Arion Bank's Q3 2024 financial results

Financial highlights for the third quarter 2024

• Arion Bank reports net earnings of ISK 7.9bn in Q3 2024, compared with ISK 6.1bn in Q3 2023
• Return on equity was 16.1%, compared with 12.9% in Q3 2023
• Earnings per share in ISK of 5.62, compared with 4.19 in Q3 2023
• Net interest margin of 3.1%, compared with 3.0% in Q3 2023
• Solid quarter for net commission income of ISK 3.9bn, compared with ISK 3.8bn in Q3 2023
• Best quarter in the history of Vördur, contributing standalone net results of ISK 1.7bn
• Core income, defined as net interest income, net commission income and insurance service results (excluding opex of the insurance operation), increased by 13.9%, compared with Q3 2023
• Operating expenses increased by 11.7%, compared with Q3 2023
• Effective tax rate was 21.1%
• Cost-to-core income ratio was 37.5%, compared with 38.2% in Q3 2023
• The balance sheet increased by 2.4% during the quarter
• Loans to customers increased by 1.5% during the quarter. The increase was 1.8% in corporate lending and 1.2% in loans to individuals, mainly mortgages
• Share buybacks of ISK 7.9bn in Q3 2024
• The Bank’s capital ratio was 23.2% and the CET1 ratio was 18.8% at the end of September. The ratios are determined on the basis of the unaudited net earnings in the quarter and take into account the deduction of 50% of net earnings as foreseeable dividend in line with the Bank’s dividend policy. The Group's capital ratio, as calculated under the Financial Undertakings Act No. 161/2002, was 22.8% and the CET1 ratio was 18.3%. These ratios comfortably exceed the requirements made by the FSA and Icelandic law

Financial highlights for the first nine months 2024

• Arion Bank reports net earnings of ISK 17.8bn for 9M 2024, compared with ISK 19.5bn in 9M 2023
• Return on equity was 12.2%, compared with 13.9% in 9M 2023
• Earnings per share in ISK of 12.45, compared with 13.40 in 9M 2023
• Net interest margin of 3.1%, the same as for 9M 2023
• Net commission income of ISK 11.2bn for the first nine months of the year, a 10.1% decrease from the previous year
• Core income, defined as net interest income, net commission income and insurance service results (excluding opex of the insurance operation), increased by 4.3% compared with 9M 2023
• Operating expenses increased by 10.4%, compared with 9M 2023
• Effective tax rate was high, 29.6%, due to unfavorable combination of income and expenses
• Cost-to-core income ratio was 43.8%, compared with 41.4% in 9M 2023
• The balance sheet increased by 5.2% from year-end 2023
• Share buybacks of ISK 12.5bn during 9M 2024
• Dividend payment of ISK 9.0 per share or a total of ISK 13.1bn in Q1 2024

Benedikt Gíslason, CEO of Arion Bank
“Arion Bank has posted solid financial results for the third quarter which are in line with our expectations. We are particularly pleased to see how well Vörður performed in the period, delivering one of the strongest quarters in the company’s history. Other segments of our core operations also performed strongly and produced excellent results. It’s safe to say that our focus on diverse financial services and thereby diverse income streams engenders a certain amount of stability in our operations. The Bank’s capital and liquidity positions remain robust and comfortably above regulatory requirements.

We are continuing to contact customers who are switching from fixed rate mortgages following interest rate resets to discuss the options available to reduce their monthly repayments. These people have enjoyed excellent mortgage rates during a period of high policy rates but are now faced with higher mortgage repayments. Various options are available, but the situation is in many ways unfortunate as policy rates remain at 9% while inflation has dropped to 5.1%. This huge difference results in the real interest rates and therefore inflation-linked interest rates being historically high. Inflation-linked mortgages have been a safe haven sought by many households and therefore it is important that policy rates continue to fall so that real interest rates in Iceland also drop. The current interest rate environment means that we are cautious in our impairments.

In September Arion Bank renewed its partnership with the European Investment Fund. We collaborated with the EIF eight years ago and this enabled Arion Bank to fund numerous innovative projects in fields as diverse as aquaculture, data centres, green fuels and product development in skin care. The objective of our partnership this time around is to support Icelandic innovators by providing EIF-guaranteed loans. The collaboration allows us to lend up to ISK 15 billion to Icelandic small and medium sized companies at more favourable terms and to fund projects earlier in the process. Our focus will be on three main areas: sustainability, innovation and the digitalization of society, and culture and the creative industries.

We reached an important milestone recently when we published a sustainable financing framework. The framework replaces the Bank’s green financing framework and applies to the Bank’s funding and lending which is classified as environmentally and/or socially sustainable. We have endeavoured to provide a sustainable range of products, and we offer our customers green mortgages, car loans, deposits and business loans. The new framework will be used to further product development in the sustainable banking sector and to issue sustainable bonds.”

Investor meeting / webcast in English on 31 October at 9:30 CET (8:30 GMT)
Arion Bank will be hosting a meeting at the Bank’s headquarters in Borgartún 19, Reykjavík, on Thursday 31 October at 9:30 CET (8:30 GMT) where CEO Benedikt Gíslason and CFO Ólafur Hrafn Höskuldsson will present the results and Chief Economist Erna Björg Sverrisdóttir will give an update on the economic environment. The meeting will take place in English and will also be streamed live. 

The webcast will be accessible live on Lumiconnect and a link is also available on the Bank’s website under Investor Relations. 

Financial calendar
Arion Bank’s financial calendar is available on the Bank’s website.