Corporate customers

Arion Bank provides comprehensive financial services to a wide range of companies. The year was both eventful and successful, in spite of a challenging interest rate environment, continued conflict overseas and seismic activity in Iceland which had a wide-reaching impact on the operations and operating environment of businesses. The Bank provided an extensive range of services over the year, both on the lending side, corporate insurance and corporate advisory.

Productive year on the corporate market

We provide major companies and SMEs in Iceland with comprehensive financial services and were engaged in numerous projects during the year, including the sale of travel agencies, project financing to meet the housing need and an acquisition which eventually led to a company being delisted from the stock market. Cross-team collaboration within the Group continued to go from strength to strength, with teams working on a range of projects for the benefit of our clients.

The Icelandic stock market continued to flourish. Five IPOs took place in 2023 and Arion Bank was involved in four of them.

Corporate services were strengthened by merging two existing units into a single team within the Corporate & Investment Banking division, the aim being to improve and coordinate the services to SMEs. The focus is on providing comprehensive financial services across Iceland built on the expertise of our highly experienced team of professionals.

Our services have been enhanced by the continued expansion of our digital services, which this year included the launch of corporate payment card solutions. Improving our digital service platforms will remain a priority next year, saving time for our customers as a result.

The Bank’s engagement with the Arctic continued, with loans to the region increasing 10%. The structure of this loan portfolio is starting to reflect more closely the Bank’s strategy in the region.

Corporate loan portfolio in the Arctic

Arion Bank and Vörður further realized the cross-selling potential for insurance during the year and continued to introduce Vörður insurance products to Arion Bank’s corporate customers. This means that the customers of both companies can get Vörður insurance through the service channels of Arion Bank and Vörður. This approach is integral to our bancassurance strategy, the aim of which is to improve customer experience and make managing one’s finances more straightforward.

Sustainability and the environment

Arion Bank has adopted a clear policy on sustainability and environmental and climate issues. The Bank’s sustainability policy is entitled Together we make good things happen which is epitomized by our commitment to working responsibly in harmony with society and the environment.

The Bank’s policy is reflected in its lending. Loans to the energy sector are in renewables. As Iceland is in the unique position of using almost entirely renewable energy for heating and electricity this focus also applies to the real estate projects the Bank finances. Loans to the fisheries aim for the sustainable use of resources.

At the end of the year committed green lending to companies amounted to ISK 49 billion and was divided into the following categories: energy efficiency, sustainable fishery and aquaculture, environmentally friendly transportation, renewable energy, and emission controls.

Green lending to companies

The largest individual green loan from the Bank is to a project at Norðurál, whose aluminium has the one of the lowest carbon footprints in the world. The company was also named Environmental Company of the Year in 2022.

The Bank offers companies a range of green loan products and publishes a report on its financed emissions using PCAF methodology.

Arion Bank’s active role in the development of the economy aligns with UN Sustainable Development Goals number 7 on affordable and clean energy, number 8 on decent work and economic growth and number 9 on industry, innovation and infrastructure.

Corporate loans

Total loans to companies amounted to ISK 544 billion, or 47% of the Bank’s total loans to customers. Corporate loans increased by more than 8% in 2023, but lending activity was significantly higher than this figure suggests due to the sale of loans and increased turnover of the loan book.

Loan book by sector

Corporate deposits

Corporate deposits were 54% of the total deposits to customers at the end of 2023. Term deposits that have maturities greater than 30 days have increased from 12% to 15% of the total corporate deposits in the last year. Deposits of SMEs at Arion Bank increased by almost 10% in 2023, and approximately 60% of new corporate deposits were made digitally last year.