Arion Banki Hf · OMXICE:ARION
Arion Banki Hf — Arion Bank — 1H 2017 Earnings Presentation
31 slides from Arion Banki Hf's earnings presentation, 2017
Slide 1: Arion Bank Investor Presentation 1H 2017
ARION BANK INVESTOR PRESENTATION 1H 2017
Slide 2: Overview
Overview 1 Strong Economy 2 Leading Universal Banking Franchise in Iceland 3 Significant Improvement in Asset Quality and Positive Outlook Strong Capital Position - Target Reduction of 4 Excess Capital and Capacity for Ongoing Dividend Payment 5 Sound Funding Profile and Liquidity Position 6 Appendi
Slide 3: Strong Economy
1 Strong Economy
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: Development of key industries
Development of key industries Tourism sector driving growth • Service exports have Marine products Aluminium Tourism changed substantially in Export value (billion ISK) Export value (billion ISK) 2,250,000 50% recent years 269 272 265 233 238 40% 252 226 225 1,750,000 40% 244 215 215 30% • 25% avera
Slide 6: Economic progress compares well to other European Countries
Economic progress compares well to other European Countries All major indicators improving GDP growth - YoY Average unemployment rate • Strong economic growth 12% 14% in recent years IMF IMF 10% 12% projection projection • Estimated GDP growth 8% 10% 6.3% in 2017 6% 8% • Accumulated growth 4% 6% ove
Slide 7: Executive summary
Executive summary Exchange rate of Euro to ISK • On March 14th 2017 capital controls on 200 individuals, firms and pension funds were lifted and the CBI acquired a large 180 part of offshore assets 160 140 120 100 80 60 40 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17
Slide 8: Leading Universal Banking Franchise in Iceland
2 Leading Universal Banking Franchise in Iceland
Slide 9: Strong local franchises
Strong local franchises leading universal banking franchise in Iceland with consistent profitability • Arion bank provides a full range of financial services around Iceland • Arion bank runs a one brand policy but owns few independant and important subsidiaries Retail Corporate Asset Investment bank
Slide 10: 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 (%) Tier 1 ratio (%) • Solid level of 49.8 57.2 50.6 capitalization due to 28.1 27.8 26.5 strong profit generation 32.6 21.8 23.4 18.6 • Steadily imp
Slide 11: Comparison with peer group (H1 2017)
Comparison with peer group (H1 2017) Arion bank compares well with local competitors and Nordic banks* Return on equity (%) Cost-to-income ratio (%) Core Tier 1 ratio (%)** • Strong capitalization 27.7% 27.2% 11.7% 60.7% compared to Nordic 10.5% 50.6% 23.3% 9.7% 9.2% 47.5% peers 43.0% 17.2% • RWA ca
Slide 12: A relationship bank strategy
A relationship bank strategy leading universal banking franchise in Iceland with consistent profitability • Primary emphasis on corporations and individuals seeking a variety of financial solutions • Focus on building and strengthening long-term customer relationships by delivering excellent service
Slide 13: Current ownership structure
Current ownership structure Recent changes in the ownership structure • On the 19th of March, 2017, Kaupskil sold a KAUPTHING EHF GOVERNMENT 9.99% Attestor Capital 29% share in Arion Bank in a private placement • In addition, the private 100% 100% placement agreements 9.99% Taconic Capital grant the
Slide 14: Strong market share across important product areas
Strong market share across important product areas Strong market share across important product areas • Strong overall Loans to households in 1H 2017 Loans to corporates in 1H 2017 position in the retail Arion Bank Arion Bank market 21% 13% 23% Íslandsbanki 17% • Arion remains the Íslandsbanki 8% 1%
Slide 15: Channel diversification
Channel diversification Digitalisation driving efficiency Opening account – digital sales Active online bank users1 Active Arion Bank app users1 • Focus on using digital channels to further +40% +4% +6% +5% +20% increase efficiency +27% 2,948 73,769 77,178 +29% 66,788 69,299 34,232 • The new generat
Slide 16: Significant Improvement in Asset Quality and Positive Outlook
3 Significant Improvement in Asset Quality and Positive Outlook
Slide 17: Low risk business model – well diversified loan portfolio
Low risk business model – well diversified loan portfolio Significant improvement in asset quality and positive outlook Problem loans*(%) • Continued good balance in loans to corporates and individuals • Increase in loans to customers during the year both corporate and 6.5 5.3 4.7 individuals 3.2 2.
Slide 18: Improving rating and positive outlook
Improving rating and positive outlook Rating fundamentals Strong capital position Strong liquidity position Largely restructured loan book Strong earnings Improved access to foreign debt capital markets A (Stable) A- BBB+ BBB+ BBB BBB BBB BBB BBB (Positive) BBB- BBB- BBB- BBB- BBB- BB+ BB+ Okt-14 No
Slide 19: Strong Capital Position with Room for Further Optimisation
4 Strong Capital Position with Room for Further Optimisation 19
Slide 20: Capital base
Capital base All amounts in ISK billion Continued strong capital base • Strong capitalization Capital ratio (%) Leverage ratio (%) compared to Nordic peers 28.4 • RWA calculated according to 26.3 27.1 0.6 15.4 16.7 18.0 17.4 0.6 14.5 standardized approach 24.2 23.6 4.5 0.8 • Strong Leverage ratio 4.
Slide 21: Capital structure and requirements
Executive summary Capital structure and requirements Capital structure and capital need • In Q4 of 2017, the combined capital buffer requirement will 28.4 0.6 reach 8.4%, based on the Group’s current risk profile 0.1 CET1 • The FME’s SREP result based on the Group’s balance sheet as at 22.2 22.2 AT1
Slide 22: Sound Funding Profile and Liquidity Position
5 Sound Funding Profile and Liquidity Position 22
Slide 23: Limited refinancing need
Limited refinancing need Balanced funding – Strong liquidity position Maturity profile 1H 2017 (ISK bn) Deposits from Customers by LCR categories 30.06.2017 • Arion’s liquidity position is 105.8 strong, based on moderate 1% 100% refinancing needs in coming 10% 70.0 years and a solid deposit base 54.
Slide 24: Funding
Funding Good performance in the international bond market – Spreads continue to tighten • In January the Bank issued 300 an additional EUR 200 million tap of the euro benchmark bond issued in December 2016 250 bringing the total to EUR 500 million or approx. ISK 60 billion • In June the Bank issued
Slide 25: Going forward
Going forward >>> Arion Bank operates in strong and growing economy Growth in loan portfolio on the back of the underlying growth in the Icelandic economy Focus on digitalization across both clientfacing offerings and automation to further increase efficiency
Slide 26: Going forward
Going forward >>> Continued focus on increasing commission income Arion Bank will seek to optimize equity by paying dividends and acquiring own shares
Slide 27: Appendix
Appendix 27 27
Slide 28: Housing prices
HOUSING PRICES HOUSING PRICES IN THE GREATER REYKJAVÍK AREA (YOY CHANGE %) 35.0 31.0 30.0 25.0 20.0 15.0 15.0 15.0 9.9 9.6 8.9 9.4 10.0 6.8 5.0 5.8 5.0 0.2 0.0 -5.0 -2.5 -10.0 -15.0 -12.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (Jan - Apr)
Slide 29: Modestly sized banking system
MODESTLY SIZED BANKING SYSTEM DOMESTIC CREDIT TO PRIVATE SECTOR BY BANKS (% OF GDP) 350 300 250 200 150 100 50 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Euro area Germany Iceland United Kingdom Sweden 29
Slide 30: 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 31: Arion Bank
5 @ Arion Bank