Arion Banki Hf · OMXICE:ARION
Arion Banki Hf — Q3 2024 Earnings Presentation
32 slides from Arion Banki Hf's earnings presentation, Oct 30, 2024
Slide 1: Q3 results 2024
Q3 results 2024 Investor presentation 30 October 2024
Slide 2: Key results in Q3
Key results in Q3 Key results Medium-term targets Q3 2024 9M 2024 Return on equity Exceed 13% 16.1% • 12.2% Strong quarter Core operating income4 / REA Exceed 7.2% 7.5% • 7.1% ‒ 16.1% ROE vs medium term target of above 13% ‒ Strong period for the insurance business Insurance revenue growth In excess
Slide 3: Key operational highlights
Key operational highlights Record insurance quarter 13% growth in Assets under Moody’s raised Arion Bank´s Management YTD covered bond rating to Aa1 Net results of ISK 1.7bn and 70% ISK bn combined ratio Bancassurance ratio: • Individuals 36.0% vs 34.9% YE 2023 • Corporates 27.8% vs 25.8% YE 2023 Ar
Slide 4: New sustainable financing framework published with increased focus on social projects
New sustainable financing framework published with increased focus on financing of social projects At the end of Q3 the Bank’s sustainable asset pool was New categories include: New agreement with the European Investment Fund ISK 194bn Committed finance by category - The European Investment Fund has
Slide 5: The economy shows (mixed) signs of cooling
The economy shows (mixed) signs of cooling A similar number of tourists, but shorter stays and consequently lower spending, have put pressure on the tourism industry. Despite a slight uptick in unemployment, the resilience of the labor market has been surprising, with the latest figures suggesting s
Slide 6: The Economic Outlook: Slower for Longer
The Economic Outlook: 6.0% Economic growth forecasts for 2023-2026 Tourist arrivals via Keflavik International Airport - millions annually Slower for Longer 5.0% 2.5 4.0% 2 - Over the last few months analysts have 3.0% revised downwards their economic forecasts 1.5 2.0% for the coming quarters, with
Slide 7: The puzzle of private consumption
The puzzle of private Payment card turnover and private consumption - quarterly data, YoY-% growth, constant prices/exchange rate Real house prices and number og purchase agreements nationwide consumption 20% 2000 1800 20% 1600 15% 15% - Although private consumption declined in Q2, 1400 10% 1200 pay
Slide 8: Rate cut against backdrop of easing inflation
CBI's key interest rates Companies planning to change staffing levels during the Rate cut against backdrop 10% -based on Arion Bank's inflation forecast next 6 months - share of companies of easing inflation 8% Forecast Specialised services Finance and insurance 6% Construction - Despite some easing
Slide 9: 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 7 6 120 0% 5 100 4 -50% 80 3 60 2 -100% 40 1 20 0 -150% 0 -1 2024* 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Slide 10: Key takeaways from Q3 2024
Key takeaways from Q3 2024 ‣ Solid quarter with all main income streams contributing to momentum Operational performance ‣ ROE of 16.1% in the quarter which then results in 12.2% for the first nine months ‣ Best quarter in the history of our insurance business Vörður contributing standalone net resu
Slide 11: Income statement Q3 2024
Income statement Q3 2024 Q3 2023 Diff Q2 2024 Diff Q3 2024 Net interest income Net fee and commission income 11,863 3,880 10,918 3,848 9% 1% 11,948 3,979 (1%) (2%) - Net profit of ISK 7.9bn resulting in ROE of 16.1% Insurance service results 1,532 395 288% 522 193% - Core income* increase by 14% YoY
Slide 12: Income statement 9M 2024
Income statement 9M 2024 9M 2023 Diff 9M 2024 Net interest income Net fee and commission income 35,056 11,224 33,338 12,486 5% (10%) - Net profit of ISK 17.8bn resulting in ROE of 12.2% Insurance service results 1,839 436 322% - Core income* increase by 4% YoY Net financial income 652 (4) - - NII in
Slide 13: Net interest income
Net interest income Net interest income (ISK bn) Credit risk (ISK bn) Solid margin while fluctuations anticipated .3 . . 3 . . - Net interest income in Q3 increased by 8.7% from Q3 2023 but decreased by 0.7% from Q2 2024 . . . . 3. 3. 3. 3. . 3. - Fluctuations in the NIM anticipated to potentially i
Slide 14: Net fee and commission income
Net fee and Net fee and commission income (ISK m) Net fee and commission income (ISK m) commission income , ,3 3, 3, Solid quarter 3, 3, , 3 3 . 3. 3 - Net fee and commission income remains stable . 3 3,3 , , between quarters and compared with same quarter 3 3. in 2023 3. . 3 3. 3 3. - Strong quarte
Slide 15: Historically highest quarterly profit and continued strong growth
* Insurance service result (ISK m) Combined ratio (%) , Historically highest quarterly profit and . 3. continued strong growth . . . . . . . - Vördur’s stand-alone operations had a net profit of ISK 1,737m for the quarter compared with ISK 48m . in Q3 2023 . . - Combined ratio 70.0% in Q3 and 87.4%
Slide 16: Net financial income
Net financial income Net financial income (ISK m) Bond holdings (ISK bn) Mixed results ,3 . . . . . 3 . . - Solid quarter for core investment business; . . . . insurance and market making . . 3. - Total investment portfolio of Vördur is ISK . 31.6bn; ISK 21.6bn of bonds and ISK 10.0bn in .3 3 .3 equ
Slide 17: Operating expenses
Operating expenses* Cost-to-Core income ratio (%) Total operating expenses (ISK bn) Continued cost discipline . . . . . . . . - Total operating expenses outlined here include 3. 3.3 3. costs related to insurance business which is 3. 3. . accounted for through insurance service results . . post IFRS1
Slide 18: Balance sheet
Balance sheet Robust and relatively simple Assets 30.09.2024 30.06.2024 Diff. 31.12.2023 31.12.2022 31.12.2021 Cash & balances with CB 96 136 (29%) 102 114 69 - Loans to customers increased by ISK 17.8bn Loans to credit institutions 33 33 0% 29 46 30 or 1.5% in Q3 Loans to customers 1,220 1,203 1% 1
Slide 19: Loans to customers
Loans to customers Loans to customers (ISK bn) Loans to customers by sector (%) Balanced loan portfolio , 3 , ther , 3 . , . Industry, energy - Loans to customers increased by ISK 17.8bn or 3. and manufacturing 3 . 1.5% during the quarter, thereof ISK 2.5bn impact inancial and . insurance activities
Slide 20: Residential mortgages
Residential mortgages Residential mortgages by interest rate type (ISK bn) Indexed mortgages were 59% of the portfolio at 30.9.2024 Interest rate reset profile for fixed rate mortgages (ISK bn) The bulk of fixed nominal rate loans are reset in 2024 and 2025 Low default rates and comfortable LTV leve
Slide 21: 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 3 - Overall real estate related lending
Slide 22: 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 the . 3. problem loans ratio is trending upwards . . . . - Despite increased prov
Slide 23: 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 Loans to customers are 0.80% provisioned at Loans to corporates are 1.24% provisioned at Deteriorating economic outlook is captured in a movement of w
Slide 24: Deposits from customers
Deposits from Deposits (ISK bn) Deposit growth by LCR outflow category (ISK bn) customers 3 3 3 Continued momentum in stable deposits 3 3. 3 3 - Deposits from customers of ISK 848bn represent 3 of the Bank’s total liabilities 3 3 - Stable deposit base between quarters but increase in deposits from i
Slide 25: Funding and rating
Funding and rating Borrowings by type (ISK bn) Maturities of borrowings and call dates on Balanced maturity profile and positive subordinated liabilities (ISK bn) 3 spread development 3 3 3 - Successful AT1 issuance in USD - Total issuance of $125 million - Alongside issuance of new AT1 notes Arion
Slide 26: Own funds
Own funds Capital ratio (%) Leverage ratio (%) Strong capital position . . . . . - CET1 position is 355bps above regulatory requirement 3. . . 3. . - Leverage ratio of 12.0% significantly above most . . 3. . international peers . . . . . - AT1 issuance strengthens the Bank's own funds . and the main
Slide 27: Own funds
Own funds Own funds and capital requirements (%) The capital ratios continue to be strong while capital 3. optimization continues 21.0 – 22.0 . . . . . . - 9M profits of ISK 17.8bn and corresponding foreseeable dividends of ISK 8.9bn included in the capital ratios shown . . - The Pillar 2 requiremen
Slide 28: Going forward
Going forward Good position to Robust balance sheet Solid momentum in core navigate evolving and capital optimization earnings drivers external environment commitment
Slide 29: Key figures
Key figures* Operations 9M 2024 9M 2023 9M 2022 9M 2021 9M 2020 Q3 2024 Q2 2024 Q1 2024 Q4 2023 Q3 2023 Net interest income 35,056 33,338 29,578 23,295 23,099 11,863 11,948 11,245 11,347 10,918 Net commission income 11,224 12,486 12,195 10,594 8,526 3,880 3,979 3,365 3,903 3,848 Operating income 48,
Slide 30: Key financial indicators - quarterly
Key financial indicators - quarterly Return on equity (%) Cost-to-Core income ratio (%) Net interest margin (%) . 3. . 3. 3. 3. 3. 3. . 3. 3. 3. 3. 3. . . . . . . 3 . 3 . 3 . 3 . . . . 3 3 3 3 3 3 3 3 3 3 3 3 Loans to deposits ratio (%) Core operating income / REA (%) Risk exposure amount / Total as
Slide 31: Key financial indicators - annual
Key financial indicators - annual Return on equity (%) Cost-to-Core income ratio (%) Net interest margin (%) . 3.3 . 3. 3. 3. . 3. . . . . . 3. . 3 M 3 M 3 M CPI imbalance (ISK bn) Core operating income / REA (%) Risk exposure amount / Total assets (%) . . . 3. . . . . . .3 . .3 . . . 3 . . 3 . . 3
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