Arion Banki SDB (ARION) Q4 2025 earnings summary

Executive summary

• Achieved a return on equity of 14.9% for 2025, surpassing the medium-term target of 13%, with net earnings attributable to shareholders reaching ISK 30.6bn, up 17% year-over-year, driven by strong core income growth and diversified revenue streams.

• Core income rose 12.3% year-over-year, supported by higher net interest income, resilient fee income, and robust insurance service results.

• Maintained cost to core income ratio at 42.3% and a combined insurance ratio below 90% for the second consecutive year, reflecting cost discipline and sound risk management.

• Capital position remains strong, with CET1 at 18.4%, 308 basis points above regulatory requirements, factoring in a 50% dividend payout and ISK 5 billion buyback.

• Merger discussions with Kvika Bank are ongoing, with regulatory review expected to conclude in early 2026 and potential for further operational strengthening.

Financial highlights

• Net interest income for 2025 rose 13% to ISK 52.5bn, with net interest margin at 3.2% and core income up 12.3% year-over-year.

• Operating expenses stable at ISK 28.2bn, with a cost-to-core income ratio of 42.3%.

• Loans to customers grew 8% year-over-year, mainly from corporate lending, and deposits from customers increased 7.5%.

• Net impairments in Q4 were 51 basis points annualized, mainly due to a single name exposure, with the year at 24 basis points.

• CET1 capital ratio at 18.4%, 308 basis points above regulatory minimum.

Outlook and guidance

• Expectation of continued strong operating performance in 2026, with core business providing solid earnings.

• Cautious stance on external rate and economic environment due to persistent inflation and slower economic growth.

• Corporate loan growth expected to slow in coming quarters.

• Merger with Kvika Bank could strengthen business and client services.