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Financial Times / Biz - Money

Arion prepares IPO 10 years after Iceland’s banking collapse

The successor bank to Iceland’s failed Kaupthing is looking to list in Reykjavik and Stockholm by the end of next month, just before the 10th anniversary of the collapse of the Nordic island’s banking system. 

Arion Bank said it could sell at least 40 per cent of total shares in the offering in the biggest test of investor appetite for Iceland’s recovery since the global financial crisis hit the nation of just 350,000 people in 2008. 

“After years of dedication and ambitious work, becoming a public listed company both in Iceland and Sweden represents a great milestone and is also a stamp of quality for Arion Bank and the Icelandic economy,” said Eva Cederbalk, Arion’s chairman. 

Iceland has enjoyed an impressive economic rebound in the past decade, fuelled by a booming tourist industry. But there are fears of overheating, with tourist numbers likely to drop this year because of the strong Icelandic krona, bringing worries about lending practices of banks. 

Arion, formed from the domestic assets of Kaupthing whose winding-up committee remains the bank’s biggest shareholder, has been looking to list since 2016 and last year sold shares to a group of foreign investors including Goldman Sachs and several hedge funds. Bankers say previous deals have valued Arion at about $1.7bn. 

The bank will receive no proceeds from the IPO, with all the shares coming from Kaupthing’s 56 per cent stake. Attestor Capital, the UK hedge fund that is Arion’s second-largest shareholder with a 12 per cent stake, will announce how many shares it will sell when the IPO prospectus is published in the next few weeks. Goldman owns 3.4 per cent, while hedge funds Och-Ziff Capital and Taconic Capital own 6.6 per cent and 10 per cent respectively. 

Arion Bank . . . today is a strong, profitable and leading bank in Iceland

Hoskuldur Olafsson, chief executive

Arion said it expected to be able to reduce its capital levels through an extraordinary dividend, planned to be issued after the listing. It has a common equity tier one ratio of 23.6 per cent but is targeting 17 per cent in the future. 

Its net profit in the first three months of this year fell 42 per cent compared with a year earlier to IKr2bn ($19m), generating a return on equity of just 3.6 per cent, compared with 6.3 per cent in 2017. 

“Arion Bank has been fully restructured for several years now, and today is a strong, profitable and leading bank in Iceland,” said Hoskuldur Olafsson, Arion’s chief executive. 

Arion said that in the medium term it was looking to sell Valitor, a payments company that is reportedly much coveted by the foreign investors in the bank. Arion’s lending practices have been under scrutiny recently after it was forced to take control of United Silicon, the maker of solar panels material that filed for bankruptcy.

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