Annual General Meeting of Arion Bank 2015
The 2015 Annual General Meeting of Arion Bank was held today, Thursday 19 March, at the Bank's headquarters in Borgartún, Reykjavík. The agenda of the meeting contained typical AGM business and the Bank's annual financial statement was approved. Changes to the Board’s salary were approved. The salaries increased by 2.76% on average. The Bank’s remuneration policy, unchanged from last year, was also approved. It was also decided that Deloitte ehf. would continue to serve as the Bank’s auditors in accordance with a resolution passed at a shareholders’ meeting on 6 February 2015.
The following people were re-elected on to the Board of Directors at the meeting: Benedikt Olgeirsson, Brynjólfur Bjarnason, Gudrún Johnsen, Kirstín Th. Flygenring, Måns Höglund, Monica Caneman and Thóra Hallgrímsdóttir. The majority of Directors, or four out of seven, are women. Kirstín is the representative of Icelandic State Financial Investments on the Board, and the others were nominated by Kaupskil.
Two of the three Alternates are women. The Alternates were also re-elected at the AGM and they are: Björg Arnardóttir, Sigurbjörg Ásta Jónsdóttir and Ólafur Örn Svansson.
The Board's proposal, that a dividend of 45% of the Bank’s earnings, or ISK 12.8 billion, be paid out for 2014, was accepted.
The report of the Board of Directors for 2014
Monica Caneman, Chairman of the Board of Directors of Arion Bank, presented the report of the Board of Directors and highlighted the strong operating results achieved by the Bank in 2014. Monica made special mention of the fact that one of the key tasks in rebuilding the Icelandic financial system had been to increase efficiency and to prepare the ground for the future. She discussed the progress that had been achieved in this area at Arion Bank in recent years and said that ambitious projects were being undertaken at the Bank designed to further enhance operational efficiency.
Monica discussed the importance of starting the process of lifting the capital controls as soon as possible. She said that now was the right time to lift the capital controls. She pointed to the positive economic conditions and what has already been achieved in relieving the pressure relating to ISK-denominated assets held by non-resident investors. Monica also noted that European interest rates were low and it was not easy for investors to obtain decent investment returns. She also suggested that the controls impeded business between Icelandic companies and international customers, suppliers and partners in many ways and in some cases may prompt major companies which contribute to the Icelandic economy to leave the country.
Monica then went on to discuss the recent debate in Iceland on interest rates and the net interest margin. She pointed out that Arion Bank’s net interest margin on interest-bearing assets has decreased by 0.6 percentage points since 2012. She noted that when comparing the interest margins of banks in Iceland and overseas that it was important to look at banks of a similar size to those in Iceland. This reveals that the net interest margin in Iceland is similar to that in many of the countries Iceland wished to compare itself with.
Monica also spoke of the importance of moderate taxation. She said that taxes that were not imposed on income or earnings were not a good idea. For example, taxation of the Bank’s liabilities simply resulted in higher funding costs for the Bank. She also stressed how important it was that Iceland introduced international regulations and that Icelandic financial institutions were not subject to Iceland specific rules, which did not apply to companies in neighbouring countries, as such Icelandic specific rules would undermine the ability of Icelandic banks to compete.
A good year in 2014
Höskuldur H. Ólafsson, CEO of Arion Bank, discussed the annual financial statements for 2014. He started off by saying that the Bank had generated strong earnings in 2014 and return on equity had been just under 19%. The Bank had exceeded expectations in all key areas. As in recent years, regular operations were characterized by stability. Höskuldur said that irregular items had had a positive influence on the results, particularly the Bank’s sale of its share in HB Grandi and the successful stock market flotation of the company.
Höskuldur emphasized that Arion Bank was financially robust and its 26% capital ratio and solid liquidity underlined its financial strength.
Höskuldur spoke about the balance in the Bank’s loan portfolio which is evenly divided between retail and corporate loans. In comparison, loans to individuals made up only 25% of the portfolio in 2010 and today’s balance is the result of targeted efforts to increase the proportion of retail loans. He also discussed the improved quality of the Bank’s loan portfolio, with problem loans representing 4.4% of the Bank’s loans, a big difference from several years ago.
With regard to the Bank’s funding, Arion Bank has successfully increased the diversity of its funding. The Bank’s recent euro bond issue was a hugely important milestone in this respect, representing the largest international bond issue by an Icelandic bank for many years.
Höskuldur went on to discuss the major changes in banking services, particularly in the retail banking sphere. The popular Arion Bank smartphone app makes the Bank accessible to its customers 24 hours a day, seven days a week. Höskuldur noted that the rate of change now is actually faster than it was when the online bank was launched almost two decades ago. As consumption patterns have changed, the Bank has modified the focus at its branches and adapted to the modern needs of the customers. In the new branch opened opposite the Bank’s headquarters in Reykjavík, a new generation of ATMs was introduced in which customers can perform far more actions than in a traditional ATM. At the Bank’s branches an even greater focus has been placed on personalized advice and services relating to major decisions in people’s lives, such as savings, buying a house or pensions.