Arion Banki hf · OMXICE:ARION
Arion Banki hf — Arion Bank — Investor Presentation (March 2018)
32 slides from Arion Banki hf's investor presentation, March 2018
Slide 1: Arion Bank Investor Presentation March 2018
ARION BANK Investor Presentation March 2018
Slide 2: Key Highlights
Key Highlights 1 Macroeconomic environment 2 Leading Universal Banking Franchise in Iceland 3 Strong Balance Sheet and Good Asset Quality 4 Sound Funding Profile 5 Strong Capital Position 2
Slide 3: Macroeconomic Environment
Macroeconomic Environment 1
Slide 4: Iceland at glance – strong and modern economy
Iceland at glance – strong and modern economy… Strong economy with further upsides • Iceland became fully independent from Central location Denmark in 1944 1944 Full independence from • The second half of the 20th century saw Denmark substantial economic growth driven primarily by the fishing indust
Slide 5: Strong and modern economy with positive economic fundamentals
Strong and modern economy with positive economic fundamentals… Economic recovery since 2010 Unemployment rate significantly General government gross debt with strong outlook below other countries (% of GDP) • High standards of living % Real GDP Growth, Year-on-year1 • Strong culture and 10 % Average
Slide 6: Leading Universal Banking Franchise in Iceland
Leading Universal Banking Franchise 2 in Iceland
Slide 7: A leading universal relationship bank in Iceland
A leading universal relationship bank in Iceland with a differentiated and innovative approach Retail Banking Corporate Banking Investment Banking Asset Management ~ 29% market share1 Leading lender to large corporates A leading capital markets house Largest player in the Icelandic Largest
Slide 8: Current ownership structure
Current ownership structure Recent changes in the ownership structure Ownership structure (%) • In early 2017, Kaupskil sold a 29% share in Arion Bank in a private placement 2.55 3.37 • In February, Kaupthing 6.58 exercised a call option Kaupskil (Kaupþing) buying 13% stake in 9.50 Attestor Capital
Slide 9: Fully restructured bank, with potential for further value creation
Fully restructured bank, with potential for further value creation 2010-2012: 2013-2014: 2015+ 2010 31.12.2017 “Restructuring of the bank and “Streamlining and building of the “Strengthening market leadership Loan portfolio composition its customers” business” and harvesting full value potential” 25
Slide 10: Digital strategy delivering tangible results
Digital strategy delivering tangible results Strong customer focus Increasing digital impact Key digital initiatives Active online bank users1 Active Arion Bank app users1 +4% +6% +5% (1)% +20% • On-boarding of a new customer: Took number of visits to a branch, 66,788 69,299 73,769 77,178 76,328 46,
Slide 11: Strong Balance Sheet and Good Asset Quality
Strong Balance Sheet and 3 Good Asset Quality
Slide 12: All key financial indicators performing
All key financial indicators performing Arion bank has consistently delivered a strong financial performance Return on equity (%) Cost-to-income ratio (%) CET1 ratio (%) • Solid level of capitalization due to 28.1 26.5 56.7 56.0 56.1 23.6 49.1 21.6 22.3 strong profit generation 19.2 18.6 32.1 • Stea
Slide 13: Comparison with peer group (2017)
Comparison with peer group (2017) Arion Bank and Nordic peers Return on equity (%) CET1 ratio (%)* Cost-to-income ratio (%) • Strong capitalization 13.0% 56.1% 54.0% 23.6% 11.4% 49.0% 47.2% 19.5% 19.4% compared to Nordic 9.4% 10.7% 44.2% 17.6% 16.4% peers 6.6% • RWA calculated according to standardi
Slide 14: Balance sheet - Assets
Balance sheet - Assets All amounts in ISK billion Robust loan growth in line with economic growth • The balance sheet grew by 31.12.2017 31.12.2016 10.8% in 2017 ISK 1,148 billion ISK 1,036 billion • Strong growth in loans to Other and intangibles: 4% Other1 33 customers, specially in the Intangible
Slide 15: Loans to customers
Loans to customers All amounts in ISK billion Well balanced loan portfolio between corporates and individuals • Loans to customers increased by 7.4% in 2017 Loans to customers Loans to customers by sector (%) • The mortgage portfolio grew 765 Individuals by 9.7%, driven by new digital 712 55 680 13
Slide 16: Balance sheet – Liabilities and Equity
Balance sheet – Liabilities and Equity All amounts in ISK billion Strong equity position and well balanced funding • Increase in deposits, 31.12.2017 31.12.2016 mainly from retail customers ISK 1,148 billion ISK 1,036 billion • Successful wholesale funding activities both in Equity Iceland and in th
Slide 17: Sound Funding Profile
Sound Funding Profile 4
Slide 18: Funding
Funding All amounts in ISK billion Success in the international and domestic bond markets • Regular issuer in the Repayment of borrowings international bond markets Borrowings 88.5 • Covered bonds issued 72.8 domestically to finance 59.9 385 47.8 50.8 mortgage lending. 13 24.6 24.6 • All legacy fund
Slide 19: Positive rating trend
Positive rating trend Rating fundamentals Strong capital position Strong liquidity position Largely restructured loan book Strong earnings Improved access to foreign debt capital markets A A (Stable) A- BBB+ BBB+ BBB+ (Stable) BBB BBB BBB BBB BBB BBB- BBB- BBB- BBB- BBB- BBB- BB+ BB+ BB+ Oct-14 Jul-
Slide 20: Good performance in the secondary bond market
Good performance in the secondary bond market The spread between Arion Bank and large Nordic banks continues to decrease Euro Senior Unsecured Bonds – Spread (bps) over mid-swaps 120 100 80 60 40 20 0 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 -20 Axis Title ARION 06/2020 ARION 04/2019 ARION 1
Slide 21: Strong Capital Position
Strong Capital Position (5 ae
Slide 22: Capital base
Capital base All amounts in ISK billion Optimizing of equity started with dividend of ISK 25 billion • Reduction in capital base Capital ratio (%) Leverage ratio (%) due to a dividend payment of ISK 25 billion 26.7 16.7 17.8 26.3 15.4 15.4 • Solid level of capital due to 0.6 14.5 24.2 24.0 strong pr
Slide 23: Capital adequacy
Capital adequacy Own funds and capital requirements • CRD IV buffers implemented in Iceland • All buffers at maximum levels except countercyclical buffer that 27.3 can be increased to 2.5% 0.4 CET 1 24.0 0.4 21.3 21.3 AT1 1.5 2.9 T2 2.1 Capital Buffer Implementation for systemically 8.4 important ba
Slide 24: Medium Term Targets
Medium Term Targets CET 1 Ratio Loan Growth (Subject to regulatory requirements) Prudent lending to Decrease to circa 17% outpace economic growth Return on Equity Exceed 10% Dividend Policy Payout ratio of circa Cost to Income Ratio 50% of net earnings Decrease to circa 50% attributable to sharehold
Slide 25: Key Highlights
Key Highlights 1 Macroeconomic environment 2 Leading Universal Banking Franchise in Iceland 3 Strong Balance Sheet and Good Asset Quality 4 Sound Funding Profile 5 Strong Capital Position 25
Slide 26: Appendix
Appendix TEN) — & - — 3 qo WN — 7 .¥ = \ > =a = = = *, ‘ 3 : - ees = ~ ? Oe ee . » Poa f . ea * me => My » > op cy a) f J « Arion-Bank
Slide 27: United Silicon
United Silicon All amounts in ISK million Effects of United Silicon (USi) on 2017 figures • Arion Bank has fully Effects of 2017 provisioned for ISK 1,164 United without million in equity investments in USi and ISK 708 million in 2017 Silicon USi bonds related to USi Net interest income 29,835 - 29,
Slide 28: Strong housing market driven by solid fundamentals
Strong housing market driven by solid fundamentals House prices, income and credit in two house Housing prices in the greater Reykjavík Area price cycles - Index (YoY change %) 180 35.0 31.0 170 30.0 160 25.0 150 20.0 15.0 15.0 14.1 140 15.0 9.9 9.6 8.9 130 10.0 5.0 5.8 6.8 120 5.0 0.2 110 0.0 100 -
Slide 29: Household debt at historically low levels
Household debt at historically low levels Household debt Household debt - % of GDP - % of GDP Romania Hungary 140 Bulgaria Lithuania Latvia Slovenia 120 Czech Republic Croatia Poland Slovakia 100 Estonia Italy Austria Ireland 80 Malta Germany France Belgium 60 Greece Luxembourg Spain Finland 40 Port
Slide 30: Rapidly decreasing corporate debt
Rapidly decreasing corporate debt Corporate debt Corporate debt - of GDP - % of GDP Sweden Czech Republic 250 Lithuania Romania Poland Slovakia Germany Slovenia 200 UK Greece Italy Hungary Latvia Austria 150 Estonia Iceland Denmark Switzerland Croatia 100 Bulgaria Finland Portugal Spain France Nethe
Slide 31: 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 32: Q&A
Q&A