bank believes the Bank is characterized by strong improvement, Arion exhibits a good the following: credit profile Significantly improved operating environment in Iceland Challenges remain, Leading domestic franchise, wit
Slide 5: Significantly Improved Economic Environment
SIGNIFICANTLY IMPROVED ECONOMIC ENVIRONMENT ECONOMIC PROGRESS COMPARES WELL TO OTHER EUROPEAN COUNTRIES GDP growth, YoY (% change) Average unemployment rate (%) Arion’s operating 30% environment has been 8% 25% transformed by 6% IMF IMF Iceland’s rapid 4% projections 20% 2% projections recovery sinc
Slide 6: Leading Domestic Franchise
LEADING DOMESTIC FRANCHISE #1 OR #2 IN MAJOR PRODUCT AREAS Arion’s leading Loans to households in 2013 (%) Loans to legal entities in 2013 (%) domestic franchise is Arion Bank Arion Bank evidenced by its #1 and Íslandsbanki Íslandsbanki #2 rankings across 11 1 19 7 15 major product areas Landsbanki
Slide 7: Loans to Customers Are Well Diversified
LOANS TO CUSTOMERS ARE WELL DIVERSIFIED INCREASE IN LOANS TO BOTH CORPORATES AND INDIVIDUALS Increased lending to Development (ISK bn.) Loan book by geographic distribution in 2013 (%) new export revenue 636 642 637 653 2.8 2.4 0.5 0.2 generating industries 567 576 Iceland It is the strategic 325 33
Slide 8: Ratings at the Sovereign Ceiling
RATINGS AT THE SOVEREIGN CEILING OUTLOOK CHANGED FROM STABLE TO POSITIVE ON OCTOBER 14TH Rating fundamentals Strong capital position Strong liquidity position Largely restructured loan book Strong earnings 8
Slide 9: Management and Strategy
CONFIDENTIAL MANAGEMENT AND STRATEGY 9
Slide 10: Current Ownership Structure
CURRENT OWNERSHIP STRUCTURE ARION IS OWNED BY THE CREDITORS OF KAUPTHING BANK (87%) AND THE GOVERNMENT OF ICELAND (13%) On behalf of its creditors, Kaupthing through its subsidiary Kaupskil, took ownership of Arion Bank on 8 January 2010 Kaupskil appoints six out of seven board members of Arion Bank
Slide 11: A Relationship Bank
A RELATIONSHIP BANK ARION BANK PROVIDES UNIVERSAL BANKING SERVICES TO CORPORATIONS AND INDIVIDUALS Prime emphasis on corporations and individuals seeking a variety of financial solutions Focus on building and strengthening long-term customer relationships by delivering excellent service and tail
Slide 12: Arion Bank's Cornerstones
ARION BANK´S CORNERSTONES BUILDING TRUST THROUGH A STRONG CULTURE Arion’s Cornerstones ROLE – WE MAKE A DIFFERENCE were introduced in early 2013 and refer to – Our role is to add to the long-term prosperity of our customers, co- the Bank’s role, workers, owners and society as a whole mindset and beh
Slide 13: The Result Is a Leading Bank in Iceland
THE RESULT IS A LEADING BANK IN ICELAND ARION BANK HAS TAKEN IMPORTANT INITIATIVES IN THE MARKET Re-opened the equity market with the IPO of Hagar, the largest retailer in the country Revolutionized the mortgage market The first Icelandic financial institution to offer non-indexed mortgages
Slide 14: Financials
CONFIDENTIAL f FINANCIALS « Arion Bank
Slide 15: Financial Highlights 9M 2014
FINANCIAL HIGHLIGHTS 9M 2014 Net earnings Return on equity Profitability ISK 22.6 bn. Profitability 19.9% 9M 2013: 10.0% 9M 2013: ISK 10.1 bn. Total assets Total equity Balance ISK 942 bn. Balance ISK 160 bn. 31.12.2013: ISK 939 bn. 31.12.2013: ISK 145 bn. Cost-to-income ratio Loans-to-deposits rati
Slide 16: Strong Financial Indicators
STRONG FINANCIAL INDICATORS Increasing Core Tier 1 due to good Return on equity (%) Cost-to-income ratio (%) Core Tier 1 ratio (%) profitability 54.2 52.5 49.8 57.3 48.7 Very positive cost-to- 21.1 19.9 19.1 19.2 income trend. 2013 13.4 10.5 13.8 15.2 16.4 position expected to 9.2 be temporary Stabl
Slide 17: Comparison with Peer Group (H1 2014)
COMPARISON WITH PEER GROUP (H1 2014) – ARION BANK COMPARES WELL WITH LOCAL COMPETITORS AND NORDIC BANKS Strong capitalization Return on equity (%) Cost-to-income ratio (%) Core Tier 1 ratio** (%) compared to Nordic peers 23.4 16.9 RWA calculated 12.7 12.3 50.5 55.6 54.0 47.4 26.1 27.3 21.1 15.6 acco
Slide 18: Income Statement
INCOME STATEMENT EXCELLENT RESULTS IN 9M 2014 Substantial increase in Million ISK 9M 2014 9M 2013 Diff Diff% Net commission income mostly due to Net interest income 18,309 18,313 (4) (0%) excellent performance Net commission income 10,119 8,284 1,835 22% in Cards and Net financial income 5,861 954 4
Slide 19: Balance Sheet
BALANCE SHEET THE BANK IS WELL PREPARED FOR THE LIFTING OF CAPITAL CONTROLS Increase in Loans to Assets customers related to Billion ISK 30.09.2014 30.06.2014 Diff% 31.12.2013 Diff% loans to individuals and Cash & balances with CB 33 17 92% 38 (12%) corporates in seafood, real-estate and Loans to cr
Slide 20: Improving Asset Quality
IMPROVING ASSET QUALITY GOOD PROGRESS IN PROBLEM LOANS DURING Q3 2014 The Bank has already Development of problem loans (%) reached its year end goal to be below 5% Loans in >90 days past due Other problem loans Problem loans as a percentage of equity 12.5 are now starting to resemble those of 6.5 6
Slide 21: Very Solid Capital Base
VERY SOLID CAPITAL BASE INCREASE IN NEW LENDING AFFECTS THE CAPITAL RATIO Arion Bank has maintained very solid levels of capitalization Total capital base (ISK bn.) Total capital ratio (%) due to strong profit generation. As Q3 is not audited the Bank cannot add 179 185 168 171 Q3 net earnings to it
Slide 22: Funding and Liquidity
CONFIDENTIAL FUNDING AND LIQUIDITY 22
Slide 23: Strong Funding Profile
STRONG FUNDING PROFILE WELL BALANCED FUNDING PROFILE Strong long-term Breakdown of liabilities and equity (%) Maturity of long-term funding 30.09.2014 (ISK bn.) funding and limited need for refinancing 85 ISK FX Long term financing 6 17 Equity mostly due 2020 or 56 Subordinated loans later 3 Covered
Slide 24: Sound Management of Liquidity
SOUND MANAGEMENT OF LIQUIDITY THE BANK EXCEEDS REGULATORY LIQUIDITY REQUIREMENTS Arion Bank´s liquidity Deposits from Customers by LCR categories 30.09.2014 position is strong On December 1st 2013 new liquidity rules took LCR ratio 30.09.2014 (%) 100% 2% effect. Minimum 8% requirement for the total
Slide 25: Appendix: Icelandic Economy
CONFIDENTIAL APPENDIX: ICELANDIC ECONOMY 25
Slide 26: Conclusions
CONCLUSIONS ALMOST ALL KEY VARIABLES HAVE IMPROVED DRAMATICALLY SINCE THE CRISIS, BUT CHALLENGES LIE AHEAD Economic Resilience Credit Risk Economic Imbalances The Icelandic economy has resumed Declining default rates and substantially External debt is still high, but healthy economic growth. Increas
Slide 27: Handsome Trade Surplus
HANDSOME TRADE SURPLUS SUPPORTS STEADY UNDERLYING CURRENT ACCOUNT SURPLUS Service exports have Composition of exports of goods and services changed substantially Other services in recent years and 14% Tourism have grown steadily on Aluminium 36% the back of growing Other goods 28% tourism. Between 2
Slide 28: Recovery Continues in the Real Estate Market
RECOVERY CONTINUES IN THE REAL ESTATE MARKET Housing prices in the capital area (% change, House prices (in real terms = 100 in 2005) 150 YoY) 140 50% The Icelandic real estate 130 40% market continues to 120 30% improve. Increased 110 20% 100 economic activity, 10% 90 growing purchasing 80 0% power
Slide 29: Government Finances Firmly on Track
GOVERNMENT FINANCES FIRMLY ON TRACK AFTER RUNNING LARGE DEFICITS AND WITNESSING A SURGE IN DEBT, FISCAL COURSE HAS TAKEN AN U-TURN Central government fiscal balance (% of GDP) Central gov. gross debt (bn. ISK / % of GDP) Arion Research Fiscal policy has been 15% 11.0 Long-term budget 1600 95 92 proj
Slide 30: Government Finances Prudent by International Comparisons
GOVERNMENT FINANCES PRUDENT BY INTERNATIONAL COMPARISONS DEBT STILL HIGH, BUT ON A DOWNWARD TRAJECTORY General government structural fiscal balance (% of GDP) The general government 6% deficit is now small 4% relative to the peer 2% 0% group, and shrinking -2% -4% If government finances -6% are kept
Slide 31: Maturity Profile of Foreign Debt Has to Be Extended
MATURITY PROFILE OF FOREIGN DEBT HAS TO BE EXTENDED STEEP REPAYMENT MAKES LANDSBANKINN’S DEBT RENEGOTIATION A NECESSITY Estimated instalments on non-Treasury Estimated instalments on non-Treasury The repayment schedule 7% foreign loans (% of GDP) 7% foreign loans after renegotiation of of foreign lo
Slide 32: www.arionbanki.is
WWW.ARIONBANKI.IS 32