Arion Bank: Q3 2026 results

Financial highlights for the third quarter of 2026

• Arion Bank reports net earnings* of ISK 8.7bn in Q3 2026, compared with ISK 8.2bn in Q3 2025
• Return on equity* was 16.3%, compared with 16.0% in Q3 2025
• Earnings per share were ISK 6.42, compared with ISK 5.95 in Q3 2025
• Net interest margin of 3.5%, compared with 3.3% for Q3 2025
• Net commission income was ISK 3.8bn, compared with ISK 4.0bn in Q3 2025
• Vördur contributed a standalone profit of ISK 0.4bn in Q3 2026, compared with a profit of ISK 0.7bn in the previous year, and a combined ratio of 85.7% compared with 88.2% in Q3 2025
• Core income, defined as net interest income, net commission income and insurance service results (excluding opex of the insurance operation), increased by 10.6%, compared with Q3 2025
• Operating expenses increased by 13.0%, equivalent to ISK 809m, compared with Q3 2025, including one-off items amounting to approximately ISK 480m.
• The effective tax rate was 26.6% during the quarter
• Total cost-to-core income ratio was 37.1%, compared with 36.3% in Q3 2025
• Cost-to-income ratio was 34.3%, compared with 32.6% in Q3 2025
• The balance sheet increased by 1.8% during the quarter
• Loans to customers decreased by ISK 3bn or 0.2% during the quarter, while deposits from customers increased by ISK 33bn or 3.3%
• The Bank’s capital ratio was 22.4%, and the CET1 ratio was 18.5% at the end of September. The ratios are determined on the basis of unaudited net earnings in the quarter and take into account the deduction of 50% of net earnings as foreseeable dividends in line with the Bank’s dividend policy. The Group's capital ratio, as calculated under the Financial Undertakings Act No. 161/2002, was 21.9% and the CET1 ratio was 18.1%. These ratios comfortably exceed the requirements made by the FSA and Icelandic law.

Financial highlights for the first 9 months of 2026

• Arion Bank reports net earnings* of ISK 24.1bn for 9M 2026, compared with ISK 24.4bn in 9M 2025
• Return on equity* was 15.1%, compared with 16.0% in 9M 2025
• Earnings per share in ISK of 17.79, compared with 17.55 in 9M 2025
• Net interest margin of 3.6%, compared with 3.3% in 9M 2025
• Net commission income of ISK 11.6bn for the first nine months, compared with ISK 13.1bn in 9M 2025
• Vördur contributed a standalone profit of ISK 0.8bn in 9M 2026, compared with a profit of ISK 0.9bn for the same period in the previous year and a combined ratio of 91.4%, compared with 89.0% for 9M 2025
• Core income increased by 10.0%, compared with 9M 2025
• Operating expenses increased by 12.3%, equivalent to ISK 2.4bn, compared with 9M 2025, mainly affected by increases in salary costs and IT expenses
• The effective tax rate was 29.5%
• Total cost-to-core income ratio was 39.2%, compared with 38.3% in 9M 2025
• Cost-to-income ratio was 36.6%, compared with 32.8% in 9M 2025
• The balance sheet increased by 7.2% from year-end 2025, mainly through loans to customers and deposits
• Dividend payment and share buybacks of ISK 25.6bn in total in 9M 2026

A proposed bank levy increase from 0.145% to 0.254% would, if enacted, add approximately ISK 1.7bn in expenses in Q4 2026.

^{* Attributable to shareholders of Arion Bank}

Benedikt Gíslason, CEO of Arion Bank
„Arion Bank’s financial results in the third quarter were good and in line with our targets. Our core operations are performing well, and deposits continue to grow strongly, while lending growth has slowed, reflecting the persistently high level of interest rates. Arion Group’s capital and liquidity positions remain strong, and, as before, we are well placed to support our customers in the projects they undertake. 

The consensus reached earlier this month between the government, local authorities and numerous companies in the fight against inflation was important and contributed to the decision not to trigger the termination clause in the collective wage agreements. The conditions are now in place for inflation to decline and, consequently, for policy rates to come down. There are, of course, many factors in the external environment beyond our control, but through broad-based cooperation we have done what is within our power to help rein in inflation. 

The government is currently planning to increase the bank levy by more than 75%. This tax is levied on the liabilities of financial institutions, the majority of which consist of customer deposits. While we certainly do not seek to avoid paying our fair share of taxes to society, taxes on Icelandic financial institutions are already considerably higher than in neighbouring countries, in addition to various Iceland-specific statutory requirements that entail additional costs. Just last year Arion Bank’s operations, excluding subsidiaries, generated approximately ISK 15 billion in tax revenues for society. 

In this context, it is important to consider Iceland’s competitiveness. While a balanced government budget is certainly an important objective, there also needs to be a long-term vision for the operating environment of businesses when it comes to financing costs and taxation, and for how we maintain prosperity over the longer term in a competitive international environment. We estimate that the proposed tax increase will amount to approximately ISK 1.7 billion a year for Arion Bank and, according to the government’s plans, the increase will be retroactive and apply to the current year. In our view, this is a short-sighted measure designed to address temporary circumstances, and if it is introduced, it would be reasonable for it to be discontinued after one to two years. 

Stefnir, a subsidiary of Arion Bank, celebrates its 30th anniversary this year. Since its establishment in 1996, Stefnir has grown to become one of Iceland’s most successful fund management companies. It currently employs twenty people and has more than ISK 390 billion in assets under active management. In 2012, Stefnir became the first Icelandic company to be recognized as a model company in good corporate governance, and recently all three companies in the Arion Group, Stefnir, Arion Bank and Vörður, had this recognition reaffirmed. 

We recently added international index funds to the Arion app and online banking platform, complementing the already wide range of savings and investment options available. The four index funds track indices in different geographical markets. Our customers therefore now have easy access to funds investing in international equity markets and the opportunity to diversify the risk in their savings easily and cost-effectively.”

Investor meeting / webcast in English on 29 October at 9:30 CET / 8:30 GMT
Arion Bank will be hosting a meeting at the Bank’s headquarters in Borgartún 19, Reykjavík, on Thursday 29 October at 9:30 CET (8:30 GMT) where CEO Benedikt Gíslason and CFO Ólafur Hrafn Höskuldsson will present the results and Chief Economist Erna Björg Sverrisdóttir will give an update on the economic environment. The meeting will take place in English and will also be streamed live. 

The webcast will be accessible live on Lumiconnect and a link is also available on the Bank’s website under Investor Relations. Participants attending virtually will be able to ask questions during the meeting through a message board on the same site. Answers will be provided by the presenters at the end of the webcast.

Financial calendar
Arion Bank’s financial calendar is available on the Bank’s website.