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===== SIDA 1 =====

Consolidated 
 Financial 
Statements 2025

===== SIDA 2 =====

Arion Bank Consolidated Financial Statements 2025
page
3
4
13
16
17
18
19
21
22
99
100
Contents
Consolidated Income Statement ...........................................................................................................................................................
Consolidated Statement of Cash Flows ................................................................................................................................................
Arion Bank highlights ............................................................................................................................................................................
Endorsement and statement by the Board of Directors and the CEO ....................................................................................................
Consolidated Statement of Financial Position .......................................................................................................................................
Consolidated Statement of Comprehensive Income .............................................................................................................................
Consolidated Statement of Changes in Equity ......................................................................................................................................
Independent Auditor's report  ................................................................................................................................................................
Notes to the Consolidated Financial Statements ...................................................................................................................................
5-year overview ....................................................................................................................................................................................
Appendices (unaudited) ........................................................................................................................................................................
2

===== SIDA 3 =====

Arion Bank 
Highlights 31 December 2025
FY 2025 14.9%
Return on
Equity*
FY 2025 42.3%
Total cost-to-
core income
18.4%
CET1 ratio
                         
    
    
    
    
    
                         
    
    
        
    
                         
      
      
   
Return on equity* (%)
Net interest margin (%)
Total cost-to-Core income ratio (%)
                                        
                    
CET1 ratio (%)
                                        
   
      
      
LCR ratio (%)
                                        
                         
Total assets (ISK bn)
   
  
  
  
  
    
  
  
Moody’s
Long term: A3 
Covered bond: Aa1
Outlook: Stable
  d   d   s
      s              s
 o s      o 
  s       d s  y
 o         d s      s
   o  od   o    d  ood
s                s
            d   s      
         s
  d s  y       y   d
             
     
Loans to customers by sector
*Return on equity attributable to shareholders of Arion Bank
 Unaudited

===== SIDA 4 =====

Arion Bank Consolidated Financial Statements 2025
About Arion Bank
- 
Operations during the year
2025
Return on equity attributable to 
shareholders of Arion Bank
14.9%
Core operating income / REA
7.4%
Insurance revenue growth (YoY)
5.5%
Combined ratio
89.8%
Total cost-to-core income ratio
42.3%
308 bps
50%
Endorsement and statement
by the Board of Directors and the CEO
The
Consolidated
Financial
Statements
of
Arion
Bank
for
the
year
ended
31
December
2025
include
the
Consolidated
Financial
Statements
of
Arion Bank ("the Bank") and its subsidiaries, together referred to as "the Group".
Income Statement
Arion
Bank
and
its
subsidiaries
provide
comprehensive
financial
services
to
the
people
of
Iceland.
Arion
Bank’s
role
is
to
help
those
who
want
to
achieve
success
in
Iceland
and
the
Arctic
through
smart
and
reliable
financial
solutions
which
enhance
financial
health
and
create
sustainable
value.
Arion
Bank
places
great
importance
on
developing
long-term
relationships
with
its
clients
and
is
a
market
leader
as
a
provider
of
cutting-
edge and modern banking services.
Arion
Bank
provides
services
to
individuals,
corporates
and
investors
in
three
business
segments:
Retail
Banking,
Corporate
&
Investment
Banking,
and
Markets.
The
service
offering
is
further
augmented
by
the
subsidiaries
Stefnir
and
Vördur.
Stefnir
is
one
of
the
largest
fund
management
companies
in
Iceland,
and
Vördur
is
the
fastest
growing
insurance
company
in
Iceland,
providing
non-life
and
life
insurance.
The
Bank also offers pension services and manages several pensions funds. Arion’s service offering is therefore highly diverse.
The
diverse
service
offering
creates
a
broad
revenue
base,
and
the
loan
portfolio
is
well
diversified
between
retail
and
corporate
customers.
The
high percentage of mortgages and the healthy distribution of loans across different sectors contribute towards risk management.
The
Group
is
a
market
leader
in
terms
of
digital
solutions
and
innovation,
and
the
majority
of
the
Group’s
services
can
be
obtained
using
the
Arion
app.
The
broad
spectrum
of
digital
services
makes
banking
more
convenient
for
customers
and
also
makes
the
business
more
cost
efficient.
The
Bank
is
a
leading
service
provider
and
advisor
to
corporate
customers
and
investors
and
has
been
a
key
figure
in
invigorating
the
Icelandic stock market.
Arion
Bank
has
adopted
a
clear
policy
on
sustainable
operations
and
environmental
and
climate
issues.
A
wide
range
of
green
financial
services,
such
as
green
car
loans,
deposits,
corporate
loans
and
mortgages,
is
available
to
its
customers.
Arion
Bank
has
in
addition
published
a sustainable financing framework which addresses the Bank’s funding and lending activities.
Arion
Bank
is
a
financially
robust
bank
which
aspires
to
operate
profitably
in
harmony
with
society
and
the
environment.
The
Bank
is
committed
to paying competitive dividends and is listed on Nasdaq Iceland and Nasdaq Stockholm.
Net
earnings
attributable
to
the
shareholders
of
Arion
Bank
amounted
to
ISK
30.6
billion
for
the
year,
with
a
return
on
equity
of
14.9%
and
earnings
per
share
ISK
22.05,
compared
with
ISK
26.1
billion,
13.2%
and
ISK
18.31
respectively
in
2024.
Core
income,
defined
as
net
interest
income,
net
commission
income
and
insurance
service
results
(excluding
opex),
increased
by
12.3%,
compared
with
the
previous
year.
Net
interest
income
increased
by
13.5%,
compared
with
the
previous
year,
and
the
net
interest
margin
was
3.2%,
compared
with
3.1%
in
2024.
Net
commission
income
increased
by
11.6%
between
years,
an
increase
across
the
major
categories.
The
operation
of
Vördur
contributed
standalone
net
results
of
ISK
2.0
billion
in
2025,
compared
with
ISK
3.7
billion
in
2024.
Insurance
revenues
continued
to
grow,
increasing
by
5.5%
between
years,
while
claims
increased
by
5.0%.
Net
financial
income
amounted
to
ISK
1.1
billion,
impacted
by
challenging
capital
markets,
especially
in
equities
during
the
first
half
of
the
year.
Other
operating
income
amounted
to
ISK
5.5bn,
mainly
due
to
the
fair
value
change
and
profit
from
sale
of
the
investment
property
Arnarland.
Operating
expenses,
including
operating
expenses
of
the
insurance
operation,
increased
by
2.5%
compared
with
the
previous
year,
with
fluctuations
in
underlying
items.
Inflation
measured
3.7%
between
years.
The
cost-to-income
ratio
was
36.0%,
compared
with
42.6%
in
2024,
while
the
total
cost-to-core
income
ratio
was
42.3%,
compared
with
47.2%
in
2024.
Impairments
were calculated at 24bps for the year. The effective income tax rate was 27.7%.
Arion Bank's medium-term financial targets
Exceed 13%
Exceed 7.2%
In excess of market growth (5.7% in 9M 2025 YoY)
Below 95%
Below 45%
Pay-out ratio of approximately 50% of net earnings attributable to shareholders through either 
dividends or buyback of the Bank's shares or a combination of both
150-250 bps management buffer (~16.8 - 17.8%)
Balance Sheet
CET1 ratio above regulatory
capital requirements
Arion Bank's medium-term financial targets compared with the operational results for the year
Dividend pay-out ratio
Arion
Bank's
balance
sheet
grew
by
8.5%
from
year-end
2024.
Loans
to
customers
increased
by
8.0%,
mainly
loans
to
corporates
which
increased
by
16.6%.
Deposits
increased
by
7.4%,
primarily
individuals
and
SMEs
with
low
LCR
outflow
weight.
Shareholders’
equity
amounted
to
ISK
217,327
million
at
the
end
of
the
year.
The
Group's
capital
ratio,
as
calculated
under
the
Financial
Undertakings
Act
No.
161/2002,
was
22.5%
and
the
CET1
ratio
was
18.4%
assuming
around
ISK
15.3
billion
dividend
payment
and
ISK
5
billion
buyback
of
own
shares
approved
by
the
Board
in
2025
and
the
Financial
Supervisory
Authority
of
the
Central
Bank
of
Iceland
(FSA)
in
January
2026.
These
ratios
comfortably
exceed
the
requirements
made
by
the
FSA
and
Icelandic
law.
The
liquidity
position
was
strong
at
year-end
and
well
above
the
regulatory
minimum.
4

===== SIDA 5 =====

Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
Merger discussion between Arion Bank and Kvika
Economic outlook
Outlook for the Group
Employees
 
Arion
Bank
and
Vördur
have
in
place
an
incentive
scheme
which
came
into
effect
in
2021
for
employees
of
Arion
Bank
and
Vördur.
The
scheme
is
in
compliance
with
the
FSA’s
rules
on
remuneration
policies
for
financial
institutions.
The
scheme
is
divided
into
two
parts.
Firstly,
employees
can
receive
up
to
10%
of
their
fixed
salary
in
the
form
of
a
cash
payment.
Secondly,
a
limited
group
can
receive
up
to
25%
of
their
fixed
salary
as
payment,
partly
in
the
form
of
shares
or
share
options
in
the
Bank.
The
key
metric
used
to
determine
whether
remuneration
will
be
paid
for
the
relevant
year,
in
part
or
in
full,
is
whether
the
Bank’s
return
on
equity
in
the
relevant
year
is
higher
than
the
weighted
ROE
of
the
Bank’s
main
competitors.
Stefnir
has
a
separate
incentive
scheme
where
other
criteria
are
used
as
a
basis.
Since
2021
Arion
Bank
has
had
in
place
a
share
option
plan
for
all
employees
of
the
Bank,
and
the
subsidiaries
Vördur
and
Stefnir,
which
is
considered
important
for
aligning
the
interests
of
employees
with
the
long-term
interests
of
the
Bank.
The
share
option
plan
was
initially
for
five
years
and
employees
are
entitled
to
buy
shares
for
up
to
ISK
1,500,000
each
year.
The
purchase
price
is
determined
by
the
Bank’s
average
share
price
10
days
before
the
share
option
agreement is signed. Further disclosure on the incentive scheme and the share option plan can be found in Note 13.
The Group had 901 full-time equivalent positions at the end of the year, compared with 858 at the end of 2024.
On
4
July
2025,
the
Board
of
Directors
of
Arion
Bank
reiterated
its
interest
from
27
May
to
the
Board
of
Kvika
banki
hf.
to
enter
into
merger
negotiations.
The
aim
of
the
merger
is
to
combine
the
companies’
strengths
and
to
create
a
robust
financial
institution
which
offers
comprehensive
services
for
its
customers.
The
Board
of
Directors
of
Kvika
agreed
to
the
request,
and
both
parties
signed
a
letter
of
intent.
According
to
the
letter
of
intent
Kvika
shareholders
receive
in
exchange
for
their
shares
new
shares
in
Arion
Bank
representing
26%
of
the
merged
entity,
a
total
of
485,237,822
shares,
representing
a
share
price
of
ISK
19.17
per
share
in
Kvika
and
a
share
price
of
ISK
174.5
per
share
in
Arion
Bank.
The
merger
of
the
two
banks
is
subject
to
both
regulatory
approval
and
the
approval
of
shareholders’
meetings
of
both
entities.
The
first
steps
involve
due
diligence
reviews
and
preliminary
discussions
with
the
Icelandic
Competition
Authority,
which
began
late
last
year,
where
the
aims
of
the
merger
and
benefits
resulting
from
it,
both
for
customers
and
the
Icelandic
financial
market,
will
be
presented.
The
parties
hope
that
the
preliminary
discussions,
the
finalization
of
contracts,
and
the
due
diligence
review
will
be
completed
in
the
next
few
months.
Assuming
that
the
preliminary
discussions
with
the
Icelandic
Competition
Authority
are
successful,
merger
negotiations
will
commence
and
the
merger
will
be
formally
announced
to
the
regulators
and
will
be
submitted
for
approval
at
shareholders’
meetings
of
both
companies.
For
further
information, see press releases from 4 and 21 July 2025.
In
recent
years,
Arion
has
followed
a
strategy
designed
to
drive
leadership
in
our
markets,
the
success
of
our
customers
and
society
as
a
whole.
This
vision
builds
on
long-term
client
relationships,
diverse
products
and
services
and
strong
teamwork
which
form
the
basis
for
a
seamless
customer
experience
and
sustainable
value
creation.
The
Group’s
performance
over
the
past
few
years,
which
has
continued
in
2025,
indicates
that
we
are
on
the
right
track.
The
proposed
merger
with
Kvika
Bank
is
a
natural
progression
of
this
strategy
and
has
strong
potential
to
further
enhance the operational performance and the service to our clients.
The
external
operating
environment
continues
to
evolve.
As
before,
Arion
benefits
from
its
diverse
revenue
streams
and
sound
infrastructure,
while
also
retaining
the
flexibility
to
respond
to
the
shifting
environment.
The
operating
environment
for
2025
has
continued
to
be
impacted
by
inflation,
elevated
interest
rates,
and
international
political
uncertainty.
Arion
Bank
remains
in
a
strong
position
to
manage
the
evolving
external
operating environment.
After
two
years
of
modest
expansion,
household
consumption
regained
its
role
as
a
key
driver
of
economic
activity.
A
6.9%
increase
in
payment
card
turnover
in
the
fourth
quarter
indicates
continued
momentum,
reflecting
households’
strong
financial
position,
considerable
resilience,
and
substantial
increases
in
real
income.
Thus,
rising
unemployment
and
a
cooling
labour
market
have
not
yet
weighed
on
household
spending.
Although
it
is
too
early
to
draw
definitive
conclusions,
signs
point
to
a
structural
shift
in
the
adjustment
mechanism
of
the
economy,
with
a
greater
share
of
adjustment
now
occurring
through
the
labour
market
rather
than
via
a
weaker
currency,
higher
inflation,
and
reduced
purchasing
power.
Such
a
shift,
however,
implies
a
higher
level
of
unemployment
than
otherwise.
Unemployment
is
projected
to
continue
rising
in
the
coming months, as labour demand has weakened sharply and business sentiment, particularly among export oriented firms, has deteriorated.
The
year
2025
proved
particularly
turbulent,
as
rising
protectionism
in
global
trade
brought
widespread
uncertainty
and
significant
volatility
in
international
markets.
Although
the
impact
on
the
Icelandic
economy
was
ultimately
less
severe
than
feared,
conditions
became
increasingly
challenging
as
the
year
progressed.
Even
so,
the
economy
demonstrated
resilience,
with
GDP
growth
of
1.5%
in
the
first
nine
months
of
the
year
according
to
Statistics
Iceland’s
preliminary
estimates.
Growth
was
driven
primarily
by
household
consumption,
which
increased
by
3.6%
year
on
year,
and
investment,
which
expanded
by
10.1%.
Despite
a
record-breaking
summer
season
for
tourism,
export
growth
was
outpaced
by
an
11.4%
rise
in
imports.
The
surge
in
imports
was
largely
attributable
to
significant
inflows
of
computer
equipment
for
data
center
operations,
together with a marked rise in foreign travel by Icelandic consumers, both reaching unprecedented levels.
During
the
autumn
the
economy
faced
a
series
of
challenges.
Flight
capacity
to
Iceland
sharply
declined,
international
guidance
on
total
allowable
catches
(TAC)
of
pelagic
species
was
significantly
reduced,
a
major
electrical
equipment
failure
halted
aluminium
production
locally,
and
households’
borrowing
terms
and
financial
conditions
tightened
following
a
Supreme
Court
ruling.
This
led
to
a
rise
in
unemployment
and
a
further
slowdown
in
housing
market
activity,
which
had
already
shown
signs
of
cooling
earlier
in
the
year.
Even
as
the
economic
slowdown
became
more
evident,
substantial
wage
increases
continued
to
fuel
domestic
inflationary
pressures.
Inflation
expectations
likewise
remained
elevated
and
well
above
the
Central
Bank’s
target.
Nevertheless,
the
Central
Bank
lowered
interest
rates
in
November,
primarily
in
response
to
turbulence
in
the
mortgage
market.
Only
two
months
later
inflation
rose
to
5.2%
in
January,
up
from
4.6%
at
the
beginning
of
2025.
Despite
visible
signs
of
cooling
economy,
the
uptick
in
inflation,
although
largely
attributable
to
changes
in
excise
taxes
and
other
public-sector
fees,
poses
a
significant
challenge
for
the
Monetary
Policy
Committee.
As
a
result,
interest
rates
were
left
unchanged
in
February,
and
further
rate
cuts were set aside for the time being. Analysts still expect rate cuts to resume, but not until the second half of the year.
5

===== SIDA 6 =====

Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
Funding and liquidity
Capital adequacy and dividends 
Ownership of Arion Bank
Risk management
The
proposed
dividend
for
2025,
which
will
be
subject
to
the
approval
of
the
Annual
General
Meeting
on
11
March
2026,
is
equivalent
to
ISK
11.5
per
share
or
around
ISK
15.3
billion,
net
of
own
shares.
In
March
2025,
Arion
Bank
paid
a
dividend
of
ISK
11.5
per
share,
approximately
ISK 16 billion. The Annual General Meeting 2025 authorized the Board to purchase up to 10% of the Bank’s issued share capital.
The
main
reason
for
the
REA
decrease
is
the
introduction
of
CRR3
in
Iceland
in
December
2025,
resulting
in
an
overall
REA
decrease
of
around
ISK
55
billion.
REA
for
credit
risk
and
operational
risk
decreased
while
changes
to
own
funds
requirements
for
market
risk
have
been
postponed
in
the
EEA
and
other
effects
are
smaller.
The
CRR3-driven
decrease
was
partly
offset
by
customer
lending
growth
of
ISK
27.3
billion,
which
led
to
an
increase
in
REA.
It
should
be
noted
that
the
Bank
makes
use
of
transitional
arrangements
in
CRR3
so
some
of
the
initial
capital
relief
will
be phased out over time.
The
AGM
of
Arion
Bank,
held
on
12
March
2025,
approved
the
reduction
of
the
Bank’s
share
capital
by
ISK
93,423,078
nominal
value,
through
cancelling
the
Bank’s
own
shares.
The
reduction
was
carried
out
on
7
April
2025.
Thus,
the
share
capital
of
Arion
Bank
was
reduced
from
ISK
1,513
million
to
ISK
1,420
million
in
2025.
In
2024
the
nominal
value
of
Arion
Bank's
share
capital
was
increased
by
ISK
53,198,719
in
order
to
cover the exercising of issued warrants.
Following
the
introduction
of
CRR3,
the
Bank
announced
its
intention
to
buy
back
up
to
ISK
5
billion
of
its
own
shares
in
Iceland
and
Sweden
and reduce its share capital.
The
Bank's
MREL
requirements
are
19.8%
of
REA
excluding
own
funds
used
to
meet
the
combined
buffer
requirement
and
6.0%
of
TEM.
The
Bank comfortably exceeded both at the end of 2025. An MREL subordination requirement of 13.5% will apply to the Bank from Q3 2027.
In
June,
the
Bank
issued
a
new
series
of
Tier
2
subordinated
bonds.
The
total
issue
amounted
to
ISK
10.0
billion.
The
series
matures
in
December 2036 and can be called by the issuer in December 2031 and on every subsequent due interest date.
Arion
Bank
continued
to
issue
covered
bonds
which
are
secured
under
the
Covered
Bond
Act
No.
11/2008.
In
2025
the
Bank
issued
covered
bonds amounting to ISK 18.5 billion, of which ISK 960 million were for own use.
Moody’s
affirmed
the
Bank's
A3
rating
for
senior
unsecured
debt
and
its
A2
rating
for
long-term
deposits
with
a
stable
outlook.
In
addition,
the
Bank
retained
its
Aa1
rating
for
covered
bonds
and
its
P-1
rating
for
short-term
deposits.
The
rating
reflected
Moody’s
expectations
that
the
Bank’s financial results would continue to be stable and that the proposed merger with Kvika will be orderly.
The
main
forum
at
which
the
Board
reports
information
to
the
shareholders
and
propose
decisions
is
at
legally
convened
shareholders’
meetings.
The
Bank
provides
an
effective
and
accessible
arrangement
for
communications
between
shareholders
and
the
Board
of
Directors
between
those
meetings.
Any
information
sensitive
to
the
market
will
be
released
through
a
MAR
press
release,
unless
legal
conditions
for
delaying
public
disclosure
apply.
Arion
Bank
also
arranges
quarterly
meetings
where
the
interim
financial
results
are
presented.
The
Bank
has
also
held
its
capital
markets
day,
most
recently
in
March
2024,
where
the
management
team
discussed
the
Group’s
performance
and
key
focus
areas going forward.
Arion
Bank's
dividend
policy
states
that
the
Bank
aims
to
pay
50%
of
net
earnings
in
dividends
and
that
additional
dividend
or
share
buybacks
can
be
considered
when
the
Bank's
capital
levels
exceed
the
minimum
regulatory
requirements
together
with
the
Bank's
management
buffer.
In
the
medium
term,
the
Bank
aims
to
maintain
capital
adequacy
ratios
150-250bps
above
total
regulatory
requirements.
Arion
Bank
is
currently
rated A3 with a stable outlook from Moody's Ratings.
The
Group's
capital
adequacy
ratio
on
31
December
2025
was
22.5%
and
the
CET1
ratio
was
18.3%.
The
ratios
account
for
a
deduction
due
to
foreseeable
dividend
payments
and
share
buybacks.
This
compares
to
a
regulatory
capital
requirement
of
19.6%,
including
the
combined
buffer
requirement. The Bank’s REA decreased by ISK 29.1 billion in the fourth quarter of 2025.
Funding
and
liquidity
were
characterized
by
a
robust
liquidity
position
and
continued
deposit
growth.
The
Bank’s
liquidity
position
was
well
in
excess of the stipulated minimum and the liquidity ratio at year-end 2025 was 199%, with the stipulated minimum being 100%.
In
January,
the
Bank
issued
floating
rate
bonds
in
the
amount
of
NOK
350
million
and
SEK
250
million,
In
February,
the
Bank
issued
€300
million
senior
preferred
notes
with
a
5-year
maturity,
in
June,
the
Bank
issued
senior
preferred
green
bonds
amounting
to
NOK
600
million
and
SEK
900
million
and
in
August,
the
Bank
issued
€300
million
senior
preferred
notes
with
a
6-year
maturity
and
the
deal
was
close
to
five
times
oversubscribed, with orders received from 105 investors spanning more than 20 countries across EMEA and APAC.
Lífeyrissjódur
verzlunarmanna
was
the
largest
shareholder
in
Arion
Bank
with
a
shareholding
of
9.56%
at
year-end
and
Arion
Bank
held
2.59%
of
its
own
shares.
The
number
of
shareholders
was
10,703
at
the
end
of
the
period,
compared
with
10,200
at
year-end
2024.
Further
information
on Arion Bank's shareholders can be found in Note 38.
The
Group
faces
various
risks
arising
from
its
day-to-day
operations
as
a
financial
institution.
Managing
risk
is
therefore
a
core
activity
within
the
Group.
The
key
to
effective
risk
management
is
a
process
of
on-going
identification
of
significant
risk,
quantification
of
risk
exposure,
actions
to
limit
risk
and
constant
monitoring
of
risk.
This
process
of
risk
management
and
the
ability
to
manage
and
price
risk
factors
is
critical
to
the
Group's
continuing
profitability
as
well
as
ensuring
that
the
Group's
exposure
to
risk
remains
within
acceptable
levels.
The
Board
of
Directors
is
ultimately
responsible
for
the
Bank’s
risk
management
framework,
ensuring
that
satisfactory
risk
policies
and
governance
structures
for
controlling
the
Bank’s
risk
exposure
are
in
place.
The
Group’s
risk
management,
its
structure
and
main
risk
factors
are
described
in
the
notes
and in the Bank’s unaudited Pillar 3 Risk Disclosures.
6

===== SIDA 7 =====

Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
Governance
Sustainability and non-financial disclosures
At Arion Bank, sustainability is integrated into the Group’s governance framework.
The
Bank
has
a
sustainability
committee,
and
the
management
of
risks
related
to
environmental,
social,
and
governance
(ESG)
factors
is
defined
as
part
of
the
risk
management
system.
The
CEO
chairs
the
committee,
whose
main
role
is
to
monitor
the
Bank’s
performance
in
terms
of
its
sustainability
strategy
and
commitments
and
to
ensure
that
ESG
factors
are
incorporated
into
decision
making
and
planning.
The
Bank’s
sustainable financing committee and equality committee are sub-committees of this body.
The
Board
of
Directors
of
Arion
Bank
places
great
importance
on
good
corporate
governance
and
a
corporate
culture
which
fosters
open
and
honest
relations
between
the
Bank,
its
shareholders,
and
other
stakeholders.
The
Board
of
Directors
is
the
supreme
authority
in
the
affairs
of
the
Bank
between
shareholders’
meetings
and
tends
to
those
operations
of
the
Bank
which
are
not
considered
part
of
the
day-to-day
business,
i.e.,
taking
decisions
on
issues
which
are
unusual
or
of
a
significant
nature.
The
Board
of
Directors
appoints
a
Chief
Executive
Officer
who
is
responsible for the day-to-day operations in accordance with a strategy set out by the Board. The CEO hires the Executive Management.
Sustainability governance framework
Vörður
has
a
sustainability
group
which
addresses
sustainability
and
related
risks
in
operations.
The
group
is
composed
of
employees
appointed
by
the
operating
officer
and
it
works
in
accordance
with
established
rules
of
procedure.
Its
role
is
to
promote
sustainability
across
all
operations
and
to
set
and
monitor
progress
toward
the
company’s
goals.
At
Stefnir,
an
ESG
committee
operates
and
consists
of
employees
involved
in
the
investment
process
of
the
funds.
The
committee
works
according
to
defined
rules,
supports
investment
decisions,
and
ensures
adherence
to
Stefnir’s responsible investment framework. It also decides on the ethical restrictions that apply to the funds’ investment decisions.
An
incentive
system
is
in
operation
for
permanent
employees
of
Arion
Bank.
The
system
is
based
on
clear
objectives
and
is
subject
to
strict
conditions
in
accordance
with
applicable
laws
and
regulations.
In
2025,
as
in
previous
years,
both
financial
and
non
financial
metrics
formed
part
of
the
system.
Non
financial
metrics
include
customer
satisfaction,
education
and
equality
matters,
and
know
your
customer
(KYC)
performance.
ESG considerations are also incorporated into incentive schemes at Stefnir and Vörður.
Corporate
governance
at
Arion
Bank
is
described
in
more
detail
in
the
Bank's
Corporate
Governance
Statement
which
is
contained
in
the
unaudited
appendix
to
the
Financial
Statement
and
on
the
website
www.arionbanki.is.
The
Corporate
Governance
Statement
is
based
on
legislation,
regulations,
and
recognised
guidelines
in
force
when
the
Bank's
annual
financial
statements
are
adopted
by
the
Board
of
Directors,
prepared
in
accordance
with
the
Guidelines
on
Corporate
Governance,
6th
edition,
issued
by
the
Icelandic
Chamber
of
Commerce,
SA
–
Business
Iceland
and
Nasdaq
Iceland
in
February
2021.
Corporate
governance
at
Arion
Bank
complies
with
the
guidelines
with
two
exceptions,
which are explained in more detail in the Corporate Governance Statement.
There
are
five
Board
sub-committees:
The
Board
Audit
Committee,
the
Board
Risk
Committee,
the
Board
Credit
Committee,
the
Board
Remuneration
Committee
and
the
Board
Tech
Committee.
One
of
the
committee
members
on
the
Board
Audit
Committee
is
not
a
Board
member and is independent of the Bank and its shareholders.
The
main
roles
of
the
Board,
as
further
specified
in
the
rules
of
procedure
of
the
Board,
include
setting
the
Bank's
strategy,
supervising
financial
affairs
and
accounting,
and
ensuring
that
appropriate
internal
controls
are
in
place.
The
Board
ensures
that
the
Bank
has
active
Internal
Audit,
Compliance
and
Risk
Management
departments.
The
Internal
Auditor
is
appointed
by
the
Board
of
Directors
and
works
independently
of
other
departments
of
the
Bank
in
accordance
with
a
charter
from
the
Board.
The
Internal
Auditor
provides
independent
and
objective
assurance
and
advice
designed
to
add
value
and
improve
the
Bank's
operations.
The
Compliance
Officer,
who
reports
directly
to
the
CEO,
works
independently
within
the
Bank
in
accordance
with
a
charter
from
the
Board.
The
main
role
of
Compliance
is
to
ensure
that
the
Bank
has
in
place
proactive
measures
to
reduce
the
risk
of
rules
being
breached
in
the
course
of
its
activities.
Compliance
is
also
responsible
for
coordinating
the
Bank’s
measures
against
money
laundering
and
terrorist
financing.
The
duties
of
Compliance
are
carried
out
under
a
risk-based
compliance
plan
approved
by
the
Board
of
Directors,
including
a
monitoring
and
training
schedule
for
employees
which
addresses
the
laws
and
rules
under
which
the Bank operates.
At
the
Bank’s
AGM
on
12
March
2025,
five
members
were
elected
to
serve
on
the
Board
of
Directors
until
the
next
AGM,
three
women
and
two
men.
Paul
Horner
was
elected
Chairman
of
the
Board.
Additionally,
two
Alternate
Directors
(one
woman
and
one
man)
were
elected.
All
Directors
and
Alternates
are
independent
of
Arion
Bank,
its
management
and
major
shareholders.
The
Board’s
composition
meets
statutory
requirements,
which
stipulate
that
companies
employing
more
than
50
people
must
ensure
that
the
gender
ratio
of
the
board
of
directors
and
alternate board is no less than 40%.
The
overarching
theme
of
Arion
Bank’s
sustainability
strategy
is
together
we
make
good
things
happen,
which,
among
other
things,
reflects
our
ambition
to
lead
by
example
when
it
comes
to
responsible
and
profitable
business
practices
that
take
into
account
environmental
and
social
considerations.
We
place
particular
emphasis
on
ensuring
that
corporate
responsibility
and
sustainability
are
fully
integrated
into
daily
operations,
decision
making,
and
processes.
The
Bank’s
code
of
ethics
serves
as
guidance
for
employees
to
encourage
ethical
behaviour
and
responsible
decision
making.
The
subsidiaries
Vörður
and
Stefnir
have
likewise
adopted
sustainability
policies
aligned
with
that
of
the
parent
company.
7

===== SIDA 8 =====

Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
     -
     -
     -
     -
     -
The Bank’s environmental and climate goals to 2030 include:
Supporting reductions in financed emissions (Scope 3) in sectors with the highest climate impact, aligned with Iceland’s 2040 net zero
goal, with updated targets published annually;
The Bank will continue to purchase only vehicles that use 100% renewable energy sources for its daily operations. Other vehicles acquired
for the Bank’s activities shall use renewable energy sources either partially or entirely. From 2030 onward, only vehicles that meet the
requirement of running on 100% renewable energy sources will be purchased;
Considerable  progress  has  been  made  in  reducing  emissions  from  own  operations  of  the  Bank  (Scopes  1  and  2),  down  64.7%  at  year-end  2025
compared  to  2015.  This  includes  a  68.6%  reduction  from  vehicles  and  59.6%  reduction  from  own  business  premises.  Vörður  and  Stefnir  refer  to
the  Bank’s  environmental  targets  when  setting  their  own  targets.  Combined  emissions  for  Arion  Bank,  Stefnir,  and  Vörður  were  622.1  tCO₂e  in
2025, with Arion Bank accounting for 88.1%, Vörður 9.2%, and Stefnir 2.7%.
Domestically, the Bank and Vörður are members of Festa, the Icelandic Centre for Sustainability, and the Bank is a founding member of
Grænvangur, a partnership between the public and private sectors on climate and green solutions. Arion Bank, Stefnir, and Vörður are founding
members of IcelandSIF, the Icelandic Sustainable Investment Forum.
Arion Bank has set environmental and climate policies and targets. These emphasise minimising the environmental impact of operations and
reducing greenhouse gas emissions. The policy highlights the importance of financing projects that contribute to sustainable development and
green infrastructure, supporting Iceland’s national climate target of carbon neutrality by 2040, and committing to the same goal for the Bank
itself.
The Bank has published sustainability policies for lending to different industries and for business operations in the Arctic, designed to support
customers on their sustainability journey. These policies reflect the Bank’s sustainability priorities and commitments and have been approved by
the sustainability committee. The policies cover the industries that have the greatest impact on the Bank’s financed emissions, as well as the
important region which the Arctic represents, both in terms of environmental and social.
Commitment to sustainability
Reducing greenhouse gas emissions from own operations (Scope 1 and 2) by 80% from 2015 levels and offsetting remaining emissions;
Obtaining SBTi verification of financed emissions targets.
Arion Bank is a member of the Partnership for Carbon Accounting Financials (PCAF). This is a global partnership of financial institutions that
work together to develop and implement a harmonized approach to assess and disclose the greenhouse gas emissions associated with their
loans and own investments (Scope 3). The Bank publishes annual financed emissions disclosures according to PCAF methodology, thereby
promoting transparency in progress on climate issues. Calculations are based on the most recent reliable data available, typically one year old.
Stefnir also reports financed emissions for its managed funds and publishes annual results, including emission intensity per ISK million invested
in particular funds.
Arion Bank’s total financed emissions for 2024, including sovereign bonds (excluding land use), amounted to 292.2 ktCO₂e, a 2% increase year
on year, primarily due to a 6% increase in the value of the loan book and own investments. Excluding sovereign bonds, financed emissions rose
by 5% from 158.8 ktCO₂e in 2023 to 167.2 ktCO₂e in 2024.
The Bank’s climate targets are based on emission intensity rather than absolute emissions. Emission intensity for lending and investments
(excluding sovereign bonds) decreased from 0.148 tCO₂e/ISKm to 0.146 tCO₂e/ISKm, a 1% reduction between years. Emissions intensity is
used to measure results because while amounts may change, percentages remain comparable and provide a better picture than just focusing
on the emissions figures for each category. The reduction on emission intensity is therefore an important metric and indicates that each ISK
million lent or invested now corresponds to proportionally lower emissions than the previous year.
In October 2025, Arion Bank published The Path to Net Zero, outlining updated climate targets for lending to 2030. The targets align with
Iceland’s 2040 goal and the Paris Agreement’s 1.5°C pathway. The targets are important steps in the Bank’s climate journey.
Arion Bank and its subsidiaries participate in extensive national and international collaboration within the fields of sustainability and corporate
responsibility and are signatories to numerous international commitments and declarations. The Bank is a participant in the UN Global Compact,
the UN Principles for Responsible Banking (UN PRB), and the UN Principles for Responsible Investment (UN PRI), with Stefnir also being a
signatory to the latter. At the end of 2023, the Bank joined the Science Based Targets initiative (SBTi) and the Net Zero Banking Alliance (NZBA)
under the auspices of the United Nations. The NZBA was discontinued in 2025; however, its net zero guidance remains valid, and the Bank will
continue to follow it. The Bank aims to have its climate targets validated by SBTi in 2027.
Environmental and climate strategy and actions
Increasing the share of sustainable lending to at least 20% of the Bank’s total loan book;
Financed emissions
8

===== SIDA 9 =====

Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
Human resources
Arion
Group
employs
a
strong
and
diverse
team.
At
year
end
2025,
total
full
time
equivalent
positions
numbered
883
across
the
Bank
and
subsidiaries.
The
gender
balance
was
44%
men
and
56%
women,
with
fewer
than
five
employees
identifying
as
another
gender.
The
average
age was 41 and average length of employment was 9.5 years.
Since
2021,
when
it
published
the
Sustainable
Financing
Framework,
the
Bank
has
regularly
issued
green
bonds.
In
2025,
it
issued
a
green
bond
in
Norwegian
kroner
and
Swedish
kronor
which
aligned
with
the
Sustainable
Financing
Framework.
Green
liabilities
decreased
during
the
year
due
to
the
maturity
of
a
€300m
green
bond.
Total
sustainable
finance
liabilities
at
year
end
were
ISK
63.4bn.
In
January
2026,
the
Bank
issued NOK 850m and SEK 850m in green bonds (approx. ISK 22bn), with a maturity of 3-5 years.
Women Invest
Women
Invest
is
a
long
term
initiative
launched
by
Arion
aimed
at
empowering
women
through
increased
participation
in
investment
and
stronger
financial
literacy.
The
foundations
for
the
project
were
laid
in
2023
when
Arion
Bank
decided
to
highlight
the
importance
of
bridging
gender
disparity
in
terms
of
participation
in
the
financial
market.
Women
Invest
was
formally
launched
in
January
2024
with
a
well
attended
opening
event,
awareness
campaign,
nationwide
educational
programme,
and
extensive
online
content.
Since
its
launch,
around
8,000
women
have
attended
approximately
90
educational
events.
Topics
have
been
diverse,
and
emphasis
was
placed
on
reaching
all
regions
and
engaging
with professional women’s groups.
To
achieve
gender
balanced
participation,
women
must
increase
investment
activity
faster
than
men.
To
this
end,
measurable
objectives
have
been set for three-year periods at a time, focusing among other things on incentives, financial education, and increasing women’s participation in 
investments. In addition, short
‑
term indicators are established to ensure that the initiative remains on track.
Arion
strives
to
foster
a
supportive
and
motivating
work
environment.
Mutual
respect
characterizes
all
communication,
and
there
is
zero
tolerance
of
bullying,
gender
based
harassment,
sexual
harassment,
and
violence.
The
Bank
places
great
importance
on
employee
health
and
safety.
We
offer
an
attractive
working
environment
and
are
a
family
friendly
workplace.
Through
flexible
work
arrangements
and
a
remote
work
policy, we accommodate the needs of our employees and support a better balance between work and personal life.
Survey
results
indicate
that
employees
are
generally
satisfied
and
feel
good
at
work.
The
2025
average
score
on
the
Arion
Index
was
4.49
for
the Bank and 4.44 for Vörður (on a scale of 1–5).
Under
the
EIF
partnership,
the
Bank
began
offering
car
and
equipment
loans
aimed
at
supporting
the
energy
transition
at
companies
in
2025.
The
aim
is
to
make
it
easier
for
companies
to
invest
in
electric
vehicles,
environmentally
friendly
equipment,
and
equipment
that
contributes
to
lower
emissions
and
improved
energy
efficiency.
Loans
under
the
EIF
guarantee
offer
more
favourable
terms
than
traditional
vehicle
and
equipment loans but must support new financing and apply to SMEs. The guarantee has been used to finance a wide range of green, innovative, 
and cultural projects.
Arion
Bank
and
the
European
Investment
Fund
(EIF)
cooperate
under
a
guarantee
agreement
within
the
EU’s
InvestEU
programme.
The
agreement
enables
the
Bank
to
extend
loans
to
Icelandic
companies
on
more
favourable
terms,
with
a
total
guarantee
exposure
of
ISK
15bn.
The
cooperation
aligns
with
the
Bank’s
Sustainable
Financing
Framework
and
has
led
to
the
development
of
new
products.
This
is
the
second
EIF
agreement
the
Bank
has
operated
under;
the
first,
introduced
in
2016,
focused
on
innovation
in
SMEs
and
was
widely
used.
The
aim
of
the
EIF
guarantee
is
to
further
support
entrepreneurial
activity
and
potentially
enable
the
financing
of
projects
earlier
than
would
otherwise
be
possible
under
the
Bank’s
credit
appetite.
The
focus
is
on
three
key
areas:
sustainability
and
green
investments,
innovation
and
digitalization,
and culture and creative industries.
Arion
updated
its
human
resources
policy
in
2025.
The
policy
consists
of
six
guiding
themes
designed
to
support
employee
satisfaction,
growth,
and
engagement:
the
right
people,
continuous
learning
and
development,
a
results
driven
culture,
well-being
and
social
interaction,
strong
leadership,
and
a
clear
vision
for
equality.
The
strategy
applies
across
the
Group
and
is
supported
by
various
tools,
including
surveys,
dialogue,
workplace audits, supervisor effectiveness evaluations, turnover analysis, absence metrics, recruitment data, equality statistics and more.
Sustainable finance
EIF guarantee agreement
Arion
Bank
has
issued
a
Sustainable
Financing
Framework
covering
green
and
sustainable
bonds,
green
deposits,
and
green
and
sustainable
lending.
The
Framework
comprises
eleven
categories
which
align
with
targets
on
mitigating
or
preventing
climate
change
and
which
have
a
positive
social
impact.
The
Framework
was
published
in
2024
and
builds
on
the
Bank’s
Green
Finance
Framework
from
2021,
which
forms
the
foundation for the Bank’s green product offering.
The
Bank
offers
green
business
loans
at
preferential
rates
to
projects
which
meet
the
terms
of
the
Framework.
Retail
customers
receive
a
100%
discount
on
loan
fees
for
mortgages
on
environmentally
certified
homes
and
a
50%
discount
on
electric
vehicle
financing
fees.
Better
interest
rates also apply to vehicles using 100% renewable energy and to plug in hybrids emitting under 50 g CO
₂
/km.
The
Bank
aims
for
sustainable
lending
to
reach
at
least
20%
of
total
lending
by
2030.
At
year
end
2025,
sustainable
lending
accounted
for
12.86%
of
the
loan
book,
of
which
green
loans
made
up
10.04%
and
loans
with
a
positive
social
impact
2.82%.
The
total
book
value
of
sustainable
loans
was
nearly
ISK
171
billion
(ISK
133.4bn
green,
ISK
37.5bn
social
impact).
A
year
on
year
decrease
is
mainly
due
to
the
prepayment of a large loan.
9

===== SIDA 10 =====

Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
     -
     -
     -
     -
     -
Arion’s
goal
is
for
all
employees
to
enjoy
the
same
terms
for
the
same
jobs
or
equally
valuable
jobs
and
to
ensure
that
no
unjustified
wage
gap
exists.
Equal
pay
means
that
pay
levels
are
determined
in
advance
and
that
there
is
no
discrimination
on
the
basis
of
gender
of
other
factors.
It
must
also
be
ensured
that
all
pay
decisions
are
predetermined
and
aligned
with
collective
agreements.
Arion
works
in
accordance
with
an
equal
pay
system
and
the
companies
in
the
Group
have
equal
pay
certification.
Vörður
received
certification
in
2014,
Arion
in
2015,
and
Stefnir
in
2024.
All
companies
in
the
Group
now
operate
under
the
same
unified
system.
In
2025,
the
unexplained
gender
pay
gap
measured
0.2%,
meeting
targets.
In
addition
to
the
annual
equal
pay
audit,
we
perform
monthly
equal
pay
analyses
in
order
to
ensure
that
decisions
of
salaries
are in compliance with our equal pay policy and our targets.
In
the
Bank’s
annual
risk
assessment,
risks
related
to
sustainability
factors
are
also
evaluated.
The
inherent
risk
associated
with
human
resources
and
social
factors
is
generally
assessed
as
low
within
the
business.
The
main
risks
identified
relate
to
employee
competence
and
development,
as
well
as
equality
and
diversity.
In
relation
to
environmental
matters,
the
risk
of
greenwashing
and
the
environmental
and
climate
impacts
of
lending
and
investments
were
assessed
as
the
key
risks.
The
results
also
showed
that
the
Bank’s
main
governance
related
risks
concern
anti
money
laundering
measures,
breaches
related
to
know
your
customer
(KYC)
requirements,
and
data
protection
issues.
Overall,
the
controls in place for these risks within the Bank were assessed as adequate or strong.
The
Bank’s
credit
policy
places
an
emphasis
on
sustainability
and
the
credit
rules
stipulate
that
ESG
factors
should
be
assessed
when
a
credit
rating
is
required,
or
a
company
meets
the
conditions
of
Article
66d
of
the
Annual
Accounts
Act.
The
Bank
has
analysed
its
loan
book
by
industry
to
assess
ESG
risk,
producing
a
heat
map
based
on
potential
impacts
over
the
next
15
years.
These
findings
have
been
integrated
into
the Bank’s credit risk systems, ensuring ESG factors are evaluated at the individual customer level.
In
compliance
with
Article
5
of
SFDR,
the
remuneration
policy
states
how
the
policy
is
consistent
with
the
integration
of
sustainability
risk
in
the
Bank’s
activities.
The
policy
explains
how
the
remuneration
policy,
e.g.
through
the
Bank’s
incentive
scheme,
ensures
that
people
integrate
sustainability risk into the investment decision process and investment advice. Stefnir’s remuneration policy includes corresponding provisions.
Arion
Bank
maintains
an
exclusion
list
of
activities
in
which
it
will
not
invest
(own
investments),
provide
corporate
finance
services,
or
extend
lending.
Beyond
these
exclusions,
the
Bank
refrains
from
doing
business
with
entities
engaged
in
illegal
activities
in
their
jurisdiction.
Arion
Bank’s
exclusion
list
is
available
on
the
Bank’s
website.
Stefnir
integrates
ESG
considerations
into
the
investment
processes
of
the
funds
it
manages
and
specifically
screens
for
companies
that
do
not
align
with
the
ethical
restrictions
that
have
been
established.
These
restrictions
can
be seen on Stefnir’s website.
Targets
have
been
set
up
to
2027
to
reduce
the
ratio
of
median
male
compensation
to
median
female
compensation
to
below
1.25
measured
on
an annual salary basis. In 2025, this figure was 1.26.
There
is
zero
tolerance
of
bullying,
gender
based
or
sexual
harassment,
and
violence
at
Arion.
A
dedicated
anti-bullying
team
oversees
policy,
procedures,
and
training
in
this
area
and
in
2025,
all
employees
completed
training
on
anti-bullying
and
harassment
measures,
and
managers
completed additional in depth workshops. All new employees undergo mandatory digital learning on anti-bullying and harassment measures. 
Measures against bribery and corruption
Zero tolerance: The Bank has zero tolerance for bribery and corruption.
Compliance: The Bank always operates in accordance with laws, regulations, and good business practices.
Preventive measures: The Bank takes appropriate steps to prevent bribery and corruption.
Due
diligence:
The
Bank
conducts
due
diligence
checks
on
third
parties
to
ensure
their
activities
align
with
the
Bank’s
standards
regarding
anti bribery and anti corruption measures.
Arion
Bank
applies
a
zero
tolerance
approach
to
bribery
and
corruption,
as
outlined
in
its
anti
bribery
and
corruption
policy.
The
policy
is
reviewed and approved annually by the Board and aligns with international standards and applies to all employees.
Controls
include
policies,
procedures,
and
mandatory
training
covering
key
risks
such
as
gifts
and
hospitality,
third
party
relationships,
suppliers,
charitable donations, political contributions, and governance practices. The Bank’s main principles are:
Sustainability risk
Reporting:
The
Bank
encourages
employees
and
third
parties
to
report
any
suspicions
or
incidents
of
bribery
or
corruption.
The
Bank’s
policy
on
internal
alerts
sets
out
the
framework
for
reporting
misconduct
and
protecting
whistleblowers.
The
Bank
operates
dedicated
whistleblowing software, available to all Group employees which allows individuals to submit reports anonymously.
Arion
is
committed
to
respecting
human
rights
and
equality
in
all
operations.
Arion
works
in
accordance
with
the
equality
and
human
rights
policy
and
an
action
plan
for
2024-2027.
The
objective
of
the
policy
and
action
plan
is
to
create
an
environment
where
people
of
similar
education,
work
experience
and
responsibility
have
equal
opportunities
and
terms,
irrespective
of
gender,
gender
identity,
sexual
orientation,
origin,
nationality,
skin
colour,
age,
disability
or
religion
or
any
other
factor.
The
policy
and
the
action
plan
have
been
approved
by
the
senior
management
of
the
Group.
The
CEO
sits
on
the
equality
committee,
which
is
responsible
for
progress
and
is
composed
of
representatives
from
Arion, Vörður, and Stefnir.
Equality and human rights
The
Bank’s
sustainability
risk
policy
is
approved
annually
by
the
Board
and
reviewed
regularly.
Key
performance
indicators
relating
to
ESG
factors are part of the risk report to the Board, and the Bank’s risk appetite with respect to these factors has been defined.
10

===== SIDA 11 =====

Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
Arion
Bank
is
subject
to
Article
66.d
of
the
Annual
Accounts
Act
on
non
financial
reporting.
Sustainability
disclosures
in
the
2025
Annual
and
Sustainability Report follow the Global Reporting Initiative (GRI Standards), supporting transparent and comparable ESG reporting.
Due diligence process
Nasdaq
Nordic
ESG
guidelines
and
the
UN
Global
Compact’s
ten
principles
are
also
used,
alongside
the
UN
Sustainable
Development
Goals.
The report includes updates on progress toward the UN PRB, of which Arion was a founding signatory in 2019.
In
2023,
legislation
on
the
European
Union
Taxonomy
was
enacted
in
Iceland.
Arion
is
subject
to
the
law
and
publishes
information
in
accordance
with
it
in
an
annex
to
the
Group’s
annual
financial
statements.
The
changes
proposed
in
the
simplified
EU
sustainability
framework
also
apply
to
the
EU
Taxonomy
and
therefore
depend
on
the
EU’s
final
approval.
Arion’s
reporting
is
therefore
unchanged
from
the
previous
year, as the amendments have not yet been incorporated into Icelandic law.
The
Bank’s
Pillar
3
Risk
Disclosures
outline
key
risks,
including
sustainability
risks,
and
provides
extensive
information
on
risk
and
capital
management. The report also includes information on the Bank’s governance structure in relation to risk, as well as its remuneration policy.
Further
information
on
sustainability
and
non
financial
disclosures
is
available
in
the
Arion
Bank
2025
Annual
and
Sustainability
Report,
to
be
published on the Bank’s website on 18 February 2026.
Deloitte
provides
limited
assurance
over
sustainability
disclosures
in
the
2025
Annual
and
Sustainability
Report
under
GRI
and
Nasdaq
guidelines.
In
November
2025,
Reitun
issued
a
new
sustainability
rating
for
Arion
Bank.
The
rating
is
based
on
the
Bank’s
performance
in
environmental,
social
and
governance
(ESG).
The
Bank
scored
90
out
of
100,
the
highest
score
awarded
to
any
company
to
date,
and
received
an
A3
rating
for
the
sixth
year
running.
By
retaining
this
rating,
the
Bank
has
successfully
met
the
stricter
requirements
made
this
year.
The
average
score
among companies rated by Reitun is 73. Arion is one of six companies rated A3, and no company has achieved a higher grade.
The
international
rating
agency
Morningstar
Sustainalytics
specializes
in
assessing
companies’
ESG
risk.
The
company
evaluates
Arion
Bank’s
performance
annually,
and
the
result
for
2025
was
positive,
as
in
previous
years.
According
to
their
assessment,
Arion
Bank
is
among
the
best
performing
banks
globally
in
sustainability
matters.
Scores
are
given
on
a
scale
of
0–100,
where
fewer
points
indicate
lower
risk.
Arion
Bank
scores
11.7
points,
meaning
the
Bank
is
considered
to
have
a
low
risk
of
significant
financial
loss
due
to
ESG
factors.
As
of
early
January
2026,
Arion Bank’s performance ranks in the top 6% of more than 1,000 banks assessed worldwide by Morningstar Sustainalytics, and in the top 3% of 
roughly 600 regional banks.
MSCI
issued
an
updated
rating
for
Arion
in
October
2025,
awarding
the
Bank
AA,
classifying
it
as
a
sustainability
leader.
MSCI
ratings
range
from
CCC
to
AAA
and
therefore
Arion
is
towards
the
top
end.
Investors
frequently
use
MSCI
ratings
to
assess
portfolio
risks
and
to
construct
sustainable portfolios.
The
reporting
in
Arion
Bank’s
Annual
and
Sustainability
Report
is
based
on
the
issues
identified
as
material
to
the
Bank’s
operations
and
its
subsidiaries
and
is
structured
around
five
main
themes:
responsible
operations,
sustainable
finance,
environmental
and
climate
matters,
human
resources, and engagement with society. The report also includes the Group’s detailed sustainability accounts.
In
2023,
Arion
Bank
began
implementing
the
European
Sustainability
Reporting
Standard
(ESRS).
The
standard
is
part
of
the
EU’s
Corporate
Sustainability
Reporting
Directive
(CSRD),
which
has
not
yet
been
enacted
into
Icelandic
law.
In
2025,
the
European
Union
announced
significant
changes
to
the
directive,
both
regarding
its
scope
and
the
extent
of
required
disclosures.
In
the
second
half
of
the
year,
draft
simplified
ESRS
standards
were
published,
and
the
European
Parliament
approved
a
simplification
of
the
regulatory
framework.
It
was
decided
to
limit
the
scope
of
the
regulation
to
companies
with
more
than
EUR
450
million
in
annual
turnover
and
over
1,000
full
time
employees.
These
changes
are
awaiting
formal
confirmation
within
the
EU,
but
they
are
widely
considered
to
be
in
their
final
form.
If
this
revised
scope
is
approved
and
incorporated
into
Icelandic
law,
the
Arion
Group
would,
as
things
currently
stand,
fall
just
below
the
thresholds
and
therefore
remain
outside
the
directive’s
scope.
Despite
this
uncertainty,
we
continue
to
apply
the
ESRS
standard,
and
this
year
we
are
using
the
simplified
version
published in November 2025.
11

===== SIDA 12 =====

Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
Endorsement of the Board of Directors and the Chief Executive Officer
The
Board
of
Directors
and
the
CEO
have
today
discussed
the
Consolidated
Financial
Statements
of
Arion
Bank
for
the
year
ended
31
December
2025
and
confirm
them
by
means
of
their
signatures.
The
Board
of
Directors
and
the
CEO
recommend
that
the
Consolidated
Financial Statements be approved at the Annual General Meeting of Arion Bank.
It
is
our
opinion
that
the
Consolidated
Financial
Statements
give
a
true
and
fair
view
of
the
financial
performance
and
cash
flow
of
the
Group
for
the
year
ended
31
December
2025
and
its
financial
position
as
at
31
December
2025.
Furthermore,
in
our
opinion
the
Consolidated
Financial
Statements
and
the
Endorsement
of
the
Board
of
Directors
and
the
CEO
give
a
fair
view
of
the
development
and
performance
of
the
Group's
operations and its position and describe the principal risks and uncertainties faced by the Group.
Board of Directors
 
Paul Horner, Chairman
The
Consolidated
Financial
Statements
of
Arion
Bank
for
the
year
ended
31
December
2025
have
been
prepared
in
accordance
with
International
Financial
Reporting
Standards
as
adopted
by
the
European
Union
and
additional
requirements
in
the
Icelandic
Financial
Statements Act, Financial Undertakings Act and Rules on Accounting for Credit Institutions.
In
our
opinion,
the
Consolidated
Financial
Statements
of
Arion
Bank
hf.
for
the
year
2025
with
the
file
name
RIL4VBPDB0M7Z3KXSF19-2025-12-
31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation.
Chief Executive Officer
Benedikt Gíslason
 
 
Steinunn Kristín Thórdardóttir
 
Kristín Pétursdóttir, Vice Chairman
Gunnar Sturluson
 
Marianne Gjertsen Ebbesen
Reykjavík, 11 February 2026
12

===== SIDA 13 =====

Arion Bank Consolidated Financial Statements 2025
 
Opinion 
Basis for Opinion 
Key Audit Matters 
Impairment charges for loans and provisions for guarantees
Based
on
the
best
of
our
knowledge
and
belief,
no
prohibited
services
referred
to
in
the
EU
Audit
Regulation
537/2014
Article
5.1
has
been
provided. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
How the matter was addressed in the audit
Key Audit Matters
Loans
to
customers
for
the
Group
amounted
to
ISK
1,341,618
million
at
31
December
2025,
and
the
total
allowance
account
for
the
Group
amounted
to
ISK
12,767
million
(including
off-balance
positions)
at
31
December 2025.
The
Group
evaluates
it´s
impairment
on
loans
based
of
IFRS
9
resulting
in
impairment
charges
are
recognised
when
losses
are
expected based on forecasting models.
Management
has
provided
further
information
about
the
accounting
policies
for
expected
credit
losses
in
Note
59
and
about
loan
impairment
charges
and
provisions
for
guarantees
in
Notes
16
and
44.
Measurement
of
loan
impairment
charges
for
loans
and
provisions
for
guarantees
is
deemed
a
key
audit
matter
as
the
determination
of
assumptions
for
expected
credit
losses
is
subjective
due
to
the
level
of judgement applied by Management.
The most significant judgements are:
•
Assumptions
used
in
the
expected
credit
loss
models
to
assess
the
credit
risk
related
to
the
exposure
and
the
expected
future
cash
flows
of the customer.
•
Timely
identification
of
exposures
with
significant
increase
in
credit
risk and credit impaired exposures.
•
Valuation
of
collateral
and
assumptions
used
for
manually
assessed
credit-impaired exposures.
Based
on
our
risk
assessment
and
industry
knowledge,
we
have
examined
the
impairment
charges
for
loans
and
provisions
for
guarantees
and
evaluated
the
methodology
applied
as
well
as
the
assumptions
made
according
to
the
description
of
the
key
audit
matter.
As
part
of
our
audit
we
examined
the
Group's
accounting
policies
to
ensure
they
are
in
accordance
with
IFRS
9.
As
part
of
our
audit
we
reviewed
the
Group's
methodology
related
to
expected
credit
losses
and
examined
the
impairment
models
used
for
expected
credit
loss
calculations.
We
used
risk
modelling
specialists
as
well
as
IFRS
specialists as part of our audit. 
Our examination included the following elements:
•
Testing
of
key
controls
over
key
assumptions
used
in
the
expected
credit
loss
models
to
assess
the
credit
risk
related
to
the
exposure
and the expected future cash flows of the customer.
•
Substantively
testing
evidence
to
support
the
assumptions
used
in
the
expected
credit
loss
models
applied
in
stage
allocation,
assumptions
applied
to
derive
lifetime
possibility
of
default
and
methods applied to derive loss given default.
•
Testing
of
key
controls
and
substantive
testing
of
timely
identification
of
exposures
with
significant
increase
in
credit
risk
and
timely
identification of credit impaired exposures.
•
Testing
of
key
controls
over
models
and
manual
processes
for
valuation of collateral used in the expected credit loss calculations.
•
Substantively
testing
evidence
to
support
appropriate
determination
of
assumptions
for
loan
impairment
charges
and
provisions
for
guarantees
including
valuation
of
collateral
and
assumptions
of
future
cash flows on manually assessed credit impaired exposures.
Independent Auditor's report
To the Shareholders and the Board of Directors of Arion Bank hf.
In
our
opinion,
the
accompanying
consolidated
financial
statements
give
a
true
and
fair
view
of
the
consolidated
financial
position
of
Arion
Bank
hf.
as
at
December
31,
2025,
its
consolidated
financial
performance
and
its
consolidated
cash
flows
for
the
year
then
ended
in
accordance
with
International
Financial
Reporting
Standards
(IFRSs)
as
adopted
by
the
EU
and
additional
requirements,
as
applicable,
in
the
Act
on
Annual
Accounts, the Act on Financial Undertakings and rules on accounting for credit institutions. 
Key
audit
matters
are
those
matters
that,
in
our
professional
judgement,
were
of
most
significance
in
our
audit
of
the
consolidated
financial
statements
of
the
current
period.
These
matters
were
addressed
in
the
context
of
our
audit
of
the
consolidated
financial
statements
as
a
whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We
have
audited
the
consolidated
financial
statements
of
Arion
Bank
hf.
for
the
year
ended
December
31,
2025
which
comprise
the
consolidated
income
statement,
consolidated
statement
of
comprehensive
income,
consolidated
statement
of
financial
position,
consolidated
statement
of
changes
in
equity,
consolidated
statement
of
cash
flows
for
the
year
then
ended
and
the
notes
to
the
consolidated
financial
statements, including a summary of material accounting policies.
We
conducted
our
audit
in
accordance
with
International
Standards
on
Auditing
(ISAs).
Our
responsibilities
under
those
standards
are
further
described
in
the
Auditor’s
Responsibilities
for
the
Audit
of
the
Consolidated
Financial
Statements
section
of
our
report.
We
are
independent
of
Arion
Bank
hf.
in
accordance
with
the
International
Ethics
Standards
Board
for
Accountants’
Code
of
Ethics
for
Professional
Accountants
(IESBA
Code)
together
with
the
ethical
requirements
that
are
relevant
to
our
audit
of
the
consolidated
financial
statements
in
Iceland,
and
we
have
fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. 
Our
opinion
in
this
report
on
the
consolidated
financial
statements
is
consistent
with
the
content
of
the
additional
report
that
has
been
submitted
to the parent company´s audit committee in accordance with the EU Audit Regulation 537/2014 Article 11.
13

===== SIDA 14 =====

Arion Bank Consolidated Financial Statements 2025
 
Independent Auditor's report
Reliability of information from IT systems relevant to financial reporting
Other information
Responsibilities of the Board of Directors and the CEO for the Consolidated Financial Statements
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements 
 •
 •
 •
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We 
also: 
The
Group’s
financial
reporting
is
highly
dependent
on
IT
systems
supporting
the
overall
financial
reporting
process,
due
to
the
significant
number
of
transactions
processed
through
various
systems needed to support the Group’s operations.
In
the
process
of
preparing
the
consolidated
financial
statements
the
Group
uses
data
from
number
of
complex
IT
systems.
The
accuracy
and
completeness
of
transactions
is
important
to
support
the
reliability of financial reporting. 
Due
to
the
importance
of
data
from
IT
systems
to
support
the
financial reporting we consider their reliability a key audit matter. 
The
procedures
performed
to
respond
to
the
key
audit
matter
included
the following, amongst others;
•
We
obtained
an
understanding
of
the
Group’s
IT
systems
and
environment that support the overall financial reporting process
•
We
reviewed
the
design,
implementation
and
effectiveness
of
control
activities,
as
appropriate,
related
to
access
management,
change
management,
accuracy
of
key
automated
calculations
and
operation
for
the
systems
considered
important
for
the
audit.
Deloitte
IT audit specialists were involved in the audit
•
For
IT
systems
that
are
outsourced
and
are
relevant
to
the
audit
we
obtained
and
assessed
the
ISAE
3402
report
issued
by
the
service
organisation 
Key Audit Matters
How the matter was addressed in the audit
The
Board
of
Directors
and
CEO
are
responsible
for
the
other
information.
The
other
information
comprises
the
unaudited
appendix
to
the
Financial
Statements,
5-year
overview,
key
figures,
unaudited
quarterly
statements
in
note
number
6
and
Endorsement
and
statements
by
the
Board of Directors and the CEO. 
Our
opinion
on
the
consolidated
financial
statements
does
not
cover
the
other
information
and
we
do
not
and
will
not
express
any
form
of
assurance
conclusion
thereon,
except
the
confirmation
regarding
the
Endorsement
and
the
statement
by
the
Board
of
Directors
and
the
CEO
as
stated below.
In
connection
with
our
audit
of
the
consolidated
financial
statements,
our
responsibility
is
to
read
the
other
information
and,
in
doing
so,
consider
whether
the
other
information
is
materially
inconsistent
with
the
consolidated
financial
statements
or
our
knowledge
obtained
in
the
audit
or
otherwise
appears
to
be
materially
misstated.
If,
based
on
the
work
we
have
performed,
we
conclude
that
there
is
a
material
misstatement
of
this
other information; we are required to report that fact. We have nothing to report in this regard.
The
Board
of
Directors
and
the
CEO
are
responsible
for
the
preparation
and
fair
presentation
of
the
consolidated
financial
statements
in
accordance
with
International
Financial
Reporting
Standards
(IFRSs)
as
adopted
by
the
EU
and
additional
requirements,
as
applicable,
in
the
Act
on
Annual
Accounts,
the
Act
on
Financial
Undertakings
and
rules
on
accounting
for
credit
institutions,
and
for
such
internal
control
as
the
Board
of
Directors
and
the
CEO
determines
is
necessary
to
enable
the
preparation
of
consolidated
financial
statements
that
are
free
from
material
misstatement, whether due to fraud or error.
In
preparing
the
consolidated
financial
statements,
the
Board
of
Directors
and
the
CEO
are
responsible
for
assessing
Arion
Bank
hf.’s
ability
to
continue
as
a
going
concern,
disclosing,
as
applicable,
matters
related
to
going
concern
and
using
the
going
concern
basis
of
accounting
unless
the Board of Directors and the CEO either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.
Our
objectives
are
to
obtain
reasonable
assurance
about
whether
the
consolidated
financial
statements
as
a
whole
are
free
from
material
misstatement,
whether
due
to
fraud
or
error,
and
to
issue
an
auditor’s
report
that
includes
our
opinion.
Reasonable
assurance
is
a
high
level
of
assurance,
but
is
not
a
guarantee
that
an
audit
conducted
in
accordance
with
ISAs
will
always
detect
a
material
misstatement
when
it
exists.
Misstatements
can
arise
from
fraud
or
error
and
are
considered
material
if,
individually
or
in
the
aggregate,
they
could
reasonably
be
expected
to
influence the economic decisions of users taken on the basis of these consolidated financial statements.
The board of directors and the audit committee shall supervise the preparation and presentation of the consolidated financial statements.
In
accordance
with
Paragraph
2
article
104
of
the
Icelandic
Financial
Statement
Act
no.
3/2006,
we
confirm
to
the
best
of
our
knowledge
that
the
accompanying
report
of
the
board
of
directors
includes
all
information
required
by
the
Icelandic
Financial
Statement
Act
that
is
not
disclosed
elsewhere in the consolidated financial statements.
Identify
and
assess
the
risks
of
material
misstatement
of
the
consolidated
financial
statements,
whether
due
to
fraud
or
error,
design
and
perform
audit
procedures
responsive
to
those
risks,
and
obtain
audit
evidence
that
is
sufficient
and
appropriate
to
provide
a
basis
for
our
opinion.
The
risk
of
not
detecting
a
material
misstatement
resulting
from
fraud
is
higher
than
for
one
resulting
from
error,
as
fraud
may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain
an
understanding
of
internal
control
relevant
to
the
audit
in
order
to
design
audit
procedures
that
are
appropriate
in
the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of Arion Bank hf.'s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made 
by management.
14

===== SIDA 15 =====

Arion Bank Consolidated Financial Statements 2025
 
Independent Auditor's report
 •
 •
 •
Report on other legal and regulatory requirements
Report on European single electronic format (ESEF Regulation)
Appointment of auditor
 
Management
is
responsible
for
preparing
the
consolidated
financial
statements
in
compliance
with
laws
no.
20/2021
disclosure
obligation
of
issuers
of
securities
and
the
obligation
to
flag.
This
responsibility
includes
preparing
the
consolidated
financial
statements
in
a
XHTML
format
in
accordance to EU regulation 2019/815 on the European single electronic format (ESEF regulation). 
Our
responsibility
is
to
obtain
reasonable
assurance,
based
on
evidence
that
we
have
obtained,
on
whether
the
consolidated
financial
statements
is
prepared
in
all
material
respects,
in
compliance
with
the
ESEF
Regulation,
and
to
issue
a
report
that
includes
our
opinion.
The
nature,
timing
and
extent
of
procedures
selected
depend
on
the
auditor's
judgement,
including
the
assessment
of
the
risks
of
material
departures from the requirement set out in the ESEF regulation, whether due to fraud or error. 
Conclude
on
the
appropriateness
of
management’s
use
of
the
going
concern
basis
of
accounting
and,
based
on
the
audit
evidence
obtained,
whether
a
material
uncertainty
exists
related
to
events
or
conditions
that
may
cast
significant
doubt
on
the
Company’s
ability
to
continue
as
a
going
concern.
If
we
conclude
that
a
material
uncertainty
exists,
we
are
required
to
draw
attention
in
our
auditor’s
report
to
the
related
disclosures
in
the
consolidated
financial
statements
or,
if
such
disclosures
are
inadequate,
to
modify
our
opinion.
Our
conclusions
are
based
on
the
audit
evidence
obtained
up
to
the
date
of
our
auditor’s
report.
However,
future
events
or
conditions
may
cause the Company to cease to continue as a going concern.
Evaluate
the
overall
presentation,
structure
and
content
of
the
consolidated
financial
statements,
including
the
disclosures,
and
whether
the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain
sufficient
appropriate
audit
evidence
regarding
the
financial
information
of
the
entities
or
business
activities
within
the
Group
to
express
an
opinion
on
the
consolidated
and
separate
financial
statements.
We
are
responsible
for
the
direction,
supervision
and
performance of the group audit.  We remain solely responsible for our audit opinion.
We
communicate
with
the
Board
of
Directors
and
the
Audit
Committee
regarding,
among
other
matters,
the
planned
scope
and
timing
of
the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We
also
provide
the
Board
of
Directors
and
the
Audit
Committee
a
statement
that
we
have
complied
with
relevant
ethical
requirements
regarding
independence,
and
to
communicate
with
them
all
relationships
and
other
matters
that
may
reasonably
be
thought
to
bear
on
our
independence,
and where applicable, related safeguards.
In
addition
to
our
work
as
the
auditors
of
Arion
Bank
hf.,
Deloitte
has
provided
the
Bank
with
permitted
additional
services
such
as
review
of
interim
financial
statements
and
other
assurance
engagement.
Deloitte
has
in
place
internal
procedures
in
order
to
ensure
its
independence
before acceptance of additional services. Deloitte has confirmed in writing to the Audit Committee that we are independent of Arion banki hf.
From
the
matters
communicated
with
the
Board
of
Directors
and
the
Audit
Committee,
we
determine
those
matters
that
were
of
most
significance
in
the
audit
of
the
consolidated
financial
statements
of
the
current
period
and
are
therefore
the
key
audit
matters.
We
describe
these
matters
in
our
auditor’s
report
unless
law
or
regulation
precludes
public
disclosure
about
the
matter
or
when,
in
extremely
rare
circumstances,
we
determine
that
a
matter
should
not
be
communicated
in
our
report
because
the
adverse
consequences
of
doing
so
would
reasonably
be
expected to outweigh the public interest benefits of such communication.
As
part
of
our
audit
of
the
consolidated
financial
statements
of
Arion
Bank
hf.
we
performed
procedures
to
be
able
to
issue
an
opinion
on
whether
the
consolidated
financial
statements
of
Arion
Bank
hf.
for
the
year
2025
with
the
file
name
RIL4VBPDB0M7Z3KXSF19-2025-12-31-
en.zip
is
prepared,
in
all
material
respects,
in
compliance
with
laws
no.
20/2021
disclosure
obligation
of
issuers
of
securities
and
the
obligation
to
flag
relating
to
requirements
regarding
European
single
electronic
format
regulation
EU
2019/815
which
include
requirements
related
to
the
preparation of the Consolidated Financial Statements in XHTML format and iXBRL markup.
Signy Magnusdottir
State Authorized Public Accountant
Gunnar Thorvardarson
State Authorized Public Accountant
 
Deloitte ehf.
Kópavogur, 11 February 2026
Deloitte
ehf.
was
appointed
auditor
of
Arion
Bank
hf.
By
the
general
meeting
of
shareholders
on
12
March
2025.
Deloitte
have
been
elected
as
auditor of the Group since the general meeting 2015.
In
our
opinion,
the
Consolidated
Financial
Statements
of
Arion
Bank
hf.
for
the
year
2025
with
the
file
name
RIL4VBPDB0M7Z3KXSF19-2025-12-
31-0-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation.
15

===== SIDA 16 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Consolidated Income Statement
Notes
2025
2024
129,777 
132,259 
(77,235)
(85,957)
7
52,542 
46,302 
21,151 
19,171 
(4,004)
(3,811)
8
17,147 
15,360 
20,766 
19,669 
(18,655)
(17,503)
9
2,111 
2,166 
10
1,075 
2,845 
11
5,516 
(222)
 
6,591 
2,623 
78,391 
66,451 
12-14
(28,248)
(28,328)
15
(2,106)
(1,924)
16
(3,053)
(1,131)
44,984 
35,068 
17
(12,458)
(8,919)
32,526 
26,149 
18
(19)
(37)
32,507 
26,112 
Attributable to
30,626 
26,111 
1,881 
1 
32,507 
26,112 
Earnings per share
19
22.05 
18.31 
21.86 
18.09 
Net impairment ...........................................................................................................................................
Income tax expense ....................................................................................................................................
Shareholders of Arion Bank hf.  ..................................................................................................................
Net earnings from continuing operations ................................................................................................
Net earnings ..............................................................................................................................................
Earnings before income tax .....................................................................................................................
Net earnings ..............................................................................................................................................
Basic earnings per share attributable to shareholders of Arion Bank (ISK) ..................................................
Diluted earnings per share attributable to shareholders of Arion Bank (ISK) ...............................................
Non-controlling interest ...............................................................................................................................
Discontinued operations held for sale, net of income tax .............................................................................
Insurance service expenses ........................................................................................................................
Net financial income ....................................................................................................................................
Bank levy ....................................................................................................................................................
Interest income ...........................................................................................................................................
Interest expense .........................................................................................................................................
Fee and commission income .......................................................................................................................
Net interest income ...................................................................................................................................
Other operating income ...............................................................................................................................
Operating expenses ....................................................................................................................................
Fee and commission expense .....................................................................................................................
Insurance revenue ......................................................................................................................................
Net fee and commission income ..............................................................................................................
Insurance service results .........................................................................................................................
Other net operating income ......................................................................................................................
Operating income ......................................................................................................................................
The accompanying Notes are an integral part of these Consolidated Financial Statements
16

===== SIDA 17 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Consolidated Statement of Comprehensive Income
Notes
2025
2024
32,507 
26,112 
257 
274 
 
10
162 
99 
Changes to reserve for financial instruments at FV thr. OCI that
419 
373 
6 
- 
Other comprehensive income that is or may be reclassified
425 
373 
32,932 
26,485 
Attributable to
31,051 
26,484 
1,881 
1 
Total comprehensive income
32,932 
26,485 
Comprehensive income per share
19
22.36 
18.57 
22.17 
18.35 
 
Net change in FV of financial assets carried at FV through OCI, net of tax .................................................
  transferred to the income statement ..........................................................................................................
    is or may be reclassified subsequently to the income statement .........................................................
Shareholders of Arion Bank ........................................................................................................................
Non-controlling interest ...............................................................................................................................
Basic comprehensive income per share attributable to shareholders of Arion Bank (ISK) ...........................
Diluted comprehensive income per share attributable to shareholders of Arion Bank (ISK) .........................
Net realized loss on financial assets carried at FV through OCI, net of tax
Total comprehensive income ...................................................................................................................
Exchange difference on translating foreign subsidiaries ..............................................................................
Net earnings ..............................................................................................................................................
The accompanying Notes are an integral part of these Consolidated Financial Statements
    subsequently to the Income Statement ..................................................................................................
17

===== SIDA 18 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Consolidated Statement of Financial Position
Assets
Notes
20
150,111 
124,094 
21
22,567 
25,690 
22
1,329,056 
1,230,058 
23-25
215,816 
206,417 
25
7,305 
9,387 
27
760 
814 
28
7,533 
7,688 
29
2 
2 
30
98 
111 
31
22,517 
14,006 
1,755,765 
1,618,267 
Liabilities
24
12,003 
6,618 
24
921,182 
857,443 
24
3,129 
8,394 
29
12,983 
11,060 
32
50,736 
49,950 
24,33
494,823 
433,178 
24,34
43,518 
44,538 
1,538,374 
1,411,181 
Equity
37
1,383 
5,686 
14,382 
13,949 
201,562 
186,947 
217,327 
206,582 
64 
504 
217,391 
207,086 
1,755,765 
1,618,267 
The accompanying Notes are an integral part of these Consolidated Financial Statements
Loans to customers ......................................................................................................................
Financial instruments ...................................................................................................................
Subordinated liabilities .................................................................................................................
Total Equity ................................................................................................................................
Total Liabilities and Equity ........................................................................................................
Non-controlling interest ................................................................................................................
Other liabilities .............................................................................................................................
Borrowings ...................................................................................................................................
Share capital and share premium .................................................................................................
Other reserves .............................................................................................................................
Retained earnings ........................................................................................................................
Shareholders' Equity ..................................................................................................................
Total Liabilities ...........................................................................................................................
Tax liabilities ................................................................................................................................
Investment property .....................................................................................................................
Deposits .......................................................................................................................................
Financial liabilities at fair value .....................................................................................................
Investments in associates ............................................................................................................
Intangible assets ..........................................................................................................................
Tax assets ...................................................................................................................................
Other assets ................................................................................................................................
Due to credit institutions and Central Bank ...................................................................................
Assets and disposal groups held for sale .....................................................................................
Total Assets ................................................................................................................................
31.12.2024
31.12.2025
Cash and balances with Central Bank ..........................................................................................
Loans to credit institutions ............................................................................................................
18

===== SIDA 19 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Debt invest-
Gain in
ments at
Foreign
Non-
subs. &
Gain in
Capitalized
fair value
currency
cont-
Share
Share
Share
assoc.,
securities,
develop-
thr. OCI,
translation
Statutory
Retained
holders'
rolling
Total
capital
premium
option
unrealized
unrealized
ment cost
unrealized
reserve
reserve
earnings
equity
interest
equity
1,412 
4,274 
411 
10,957 
513 
759 
(328)
- 
1,637 
186,947 
206,582 
504 
207,086 
30,626 
30,626 
1,881 
32,507 
257 
257 
257 
162 
162 
162 
6 
6 
6 
- 
- 
- 
- 
- 
- 
419 
6 
- 
30,626 
31,051 
1,881 
32,932 
(16,114)
(16,114)
(16,114)
(36)
(5,218)
(699)
(5,953)
(5,953)
87 
87 
87 
6 
715 
(119)
602 
602 
(88)
88 
- 
- 
536 
304 
840 
840 
1 
229 
230 
230 
1,803 
(193)
(759)
(1,259)
408 
- 
- 
- 
(2,321)
(2,321)
1,383 
- 
827 
12,760 
320 
- 
91 
6 
378 
201,562 
217,327 
64 
217,391 
The accompanying Notes are an integral part of these Consolidated Financial Statements
  Share option charge - incentive scheme ............
  Sale of a subsidiary ............................................
Net realized loss transferred to P/L ......................
Transactions with owners
  Share option forfeited .........................................
  Net changes in reserves .....................................
Equity 31 December 2025 ..................................
Total comprehensive income ............................
  Share option vested ...........................................
  Incentive scheme ...............................................
  Purchase of treasury shares ...............................
Net changes in reserves .......................................
Consolidated Statement of Changes in Equity
Total 
share-
Net earnings .........................................................
Restricted reserves
Equity 1 January 2025 ........................................
  Share option charge ...........................................
  Dividend paid .....................................................
Net change in fair value ........................................
19

===== SIDA 20 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Consolidated Statement of Changes in Equity
Debt invest-
Gain in
ments at
Non-
subs. &
Gain in
Capitalized
fair value
cont-
Share
Share
Share
assoc.,
securities,
develop-
thr. OCI,
Warrants
Statutory
Retained
holders'
rolling
Total
capital
premium
option
unrealized
unrealized
ment cost
unrealized
reserve
reserve
earnings
equity
interest
equity
1,446 
9,188 
408 
7,772 
1,462 
880 
(701)
825 
1,637 
175,881 
198,798 
503 
199,301 
 
26,111 
26,111 
1 
26,112 
274 
274 
274 
99 
99 
99 
- 
- 
- 
- 
- 
- 
373 
- 
- 
26,111 
26,484 
1 
26,485 
(13,058)
(13,058)
(13,058)
(90)
(12,362)
(12,452)
(12,452)
53 
6,187 
6,240 
6,240 
162 
162 
162 
2 
280 
(40)
242 
242 
(119)
119 
- 
- 
1 
165 
166 
166 
816 
(825)
9 
- 
- 
3,185 
(949)
(121)
(2,115)
- 
- 
1,412 
4,274 
411 
10,957 
513 
759 
(328)
- 
1,637 
186,947 
206,582 
504 
207,086 
The accompanying Notes are an integral part of these Consolidated Financial Statements
Net earnings .........................................................
  Net changes in reserves .....................................
Equity 31 December 2024 ..................................
  Warrants excercised ..........................................
  Share capital increase ........................................
  Incentive scheme ...............................................
  Purchase of treasury shares ...............................
  Share option vested ...........................................
  Dividend paid .....................................................
  Share option forfeited .........................................
  Share option charge ...........................................
Total comprehensive income ............................
Restricted reserves
Total 
share-
Equity 1 January 2024 ........................................
Net change in fair value ........................................
Net realized loss transferred to P/L ......................
Transactions with owners
20

===== SIDA 21 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
 
2025
2024
Operating activities
32,507 
26,112 
(39,943)
(38,148)
(527)
211 
(76,733)
(55,406)
(3,475)
(4,890)
67,529 
68,876 
46,667 
16,946 
(52)
(9,433)
100,654 
102,793 
(79,776)
(74,623)
204 
146 
(10,535)
(8,990)
36,521 
23,593 
Investing activities
4,949 
- 
(191)
(233)
447 
- 
(463)
(325)
23 
27 
19 
(1)
8 
- 
(852)
(622)
3,940 
(1,154)
Financing activities
(16,114)
(13,058)
- 
6,240 
(5,953)
(12,452)
10,040 
19,735 
(8,769)
(6,775)
- 
(10,471)
602 
242 
(20,194)
(16,539)
20,266 
5,901 
117,310 
114,993 
972 
(3,584)
138,548 
117,310 
Cash and cash equivalents
150,111 
124,094 
22,040 
25,690 
(33,603)
(32,474)
138,548 
117,310 
* Interest paid includes interest on deposits at the end of the year.
The accompanying Notes are an integral part of these Consolidated Financial Statements
Consolidated Statement of Cash flows
Net earnings .............................................................................................................................................................
Non-cash items included in net earnings ...................................................................................................................
Changes in operating assets and liabilities
Interest received .......................................................................................................................................................
Proceeds from sale of property and equipment .........................................................................................................
Mandatory reserve deposit with Central Bank ...........................................................................................................
Cash and balances with Central Bank .......................................................................................................................
Other changes in operating assets and liabilities ...................................................................................................
Proceeds from vested share options .........................................................................................................................
Cash and cash equivalents ....................................................................................................................................
Issued subordinated liabilities ...................................................................................................................................
Dividend received .....................................................................................................................................................
Income tax paid ........................................................................................................................................................
Purchase of treasury stock .......................................................................................................................................
Dividend paid to shareholders of Arion Bank .............................................................................................................
Net cash used in financing activities .....................................................................................................................
Net cash from (used) in investing activities ..........................................................................................................
Settlement of subordinated liabilities .........................................................................................................................
Bank accounts ..........................................................................................................................................................
Cash and cash equivalents at beginnning of the year ...............................................................................................
Effect of exchange rate changes on cash and cash equivalent .................................................................................
Issued new share capital ...........................................................................................................................................
Repurchase of subordinated liabilities .......................................................................................................................
Net increase in cash and cash equivalents ...............................................................................................................
Proceeds from sale of subsidiary, net of minority interest .........................................................................................
Cash and cash equivalents ....................................................................................................................................
Financial instruments and financial liabilities at fair value .......................................................................................
Loans to credit institutions, excluding bank accounts .............................................................................................
Loans to customers ...............................................................................................................................................
Acquisition of property and equipment ......................................................................................................................
Acquisition of intangible assets .................................................................................................................................
Net cash from operating activities .........................................................................................................................
Decreased (increased) share capital of associates ...................................................................................................
Deposits .................................................................................................................................................................
Borrowings .............................................................................................................................................................
Interest paid * ...........................................................................................................................................................
Acquisition of investment property ............................................................................................................................
Dividend from associates ..........................................................................................................................................
Proceeds from sale of investment property ...............................................................................................................
21

===== SIDA 22 =====

Arion Bank Consolidated Financial Statements 2025
page
page
General information
 
Basis of preparation ..........................................................
23
Offsetting financial assets and financial liabilities ..............
44
Changes in accounting policies .........................................
23
Investment in associates ..................................................
44
Material accounting estimates and judgments
Intangible assets ..............................................................
45
in applying accounting policies .......................................
23
Tax assets and tax liabilities .............................................
46
The Group .........................................................................
24
Assets and disposal groups held for sale ..........................
46
Other assets .....................................................................
47
Operating segment reporting
 
Other liabilities ..................................................................
48
Operating segments ..........................................................
25
Borrowings .......................................................................
49
Subordinated liabilities ......................................................
50
Quarterly statements
Liabilities arising from financial activities ...........................
50
Operations by quarters ......................................................
28
Pledged assets .................................................................
51
Equity ...............................................................................
51
Notes to the Consolidated Income Statement
Net interest income ...........................................................
29
Other information
Net fee and commission income .......................................
30
Shareholders of Arion Bank ..............................................
53
Insurance service results ..................................................
30
Legal matters ....................................................................
53
Net financial income ..........................................................
31
Events after the reporting period .......................................
54
Other operating income .....................................................
31
Operating expenses ..........................................................
32
Off Balance sheet information
Personnel and salaries ......................................................
32
Commitments ...................................................................
55
Other operating expense ...................................................
34
Assets under management, supervision and custody .......
55
Bank levy ..........................................................................
34
Net impairment ..................................................................
34
Related party
Income tax expense ..........................................................
35
Related party ....................................................................
55
Discontinued operations held for sale, net of income tax ...
35
Earnings per share ............................................................
35
Risk management disclosures
Credit risk .........................................................................
57
Notes to the Consolidated Statement of
Market risk ........................................................................
69
Financial Position
Liquidity and Funding risk .................................................
75
Cash and balances with Central Bank ...............................
36
Capital management ........................................................
79
Loans to credit institutions .................................................
36
Operational risk ................................................................
81
Loans to customers ...........................................................
36
Sustainability risk ..............................................................
82
Financial instruments ........................................................
36
Financial assets and financial liabilities .............................
37
Material accounting policies
83
Fair value hierarchy ...........................................................
39
Notes to the Consolidated Financial Statements
Contents
22

===== SIDA 23 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
General information
1.
Basis of preparation
Statement of compliance
 
Basis of measurement
Functional and presentation currency
2.
Changes in accounting policies
3.
Material accounting estimates and judgements in applying accounting policies
Estimates and assumptions
- investment properties are measured at fair value; and
Notes to the Consolidated Financial Statements
The
same
accounting
policies,
presentation
and
methods
of
computation
are
followed
in
these
Consolidated
Financial
Statements
as
were
applied in the Consolidated Financial Statements for the year 2024.
-
bonds
and
debt
instruments,
shares
and
equity
instruments,
short
positions
in
listed
bonds
and
equities,
derivatives
and
certain
loans
to
customers. For details on the accounting policy, see Note 59;
Arion
Bank
hf.,
the
Parent
Company,
was
established
on
18
October
2008
and
is
incorporated
and
domiciled
in
Iceland.
The
registered
office
of
Arion
Bank
hf.
is
located
at
Borgartún
19,
Reykjavík.
The
Consolidated
Financial
Statements
for
the
year
2025
comprise
the
Parent
Company and its subsidiaries (together referred to as "the Group").
The
Consolidated
Financial
Statements
were
approved
and
authorized
for
publication
by
the
Board
of
Directors
of
Arion
Bank
on
11
February 2026.
In
preparing
these
Consolidated
Financial
Statements,
the
Group
has
applied
the
concept
of
materiality
to
the
presentation
and
level
of
disclosure.
Only
essential
and
mandatory
information
is
disclosed
which
is
relevant
to
an
understanding
by
the
reader
of
these
Consolidated
Financial Statements.
The
Consolidated
Financial
Statements
have
been
prepared
in
accordance
with
International
Financial
Reporting
Standards
(IFRS
Accounting
Standards),
as
adopted
by
the
European
Union
and
additional
requirements
in
the
Icelandic
Financial
Statements
Act,
Financial
Undertakings Act and rules on Accounting for Credit Institutions.
These Consolidated Financial Statements have been prepared on a historical cost basis except for the following:
- non-current assets and disposal groups held for sale are stated at the lower of their carrying amounts and fair value, less cost to sell.
These
Consolidated
Financial
Statements
are
presented
in
Icelandic
krona
(ISK),
which
is
the
Parent
Company's
functional
currency,
rounded
to
the
nearest
million,
unless
otherwise
stated.
At
the
end
of
the
year
the
exchange
rate
of
the
ISK
against
USD
was
125.44
and
147.28 for EUR (31.12.2024: USD 138.99 and EUR 143.89).
The
preparation
of
these
Consolidated
Financial
Statements
requires
management
to
make
judgments,
estimates
and
assumptions
that
affect
the
reported
amount
of
revenues,
expenses,
assets
and
liabilities,
and
the
accompanying
disclosures,
as
well
as
the
disclosure
of
contingent
liabilities.
Uncertainty
about
these
assumptions
and
estimates
could
result
in
outcomes
that
require
a
material
adjustment
to
the
carrying amount of assets or liabilities affected in future periods.
The
key
assumptions
concerning
the
future
and
other
key
sources
of
estimation
uncertainty
at
the
reporting
date,
that
have
a
significant
risk
of
causing
a
material
adjustment
to
the
carrying
amounts
of
assets
and
liabilities
within
the
next
financial
year,
are
described
below.
The
Group
based
its
assumptions
and
estimates
on
parameters
available
when
the
Consolidated
Financial
Statement
were
prepared.
Existing
circumstances
and
assumptions
about
future
developments,
however,
may
change
due
to
market
changes
or
circumstances
arising
that
are
beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
Amendments
to
standards
effective
from
1
January
2025
did
not
have
a
material
impact
on
theses
Consolidated
Financial
Statements.
The
Group has not early adopted any standards, interpretations or amendments that have been issued but are not effective, see Note 77.
23

===== SIDA 24 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
3.
Material accounting estimates and judgements in applying accounting policies, continued
Impairment of financial assets
Macroeconomic outlook
Impairment of intangible assets
Revaluation of investment properties
4.
The Group
Shares in the main subsidiaries in which Arion Bank holds a direct interest
Currency
31.12.2025
31.12.2024
GBP
100.0% 
-
ISK
100.0% 
100.0% 
ISK
100.0% 
100.0% 
ISK
51.0% 
51.0% 
ISK
100.0% 
100.0% 
ISK
100.0% 
100.0% 
 
In
June
2025
Arion
Bank
acquired
all
shareholdings
in
Arion
(Financial)
Advisory
Services
Ltd
(formerly
Arngrimsson
Advisors
Ltd),
an
entity
offering
financial
service
for
institutional
investors
investing
in
international
markets.
The
acquisition
was
defined
as
asset
purchase,
mainly
affecting
other
assets
in
the
Statement
of
Financial
position
whereas
the
effects
on
the
Income
Statement
were
mainly
on
net
fee
and commission income.
The
sale
of
the
subsidiary
Arnarland
ehf.
was
completed
on
23
October
2025.
Arion
Bank
owned
a
51%
stake
in
Arnarland
through
its
subsidiary Landey and recognized a minority interest accordingly.
The
carrying
amounts
of
goodwill,
infrastructure
and
customer
relationship
and
related
agreements
are
reviewed
annually
to
determine
whether
there
is
any
indication
of
impairment.
If
any
such
indication
exists
the
asset's
recoverable
amount
is
estimated.
An
impairment
loss
is
recognized
if
the
carrying
amount
of
an
asset
exceeds
its
recoverable
amount.
Impairment
losses
are
recognized
in
the
Consolidated
Income
Statement.
The
recoverable
amount
of
an
asset
is
the
greater
of
its
value
in
use
and
its
fair
value
less
cost
to
sell.
In
assessing
value
in
use,
the
estimated
future
cash
flows
are
discounted
to
their
present
value
using
a
pre-tax
discount
rate
that
reflects
current
market
assessments of the time value of money and the risks specific to the asset.
The
Group
carries
its
investment
properties
at
fair
value,
with
changes
in
fair
value
being
recognized
in
the
income
statement.
For
investment
properties,
either
a
valuation
methodology
based
on
present
value
calculations
is
used,
as
there
is
a
lack
of
comparable
market
data
because
of
the
nature
of
the
properties,
or
the
investment
properties
are
valued
by
reference
to
transactions
involving
properties
of
a
similar nature, location and condition.  
The
macroeconomic
scenario
applied
for
2026
reflects
management's
judgment
that,
despite
elevated
inflation
and
continued
uncertainty
affecting
key
export
sectors,
the
Icelandic
economy
is
expected
to
avoid
a
severe
downturn.
Inflation
is
anticipated
to
remain
elevated
in
early 2026, partly due to changes in taxes and levies, before moderating as underlying disinflationary pressures emerge.
The
book
value
of
financial
assets
which
fall
under
the
impairment
requirements
of
IFRS
9
are
presented
net
of
expected
credit
losses
in
the
statement
of
financial
position.
On
a
monthly
basis
expected
credit
losses
for
stages
1
and
2
are
recalculated
for
each
asset,
the
calculations
are
based
on
probability
of
default
(PD),
loss
given
default
(LGD)
and
exposure
at
default
(EAD)
models.
Stage
3
calculations
are
based
on
LGD
and
EAD
parameters.
In
addition
to
the
model
outcomes,
the
assessment
of
expected
credit
losses
is
based
on
three
key
factors:
management's
assumptions
regarding
the
development
of
macroeconomic
factors
over
the
next
five
years,
how
those
factors
affect
each
model
and
how
to
estimate
a
significant
increase
in
credit
risk.
The
assumptions
for
macroeconomic
development
are
incorporated
into
each
model
for
three
scenarios:
a
base
case,
an
optimistic
case,
and
a
pessimistic
case.
Management
estimates
the
probability
weight
for
each
scenario
used
for
calculations
of
the
probability
weighted
expected
credit
losses.
The
amount
of
expected
credit
losses
to
be
recognized
is
dependent
on
the
Bank's
definition
of
significant
increase
in
credit
risk,
which
controls
the
impairment
stage
each
asset
is
allocated
to.
Management
has
estimated
factors
to
measure
significant
increase
in
credit
risk
from
origination,
by
comparison
of
changes in PD values, annualized lifetime PD values, days past due and watch list. For further information see Note 59.
Notes to the Consolidated Financial Statements
 
Management
has
judged
that
signs
of
a
cooling
labour
market
and
weaker
forward
looking
indicators
of
labour
demand,
together
with
the
Central
Bank’s
signalling
of
a
continued
easing
bias
and
its
stated
approach
of
looking
through
one-off
inflationary
shocks,
support
the
use
of
a
baseline
scenario
assuming
moderate
GDP
growth.
This
judgement
is
made
notwithstanding
ongoing
uncertainties
related
to
wage
growth, which is expected to remain elevated, and the extent to which softer labour market conditions may dampen domestic demand.
 
The
applied
scenario
further
reflects
management’s
assessment
that
the
housing
market
is
expected
to
continue
to
cool
in
an
orderly
manner
and
that
domestic
demand
will
remain
sufficiently
resilient
to
offset
external
headwinds.
However,
given
the
inherent
uncertainty
surrounding
inflation
persistence,
wage
dynamics,
and
exchange
rate
valuation,
the
assumptions
applied
are
subject
to
estimation
uncertainty and may differ from actual outcomes.
Equity interest
Operating activity
Arion (Financial) Advisory Services Ltd, 30-32 Fleet Street, London, UK ..........
Financial service
Eignabjarg ehf., Borgartún 19, Reykjavík, Iceland ............................................
Holding company
Leiguskjól ehf., Bjargargata 1, Reykjavík, Iceland .............................................
Rental guarantee
Stefnir hf., Borgartún 19, Reykjavík, Iceland .....................................................
Asset management
Landey ehf., Borgartún 19, Reykjavík, Iceland ..................................................
Real estate
Vördur tryggingar hf., Borgartún 19, Reykjavík, Iceland ....................................
Insurance
24

===== SIDA 25 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
Operating segment reporting
5.
Operating segments
Markets & Stefnir
Corporate & Investment Banking (CIB)
Retail Banking
Treasury
Vördur tryggingar hf.
Supporting units
Corporate
Banking's
experienced
account
managers
specialize
in
key
economic
sectors
such
as
retail
and
services,
seafood,
energy
and
real
estate.
The
division
serves
companies
ranging
from
SMEs
to
large
cap´s
and
provides
full
range
lending
and
insurance
products,
including
guarantees,
deposit
accounts,
payment
solutions,
and
a
variety
of
value-added
digital
solutions.
The
Corporate
portfolio
composition
is
diversified
between
sectors,
customers
and
currencies
which
include
international
exposures,
partly
through
syndicates
with
other Icelandic or international banks.
Arion
Bank‘s
Corporate
Finance
works
closely
with
Corporate
Banking
and
provides
the
Bank’s
clients
with
comprehensive
financial
advisory services, with a key focus on M&A advisory, private placements, IPOs and other offerings of securities.
Retail
Banking
provides
a
diverse
range
of
financial
services
in
12
branches
and
service
points
across
Iceland
in
addition
to
service
centre
and
digital
solutions
both
in
the
Arion
app
and
online
banking.
These
services
include
deposits
and
loans,
savings,
payment
cards,
pensions
,
securities
and
funds.
In
order
to
improve
efficiency
the
branch
network
is
split
into
four
regions,
and
smaller
branches
can
therefore benefit from the strength of larger units within each region.
Corporate
&
Investment
Banking
provides
comprehensive
financial
services
to
companies
and
investors
with
focus
on
meeting
the
needs
of each client, both in Iceland and internationally. The division is divided into Corporate Banking and Corporate Finance.
Markets
&
Stefnir
comprise
Asset
Management
and
Capital
Markets.
Asset
Management
manages
financial
assets
on
behalf
of
its
clients
according
to
a
pre-determined
investment
strategy.
Asset
Management
also
handles
the
operation
and
development
of
securities
and
pension
funds.
Asset
Management
comprises
Institutional
Asset
Management,
Premia
Services,
development
and
operations,
research,
and
sales
and
services.
Premía
Services
are
divided
into
three
service
streams:
Premia;
Premia
-
Private
Banking;
and
Premia
–
Wealth
Management
and
provide
customers
with
comprehensive
and
personal
financial
services.
Capital
Markets
is
a
securities
brokerage
and
brokers
listed
securities
transactions
for
the
Bank’s
international
and
domestic
clients
on
all
the
world’s
major
securities
exchanges.The
operation
of
Stefnir
hf.
is
presented
under
the
segment.
Stefnir
hf.
is
an
independently
operating
financial
company
owned
by
Arion
Bank
and
manages
a
broad
range
of
mutual
funds,
investment
funds
and
institutional
investor
funds
for
investors.
Markets
also
offer
a
comprehensive
selection
of
funds
from
some
of
the
leading
international
fund
management
companies,
both
through
the
Bank
and
the
Bank's subsidiary Arion (Financial) Advisory Services Ltd. 
Segment
information
is
presented
in
respect
of
the
Group's
operating
segments
and
is
based
on
the
Group's
management
and
internal
reporting
structure.
The
business
units
are
segmented
according
to
customers,
products
and
services
characteristics.
Segment
performance is evaluated based on earnings before tax.
Inter
segment
pricing
is
determined
on
an
arm's
length
basis.
Operating
segments
pay
and
receive
interest
to
and
from
Treasury
on
an
arm's length basis to reflect the allocation of capital, funding cost and relevant risk premium. 
Supporting
units
include
the
Bank's
headquarters
which
carry
out
support
functions
such
as
the
CEO
office,
Risk
Management,
Finance
(excluding
Treasury),
IT
and
Operations
&
Culture.
The
information
presented
relating
to
the
supporting
units
does
not
represent
an
operating
segment.
A
significant
proportion
of
expenses
from
support
functions
is
allocated
to
operating
segments
in
a
separate
line
in
the
operating segment overview.
Treasury
is
responsible
for
the
Bank's
funding,
liquidity
and
asset-and-liability
management.
Treasury
oversees
the
internal
funds‘s
transfer
pricing
and
manages
the
relationship
with
investors,
credit
rating
agencies
and
financial
institutions.
Market
making
activities
in
domestic
securities and FX as well as FX brokerage sits within Treasury.
Vördur
is
a
comprehensive
insurance
company
that
services
both
individuals
and
companies
and
focuses
on
simple
and
convenient
services.
Vördur
collaborates
closely
with
Retail
Banking
and
Corporate
and
Investment
Banking
on
insurance
sales
and
customer
services.
25

===== SIDA 26 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
5.
Operating segments, continued
 
 
 
Subsidi-
Supporting
2025
aries excl.
units
Markets
Retail
Stefnir and
and elimi-
Income Statement
and Stefnir
CIB
Banking
Treasury
Vördur
Vördur
nations
Total
Net interest income ...................................
1,387 
29,890 
16,163 
5,315 
(75)
6 
(144)
52,542 
Net fee and commission income ...............
5,686 
6,844 
3,261 
796 
(180)
210 
530 
17,147 
Insurance service results ..........................
- 
- 
- 
- 
2,174 
(5)
(58)
2,111 
Net financial income ..................................
3 
5 
- 
211 
815 
69 
(28)
1,075 
Other operating income .............................
2 
9 
29 
3 
9 
5,465 
(1)
5,516 
Operating income ....................................
7,078 
36,748 
19,453 
6,325 
2,743 
5,745 
299 
78,391 
Operating expenses ..................................
(2,855)
(2,528)
(3,688)
(687)
1,121 
(577)
(19,034)
(28,248)
Allocated expenses ...................................
(3,217)
(5,284)
(7,105)
(1,428)
(1,204)
(96)
18,334 
- 
Bank levy ..................................................
(42)
(801)
(830)
(434)
- 
- 
1 
(2,106)
Net impairment ..........................................
21 
(2,753)
(201)
(15)
- 
- 
(105)
(3,053)
Earnings before income tax ...................
985 
25,382 
7,629 
3,761 
2,660 
5,072 
(505)
44,984 
Net seg. rev. from ext. customers .............
3,600 
45,962 
37,116 
(16,944)
2,770 
5,920 
(33)
78,391 
Net seg. rev. from other segments ............
3,478 
(9,214)
(17,663)
23,269 
(27)
(175)
332 
- 
Operating income ....................................
7,078 
36,748 
19,453 
6,325 
2,743 
5,745 
299 
78,391 
Statement of financial position
Loans to customers ...................................
9,242 
678,151 
640,225 
- 
- 
- 
1,438 
1,329,056 
Financial instruments ................................
19,591 
- 
- 
162,790 
36,277 
164 
(3,006)
215,816 
Other external assets ................................
6,199 
69 
1,573 
172,826 
4,421 
12,700 
13,105 
210,893 
Internal assets ..........................................
68,213 
- 
- 
265,545 
- 
- 
(333,758)
- 
Total assets .............................................
103,245 
678,220 
641,798 
601,161 
40,698 
12,864 
(322,221)
1,755,765 
Deposits ....................................................
91,930 
405,169 
408,750 
20,160 
- 
- 
(4,827)
921,182 
Other external liabilities .............................
2,496 
6,792 
2,763 
561,457 
25,790 
1,529 
16,365 
617,192 
Internal liabilities .......................................
- 
148,194 
177,791 
- 
- 
7,774 
(333,759)
- 
Total liabilities .........................................
94,426 
560,155 
589,304 
581,617 
25,790 
9,303 
(322,221)
1,538,374 
Allocated equity ......................................
8,819 
118,065 
52,494 
19,544 
14,908 
3,561 
- 
217,391 
Notes to the Consolidated Financial Statements
26

===== SIDA 27 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
5.
Operating segments, continued
Subsidi-
Supporting
2024
aries excl.
units
Markets
Retail
Stefnir and
and elimi-
Income Statement
and Stefnir
CIB
Banking
Treasury
Vördur
Vördur
nations
Total
Net interest income ...................................
1,257 
26,086 
15,103 
4,079 
(76)
(194)
47 
46,302 
Net fee and commission income ...............
5,315 
5,213 
3,471 
672 
(137)
292 
534 
15,360 
Insurance service results ..........................
- 
- 
- 
- 
2,231 
- 
(65)
2,166 
Net financial income ..................................
94 
853 
- 
(580)
2,468 
23 
(13)
2,845 
Other operating income .............................
4 
(1)
37 
- 
11 
(309)
36 
(222)
Operating income ....................................
6,670 
32,151 
18,611 
4,171 
4,497 
(188)
539 
66,451 
Operating expenses ..................................
(2,793)
(2,524)
(3,883)
(917)
1,064 
(409)
(18,866)
(28,328)
Allocated expenses ...................................
(2,894)
(5,132)
(7,780)
(1,463)
(1,164)
(123)
18,556 
- 
Bank levy ..................................................
(46)
(694)
(829)
(355)
- 
- 
- 
(1,924)
Net impairment ..........................................
(24)
(1,016)
(71)
(20)
- 
- 
- 
(1,131)
Earnings before income tax ...................
913 
22,785 
6,048 
1,416 
4,397 
(720)
229 
35,068 
Net seg. rev. from ext. customers .............
3,390 
41,220 
37,276 
(20,279)
4,529 
39 
314 
66,489 
Net seg. rev. from other segments ............
3,280 
(9,069)
(18,665)
24,459 
(38)
(227)
222 
(38)
Operating income ....................................
6,670 
32,151 
18,611 
4,180 
4,491 
(188)
536 
66,451 
Statement of financial position
Loans to customers ...................................
6,105 
588,483 
634,959 
4 
- 
- 
507 
1,230,058 
Financial instruments ................................
25,317 
587 
- 
147,478 
35,790 
117 
(2,872)
206,417 
Other external assets ................................
6,521 
414 
1,675 
141,379 
4,634 
19,215 
7,954 
181,792 
Internal assets ..........................................
63,261 
- 
- 
261,499 
- 
- 
(324,760)
- 
Total assets .............................................
101,204 
589,484 
636,634 
550,360 
40,424 
19,332 
(319,171)
1,618,267 
Deposits ....................................................
87,630 
394,512 
355,787 
22,003 
- 
- 
(2,489)
857,443 
Other external liabilities .............................
4,569 
4,644 
1,923 
501,793 
25,076 
7,655 
8,078 
553,738 
Internal liabilities .......................................
- 
89,733 
232,638 
- 
- 
2,389 
(324,760)
- 
Total liabilities .........................................
92,199 
488,889 
590,348 
523,796 
25,076 
10,044 
(319,171)
1,411,181 
Allocated equity ......................................
9,005 
100,596 
46,286 
26,564 
15,348 
9,288 
- 
207,086 
Income taxes and discontinued operations held for sale are excluded from the profit and loss segment information. 
27

===== SIDA 28 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
Notes to the Consolidated Income Statement
Quarterly statements
6.
Operations by quarters, unaudited
2025
Q1
Q2
Q3
Q4
Total
12,166 
14,200 
13,826 
12,350 
52,542 
4,536 
4,553 
4,003 
4,055 
17,147 
(31)
1,066 
630 
446 
2,111 
(951)
179 
483 
1,364 
1,075 
3,321 
1,324 
45 
826 
5,516 
19,041 
21,322 
18,987 
19,041 
78,391 
(6,601)
(6,697)
(6,194)
(8,756)
(28,248)
(508)
(521)
(530)
(547)
(2,106)
(378)
147 
(1,128)
(1,694)
(3,053)
11,554 
14,251 
11,135 
8,044 
44,984 
(3,726)
(3,984)
(2,928)
(1,820)
(12,458)
7,828 
10,267 
8,207 
6,224 
32,526 
(11)
(11)
3 
- 
(19)
7,817 
10,256 
8,210 
6,224 
32,507 
2024
11,245 
11,948 
11,863 
11,246 
46,302 
3,365 
3,979 
3,880 
4,136 
15,360 
(215)
523 
1,532 
326 
2,166 
29 
99 
524 
2,193 
2,845 
50 
38 
(313)
3 
(222)
14,474 
16,587 
17,486 
17,904 
66,451 
(6,554)
(7,154)
(6,021)
(8,599)
(28,328)
(460)
(476)
(500)
(488)
(1,924)
(315)
(775)
(954)
913 
(1,131)
7,145 
8,182 
10,011 
9,730 
35,068 
(2,704)
(2,671)
(2,114)
(1,430)
(8,919)
4,441 
5,511 
7,897 
8,300 
26,149 
(9)
(11)
(6)
(11)
(37)
4,432 
5,500 
7,891 
8,289 
26,112 
Operating expenses ...........................................................................................
Bank levy ...........................................................................................................
Net impairment ..................................................................................................
Income tax expense  ..........................................................................................
Net earnings from continuing operations ......................................................
Discontinued operations, net of tax ....................................................................
Net earnings .....................................................................................................
Operating expenses ...........................................................................................
Bank levy ...........................................................................................................
Net impairment ..................................................................................................
Earnings before income tax ............................................................................
Income tax expense  ..........................................................................................
Insurance service results ...................................................................................
Net financial income ..........................................................................................
Operating income ............................................................................................
The
half-year
results
were
reviewed
by
the
Bank's
auditors.
Other
quarterly
statements
and
the
split
between
quarters
were
not
audited
or
reviewed by the Bank's auditors.
Net interest income ............................................................................................
Net fee and commission income ........................................................................
Discontinued operations, net of tax ....................................................................
Net earnings .....................................................................................................
Earnings before income tax ............................................................................
Net earnings from continuing operations ......................................................
Net interest income ............................................................................................
Net fee and commission income ........................................................................
Other operating income .....................................................................................
Operating income ............................................................................................
Insurance service results ...................................................................................
Net financial income ..........................................................................................
Other operating income .....................................................................................
28

===== SIDA 29 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
7.
Net interest income
 
2025
Amortized
Fair value
Fair value
Interest income
cost
thr. P/L
thr. OCI 
Total
6,795 
- 
- 
6,795 
864 
- 
- 
864 
114,697 
119 
- 
114,816 
- 
675 
6,520 
7,195 
107 
- 
- 
107 
122,463 
794 
6,520 
129,777 
Interest expense
(48,552)
- 
- 
(48,552)
(23,406)
(1,623)
- 
(25,029)
(3,217)
(295)
- 
(3,512)
(142)
- 
- 
(142)
(75,317)
(1,918)
- 
(77,235)
47,146 
(1,124)
6,520 
52,542 
2024
Interest income
 
7,752 
- 
- 
7,752 
1,242 
- 
- 
1,242 
115,425 
65 
- 
115,490 
- 
1,532 
6,147 
7,679 
96 
- 
- 
96 
124,515 
1,597 
6,147 
132,259 
Interest expense
(53,865)
- 
- 
(53,865)
(22,372)
(5,542)
- 
(27,914)
(3,396)
(647)
- 
(4,043)
(135)
- 
- 
(135)
(79,768)
(6,189)
- 
(85,957)
44,747 
(4,592)
6,147 
46,302 
Interest spread
2025
2024
Interest spread (the ratio of net interest income to the average carrying amount
3.2% 
3.1% 
 
 of interest bearing assets) .........................................................................................................................................
Deposits ...............................................................................................................................
Borrowings ...........................................................................................................................
Subordinated liabilities ..........................................................................................................
Other ....................................................................................................................................
Interest income ...................................................................................................................
Loans to customers ..............................................................................................................
 
Interest expense .................................................................................................................
Net interest income ............................................................................................................
Other ....................................................................................................................................
Interest expense .................................................................................................................
Other ....................................................................................................................................
Cash and balances with Central Bank ..................................................................................
Loans to credit institutions ....................................................................................................
Subordinated liabilities ..........................................................................................................
Loans to customers ..............................................................................................................
Net interest income calculated using the effective interest rate method were ISK 127,752 million (2024: ISK 125,974 million).
Net interest income ............................................................................................................
Securities .............................................................................................................................
Loans to credit institutions ....................................................................................................
Cash and balances with Central Bank ..................................................................................
Securities .............................................................................................................................
Other ....................................................................................................................................
Borrowings ...........................................................................................................................
Deposits ...............................................................................................................................
Interest income ...................................................................................................................
 
29

===== SIDA 30 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
8.
Net fee and commission income
Net
Net
Income
Expense
 income
Income
Expense
 income
5,508 
(495)
5,013 
5,346 
(563)
4,783 
2,475 
(37)
2,438 
1,787 
(40)
1,747 
5,244 
- 
5,244 
4,326 
- 
4,326 
1,403 
(81)
1,322 
1,590 
(109)
1,481 
5,766 
(2,783)
2,983 
5,286 
(2,617)
2,669 
755 
(959)
(204)
836 
(839)
(3)
- 
351 
351 
- 
357 
357 
21,151 
(4,004)
17,147 
19,171 
(3,811)
15,360 
9.
Insurance service results
2025
2024
20,766 
19,669 
(14,406)
(13,723)
(4,010)
(3,749)
(18,416)
(17,472)
(239)
(31)
2,111 
2,166 
Operation results of Vördur
2025
2024
2,111 
2,166 
14 
23 
2,125 
2,189 
1,608 
3,260 
(1,083)
(1,063)
525 
2,197 
9 
11 
2,659 
4,397 
(622)
(721)
2,037 
3,675 
Combined ratio
89.8% 
88.9% 
Capital markets and corporate finance ............................................
Asset
management
fees
are
earned
by
the
Group
for
trust
and
fiduciary
activities
where
the
Group
holds
or
invests
assets
on
behalf
of
the
customers. 
Fee
and
commission
income
on
collection
and
payment
services
is
generated
billing
services,
such
as
issuing
invoices
and
payment
collection notices, wire transfer services and other payment services.
Cards and payment solution ............................................................
Collection and payment services .....................................................
Insurance revenue .....................................................................................................................................................
Asset management .........................................................................
2025
Vördur's
operation
resulted
in
a
profit
of
ISK
2,037
million
in
2025,
with
a
return
on
equity
of
13.7%,
compared
with
a
profit
of
ISK
3,675
million in 2024 and a return on equity of 30.8%.
Incurred claims ..........................................................................................................................................................
Service expenses ......................................................................................................................................................
Insurance service expenses .......................................................................................................................................
Insurance service results ........................................................................................................................................
Net expense from reinsurance contracts held ............................................................................................................
Insurance service results ...........................................................................................................................................
Insurance revenue elimination and reclassification ....................................................................................................
Fee
and
commission
income
from
capital
markets
and
corporate
finance
includes
miscellaneous
corporate
finance
services
plus
commission from capital markets relating to sales of shares, bonds, FX and derivatives.
2024
Insurance service results according to the Financial Statements of Vördur ................................................................
Investment return .......................................................................................................................................................
Net financial loss from insurance contracts ................................................................................................................
Total investment return ..............................................................................................................................................
Other income .............................................................................................................................................................
Income tax .................................................................................................................................................................
Earnings before income tax ....................................................................................................................................
Net earnings .............................................................................................................................................................
Combined ratio of Vördur, including insurance revenue from the Group .....................................................................
Lending and financial guarantees ....................................................
Other ...............................................................................................
Net fee and commission income ..................................................
Commission expense from insurance operation ..............................
Commission expense from insurance operation is transferred to insurance service results in accordance with IFRS 17.
Fee
and
commission
income
from
lending
and
financial
guarantees
is
mainly
related
to
lending
activities,
extension
fees,
advisory
services
and documentation, notification and payment fees plus fees from the issuing of guarantees on behalf of customers.
Other fee and commission income is mainly fees relating to sale, custody and market making on the Icelandic stock exchange.
Commission
from
cards
and
payment
solutions
is
mainly
from
the
Bank's
issuance
of
credit
and
debit
cards
and
other
card
related
commission, e.g. yearly fee on cards and transaction fees.
30

===== SIDA 31 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
10.
Net financial income
2025
2024
Net gain on financial assets and financial liabilities mandatorily measured 
1,760 
4,686 
33 
(182)
(13)
(383)
(219)
(134)
(1,083)
(1,063)
597 
(79)
1,075 
2,845 
Net gain on financial assets and financial liabilities mandatorily measured at fair value through the income statement
(729)
2,778 
2,147 
1,866 
372 
56 
(30)
(14)
Net gain on financial assets and financial liabilities
1,760 
4,686 
Net loss on fair value hedge of interest rate swap
1,185 
4,867 
(1,198)
(5,250)
(13)
(383)
11.
Other operating income
2025
2024
5,277 
(339)
(429)
- 
600 
1 
13 
7 
(27)
24 
82 
85 
5,516 
(222)
Net gain on assets held for sale
 
 
18 
16 
(5)
(9)
13 
7 
Expense related to real estates and other assets .......................................................................................................
Net gain from real estates and other assets ...............................................................................................................
Fair value changes on investment property ................................................................................................................
Realised loss on investment property ........................................................................................................................
Net gain on assets held for sale .................................................................................................................................
Share of (loss) profit of associates .............................................................................................................................
Other income .............................................................................................................................................................
Other operating income ...........................................................................................................................................
Net gain on disposal of assets ...................................................................................................................................
Net loss on fair value hedge of interest rate swap .................................................................................................
Fair value change on bonds issued by the Group attributable to interest rate risk ......................................................
Fair value change of interest rate swaps designated as hedging instruments ............................................................
  mandatorily measured at fair value through the income statement ...................................................................
Real estates and other assets classified as assets held for sale are generally the result of foreclosures on companies and individuals. 
Net gain (loss) on prepayments of borrowings ...........................................................................................................
Net gain on assets held for sale ..............................................................................................................................
Equity instruments .....................................................................................................................................................
Debt instruments ........................................................................................................................................................
Derivatives .................................................................................................................................................................
Loans .........................................................................................................................................................................
Net realized loss on financial assets carried at fair value through OCI .......................................................................
Net financial loss from insurance contracts ................................................................................................................
Net foreign exchange gain (loss) ................................................................................................................................
Net financial income ................................................................................................................................................
Net loss on fair value hedge of interest rate swap ......................................................................................................
  at fair value through the income statement ..............................................................................................................
31

===== SIDA 32 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
12.
Operating expenses
2025
2024
19,217 
18,694 
12,690 
13,026 
(3,659)
(3,392)
28,248 
28,328 
13.
Personnel and salaries
2025
2024
Number of employees
878 
836 
901 
858 
Salaries and related expenses
13,739 
12,914 
1,325 
1,813 
86 
162 
2,016 
1,901 
2,051 
1,904 
19,217 
18,694 
Remuneration to the Board of Directors
Fixed
Additional
Fixed
Additional
remuner-
remuner-
Pension
remuner-
remuner-
Pension
ation*
ation**
contribution
Total
ation*
ation**
contribution
Total
Paul Horner, Chairman ..............................
18.8 
14.8 
- 
33.7 
17.2 
13.7 
- 
30.9 
Kristín Pétursdóttir, Vice Chairman ...........
10.7 
13.3 
2.8 
26.8 
9.5 
12.2 
2.5 
24.1 
Gunnar Sturluson, Director ........................
7.1 
11.5 
2.1 
20.8 
6.7 
9.8 
1.9 
18.4 
Marianne Gjertsen Ebbesen, Director
   (elected 12 March '25) ...........................
8.9 
5.9 
- 
14.8 
- 
- 
- 
- 
Steinunn K. Thórdardóttir, Director*** ........
16.6 
14.7 
3.6 
34.9 
13.5 
12.9 
3.0 
29.5 
Liv Fiksdahl (until 12 March '25) ................
2.2 
2.2 
- 
4.4 
10.7 
11.2 
- 
21.9 
Brynjólfur Bjarnason (until 13 March '24) ...
- 
- 
- 
- 
2.7 
2.2 
0.6 
5.4 
Alternate directors of the Board .................
1.2 
0.6 
0.2 
2.0 
1.1 
1.5 
0.3 
3.0 
Total remuneration ..................................
65.5 
63.1 
8.7 
137.4 
61.4 
63.5 
8.3 
133.2 
Defined contribution pension plans  ...........................................................................................................................
2025
* Fixed remuneration represents Board Member compensation for their attendance at meetings of the Board of Directors.
*** Steinunn K. Thórdardóttir also serves on the Board of Vördur.
2024
Salaries and related expenses ...................................................................................................................................
Other operating expenses ..........................................................................................................................................
Operating expenses from insurance operation ...........................................................................................................
Operating expenses .................................................................................................................................................
Average number of full-time equivalent positions during the year ...............................................................................
Full-time equivalent positions at the end of the year ...................................................................................................
Salaries ......................................................................................................................................................................
Incentive scheme, including salary related expense ...................................................................................................
Share-based payment expenses ................................................................................................................................
** Additional remuneration represents Board Member compensation for their participation in Board Committees.
Salary-related expenses ............................................................................................................................................
Salaries and related expenses ................................................................................................................................
32

===== SIDA 33 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
13.
Personnel and salaries, continued
Remuneration to key management personnel
 
Performance-
Performance-
based
Pension
based
Pension
Salaries
payments
contribution
Total
Salaries
payments
contribution
Total
Benedikt Gíslason, CEO ...........................
69.5 
14.5 
10.3 
94.3 
68.4 
6.1 
10.5 
85.0 
Members of the Executive Committee* .....
358.2 
83.0 
53.0 
494.2 
350.7 
30.6 
54.2 
435.4 
Former members of Executive Committee 
- 
- 
- 
- 
7.0 
3.8 
1.5 
12.3 
Other key employees ................................
68.3 
- 
10.2 
78.5 
66.1 
- 
9.9 
75.9 
Total remuneration ..................................
496.1 
97.5 
73.5 
667.0 
492.2 
40.5 
76.0 
608.7 
Incentive schemes
Share-based payment expense
 
 
Arion
Bank
has
in
place
a
share
option
plan
for
all
employees
of
the
Bank,
Vördur
and
Stefnir,
approved
at
the
Banks
annual
general
meeting.
A
total
expense
of
ISK
86
million
was
recognised
in
the
Income
Statement
during
the
year
(2024:
ISK
122
million).
Estimated
remaining
expenses
due
the
share
option
contracts
are
ISK
9
million
and
will
be
expensed
over
the
next
four
months.
For
further
information on the share option program, see Note 37.
* Members of the Executive Committee are listed in Note 43.
The
current
incentive
scheme
for
Arion
Bank
hf.
and
Vördur
came
into
effect
in
2021.
The
scheme
is
in
compliance
with
the
FSA’s
rules
on
remuneration
policy
for
financial
institutions.
The
scheme
is
divided
into
two
parts.
Firstly,
employees
can
receive
up
to
10%
of
their
fixed
salary
for
each
fiscal
year
in
the
form
of
a
cash
payment.
Secondly,
a
limited
group
can
receive
up
to
25%
of
their
fixed
salary
as
a
payment
in
the
form
of
shares
or
share
options
in
the
Bank.
Of
this
25%,
(i)
a
total
of
20%
will
be
settled
instantly
with
cash,
40%
will
be
settled
instantly
with
shares
subject
to
a
3-year
lock-up
period
and
the
remaining
40%
will
be
settled
with
shares
or
share
options
after
4-5
years
or
(ii)
a
total
of
20%
will
be
settled
instantly
with
cash
and
the
remaining
80%
will
be
settled
with
share
options
after
4-5
years.
The 
key
metric
used
to
determine
whether
incentive
scheme
payments
will
be
paid
by
the
Bank,
in
part
or
in
full,
is
whether
the
Bank’s
return
on
equity
is
higher
than
the
weighted
ROE
of
the
Bank’s
main
competitors.
Other
supporting
metrics
include
ROE
and
cost-to-income
ratio
vs
target, compliance, staff NPS etc. Stefnir hf. has a special incentive scheme where other criteria are used as a basis.
Board
Members
receive
remuneration
for
their
involvement
in
board
committees.
In
addition
to
21
Board
meetings
(2024:
13)
during
the
year
4
Board
Credit
Committee
meetings
(2024:
7),
5
Board
Audit
Committee
meetings
(2024:
5),
8
Board
Risk
Committee
meetings
(2024:
8), 5 Board Remuneration Committee meetings (2024: 5) and 4 Board Tech committee meetings (2024: 5) were held.
2025
The
2025
Annual
General
Meeting
of
the
Bank
held
on
12
March
2025
approved
the
monthly
salaries
for
2025
for
the
Chairman,
Vice
Chairman
and
for
other
Board
Members
of
amounts
ISK
1,200,000,
ISK
900,000
and
ISK
600,000
(2024:
ISK
1,130,000;
847,500;
565,000)
respectively.
Alternate
Board
Members
receive
a
payment
of
ISK
600,000
per
year
and
ISK
300,000
for
each
meeting
attended
but
cannot
exceed
ISK
600,000
per
month
(2024:
ISK
565,000
per
year,
ISK
282,500
for
each
meeting
but
cannot
exceed
ISK
565,000
per
month).
Board
members
residing
outside
of
Iceland
receive
a
further
ISK
387,500
for
each
Board
meeting
they
attend
in
person
(2024:
ISK
365,000).
In
addition,
it
was
approved
to
pay
Board
Members
who
serve
on
board
sub-committees
of
the
Bank
a
maximum
of
ISK
250,000
(2024:
ISK
235,000)
per
month
for
each
committee
they
serve
on
and
the
Chairman
of
the
board
committees
ISK
375,000
(2024:
ISK
352,500).
In
2025
the
Group
made
a
ISK
1,325
million
provision
for
the
incentive
scheme,
including
salary-related
expenses
(2024:
ISK
1,813
million).
At
year
end
the
Group's
accrual
for
the
incentive
scheme
payments
amounted
to
ISK
1,678
million
(31.12.2024:
ISK
2,853
million).
The
estimated
cost
of
the
deferred
part
of
the
incentive
scheme
from
the
fiscal
years
2022–2025,
to
be
settled
in
2026–2030,
amounting
to
ISK 546 million, will be expensed on a proportional basis over the years leading up to their settlement.
2024
33

===== SIDA 34 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
14.
Other operating expenses
2025
2024
5,127 
5,074 
1,565 
1,435 
1,283 
1,215 
522 
502 
2,532 
3,103 
493 
573 
161 
139 
1,007 
985 
12,690 
13,026 
Auditor's fee
180 
189 
16 
17 
5 
13 
201 
219 
15.
Bank levy
16.
Net impairment
2025
2024
Net impairment on financial instruments and value changes on loans
(3,064)
(1,738)
(4)
- 
- 
83 
15 
524 
(3,053)
(1,131)
Net impairment by customer type
(736)
69 
(2,317)
(1,200)
(3,053)
(1,131)
Other services from auditors ......................................................................................................................................
Auditor's fee .............................................................................................................................................................
Marketing ...................................................................................................................................................................
Housing expenses .....................................................................................................................................................
Other administration expenses* .................................................................................................................................
IT expenses ...............................................................................................................................................................
Professional services .................................................................................................................................................
Individuals ..................................................................................................................................................................
Net impairment on loans to customers and financial institutions ................................................................................
Net impairment on other financial instruments at FVOCI ............................................................................................
Depreciation of property and equipment .....................................................................................................................
Other value changes of loans - corporates .................................................................................................................
Other value changes of loans - individuals .................................................................................................................
Audit and review of the Consolidated Financial Statements for the relevant fiscal year ..............................................
Other audit related services for the relevant fiscal year ..............................................................................................
Amortization of intangible assets ................................................................................................................................
Other operating expenses .......................................................................................................................................
Net impairment .........................................................................................................................................................
Corporates .................................................................................................................................................................
Net impairment .........................................................................................................................................................
* Included ISK 585 million fine following settlement with the Financial supervision of the Central Bank in June 2024.
Depreciation of right of use asset ...............................................................................................................................
The
Bank
levy
is
0.145%
on
total
debts
excluding
tax
liabilities,
in
excess
of
ISK
50
billion.
The
Bank
levy
is
assessed
on
Financial
Undertakings but non-financial subsidiaries are exempt from this tax. 
Other
value
changes
of
loans
to
individuals
and
corporates
are
mainly
due
to
release
of
discount
from
loans
acquired
with
discount
during
the
years
2008
to
2013,
both
due
to
impairments
and
other
discount
rate
than
reflected
in
the
interest
rates
of
the
loans.
There
are
no
further discounts related to the aforementioned loans on balance.
34

===== SIDA 35 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
17.
Income tax expense
2025
2024
11,386 
9,651 
1,072 
(732)
12,458 
8,919 
Reconciliation of effective tax rate
44,984 
35,068 
20.0% 
8,997 
21.0% 
7,364 
5.0% 
2,258 
5.6% 
1,977 
0.2% 
82 
0.5% 
163 
1.7% 
757 
(1.9%)
(664)
0.9% 
421 
1.1% 
385 
0.0% 
17 
0.0% 
- 
0.1% 
44 
(0.2%)
(78)
(0.3%)
(118)
(0.7%)
(228)
27.7% 
12,458 
25.4% 
8,919 
18.
Discontinued operations held for sale, net of income tax
2025
2024
(19)
(37)
(19)
(37)
19.
Earnings per share
 
2025
2024
2025
2024
2025
2024
30,645 
26,148 
(19)
(37)
30,626 
26,111 
31,070 
26,521 
(19)
(37)
31,051 
26,484 
1,389 
1,426 
1,389 
1,426 
1,389 
1,426 
1,401 
1,443 
1,401 
1,443 
1,401 
1,443 
22.07 
18.34 
(0.01)
(0.03)
22.05 
18.31 
21.88 
18.12 
(0.01)
(0.03)
21.86 
18.09 
22.37 
18.59 
(0.01)
(0.03)
22.36 
18.57 
22.18 
18.38 
(0.01)
(0.03)
22.17 
18.35 
Tax exempt revenues / loss ..................................................................................................
Additional 6% tax on Financial Undertakings ........................................................................
Non-deductible expenses .....................................................................................................
2024
2025
Earnings before income tax ..................................................................................................
Income tax using the Icelandic corporate tax rate .................................................................
Basic earnings per share (ISK) ....................................................
Weighted average number of outstanding shares (millions) ............
Continued
Discontinued
Net loss from discontinued operations held for sale, net of income tax ......................................................................
Basic comprehensive income per share (ISK) ............................
Diluted earnings per share (ISK) ..................................................
    including options and warrants (2024) (millions) ..........................
Weighted average number of outstanding shares
Total comprehensive income attributable to the shareholders .........
 operations
operations
Current tax expense ...................................................................................................................................................
Deferred tax expense .................................................................................................................................................
Current tax expense .................................................................................................................................................
Net earnings attributable to the shareholders of Arion Bank ............
Effective tax rate .................................................................................................................
Tax exempt revenues / loss consist mainly of profit / loss from equity positions.
Financial undertakings pay 6% additional tax on taxable profit exceeding ISK 1 billion.
Effect of tax rates in foreign jurisdictions ..............................................................................
Sólbjarg ehf., a subsidiary of Eignabjarg is classified as held for sale.
Basic
earnings
per
share
is
based
on
net
earnings
attributable
to
the
shareholders
of
Arion
Bank
and
the
weighted
average
number
of
shares
outstanding
during
the
year.
Diluted
earnings
per
share
is
calculated
by
adjusting
the
weighted
average
number
of
outstanding
shares
to
assume
conversion
of
all
dilutive
potential
ordinary
shares.
Arion
Bank
has
issued
share
options,
share
rights
and
warrants
(terminated in 2024) that have dilutive effects.
Net earnings
Diluted comprehensive income per share (ISK) ..........................
Discontinued operations held for sale, net of income tax .....................................................................................
Tax incentives not recognized in the Income Statement .......................................................
Other changes ......................................................................................................................
Non-deductible taxes (Bank levy) .........................................................................................
35

===== SIDA 36 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
Notes to the Consolidated Statement of Financial Position
20.
Cash and balances with Central Bank
31.12.2025
31.12.2024
2,022 
2,481 
114,486 
89,139 
33,603 
32,474 
150,111 
124,094 
21.
Loans to credit institutions
31.12.2025
31.12.2024
22,040 
25,690 
527 
- 
22,567 
25,690 
22.
Loans to customers
Gross
 
Gross
Gross
carrying
Book
carrying
Book
carrying
Book
31.12.2025
amount
value
amount
value
amount
value
15,373 
14,666 
53,125 
50,643 
68,498 
65,309 
17,558 
17,301 
2,561 
2,478 
20,119 
19,779 
- 
- 
1,933 
1,450 
1,933 
1,450 
577,492 
576,828 
91,007 
89,765 
668,499 
666,593 
- 
- 
57,705 
56,224 
57,705 
56,224 
681 
674 
7,174 
7,046 
7,855 
7,720 
31,851 
30,925 
485,158 
481,056 
517,009 
511,981 
642,955 
640,394 
698,663 
688,662 
1,341,618 
1,329,056 
31.12.2024
14,575 
13,925 
42,233 
41,222 
56,808 
55,147 
16,873 
16,647 
2,297 
2,230 
19,170 
18,877 
- 
- 
1,751 
1,313 
1,751 
1,313 
571,525 
570,842 
74,287 
73,712 
645,812 
644,554 
- 
- 
49,508 
48,806 
49,508 
48,806 
1,298 
1,283 
7,344 
7,295 
8,642 
8,578 
37,627 
36,707 
420,530 
416,076 
458,157 
452,783 
641,898 
639,404 
597,950 
590,654 
1,239,848 
1,230,058 
23.
Financial instruments
31.12.2025
31.12.2024
170,985 
158,735 
21,260 
18,470 
8,624 
6,715 
14,947 
22,497 
215,816 
206,417 
Further analysis of loans is provided in Risk management disclosures.
Financial instruments ..............................................................................................................................................
Shares and equity instruments with variable income ..................................................................................................
Bonds and debt instruments ......................................................................................................................................
Construction loans ..........................................................................
Loans to customers at fair value .....................................................
Overdrafts .......................................................................................
Total
Loans to customers ......................................................................
Other loans .....................................................................................
Loans to customers at fair value .....................................................
Loans to credit institutions .....................................................................................................................................
Loans to customers ......................................................................
Mortgage loans ...............................................................................
Overdrafts .......................................................................................
Capital lease ...................................................................................
The
mandatory
reserve
deposit
with
the
Central
Bank
is
not
available
for
the
Group
to
use
in
its
daily
operations.
The
minimum
interest-free
fixed reserve requirement of the Central Bank is 3%.
Construction loans ..........................................................................
Credit cards ....................................................................................
Corporates
Credit cards ....................................................................................
Cash with Central Bank ..............................................................................................................................................
Capital lease ...................................................................................
Securities used for economic hedging ........................................................................................................................
Derivatives .................................................................................................................................................................
Mandatory reserve deposit with Central Bank ............................................................................................................
Cash on hand ............................................................................................................................................................
Other loans ................................................................................................................................................................
Individuals
Cash and balances with Central Bank ....................................................................................................................
Other loans .....................................................................................
The
total
book
value
of
pledged
loans
that
were
pledged
against
outstanding
borrowings
was
ISK
286
billion
at
the
end
of
the
year
(31.12.2024: ISK 304 billion). Pledged loans comprised mortgage loans to individuals.
Bank accounts ...........................................................................................................................................................
Mortgage loans ...............................................................................
36

===== SIDA 37 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
24.
Financial assets and financial liabilities
Fair value
Fair value
Financial assets
Amortized
through
through
Loans
cost
OCI
P/L
Total
150,111 
- 
- 
150,111 
22,567 
- 
- 
22,567 
1,327,606 
- 
1,450 
1,329,056 
1,500,284 
- 
1,450 
1,501,734 
Bonds and debt instruments
- 
138,302 
32,479 
170,781 
- 
- 
204 
204 
- 
138,302 
32,683 
170,985 
Shares and equity instruments with variable income
- 
- 
11,499 
11,499 
- 
- 
9,008 
9,008 
- 
- 
753 
753 
- 
- 
21,260 
21,260 
Derivatives
- 
- 
5,414 
5,414 
- 
- 
3,210 
3,210 
- 
- 
8,624 
8,624 
Securities used for economic hedging
- 
- 
1,732 
1,732 
- 
- 
13,215 
13,215 
- 
- 
14,947 
14,947 
Other financial assets
3,465 
- 
- 
3,465 
13,566 
- 
- 
13,566 
17,031 
- 
- 
17,031 
1,517,315 
138,302 
78,964 
1,734,581 
Financial liabilities
12,003 
- 
- 
12,003 
921,182 
- 
- 
921,182 
494,823 
- 
- 
494,823 
43,518 
- 
- 
43,518 
- 
- 
1,411 
1,411 
- 
- 
1,718 
1,718 
11,792 
- 
- 
11,792 
1,483,318 
- 
3,129 
1,486,447 
Listed ...................................................................................................................................
* Including effect from hedge accounting derivatives.
Subordinated liabilities * .......................................................................................................
Derivatives ...........................................................................................................................
31.12.2025
Listed ...................................................................................................................................
Financial liabilities .............................................................................................................
Loans to customers ..............................................................................................................
Derivatives ..........................................................................................................................
Loans ...................................................................................................................................
Cash and balances with Central Bank ..................................................................................
Borrowings * .........................................................................................................................
Loans to credit institutions ....................................................................................................
Accounts receivable .............................................................................................................
Other financial assets ...........................................................................................................
Financial assets ..................................................................................................................
Other financial assets ........................................................................................................
Due to credit institutions and Central Bank ...........................................................................
Other financial liabilities ........................................................................................................
Deposits ...............................................................................................................................
Unlisted ................................................................................................................................
Bonds and debt instruments, listed .......................................................................................
Bonds and debt instruments .............................................................................................
Derivatives used for hedge accounting .................................................................................
Securities used for economic hedging .............................................................................
Shares and equity instruments with variable income, listed ..................................................
Bond funds with variable income, unlisted ............................................................................
Derivatives used for hedge accounting .................................................................................
Shares and equity instruments with variable income ......................................................
OTC derivatives ...................................................................................................................
Unlisted ................................................................................................................................
37

===== SIDA 38 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
24.
Financial assets and financial liabilities, continued
Fair value
Fair value
Financial assets
Amortized
through
through
Loans
cost
OCI
P/L
Total
124,094 
- 
- 
124,094 
25,690 
- 
- 
25,690 
1,228,745 
- 
1,313 
1,230,058 
1,378,529 
- 
1,313 
1,379,842 
Bonds and debt instruments
- 
126,898 
31,217 
158,115 
- 
- 
620 
620 
- 
126,898 
31,837 
158,735 
Shares and equity instruments with variable income
- 
- 
11,499 
11,499 
- 
- 
6,291 
6,291 
- 
- 
680 
680 
- 
- 
18,470 
18,470 
Derivatives
- 
- 
3,685 
3,685 
- 
- 
3,030 
3,030 
- 
- 
6,715 
6,715 
Securities used for economic hedging
- 
- 
2,664 
2,664 
- 
- 
19,833 
19,833 
- 
- 
22,497 
22,497 
Other financial assets
2,552 
- 
- 
2,552 
5,924 
- 
- 
5,924 
8,476 
- 
- 
8,476 
1,387,005 
126,898 
80,832 
1,594,735 
Financial liabilities
6,618 
- 
- 
6,618 
857,443 
- 
- 
857,443 
433,178 
- 
- 
433,178 
44,538 
- 
- 
44,538 
- 
- 
4,096 
4,096 
- 
- 
4,298 
4,298 
10,631 
- 
- 
10,631 
1,352,408 
- 
8,394 
1,360,802 
31.12.2024
Loans ...................................................................................................................................
Derivatives used for hedge accounting .................................................................................
Bonds and debt instruments, listed .......................................................................................
Cash and balances with Central Bank ..................................................................................
Unlisted ................................................................................................................................
Bonds and debt instruments .............................................................................................
Accounts receivable .............................................................................................................
Shares and equity instruments with variable income ......................................................
Unlisted ................................................................................................................................
Derivatives ..........................................................................................................................
Financial liabilities .............................................................................................................
Due to credit institutions and Central Bank ...........................................................................
Other financial liabilities ........................................................................................................
Shares and equity instruments with variable income, listed ..................................................
* Including effect from hedge accounting derivatives.
Financial assets ..................................................................................................................
Other financial assets ........................................................................................................
Subordinated liabilities * .......................................................................................................
Listed ...................................................................................................................................
Listed ...................................................................................................................................
OTC derivatives ...................................................................................................................
Bond funds with variable income, unlisted ............................................................................
Loans to customers ..............................................................................................................
Securities used for economic hedging .............................................................................
Loans to credit institutions ....................................................................................................
Deposits ...............................................................................................................................
Borrowings * .........................................................................................................................
Other financial assets ...........................................................................................................
Derivatives ...........................................................................................................................
Derivatives used for hedge accounting .................................................................................
38

===== SIDA 39 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
24.
Financial assets and financial liabilities, continued
Manda-
Fair value
torily at
through
fair value
OCI
thr. P/L
Total
1,434 
8,667 
10,101 
136,868 
20,366 
157,234 
- 
3,650 
3,650 
138,302 
32,683 
170,985 
975 
8,494 
9,469 
125,923 
20,257 
146,180 
- 
3,086 
3,086 
126,898 
31,837 
158,735 
25.
Fair value hierarchy
Level 1
Level 2
Level 3
Total
- 
- 
1,450 
1,450 
167,250 
3,732 
3 
170,985 
11,201 
6,055 
4,004 
21,260 
- 
5,414 
- 
5,414 
- 
3,210 
- 
3,210 
14,947 
- 
- 
14,947 
- 
- 
7,305 
7,305 
193,398 
18,411 
12,762 
224,571 
- 
1,411 
- 
1,411 
- 
1,718 
- 
1,718 
- 
3,129 
- 
3,129 
Investment property ..............................................................................................................
Corporates ..............................................................................................................................................
31.12.2025
The Group uses the following hierarchy for determining and disclosing the fair value of assets and liabilities by valuation technique:
Bonds and debt instruments at fair value ............................................................................................
Loans to customers ..............................................................................................................
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Derivatives ...........................................................................................................................
Public sector ...........................................................................................................................................
Bonds and debt instruments .................................................................................................
Financial and insurance activities ............................................................................................................
Derivatives ...........................................................................................................................
Assets at fair value .............................................................................................................
Derivatives used for hedge accounting .................................................................................
Securities used for economic hedging ..................................................................................
Shares and equity instruments with variable income ............................................................
31.12.2024
Assets and liabilities recorded at fair value by level of the fair value hierarchy
Level 2: valuation techniques for which all significant inputs are market observable, either directly or indirectly; and
31.12.2025
Bonds and debt instruments at fair value ............................................................................................
Corporates ..............................................................................................................................................
Financial and insurance activities ............................................................................................................
The
total
amount
of
pledged
bonds
was
ISK
3.2
billion
at
the
end
of
the
year
(31.12.2024:
ISK
3.1
billion).
Pledged
bonds
comprise
Icelandic
Government
Bonds
that
were
pledged
against
funding
received
and
included
in
Due
to
credit
institutions
and
Central
Bank
as
well
as short positions included in Financial liabilities at fair value.
Public sector ...........................................................................................................................................
For
assets
and
liabilities
that
are
recognized
at
fair
value
on
a
recurring
basis,
the
Group
determines
whether
transfers
have
occurred
between
Levels
in
the
hierarchy
by
re-assessing
categorization
(based
on
the
lowest
level
input
that
is
significant
to
the
fair
value
measurement as a whole) at the end of each reporting period.
Bonds and debt instruments measured at fair value, specified by issuer
Liabilities at fair value
Liabilities at fair value ........................................................................................................
Derivatives used for hedge accounting .................................................................................
Assets at fair value
Level 3: valuation techniques which include significant inputs that are not based on observable market data.
39

===== SIDA 40 =====