As previously announced in Arion Bank's Q2 2019 financial results on 8 August, Arion Bank is planning to prepay in full the contractual covered bond issuance (Arion CB2) in the amount of ISK 60 billion, which is largely owned by the Housing Financing Fund (HFF). At the same time, the Bank has agreed to sell to HFF a mortgage loan portfolio in the amount of ISK 50 billion. The Bank's customers will not be affected by HFF's acquisition and Arion Bank will continue to service and administer the loans. The agreement with the HFF and the prepayment of covered bond is subject to several conditions precedents. The major conditions, that now have been fulfilled, include the approval of the Icelandic Competition Authority, completion of due diligence, and the finalization of a service and revenue sharing contract between Arion Bank and the HFF.
The prepayment of the bond and the finalization of the agreements will have a positive impact on the Bank's earnings in Q4 2019 amounting to ISK 1.3 billion, net of tax. This is mostly due to lower bank levy for 2019 and the realization of discounts in Q4 2019 that would otherwise have been recognized following a prepayment of the mortgages or during the time until the mortgages mature. The Bank will continue to receive income from the mortgages in accordance with the service and revenue sharing contract with the HFF. The sale also has a positive effect on the Bank's capital ratios as the transaction will reduce the Bank's risk weighted assets by approximately ISK 18 billion.
For further information please contact Arion Bank's Investor Relations at ir@arionbanki.is or Theodór Fridbertsson, investor relations, +354 444 6760.
This is information that Arion Bank hf. is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication through the agency of the contact persons set out above.
