Arion Bank’s return on equity was 13.9% in the first quarter of 2026. Investor meeting and webcast in English on 7 May at 10:30 CET (8:30 GMT)

Financial highlights for the first quarter of 2026

• Arion Bank reports net earnings attributable to shareholders of Arion Bank of ISK 7.3bn in Q1 2026, compared with ISK 6.4bn in Q1 2025
• Return on equity attributable to shareholders of Arion Bank was 13.9%, compared with 12.8% in Q1 2025
• Earnings per share were ISK 5.33, compared with ISK 4.59 in Q1 2025
• Net interest margin of 3.8%, compared with 3.1% in Q1 2025
• Net commission income was ISK 3.9bn, compared with ISK 4.5bn in Q1 2025
• Vördur contributed a standalone loss of ISK 0.1bn in Q1 2026, compared with a loss of ISK 0.6bn in the previous year
• Core income, defined as net interest income, net commission income and insurance service results (excluding opex of the insurance operation), increased by 20.3%, compared with Q1 2025
• Operating expenses increased by 13.0%, equivalent to ISK 855m, compared with Q1 2025, partly due to the reversed expense for the incentive scheme in Q1 2025
• Effective tax rate was 33.8% during the quarter
• Total cost-to-core income ratio was 40.0%, compared with 42.6% in Q1 2025
• Cost-to-income ratio was 38.3%, compared with 34.7% Q1 2025
• The balance sheet increased by 1.6% during the quarter
• Loans to customers increased by ISK 23.2bn or 1.7% during the quarter
• Share buybacks and dividend payments totalled ISK 20.7bn in the quarter
• The Bank’s capital ratio was 22.5% and the CET1 ratio was 18.5% at the end of March. 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 22.1% and the CET1 ratio was 18.1%. These ratios comfortably exceed the requirements made by the FSA and Icelandic law.

Benedikt Gíslason, CEO of Arion Bank
“The Bank’s financial results in the first quarter are in line with expectations and targets. Arion Group’s income is based on diverse sources, which has a stabilizing effect on earnings and improves risk diversification. The Group remains financially strong, with solid capital and liquidity positions, enabling us not only to further enhance our service to customers but also to address the challenges present in the external environment.

In articles I have published in recent months, I have pointed to opportunities to help bring about lower interest rates in Iceland. One such opportunity involved simplifying the financial system with the aim of reducing overall system costs. Unfortunately, it became clear last month, when preliminary discussions between Arion and Kvika with the Competition Authority regarding the proposed merger came to an end, that the Authority’s stance on the merger was sufficiently negative for the merger not to proceed. It therefore became clear that the simplification of the financial system, which I believe would have been desirable and beneficial for customers and shareholders alike, will not materialize.

I have also highlighted the negative impact that Iceland‑specific provisions in laws and regulations have on interest rate levels. In particular, this includes specific obligations and levies imposed on financial institutions in Iceland. Taxes on financial institutions are considerably higher in Iceland than in the countries we typically compare ourselves with, yet there are plans to increase them further. This will affect pricing and profitability across the banking sector. It is worth emphasizing that the shareholders of Icelandic banks are, to a significant extent, the general public, either directly or through pension funds and state ownership.

There are also significant opportunities in reducing the role of inflation indexation in Iceland; nowhere else in Europe are households subject to inflation indexation. While indexation certainly has its advantages, it nonetheless contributes to persistently high interest rates. I have pointed out that Denmark and the Netherlands have transitioned their strong pension systems away from guarantees of specific real returns and indexation towards more flexible entitlement frameworks that better reflect real value creation in the economy and distribute risk more fairly between generations. Changes in this direction would represent important first steps towards reducing the role of indexation. A constructive and meaningful discussion on this topic has emerged, which I welcome and hope will continue.

Due to high interest rates, there has in recent months been strong demand for inflation‑linked residential mortgages, and lending to individuals increased somewhat during the quarter. From the Bank’s perspective, a drawback of inflation‑linked residential mortgages is that they are largely funded on a non‑index‑linked basis, for example through customer deposits. This leads to an imbalance on the Bank’s balance sheet, where inflation‑linked assets significantly exceed inflation‑linked liabilities, and results in income volatility in line with inflation and indexation gains. Calculated indexation gains were substantial in the first quarter, as inflation was unusually high during the period. Indexation gains form part of net interest income, which was therefore unusually high in the quarter. However, this will even out over time. As before, our objective remains for the net interest margin to be around or slightly above three per cent on an annual basis.

It is safe to say that exciting times lie ahead as artificial intelligence continues to gain ground. The world is facing what may become some of the fastest and most far‑reaching technological advances of recent decades, or even centuries. At Arion, we have been preparing for these changes ever since the first user‑friendly language models became available. We are well positioned to harness this powerful technology with the aim of making our services even better and more personalized, so that they more effectively meet the needs and preferences of each individual customer.”

Investor meeting / webcast in English on 7 May at 10:30 CET (8:30 GMT)
Arion Bank will be hosting a meeting at the Bank’s headquarters in Borgartún 19, Reykjavík, on Thursday 7 May at 10:30 CET (8:30 GMT) where CEO Benedikt Gíslason and CFO Ólafur Hrafn Höskuldsson will present the financial results, and Chief Economist Erna Björg Sverrisdóttir will provide 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 presenters at the end of the webcast.

Financial calendar

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

For further information please contact:

Theodór Friðbertsson, Investor Relations at Arion Bank, ir@arionbanki.is, tel. +354 856 6760 or Haraldur Guðni Eiðsson, Head of Corporate Communications, samskiptasvid@arionbanki.is, tel. +354 856 7108.

This information is information that Arion Bank is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 2026-05-06 15:31 GMT.

Attachments

Arion Bank – Condensed Consolidated Interim Financial Statements 1 January – 31 March 2026
Q1 2026 Press Release Arion Bank
Arion Bank Q1 2026 Investor Presentation

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