ARION BANK’S SUBSIDIARY VALITOR HOLDING HF. CLASSIFIED AS DISPOSAL GROUP HELD FOR SALE AND DISCONTINUED OPERATIONS - RESTATED CONSOLIDATED FINANCIAL STATEMENTS

As communicated in connection with the Q3 2018 results and in a press release in November announcing the appointment of Citi as an advisor, Arion Bank is in the process of divesting the Bank’s subsidiary Valitor Holding hf. (Valitor). In accordance with IFRS, Valitor will be classified as a disposal group held for sale in the Financial Statements of the Bank for the full year 2018, including restatement of the Income Statement and presentation as discontinued operation. The comparative figures for the year 2017 will be restated in the Consolidated Income Statement for the year 2018 as well as the Consolidated Interim Income Statements for each quarter of the years 2017 and 2018.

Restated Financial Statements

With Valitor classified as a disposal group held for sale and discontinued operations the presentation in the Consolidated Income Statement changes. Net earnings of Valitor will be recognized in a single line item as discontinued operations, net of tax.

Restated Consolidated Income Statements for the first nine months of 2018 and the full year 2017:

Consolidated Income Statement
	in ISK million		Restated	Published		Restated	Published
			9M 2018	9M 2018		12M 2017	12M 2017
	Interest income		42,967	43,652		56,028	57,089
	Interest expense		(21,617)	(21,686)		(27,107)	(27,254)
Net interest income			21,350	21,966		28,921	29,835
	Fee and commission income		8,594	24,789		11,619	29,777
	Fee and commission expense		(990)	(12,509)		(1,408)	(14,420)
Net fee and commission income			7,604	12,280		10,211	15,357
	Net financial income		3,075	2,849		4,045	4,091
	Net insurance income		1,885	1,885		2,093	2,093
	Share of profit of associates and net impairment		16	18		(927)	(925)
	Other operating income		1,290	1,310		2,520	2,927
Other operating income			6,266	6,062		7,731	8,186
Operating income			35,220	40,308		46,863	53,378
	Salaries and related expense		(10,694)	(13,815)		(13,602)	(17,189)
	Other operating expense		(8,985)	(11,777)		(9,291)	(12,772)
Operating expense			(19,679)	(25,592)		(22,893)	(29,961)
	Bank levy		(2,621)	(2,621)		(3,172)	(3,172)
	Net impairment		(2,952)	(2,969)		312	186
Earnings before tax			9,968	9,126		21,110	20,431
	Income tax expense		(3,165)	(3,078)		(5,966)	(5,806)
Net earnings from continuing operations			6,803	6,048		15,144	14,625
	Discontinued operations, net of tax		(643)	112		(725)	(206)
Net earnings			6,160	6,160		14,419	14,419
KPI's
	Return on equity		3.9%	3.9%		6.6%	6.6%
	Cost-to-income ratio		55.9%	63.5%		48.9%	56.1%

The main impact of the restatement on the Consolidated Income Statement is on Net fee and commission income (38% decrease in 9M 2018 and 34% decrease in 12M 2017) and Operating expense (23% decrease in 9M 2018 and 24% decrease in 12M 2017).

In the Balance Sheet as of 31 December 2018, total assets of Valitor will be recognized in the line item Non-current assets and disposal groups held for sale (30.9.2018: ISK 44,374 million) and total liabilities will be recognized in the line item Non-current liabilities and disposal groups held for sale (30.9.2018: ISK 26,762 million).

The restated Consolidated Income Statement on quarterly basis for 2017 and the first three quarters of 2018 are available on arionbanki.is under Investor Relations.

Arion Bank’s medium-term financial targets are unaffected by the restatements. 

The Consolidated Financial Statements for 2018 will be published on 13 February 2019 on a restated basis.

For further information please contact Sture Stolen, head of Arion Bank’s Investor Relations at [e-mail] Theódór Fridbertsson at Investor Relations at [e-mail], tel. [phone].