Arion Bank’s financial results for 2017

Improvement in core revenues

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.

Total assets amounted to ISK 1,147.8 billion at the end 2017, compared with ISK 1,036.0 billion at the end of 2016. Shareholders’ equity totalled ISK 225.6 billion, compared with ISK 211.2 billion at the end of 2016. The Bank has a strong financial position and the focus has been on maintaining good liquidity, both as the capital controls are lifted, and in preparation for the redemptions of public bonds in early 2018.

The Bank’s capital ratio at the end of the year was 24.0%, compared with 26.8% at the end of 2016. The CET1 ratio decreased to 23.6% at the end of 2017, compared with 26.1% at the end of 2016. The decrease in CET1 is primarily due to the ISK 25 billion payment of a dividend or the purchase of own shares, which was approved at a shareholders’ meeting on 12 February and will be exercised in the coming weeks.

Highlights of the income statement and key income related performance indicators:

In ISK million 2017  2016  Q4 2017 Q4 2016
Net interest income 29,835 29,900 7,265 7,842
Net commission income 15,357 13,978 4,654 3,765
Other income 8,186 10,668 2,005 2,578
Operating income 53,378 54,546 13,924 14,185
Operating expenses  (29,961)  (30,540)  (8,581)  (8,210)
Bank levy  (3,172)  (2,872)  (784)  (682)
Net impairment 186 7,236 1,448 409
Net earnings before taxes 20,431 28,370 6,007 5,702
Income tax expense  (5,806)  (6,631)  (1,735)  (1,227)
Discontinued operations, net of tax  (206)  (206)
Net earnings 14,419 21,739 4,066 4,475
Return on equity (ROE) 6.6%  10.5%  7.3%  8.6% 
Earnings per share (ISK) 7.20  10.57  2.02  2.19 
Net interest margin (int. bearing assets) 2.9%  3.1%  2.7%  3.2% 
Cost-to-income ratio 56.1%  56.0%  61.6%  57.9% 

Highlights of the balance sheet and key performance indicators:

In ISK million 31.12.2017 31.12.2016 Diff Diff%
Loans to customers 765,101 712,422 52,679 7%
Other assets 382,653 323,602 59,051 18%
Liabilities 922,021 824,640 97,381 12%
Equity 225,733 211,384 14,349 7%
Loans to Deposits ratio 165.5% 172.9%    
RWA / Total assets 66.8% 72.0%    
CET 1 ratio 23.6% 26.1%    
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For detailed information on the accounts please refer to Arion Bank’s Consolidated Interim Financial Statements for the year 2017 on the Bank’s website,


Höskuldur H. Ólafsson, CEO of Arion Bank:

“The financial results for 2017 are satisfactory although one-off events did have an effect on the overall picture.  The Bank’s core operations are sound, the revenue base is strong and the Bank is financially robust. This enables the Bank to make a special dividend payment of ISK 25 billion which was decided upon at a shareholders’ meeting on 12 February. This dividend payment is consistent with the Bank’s aim to optimize its capital ratio so that it is closer to the ratios of international banks and other Icelandic banks. Despite the dividend the bank’s capital position is strong and well above the requirements made by the regulators. The dividend forms part of the process of selling the Bank, which we expect to be one of the key developments of 2018. Listing Arion Bank on the stock market in Iceland, and even abroad, is one of the options under consideration. A decision on the next phase is likely to be taken in the next few weeks and months.

In March 2017 the first steps in the sale of the Bank were taken when three international investment funds and the investment bank Goldman Sachs came on board as shareholders of Arion Bank. The seller was Kaupthing, through its subsidiary Kaupskil, which sold approximately 30% of its interest in the Bank. The investment funds Attestor Capital and Taconic Capital Advisors were the largest investors and each acquired approximately 10% in the Bank. Attestor Capital then added to its share slightly after the Financial Supervisory Authority deemed the fund to be competent to own a qualifying holding. It was announced today that Kaupthing had sold a 5% stake in the Bank to Attestor Capital and Goldman Sachs and several funds managed by four Icelandic fund management companies.  We are especially pleased to add Icelandic investors to our shareholder base.   

Arion Bank continues to occupy a strong position on its key markets and the Bank has taken a decisive lead as a provider of cutting edge innovations in the retail banking market. This leading role has delivered better services, higher revenues, increased efficiency and enhanced customer satisfaction. During the year the Bank introduced a whole host of new digital services which were very well received by our customers. The digital mortgage application process has perhaps attracted the most attention, and customers can now undergo a credit assessment and perform the entire application process quickly and easily online. Our objective is to make life easier for our customers by offering them convenient banking and we aim continue along this path.

Arion Bank, along with individual, corporate and investor customers of the Bank, benefits from being a participant in an economy in robust health. The Bank’s target is for loan growth to outpace economic growth, and we achieved this objective in 2017 when loans to customers grew by 7% during the year. Loans to corporates grew by approximately 7% while loans to individuals were up more than 8%. Growth in loans to individuals can almost entirely be attributed to mortgages, despite fierce competition on this market from the pension funds. The swift and convenient service available in the Bank’s new digital application process for mortgages has been integral to our success on this market.

The operational setbacks and eventual bankruptcy of United Silicon left their mark on the annual results. Impairments on loans and investments in the company amounted to ISK 4 billion after tax. The Bank never intended to become a shareholder but as operational difficulties mounted the Bank had to step in and inject additional capital. The Bank has asked the administrator of the estate to foreclose on its collateral in the company with the aim of making necessary improvements to the plant and to sell it is as quickly as possible.  On the positive side we have detected strong interest in the plant from international investors in the silicon industry.    

In 2017 Arion Bank paid off the remainder of the Kaupthing bond issued in 2016 which originally amounted to ISK 97 billion. Consequently, all funding linked to the founding of the Bank had been repaid and Arion Bank is now fully funded on the market and by deposits. Arion Bank is now a regular issuer of bonds on the international capital markets and international investors are taking increasing interest in the Bank as an investment option. The bonds issued by the Bank have performed well on the secondary market which underscores investors’ confidence in the Bank. In the autumn Standard & Poor’s upgraded the Bank’s credit rating to BBB+ from BBB with a stable outlook.

The outlook is good and it is clear that an eventful year is ahead. The Icelandic economy is flourishing and stability characterizes the Icelandic wider society. Arion Bank will continue to develop its services with the aim of making banking more convenient for our customers and the Bank is ready to fully engage in the tasks which await – strengthening the infrastructure and working with our customers in their undertakings.”


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Conference call in english

Arion Bank will be hosting a conference call in English on Thursday 15 February at 1:00 pm GMT (2:00 pm CET), where Stefán Pétursson, Chief Financial Officer, will discuss the highlights of the Bank’s financial results. People interested in participating can contact [email protected] to obtain dial-in information.


For further information please contact Haraldur Gudni Eidsson of Arion Bank’s Communications division at [email protected], tel. +354 444 7108, or Sture Stolen in Investor Relations at [email protected].