Q2 2024 Arion banki hf Earnings Call Transcript
Key Points
- Solid quarter with good momentum in asset management, cloud services, and loans.
- Insurance business income grew by 12.8% in the second quarter.
- Core operating income versus risk exposure amount was 7.3%, above the financial target of 7.2%.
- Strong capital position with Tier one capital up 18.5%, 330 basis points above the statutory minimum.
- New ISK2.5 billion share buyback program launched, continuing capital optimization efforts.
- Return on equity (ROE) was impacted by a one-off ISK0.6 billion settlement fine, reducing it to 11.5%, below the 13% target.
- Operating expenses increased by 9% between quarters, driven by the settlement fine.
- High effective tax rate of 32.5% due to the non-tax-deductible settlement expense.
- Negative impact from the increase of the central bank's interest-free reserve requirements, lowering interest income by ISK200 million per quarter.
- Economic slowdown with leading indicators pointing towards a cooling labor market and slower growth in the tourist industry.
Good morning. We welcome you to this earnings call for the second quarter's financials of Arion. My name is Benedikt GÃÂslason. I'm the CEO of Arion. And with me here today to present the second quarter results is Olafur Hrafn Hoskuldsson, our CFO. Please feel free to submit your questions during this presentation, which will then be followed by a Q&A session as we've done in previous earnings calls.
It's fair to say that this was a solid quarter with good momentum in most areas of the business particularly asset management, cloud services and loans. One of the factors affecting return on equity in the period was administered defined following an inspection by the FSA in the summer of 2022 of the bank's measures to combat money laundering and terrorist financing.
The FSA inspection revealed shortcomings in the bank's practices. We took these findings with the utmost seriousness and undertook a comprehensive review of our practices, and we have now significantly reinforced our money-laundering defenses by enhancing our
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