Arion Banki Hf · OMXICE:ARION
Arion Banki Hf — Q1 2025 Earnings Presentation
28 slides from Arion Banki Hf's earnings presentation, May 8, 2025
Slide 1: Investor presentation
Investor presentation 7 May 2025
Slide 2: Key results
Key results Medium-term targets Q1 2025 Key results Return on equity1 Exceed 13% • 12.8% Core operating income2 / REA Exceed 7.2% • 7.0% Solid start to the year Insurance revenue growth (YoY)3 In excess of market growth • 5.4% 12.8% ROE vs medium term target of above 13% ‒ Good momentum in core earn
Slide 3: Key highlights in Q1 2025
Key highlights in Q1 2025 Important milestone for Arnarland Expressed merger interest with Íslandsbanki • In February, the Board of Arion Bank decided to express • The Arnarland development project reached an important interest in initiating discussions with the Board of Íslandsbanki milestone when
Slide 4: The economic outlook: Bouncing back during turbulent times
GDP growth (%) Tourist arrivals via Keflavik International Airport The economic outlook: 10 - IMF's forecast 3 - millions annually Bouncing back during 8 2.5 turbulent times 6 4 2 GDP increased by 0.5% in 2024, according to 2 1.5 preliminary figures from the National Accounts. - Economic growth gain
Slide 5: Challenges ahead
Challenges ahead Exports to the US - bn. ISK at constant exchange rate 12% CPI by expenditure groups 450 Rising trade protectionism — particularly in the US — 400 33 10% and ongoing geopolitical uncertainty could dampen 29 39 26 global economic activity. In 2024, 22% of Iceland’s 350 36 38 8% 32 exp
Slide 6: 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% 7 140 6 0% 120 5 100 4 -50% 80 3 2 60 -100% 1 40 - -150% 20 (1) (2) 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2
Slide 7: Key takeaways from Q1 2025
Key takeaways from Q1 2025 ‣ Solid start to the year with ROE of 12.8% in the quarter Operational performance ‣ Diversified pillars of the Group continue to support earnings momentum through the cycle ‣ Stable net interest margin of 3.1% despite complicated external rate environment Core income ‣ St
Slide 8: Income statement Q1 2025
Income statement Q1 2025 Net interest income Q1 2025 12,166 Q1 2024 11,245 Diff 8% Q4 2024 11,246 Diff 8% - Net earnings attributable to shareholders of Arion Net fee and commission income 4,536 3,365 35% 4,136 10% Bank of ISK 6.4bn resulting in ROE of 12.8% Insurance service results (31) (215) - 32
Slide 9: Net interest income
Net interest income Net interest income (ISK bn) Credit risk (ISK bn) Solid margin in line with guidance 11. 11. 12.2 0 11.2 11.2 21 - Net interest income of ISK 12.2bn in Q1 which is an increase of 8.2% between years . . . . .1 .2 .1 .1 .2 2. - Guidance for the margin near term continues to be arou
Slide 10: Net fee and commission income
Net fee and Net fee and commission income (ISK m) Net fee and commission income (ISK m) commission income 1 ,44 1 , 4, 1 , 0 Best quarter in terms of fees since 2022 2 14, 4,2 4 , 0 4,1 4,1 , 4,0 - Fees continue to be broad-based and diversified , 0 2 2 2 - Strong quarter for CIB, especially fees fr
Slide 11: Second best Q1 combined ratio to date
* Combined ratio (%) Insurance service result (ISK m) 1, 1 Second best Q1 combined ratio to date 11 .4 10 .2 10 . 22. . 20.0 . 04 - Net result in the quarter negative by ISK 641m . 1 . .4 1 .2 compared with negative ISK 166m in Q1 2024 . 1 .0 22.0 1 . 0.0 22 1 1 .4 - Favorable claims and reinsurance
Slide 12: Net financial income
Net financial income Net financial income (ISK m) Bond holdings (ISK bn) Challenging equity markets 21 .4 2,1 2 . - Total investment portfolio of Vördur is ISK 34.2bn, 1 .2 1 . 4. yielding a loss of ISK 627m in the quarter, including 1, 1 . 1 .2 20.0 22. negative net effects from insurance contracts
Slide 13: Operating expenses
Operating expenses* Cost ratios (%) Total operating expenses (ISK bn) Stable cost base . . .0 1. 4 .4 4 .4 . 4 . .4 . - Total operating expenses outlined here include 4 .2 4 . 42. . . .2 costs related to insurance business which is 41. .2 . .0 accounted for through insurance service results 4. post
Slide 14: Balance sheet
Balance sheet Robust and relatively simple Assets 31.03.2025 31.12.2024 Diff. 31.03.2024 31.12.2023 31.12.2022 Cash & balances with CB 125 124 1% 102 102 114 - Loans to customers increased by ISK 3.9bn or Loans to credit institutions 27 26 6% 34 29 46 0.3% in Q1 Loans to customers 1,234 1,230 0% 1,1
Slide 15: Loans to customers
Loans to customers Loans to customers (ISK bn) Loans to customers by sector (%) Balanced loan portfolio 1,2 0 1,2 4 ther sectors 1,1 1,1 .0 . 1,0 4. . inancial and - Loans to customers total ISK 1,234bn at the end of .0 4. insurance activities .1 . the quarter, increasing by ISK 3.9bn or 0.3% during
Slide 16: Residential mortgages
Residential mortgages Residential mortgages by interest rate type (ISK bn) Indexed mortgages were 63% of the portfolio at 31.03.2025 Household debt to GDP (%) Relatively low household debt Low default rates and comfortable LTV 1 0 0 1 1 levels, but rising costs for borrowers 4 14 2 140 1 1 120 1 0 1
Slide 17: Risk profile
Risk profile Development of problem loans, moratoria and forbearance (% of total loan book) Development of problem loans ratio for loan portfolios (% of relevant loan book) Strong credit quality indicators while the .2 .4 problem loans ratio has recently trended upwards 4. 4.2 4.4 2. 4. . . .4 .4 -
Slide 18: 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 1.19% provisioned at As a result of receding inflation and monetary easing, the Bank has
Slide 19: Deposits from customers
Deposits from Deposits (ISK bn) Deposit growth by LCR outflow category (ISK bn) customers 02 1 10 1 1 2 2 24 2 2 Continued momentum in stable deposits 1 20 1 0 2 24 1 1 2 1 0 4 1 2 14 - Deposits from customers of ISK 885bn represent 1 1 1 1 % of the Bank’s total liabilities 1 14 144 - YoY growth has
Slide 20: Funding and rating
Funding and rating Borrowings by type (ISK bn) Maturities of borrowings and call dates on Majority of 2025 FX funding plan completed subordinated liabilities (ISK bn) 4 14 in the quarter 1 420 4 4 - Successful issuance of EUR 300m senior 104 preferred notes in February 24 14 1 1 1 - In January, the
Slide 21: Own funds
Own funds Capital ratio (%) Leverage ratio (%) Strong capital position 12.4 12.0 12.2 11. 11.4 - CET1 position is 297bps above regulatory 24.0 24.1 requirement 2 .2 22. 2. . 21. - Leverage ratio of 11.4% significantly above most 2. 2. international peers 1. 1. 1. 1.4 2.1 - The Resolution Authority o
Slide 22: Own funds
Own funds Own funds and capital requirements (%) Capital optimization progressing 21.1 – 22.1 21. 1. - Q1 net earnings and foreseeable dividends of 50% of earnings are included in the 1 . 1 . 1 . 2. capital ratios presented 1. 2. 1. - The Pillar 2 requirement is 1.8% as a result of the SREP process
Slide 23: CRR3
CRR3 Immediate reduction in REA estimated at around ISK 40bn as of Q2 2025* Estimated initial effect of CRR3 implementation on REA (ISK bn) - Primary drivers: • Increased risk-sensitivity for exposures secured by real estate. Risk weights for residential mortgages with LTV below 55% are reduced from
Slide 24: Going forward
Going forward Operational momentum External environment Balance sheet • Solid start to the year • Cautious stance as to evolving • Very strong balance sheet demonstrates good momentum in external rate and economic position with ability to capture core earnings environment growth opportunities • The
Slide 25: Key figures
Key figures* Operations Q1 2025 Q1 2024 Q1 2023 Q1 2022 Q1 2021 Q1 2025 Q4 2024 Q3 2024 Q2 2024 Q1 2024 Net interest income 12,166 11,245 10,994 9,476 7,342 12,166 11,246 11,863 11,948 11,245 Net commission income 4,536 3,365 4,451 3,556 3,277 4,536 4,136 3,880 3,979 3,365 Operating income 19,041 14
Slide 26: Key financial indicators - quarterly
Key financial indicators - quarterly Return on equity (%) Total cost-to-Core income ratio (%) Net interest margin (%) 1 .1 1 .4 . .1 .2 .2 .1 1 . 4. .1 .1 .1 .0 2. 1 . 4 . 4 .4 1 .0 12. 12. 4 .2 42. 11. .4 .2 . .1 12 1 24 12 12 1 24 12 12 1 24 12 Loans to deposits ratio (%) Core operating income / R
Slide 27: Key financial indicators - annual
Key financial indicators - annual Return on equity (%) Total cost-to-Core income ratio (%) Net interest margin (%) 1 . . .1 .1 .1 .1 1 .0 12. 12. 4 .4 4 .4 4 . 2. 42. .1 1 2021 1 2022 1 202 1 2024 1 202 1 2021 1 2022 1 202 1 2024 1 202 1 2021 1 2022 1 202 1 2024 1 202 CPI imbalance (ISK bn) Core ope
Slide 28: 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