Arion Banki Hf · OMXICE:ARION
Arion Banki Hf — Investor Presentation (March 2024)
27 slides from Arion Banki Hf's investor presentation, March 2024
Slide 1: Investor Presentation March 2024
Investor Presentation March 2024
Slide 2: Operating in an attractive market
Operating in And a track With a unique an attractive record of position market delivering
Slide 3: Opportunities for growth in a dynamic business climate
Opportunities for growth in a dynamic business climate Operating in an attractive market With a unique position And a track record of delivering Dynamic business climate Opportunities for growth • Iceland is among the top 15 Record growth of the most educated countries in the world Icelandic populat
Slide 4: Track record of solid economic growth
Track record of solid economic growth Operating in an attractive market With a unique position And a track record of delivering Iceland's thriving economy attracts an international workforce which has led to one of the highest rates of population growth in Europe contributing to robust and consisten
Slide 5: Favorable demographics foster growth
Favorable demographics foster growth Operating in an attractive market With a unique position And a track record of delivering With largest generation aged between 25-35, the demographics are deemed to be favorable for the foreseeable future Working age population Population age distribution Share o
Slide 6: Strong financial standing of private and public sectors
Strong financial standing of private and public sectors Operating in an attractive market With a unique position And a track record of delivering provides fertile ground for continued entrepreneurship and innovation Households' financial assets and liabilities Household and non-financial corporate d
Slide 7: Exports remain robust as tourism bounces back
Exports remain robust as tourism bounces back, fostering Operating in an attractive market With a unique position And a track record of delivering economic vitality Number of foreign tourists Exports -ISK bn per quarter, seasonally adjusted (Jan 2024 price levels) 3,500,000 600 3,000,000 500 2,500,0
Slide 8: Arion is positioned in the most attractive customer segments
Arion is positioned in the most attractive customer Operating in an attractive market With a unique position And a track record of delivering segments with a strong and diversified product offering Mortgages Mandatory pensions Car loans Integrated model with diverse key Supplementary pensions Consum
Slide 9: Strong financial and risk profile
Strong financial and risk profile Operating in an attractive market With a unique position And a track record of delivering Diverse income mix Diverse loan book Operating income 2023 Loans to customers YE 2023 CET1 19.7% Leverage ratio 12.4% ISK 64.2bn ISK 1,153bn LCR 192% Problem loans 1.7% 9
Slide 10: Focused strategic direction has enabled us to significantly exceed our medium-term targets
Focused strategic direction has enabled us to significantly Operating in an attractive market With a unique position And a track record of delivering exceed our medium-term targets ROE target of >10% reached in 2021 – revised target of >13% reached in 2022 and 2023 Target revised to cost to core inc
Slide 11: 2019 strategic focus areas remain the guiding light
2019 strategic focus areas remain the guiding light Capital Markets Day 2019 2019-2023 Next steps…. Updated strategic priorities Strong delivery Strategic refinements to secure long-term success • Increased operational efficiency through key 2019 2021 2023 cost initiatives The strategic priorities l
Slide 12: The Arctic offers significant potential in the long term
The Arctic offers significant potential in the long term Key focus sectors • One third of rare earth metals and Continued measured and deliberate steps materials to position ourselves to play a key role in the Arctic region Fishing • ~40% of farmed salmon and related species • Arion is in a unique p
Slide 13: Continued focus on sustainability
Continued focus on sustainability The Bank received strong ESG ratings and aims to be net zero by 2040 Next steps in our sustainability journey Aim to reduce financed emissions in the sectors which Sustainalytics places Arion Bank in the have the most impact in line with net zero target by top 5% of
Slide 14: Medium term targets
Medium term targets* Operating in With a unique And a track >13% Return on equity an attractive market position record of delivering >7.2% Core income over REA • Robust Icelandic economy with • Broad product offering with an • ROE above local competitors for <45% Cost to core income strong foundatio
Slide 15: Appendix
Appendix
Slide 16: Blikastadir is one of the Bank's non-strategic assets
Blikastadir is a part of Landey portfolio and is one of the Bank’s non-strategic assets (Book value ISK 6.7bn) Local planning in progress This first phase area is expected to be approximately 30-35 ha. with around 1,200 units, divided between family housing and apartments. A new school will also be
Slide 17: A new approach to our development assets
A new approach to our development assets A combination of local market expertise and deep sector Robust real estate know- w “ -stop- ” company A strong real estate and development company that covers the entire real estate process from start to • Arion Bank is exploring the option of creating a new
Slide 18: Net interest margin
Net interest margin Stability through the cycle and near-term tailwind Evolution of NIM Near-term NIM outlook Examples of strategic initiatives impacting NIM • Stability in net interest margin through the cycle around 3% Repricing of the fixed rate mortgages will Loyalty projects support customer re
Slide 19: Net fee and commission income
Net fee and commission income Continued momentum Evolution of fee and commission income Near-term outlook Strategic initiatives impacting fee generation • Robust growth over past five years with increase of 65% from 2019 Slower economic growth outlook is a near Capital velocity enhanced utilization
Slide 20: Vörður
Vörður Expected to deliver up to ISK 5bn in pre-tax profit, at a high return on capital employed The road to enhanced profitability Outlook Strategic initiatives impacting net of insurance insurance and financial income • ’ combined ratio was 97% in 2023 which is high in a historical perspective. At
Slide 21: Operating expenses
Operating expenses Ongoing efficiency drive Examples of strategic Evolution of OPEX initiatives impacting operating Near term OPEX outlook expenses Cost increase in recent years been below inflation and held relatively General inflationary pressures IT investment commitment supporting stable while s
Slide 22: Cost of Risk
Cost of Risk Solid position Evolution of Cost of Risk Near term Cost of Risk outlook Strategic initiatives impacting Cost of Risk • Current expected credit loss levels predict 30bps cost of risk in the near term, impacted by conservative IFRS 9 assumptions High interest rates are a near term Close d
Slide 23: Funding
Funding Navigating through multiple Near-term funding considerations capital and funding constraints Enhanced stability and diversity Covered bonds Regulatory constraints Deposits • Established domestic investor base and • MREL requirements inaugural euro covered bond in 2021 with • MREL- subordinat
Slide 24: Capital and credit rating
Capital and credit rating Ongoing strategic review on Arion’s optimal credit rating coverage Medium term capital target unchanged Issuer rating BBB Covered bond A+ Outlook Stable Arion is currently undertaking a review of the appropriate number of credit rating agencies Target capital structure over
Slide 25: Increased investment in and higher productivity of digital development organization
Increased investment in and higher productivity of digital B development organization Mid ’ Agile@Scale transformation already delivering Continued investment in IT development Acceleration of Data ambitions with new Data improved productivity planned for ’ -’ organization reporting to CDAO # of tec
Slide 26: Key initiatives to drive continued financial momentum
Key initiatives to drive continued financial momentum Projects outlined in earlier presentations have clear positive impact to financial performance Strategic projects with clear positive financial impact, around resilience, efficiency and growth opportunities IT Retail Banking Vörður Investment com
Slide 27: 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, Arion