Arion Bank Tightens Its Belt, Mass Firings Pending

The board of Arion Bank has decided that organisational changes they seek to make will be implemented today, Kjarninn reports. Entailed in these changes will be firing 12% of their employees, totally about a hundred people. About 80% of those slated for firing work in the greater Reykjavík area.

In a statement from the bank, the board says that the goal with these organisational changes is to get their operational costs down to 50% of their revenue, and to achieve a return of equity of 10%.

Benedikt Gíslason, the director of Arion Bank, lamented that this would be a difficult day for the company, in having to let go of skilled and dedicated employees. However, he says, the operating costs of the bank have been too high and the structural organisation of the bank has not adapted to new market conditions. He also blamed “heavy changes to banking regulations and taxes over the past decade leading to increased operational costs.”

However, there is more to the story behind Arion Bank’s decreasing returns. Three of their largest clients have recently gone bankrupt: United Silicon, Primera Air and WOW Air. The bank, while seeing a decrease in returns, is still very far from being insolvent: in the first six months of 2019, the bank earned 3.1 billion ISK in returns; 1.9 billion ISK less than the first six months of last year.

“With each day, we do not create value for our investors but rather costs,” Benedikt told Markaðinn about two weeks ago. “This we need to change and fix,” adding that Arion Bank’s goal was not to be the biggest bank but to create returns for its investors.