First steps towards reducing the Bank’s excess capital
Arion Bank reported net earnings of ISK 1.9 billion for the first three months of 2018, compared with ISK 3.4 billion for the same period of 2017. Return on equity was 3.6%, compared with 6.3% for the first three months of 2017.
Total assets amounted to ISK 1,131.8 billion at the end of March 2018, compared with ISK 1,147.8 billion at the end of 2017. Shareholders’ equity totalled ISK 204.1 billion, compared with ISK 225.6 billion at the end of 2017. Arion Bank has a strong financial position and during the period Arion Bank took the first steps towards reducing its equity by purchasing ISK 24.3 million of treasury stock, which represents 9.5% of the shares in the Bank, and by paying a dividend.
The Bank’s capital ratio at the end of March was 23.6%, compared with 24.0% at the end of 2017. The CET1 ratio was 23.6% at the end of March, the same as at the end of 2017.
Highlights of the income statement and key income related performance indicators:
Highlights of the balance sheet and key performance indicators:
For detailed information on the accounts please refer to Arion Bank’s Consolidated Interim Financial Statements for the first three months of 2018 on the Bank’s website, www.arionbanki.is.
Höskuldur H. Ólafsson, CEO of Arion Bank:
„The financial results for the first quarter of 2018 were slightly below expectations. Commission income and financial income both increased but the net interest margin decreased, partly as a result of the Bank’s strong liquidity and increasing competition on the credit market which has squeezed interest rates. Insurance income decreased at Vördur mainly due to vehicle claims during the winter. Revenue from the subsidiary Valitor continues to grow as the company expands internationally, but growth overseas also entails high costs and Valitor has had a negative impact on the financial results and cost level of the Group. The focus at Valitor will continue to be growth on its international markets. These markets present exciting opportunities and sustained growth could have a substantial effect on the company’s potential market value in the medium term. The Bank’s loan portfolio grew strongly and the quality of loans continues to be good. The Bank remains financially robust, a fact underlined by a capital ratio of 23.6%.
Arion Bank has attained a unique position on the Icelandic financial services market by pioneering a diverse range of cutting edge digital products. Our objective is to make the services we offer as simple and convenient for our customers as possible. Among the innovations launched in the first quarter were new digital processes for short-term loans and vehicle loans, while spreading out credit card bills and opening savings accounts has been made easier. Convenient banking enhances our customers' experience and also brings greater efficiency to our business. Nowadays 96% of our contact with customers is via digital channels. This clearly illustrates the extent to which financial services are evolving and we have been modifying our branch network to reflect this. The aim of the changes is to reinforce our core branches where companies and retail customers can obtain all the traditional financial services, while at the same time we are developing the smaller branches to match our experimental branch at Kringlan where the focus is on digital solutions.
In recent years Arion Bank has accumulated a considerable amount of excess capital and in March the first step to reduce it was taken when the Bank bought back 9.5% of its own shares and paid a dividend to shareholders. The Bank still has substantial amounts of excess capital and capacity and will be able to pay out further dividends.
Changes in the shareholder base occurred during the period when the Icelandic government, the owner of 13% since 2010, sold its stake in the Bank. Icelandic investment funds came on board as shareholders when 24 funds acquired a total of 2.5% in the Bank. Changes to the Bank’s ownership structure have been underway for some time and Kaupthing has been examining various options for selling shares in the Bank. This work will continue and one of the options on the table is list the Bank on the stock market both in Iceland and internationally.“
Arion Bank will be hosting a conference call in English on Thursday 3 May at 1:00 pm GMT (3:00 pm CET), where Stefán Pétursson, Chief Financial Officer, will discuss the highlights of the Bank’s financial results. People interested in participating can contac firstname.lastname@example.org to obtain dial-in information.
Stefán Pétursson, CFO of Arion Bank, gives an overview of Arion Bank's 3M 2018 financial results.
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