The 2017 Annual General Meeting of Arion Bank was held today, Thursday 9 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 salaries were approved. The salaries increased by 6.6% on average. The Bank’s remuneration policy, unchanged from last year, was also approved with minor changes to its wording. 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 and at the Annual General Meeting on 19 March 2015. The Board's proposal, not to pay a dividend, was accepted but the Board of Directors has a broad authority to propose that the Bank pay dividends or other disbursement of equity and may convene a special shareholders' meeting later in the year to propose a payment.
The following people were re-elected on to the Board of Directors at the meeting: Brynjólfur Bjarnason, Gudrún Johnsen, John P. Madden, Kirstín Th. Flygenring, Måns Höglund, Monica Caneman and Thóra Hallgrímsdóttir. Jakob Már Ásmundsson was also elected on to the Board of Directors. He is a new board member. Benedikt Olgeirsson is standing down from the Board of Directors. There continues to be an equal ratio between men and women on the Board of Directors. Kirstín is the representative of Icelandic State Financial Investments on the Board, and the others were nominated by Kaupskil.
The Alternates were also re-elected at the AGM and they are: Björg Arnardóttir, Ólafur Örn Svansson and Sigurbjörg Ásta Jónsdóttir.
Monica Caneman, Chairman of the Board of Directors of Arion Bank, presented the report of the Board of Directors and underlined that the year 2016 was a good year but that it differed from previous years in many respects, which were characterized by the divestment of acquired assets and issues related to legacy assets. The year 2016 on the other hand was all about optimism and investments in the tasks which matter most to the future development of the Bank. Arion Bank’s acquisition of the insurance company Vördur was completed during the year, and in the spring Arion Bank opened a new branch at Keflavík International Airport. The Bank’s subsidiary Valitor also continued to invest in its Danish and UK operations. The Bank also invested heavily in digital solutions and it’s fair to say that Arion Bank is at the forefront in this field in Iceland. Arion Bank introduced several new digital services during the year, for example an online credit appraisal for buying a house.
Monica talked about the fact that the Bank’s terms on international credit markets have improved markedly recently, clear testament to the growing confidence of bond investors in the Bank and the Icelandic economy. The progress made by the Bank and the improved performance of the Icelandic economy, as well as the vital steps towards lifting the capital controls all have a lot to say in this regard in her opinion. Arion Bank issued bonds in euros to a broad group of investors on two occasions during the year.
Monica discussed Arion Bank’s new policy on sustainable banking that was adopted by the Board of Directors of Arion Bank. One of the objectives of the new strategy is to increase the number of goals we set and the number of key performance indicators. The strategy also calls for more prominence to sustainability in the Bank’s reporting. The first steps in this direction have being taken in the Bank’s annual report for 2016. This is a response to the UN Global Compact and also the guidelines made by the World Federation of Exchanges which set out which non-financial information listed companies should highlight in their reporting.
It was clear in 2016 that the banks would still be expected to pay the bank levy, a tax which is not imposed on other Icelandic sectors or international banks. In Monica’s opinion the bank levy, a tax on the debt of the banks, makes it difficult for banks to compete, both on the domestic market and with international banks when funding Iceland’s largest companies. The arguments for extending the bank levy are weak according to Monica. She feels that it is important that this form of taxation be reviewed. The first step could possibly be to scrap the tax on bonds issued by the Bank to fund mortgages.
Monica said that many important steps were taken during the year 2016 towards consolidating the Bank's future. She thanked the management and the Bank’s employees for their contribution to the Bank’s accomplishments.
Höskuldur H. Ólafsson, CEO of Arion Bank, discussed the annual financial statements for 2016. Höskuldur said the Bank’s earnings were in line with expectations. In his opinion the Bank performed well in its core operations during the year and continued to consolidate its financial position. Net earnings amounted to ISK 21.7 billion and return on equity was 10.5%. Höskuldur discussed the challenges in the external environment and impact that had on core operations. The performance of the securities markets and wage developments following new collective wage agreements had a detrimental effect. However, Höskuldur mentioned that Valitor’s sale of its holding in Visa Europe to Visa Inc. and valuation changes of loans had a positive impact on the annual financial results. Investments in new service channels and the Bank's branch network also left an impression on activities during the year according to Höskuldur.
On this note Höskuldur discussed the changing demand for banking services and the fact that customers are increasingly using digital services, such as online banking and the Arion app. In addition Arion Bank has introduced a new generation of ATMs in its branches where customers can perform self-service transactions, in a convenient manner. Höskuldur said that this shift in behaviour inevitably affects the services which the Bank provides in its branches, where the Bank now places more emphasis on financial advice, and adjustments had been made during the year. Höskuldur stated that it was the Bank’s goal to make every effort to meet the Bank’s customers’ wishes and to develop news ways for them to do their banking as conveniently as possible.
Höskuldur agreed with Monica Caneman, chairman of the Board of Directors of Arion Bank, and expressed his disappointment with the fact that the authorities have decided to extend the bank levy. Höskuldur stated that since the bank levy was a tax on the Bank’s funding, its debt, which to a great extent is made up of deposits from the Bank’s customers, makes it primarily a tax on the deposits of the general public and the corporate sector. Such a tax cannot be beneficial in the long run. In 2016 Arion Bank paid a total of ISK 5 billion in tax which companies in other sectors are not required to pay.
Höskuldur talked about Arion Bank’s special emphasis on innovation in Iceland. Arion Bank provides backing to innovation at both primary and secondary schools in Iceland. The Bank has also played a key role in the creation and development of business accelerators in Iceland. These include Startup Reykjavík and Startup Energy Reykjavík. Arion Bank invested in 17 start-ups through the business accelerators in 2016 and has now invested in more than 70 companies since 2012.
Höskuldur thanked the Bank’s customers for their cooperation and extended his gratitude to Arion Bank’s employees for their contribution to the Bank’s success this year.
Arion Bank hf. has agreed to a buyback of 9.5% of issued share capital in Arion Bank from Kaupskil ehf, a subsidiary of Kaupthing ehf.
Arion Bank reported net earnings of ISK 14.4 billion in 2017, compared with ISK 21.7 billion in 2016. Return on equity was 6.6%, compared with 10.5% in 2016.
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