Arion Banki SDB (ARION) Q3 2025 earnings summary

Executive summary

• Achieved a 16.0% return on equity for both Q3 and 9M 2025, surpassing the 13% medium-term target and reflecting strong core earnings momentum.

• Core income grew 6.9% year-over-year in Q3, with net interest margin at 3.3% and improved cost-to-core income ratio.

• Insurance segment (Vörður) maintained a combined ratio of 88.2% in Q3 and 89.0% for 9M, outperforming the 95% target.

• Capital optimization and distribution on track, with ISK 22bn returned via dividends and buybacks in 9M.

• Merger discussions with Kvika are ongoing, aiming to create a stronger financial institution, with regulatory and shareholder approvals pending.

Financial highlights

• Net earnings attributable to shareholders were ISK 8.2bn in Q3 (up 5% YoY) and ISK 24.4bn for 9M (up 37% YoY).

• Core income reached ISK 19.3bn in Q3, with operating income for 9M 2025 at ISK 59.4bn, up from ISK 48.5bn in 9M 2024.

• Net interest income for 9M 2025 was ISK 40.2bn, up from ISK 35.1bn year-over-year.

• Cost-to-income ratio improved to 32.6% in Q3 2025 from 34.4% in Q3 2024.

• CET1 ratio stood at 18.0% at period end, with a total capital adequacy ratio of 21.9%.

Outlook and guidance

• Operational momentum expected to continue, with a cautious stance on external economic and rate environment.

• Merger process with Kvika is progressing, expected to enhance operational performance and client service.

• CRR3 implementation anticipated to provide ISK 10bn capital relief before year-end.

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

• The external environment remains challenging due to inflation, high interest rates, and global uncertainty, but the bank is well-positioned with strong capital and liquidity.