Arion banki : Bank Investor Presentation March 2024

Investor Presentation

March 2024

Operating in		With a unique		And a track
an attractive			record of
	position
market			delivering

Opportunities for growth in a dynamic business climate

Operating in an attractive market With a unique position

And a track record of delivering

Dynamic business climate

• Iceland is among the top 15 most educated countries in the world
• Strong culture of innovation and economic engagement
• Top 3 on the Human Development Index
• 3rd in digital sales to customers in Europe
• Over 95% of people use digital IDs, among the highest in Europe
• 4th in digital public services and
  1st in eDocuments in Europe

Opportunities for growth

Record growth of the Icelandic population in 2022, growing by 3.1%

We are positioning ourselves		Premia client segment
to capitalize on substantial	Revenue 2023	Customers 2023	Bancassurance YE2023
growth opportunities within our	+34%	+11%	40%
target client segments

	~40% of farmed	Plenty of sustainable	Opportunities to
	salmon and related	develop further as a
Arctic region presents	energy resources
species	tourist destination
significant long-term		~12% of fish caught in
opportunities	One third of rare earth	~10% of total
the world are in the
metals and materials	aluminum production
	North Atlantic Ocean

3	Source: Iceland Chamber of Commerce, UNDP, Statistics Iceland, European Commission, Government of Iceland, Eurostat, International-Aluminium, FAO, Financial

Times

Track record of solid economic growth

Iceland's thriving economy attracts an international workforce which has led to one of the highest rates of population growth in Europe contributing to robust and consistent economic growth

Population growth 2013-2023

Real GDP - Index (Jan 2006 = 100)

Operating in an attractive market With a unique position

And a track record of delivering

Malta										150
Luxembourg
Iceland
Türkiye
Ireland
Sweden										140
Switzerland
Norway
Austria
Cyprus
Netherlands										130
Denmark
Belgium
Germany
France
Estonia										120
Czechia
Spain
Slovenia
Finland
Slovakia										110
Portugal
Montenegro
Italy
Hungary
Poland										100
Lithuania
Albania
Romania
Latvia
Serbia										90
Croatia
									2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
North Macedonia
Bulgaria
-15%	-10%	-5%	0%	5%	10%	15%	20%	25%	30%	35%			Denmark		Finland		Iceland		Norway		Sweden

4	Sources: OECD, Arion Research

Favorable demographics foster growth

With largest generation aged between 25-35, the demographics are deemed to be favorable for the foreseeable future

Operating in an attractive market With a unique position

And a track record of delivering

Working age population	Population age distribution
Share of total population (%)	Number of inhabitants by age

68%
																																	7,000
67%
																																	6,000
66%
65%																																	5,000
64%																																	4,000
63%																																	3,000
62%
																																	2,000
61%
																																	1,000
60%	1991		1993		1995		1997																	2014		2016		2018		2020		2022
1990	1992	1994	1996	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2015	2017	2019	2021	0	3	6	9	12	15	18	21	24	27	30	33	36	39	42	45	48	51	54	57	60	63	66	69	72	75	78	81	84	87	90	93	96	99	102	105	108
			Denmark		Finland		Iceland		Norway			OECD members		Sweden				0

5	Source: OECD, Statistics Iceland, Arion Research

Strong financial standing of private and public sectors provides fertile ground for continued entrepreneurship and innovation

Operating in an attractive market With a unique position

And a track record of delivering

Households' financial assets and liabilities	Household and non-financial corporate debt	Debt of central government
ISK bn (Jan 2024 prices)	% of GDP	% of GDP

14,000																				400%																					140%
12,000																				350%																					120%
																				300%
10,000																																									100%
																				250%
8,000																																									80%
																				200%
6,000																																									60%
																				150%
4,000																				100%																					40%
2,000																				50%																					20%
0																				0%																					0%
2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	Q22023	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
	BF90 Net financial assets		FA0 Total financial assets										Households	Companies
	FL0 Total financial liabilities																																Gross debt		Net debt

6	Source: Central Bank of Iceland, Statistics Iceland, Arion Research

Exports remain robust as tourism bounces back, fostering economic vitality

Operating in an attractive market With a unique position

And a track record of delivering

Number of foreign tourists

3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0			2005	2006				2010				2014				2018	2019				2023
2002	2003	2004	2007	2008	2009	2011	2012	2013	2015	2016	2017	2020	2021	2022
								Air travel	Cruises

Exports

-ISK bn per quarter, seasonally adjusted (Jan 2024 price levels)

600
500
400
300
200
100
0
2014	2016	2018	2020	2022
	Tourism	Aluminium	Marine Products	Other

7	Source: Statistics Iceland, Arion Research

Arion is positioned in the most attractive customer segments with a strong and diversified product offering

Operating in an attractive market With a unique position

And a track record of delivering

Integrated model with diverse key products in-house, offering strong opportunities for synergies

Known for innovation - digital at the core and a customer first focus

Top corporate and institutional bank in Iceland with a clear focus on capital efficient operations

Servicing half of the Icelandic population

and over half of Icelandic corporations

8	Sources: Statistics Iceland YE 2023, Iceland Revenue and Customs

Mandatory pensions	Mortgages
Car loans
Supplementary pensions	Consumer lending
Pension fund operations	Deposits

Individuals	SMEs
	Corporate banking
UCITS funds	Corporate finance
Institutional investor funds	Investment banking
Private equity funds	SMEs
Private debt funds	Specialized lending
Corporates	Institutional
	investors

	Brokerage
Private insurance	Asset management
Private banking
Corporate insurance
Premia

Strong financial and risk profile

Diverse income mix	Diverse loan book
Operating income 2023	Loans to customers YE 2023

ISK 64.2bn		ISK 1,153bn

9

Operating in an attractive market With a unique position

And a track record of delivering

CET1

19.7%

Leverage ratio

12.4%

LCR

192%

Problem loans

1.7%

Focused strategic direction has enabled us to significantly exceed our medium-term targets

ROE target of >10% reached in 2021 - revised target of >13% reached in 2022 and 2023

Operating in an attractive market With a unique position

And a track record of delivering

	Target revised to cost to core income
Cost to income target of 50% reached in 2020 - revised target of <45% reached in 2021 and 2022	of <48% and reached in 2023

		Target revised to core income to
Income to REA of >6.5% reached in 2020, revised target of >6.7% reached in 2021	REA of >6.7% and reached in 2023

10	* Core income: Net interest income, Net fee and commission income and Insurance service results (excluding operating expenses from insurance.) Operating

expenses from insurance are included in cost when calculating cost to core income ratio