Arion Banki SDB (ARION) investor relations material

Executive summary

• ROE reached 19.7% in Q2 and 16.1% for H1 2025, both exceeding medium-term targets.

• Core earnings and income grew strongly, driven by higher net interest and record fee income, especially in CIB and Markets.

• Significant milestones in development assets and successful funding activities contributed to valuation uplift and liquidity.

• Entered merger negotiations with Kvika, aiming to create a leading Icelandic financial institution, with completion targeted in 9–12 months pending regulatory approval.

• Maintained strong capital and liquidity, supporting growth and shareholder returns.

Financial highlights

• Net earnings for Q2 2025 were ISK 9.8bn–10.3bn, up 77% year-over-year; H1 2025 net earnings were ISK 16.2bn–18.1bn, up 63%.

• Core income rose 19.8% year-over-year in Q2 and 17.8% in H1; net interest income up 18.8%, fees up 14.4%.

• Cost-to-core income ratio improved to 36.6% in Q2 and 39.4% in H1; cost-to-income ratio at 31.4% in Q2.

• Combined ratio in insurance operations was 79.4% in Q2 and 89.4% for H1, reflecting strong performance.

• Net earnings per share for H1 2025 were ISK 11.22, up from ISK 6.92 in H1 2024.

Outlook and guidance

• Net interest margin guidance remains at 2.9–3.5%, with expectations to operate at the upper end for the year.

• Merger with Kvika expected to be completed within 9–12 months, subject to regulatory approval.

• No significant monetary policy easing is expected before 2026 due to persistent inflation and robust wage growth.

• The bank maintains a strategy focused on market leadership, customer success, and sustainable value creation.

• CRR3 implementation and merger anticipated to further strengthen capital position.