Arion Banki SDB (ARION) Q1 2026 earnings summary

Executive summary

• Net profit reached ISK 7.3 billion in Q1 2026, up from ISK 6.4 billion year-over-year, with ROE at 13.9% and EPS at ISK 5.33, both higher year-over-year.

• Core income rose over 20% year-over-year, driven by a 34% increase in net interest income; net interest margin improved to 3.8%.

• Insurance operations saw revenue growth of 7.2% year-over-year, outperforming competitors, and a significant reduction in net loss.

• Capital optimization continued, with ISK 20.7bn distributed through dividends and buybacks in the quarter.

• The proposed merger with Kvika was discontinued following regulatory feedback.

Financial highlights

• Net interest income was ISK 16.3 billion, up from ISK 12.4 billion sequentially; NIM at 3.8% vs. 2.9% in Q4.

• Fee income stable at ISK 3.9 billion, with CIB fees showing expected volatility.

• Operating expenses rose by about 13% year-over-year, impacted by one-off items and wage increases.

• CET1 ratio stood at 18.5%, 318bps above regulatory minimum, and leverage ratio at 11.2%.

• Loans to customers and deposits both increased by 1.7% in Q1 2026.

Outlook and guidance

• Strategy, targets, and capital priorities remain unchanged after discontinuation of merger talks with Kvika.

• Expect continued NIM volatility near-term, but mid-term margin guided above 3%.

• Insurance business targeting a combined ratio below 95% medium-term.

• Cautious outlook given high inflation, persistent rate environment, and global uncertainties.

• Inflation is expected to remain high into next year, with potential for further monetary tightening.