Investment Banking

Corporate Finance provides M&A advisory services and is a leading arranger of stock market listings on Nasdaq Iceland. Corporate Finance’s clients include some of the largest companies and major investors in Iceland. Our team has extensive experience with a variety of educational and professional backgrounds and a proven track record of success.

Corporate Finance undertook a wide range of engagements in 2018. The division was one of four international arrangers for the IPO and listing of Arion Bank in Iceland and Sweden. Corporate Finance also advised the petroleum and service company N1 on its acquisition of all share capital in the retail company Festi and advised the real estate company Reginn on its acquisition of properties owned by the real estate company Fast-1. These represented the two largest domestic corporate transactions undertaken in recent years. Other engagements included advising the private equity fund Umbreyting on its acquisition of Borgarplast and Plastgerd Sudurnesja, arranging the largest bond offering of 2018 for the real estate company Reginn and managing a variety of Corporate Development projects for Arion Bank.

Corporate Finance also advised the petroleum and service company N1 on its acquisition of all share capital in the retail company Festi and advised the real estate company Reginn on its acquisition of properties owned by the real estate company Fast-1. These represented the two largest domestic corporate transactions undertaken in recent years.

Corporate Finance has over the past few years made a strong contribution to the growth of the domestic securities market by arranging IPOs and listings on Nasdaq Iceland and is committed to maintaining its position as a leading adviser to corporates and investors and continuing to provide top quality services to its customers.

Capital Markets brokers financial instruments for the Bank’s international and domestic clients. Arion Bank has occupied a strong position in recent years on Nasdaq Iceland and has had the highest market share in equities for the last three years. During the year 2018 Fixed Income Brokerage arranged the primary sale of bonds for companies including Félagsbústadir, Reitir and Reginn and also managed the primary sale of Arion Bank covered bonds and commercial papers. FX Brokerage has traditionally held a very strong position on the FX market and offers its customers various risk management products to hedge against interest rate and FX risk, for example. Capital Markets has cultivated strong links with international securities brokers and can broker transactions with listed securities on all the world's major securities markets.

Arion Bank has occupied a strong position in recent years on Nasdaq Iceland and has had the highest market share in equities for the last three years.

The main aim of Capital Markets is to provide its growing customer base with high quality brokerage services and access to financial markets expertise and state-of-the-art trading systems and digital solutions. The focus in the medium term will continue to be on product development, offering our clients more options regarding investment opportunities and diversifying and hedging different types of risk, while expanding our range of digital solutions.

Arion Research publishes reports on the Icelandic economy, including the bond market, the exchange rate, the real estate market, Icelandic companies and other important areas of the economy. Material published by Arion Research is intended for the general public, selected clients and other divisions of the Bank. It bases its research on publicly available information.

One of the objectives of Arion Research is to encourage and advance public discussion of the Icelandic economy. Arion Research is an independent research team, staffed by experts who have the requisite education, dedication and experience to provide in-depth analysis of economic issues, getting to the heart of what really matters and who are able to present their material in an accessible manner.

The Research team organized various seminars and conferences for the public and investors at the Bank’s headquarters at which topics such as the real estate market and the tourist sector were analyzed and Arion Research’s economic forecasts were presented. Arion Research also presented its research at numerous meetings with Arion Bank’s clients across the country.

Outlook

The Icelandic economy is on a strong footing by most standards. However, there are signs that GDP growth in Iceland will be lower in 2019 than in previous years. Tourism will not drive export growth as it has done in recent years. Uncertainty over collective wage agreements means that some investors are holding on to their money. Economic developments during the last few months of 2018 and early 2019 have been affected by concerns that the economic landing will not be as soft as hoped. This has meant that short-term interest rates and non-indexed long-term rates have increased, inflation and the inflation premium have increased and the Icelandic króna has been more volatile than previous years. Returns on listed Icelandic companies has been negative after two lacklustre years and there are signs that the fiscal stance is becoming tighter, more than suggested by the Central Bank’s interest rates alone. The availability of credit is likely to become a scarce resource compared with previous years, both for companies and individual borrowers. Adding to the impact are factors such as increased capital requirements for financial institutions and restrictions on non-resident investments.

It is sometimes said that the capital markets are better at predicting the future than the economy. The markets were thus in many ways less favourable to investors and investment banking than the previous years, even though GDP growth, particularly in the first half of the year, was strong.

Although the economic outlook has deteriorated, the outlook on the capital markets seems to be reasonably good, with various opportunities available for investment banking services. The business sector seems increasingly likely to turn to the capital markets to fund its activities, the number of IPOs and listings on the Icelandic stock market is set to increase, the increased volatility of the Icelandic króna underlines the benefits of hedging various types of risk, restrictions to foreign investment in Iceland have been relaxed and there is a pent-up need to develop infrastructure where the strengths of the debt capital markets could really make a difference regarding the funding of different projects.