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Arion Bank: The 2020 Annual General Meeting

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The 2020 Annual General Meeting of Arion Bank was held today, Tuesday 17 March, at the Bank's headquarters in Borgartún, Reykjavík. The agenda of the meeting contained typical AGM business and the Bank's annual financial statement was approved. The Bank’s remuneration policy was also approved, as were changes to the rules of procedure of the Nomination Committee and changes to the Bank's articles of association. It was also decided that Deloitte ehf. would continue to serve as the Bank’s auditors.

The following people were re-elected to the Board of Directors in accordance with a proposal by the Nomination Committee: Brynjólfur Bjarnason, Herdís Dröfn Fjeldsted, Gunnar Sturluson, Liv Fiksdahl, Paul Richard Horner, Renier Lemmens and Steinunn Kristín Þórðardóttir. Brynjólfur Bjarnason was re-elected as Chairman and Herdís Dröfn Fjeldsted was re-elected as Vice Chairman. Ólafur Örn Svansson, Sigurbjörg Ásta Jónsdóttir and Þröstur Ríkharðsson were re-elected as Alternate Directors. Júlíus Þorfinnsson was elected as a new member of the Nomination Committee and Sam Taylor was re-elected to the Nomination Committee. Changes were approved to the salaries of members of the Board of Directors and Nomination Committee and they will receive a pay increase of 3% from the previous year.  

The Board’s proposal on dividends was postponed for two months at the request of shareholders controlling more than one third of the Bank’s share capital. This postponement is line with the request made by the Central Bank of Iceland that financial institutions reconsider their proposed dividend payments in light of the economic uncertainty caused by Covid-19.

The Board of Directors was also authorized to approve a share option plan and to enter into share option agreements with employees of Arion Bank, whereby they will be able to buy shares of up to ISK 600,000 market value every year for the next five years. The Board of Directors was also authorized until the 2022 AGM to issue warrants for up to 54,000,000 new shares in the company. The Board of Directors is furthermore authorized for five years to increase share capital in relation to the exercise of the warrants.  

The meeting agreed to reduce the Bank’s share capital by ISK 84,000,000 at nominal value by cancelling own shares, reducing the total from ISK 1,814,000,000 to ISK 1,730,000,000 at nominal value. The Board’s authorization to purchase up to 10% of the Bank’s share capital was renewed.

Further information on the results of the AGM can be seen on the Bank’s website.

The report of the Board of Directors for 2019
Brynjólfur Bjarnason, Chairman of the Board of Directors, presented the report of the Board. The following is an excerpt from his report:

“At times like this, we who work in the financial sector are reminded of the vital role of banks.  They support job creation, economic growth and a diverse economy. In the current circumstances banks need to reach out to their customers – households and companies. Arion Bank has announced measures to help households through potential difficulties caused by Covid-19 and in the case of companies, we will do what it takes to help those companies which have enjoyed good business relationships with the Bank but are now experiencing temporary problems. As a society, we benefit from the fact that the financial system has been developed in recent years to cope with shocks. Arion Bank is no exception. The Bank is strongly capitalized and is ready to provide support to its customers.”

“Numerous changes have occurred in the last decade to the regulatory framework within which financial institutions operate. These changes are to a great extent based on European Union directives and their adoption into Icelandic law. When adopted into Icelandic law, the authorities added several restrictive provisions applicable only to Iceland due to the circumstances which existed at the time - and we feel the benefits of many of these today. However, in this country extremely high taxes are imposed on financial institutions, far in excess of the norm in Europe. We are talking here about a financial sector tax, a special financial sector tax and a bank levy. Despite proposals to reduce the bank levy, it will nevertheless remain many times higher than comparable taxes in Europe. These special taxes are not calculated on revenue or earnings but on costs and are imposed on funding and salary expenses, for example.

The simple fact of the matter is that special Icelandic taxes increase the operating expenses of Icelandic banks and undermine their ability to compete with other lenders. As a direct consequence of government policy, lending rates offered by Icelandic banks are made more expensive, which in turn has a detrimental impact on economic growth and job creation – making it more difficult for banks to support their customers. Various government measures over the last decade have impeded the lending capacity of the Icelandic banks and reduced their ability to support value creation and the business sector. Therefore the authorities need to – not least when Icelandic companies have their backs to the wall – review their policies and consider the role of the banks in supporting a diverse business sector, prosperity and quality of life in Iceland.”

“It would be beneficial if Icelandic banks were able to cooperate more closely on infrastructure such as IT, defences against money laundering and operating ATMs without it having a negative impact on healthy competition between the banks. It’s very wasteful for a small nation like Iceland to maintain a triple system – a triple infrastructure. We need to create an atmosphere where shared infrastructure is looked on positively and not negatively. Systemically important companies should work together on developing infrastructure for the benefit of everyone, with the approval of the competition authorities and without running the risk of incurring censure and fines.”

Brynjólfur concluded his speech by thanking Höskuldur H. Ólafsson, who had been CEO for nine years, members of the management team and other employees who moved on during the year for their efforts and important contribution to the Bank over the past few years. He also thanked the employees of Arion Bank, the management and board of directors for the excellent cooperation and wished everyone the best in these unusual times.

The annual financial statements for 2019
Benedikt Gíslason, CEO, began his address by discussing the state of the economy in Iceland and the approaching recession due to the Covid-19 virus. Benedikt believes the impact could be substantial in Iceland due to the importance of tourism. He stressed, however, that the Icelandic economy, and not least the financial system, was in a good position to deal with the situation. Benedikt noted that the Central Bank of Iceland had currency reserves of ISK 800 billion and had a range of tools at its disposal to support the economy. The Icelandic financial system is stronger than ever as it has been built up over the past decade to withstand shocks such as this. The capital ratios of the banks are in excess of 20%, which are very high and liquidity positions are well above the required minimums. Furthermore, debt levels of households, companies and the government are low in historical terms and the Icelandic treasury ran a surplus over the last few years. Benedikt also discussed in detail the Bank’s loan portfolio, collateral position, tourism's share in the Bank's credit risk and the development of the portfolio over the last few years.

Benedikt described the financial results and operations of Arion Bank for 2019 and said that the year had in many ways been characterized by changes to the senior management and the Bank’s organization. Benedikt said that the positive impact of the changes were felt in the Q4 results, both on the revenue and costs sides. Earnings from continuing operations amounted to ISK 14 billion in 2019 and return on equity was 7.2%. Companies held for sale, however, had a negative impact on annual earnings which only amounted to ISK 1.1 billion. The Bank’s balance sheet shrank during the year in line with new lending focuses, where there is a greater emphasis on profitability rather than growth. Benedikt made specific mention of the importance of asset management to the business, and Arion Bank’s Asset Management division and the subsidiary Stefnir remain market leaders in Iceland with assets under management of ISK 1,013 billion at year end. 2019 was a positive year and returns on assets were generally good. Benedikt also mentioned that the Bank advised Marel when the company was listed on Euronext Amsterdam and also managed a successful stock offering for TM. For the fourth year in a row Arion Bank was in first place in equity trading volume on Nasdaq Iceland.

In December the Board of Directors adopted an ambitious environment and climate policy and targets for the next few years. The policy is recognition of the vital role played by financial institutions in combatting climate change through their loans and investment and underlines that the Bank wishes to help Iceland meets its obligations under the Paris Agreement and other domestic and international climate agreements.

Benedikt went on to discuss the importance of digital and contactless solutions, not least today when society is battling the spread of Covid-19. He said that digital solutions represent a vital component of the Bank's service offering and future vision.

For further information on the Annual General Meeting of Arion Bank please visit the Bank’s website or contact Theódór Fridbertsson, head of Arion Bank’s Investor Relations, at theodor.fridbertsson@arionbanki.is, tel. +354 444 6760, or Haraldur Guðni Eiðsson, head of Arion Bank’s corporate communications, at haraldur.eidsson@arionbanki.is, s: +354 856 7108.

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