Good morning and a warm welcome to all of you joining Arion Banki Capital Markets Day. Either here in our headquarters in Borgartún or through the live stream. Arion's last Capital Markets Day was held in 2019, and today we will be revisiting some of what was presented then and measure how things have developed since. The main focus of this event is to reflect on our current business and future plans. As you can see from this slide, there is a tight schedule ahead of us. Before I start my presentation, I want to point out for those that are joining online that questions can be logged in the system. In the message board, throughout the event, which will then be addressed in the Q&A session at the end of this event.
For those of you who are watching live, please feel free to submit questions as they arise. Now, two years ago, we talked about building a smaller but more profitable bank. And in my presentation, I will revisit what we have achieved over the last two years and also lay ahead the future. We talked about three components to building a smaller but more profitable bank. Building a winning team, improve earnings profile, reducing volatility in the earnings, and move to a robust earnings trajectory. The focus there was to enhance the operational efficiency by cutting costs, unprofitable products and assets, and address sort of the discipline in the capital allocation.
We wanted to improve margins and strengthen and build on the existing competitive advantages that we had, a broad service offering. Third component was the capital velocity, the originate and distribute approach to our business. The third component to building a smaller but more profitable bank was actually to shrink it. Pay out some of the excess capital, normalize the capital structure, but also improve the funding structure. Let's look at how we have achieved. Starting with the winning team, which is the constant effort obviously on talent management, but also on remuneration.
It was a big milestone for us when we revised and did a new remuneration scheme for all of our employees in December 2020 with the title One Goal, One Team. Meaning that the system was designed for all our employees with one overarching target, which was to win or have a higher return on equity, t han the weighted average of our peers or competitors in Iceland. The system was partially share based.
We also rolled out the share option plan according to the tax code in Iceland in February 2020, and those two efforts combined with market exercises has increased the employee ownership, direct and indirect. From 0.6%- 2% of our outstanding shares, further aligning the interests of shareholders and employees. Secondly, on improved earnings profile. I think it's fair to say that despite the setback from the COVID pandemic, we already saw the earnings profile improving in the second quarter of 2020. The momentum has continued into third quarter of this year, where the average EPS growth has actually measured 25%. Over the last four quarters, each quarter, as I will demonstrate later on. The third component was the capital and funding optimization.
We managed to issue an additional Tier One instrument that we had promised just before COVID hit. And the capital, the AT1 capital that we effectively released. Was, however, trapped due to kind of a blanket ban on capital distributions of banks because of the economic uncertainty. We were the first or one of the first banks in Europe to get the permission from the regulator to start releasing capital, little less than a year after having issued this bond. The overall capital distribution for this year looks to become in the vicinity of ISK 36 billion or 4.6% of the risk exposure amount.
If I summarize this slide, I think it's fair to state that the successful delivery of the equity story. Which was presented two years ago, has resonated well with investors. With strong share price performance and strong trading volumes in our shares. Despite considerable ownership changes during the period, we also presented a ROE bridge. We were operating at a very low return on equity, unacceptable returns for the bank, for the financial stability of this country, obviously as well.
As you can see from this slide, we have met or exceeded all our targets here. Within the two-year period, except one, which is the normalization of our capital structure down to 17%. Which we told investors two years ago that we were aiming for, and which currently stands at 20.9%, and our target is 17%. I think, you know, this is a positive problem. The strong earnings momentum over the last few quarters, and the temporary ban on distributions to shareholders. Meant that our CET 1 ratio went as high as 22.3% at the end of last year, and we are finally getting it down. We'll be telling you today that the key focus for next year is to get this level down to 17%.
Now, we talked about a smaller but more efficient bank, and as you can see from these three graphs, we have definitely managed to do that. I think the best measurement on this slide is the Risk Exposure Amount that effectively measures our balance sheet from a risk weight perspective. We are, out of the comparing banks here, the only bank who effectively shrunk our balance sheet during the period. And it's only recently that we've seen growth coming back, and we are at similar levels. Effectively, no growth over the last two years for Risk Exposure Amount. We've been very focused on Net Interest Income as opposed to credit risk, which ranks one of the highest in the comparing group.
We've seen our cost-to-income ratio kind of normalize around best in class in the Nordics. When we say that the higher profitability we have achieved by the better risk-managed originate-and-distribute model. We mean that we did it by discipline in our capital allocation and not by trying to grow into profitability as the Risk Exposure Amount development illustrated. We are now enjoying one of the highest returns on equity even on a higher capital than we intend to use in the Nordic region. Here you can see the earnings per share development. As I said earlier, you've seen 25% growth on average for the last four quarters here. Where do we go from here?
Where does growth come from in the next two years? As you will hear from our Chief Economist today, the economic outlook for Iceland is favorable with considerable growth ahead for our main export industries. Especially the knowledge-based IT industry, which is the fourth pillar of our export revenues. For banks, that means increased business investments, and if you combine it with the favorable demographics in Iceland. We are looking at a robust operating environment for financial institutions. Based on our own economic projections, the nominal GDP growth in the next few years will be high single digit numbers, and actually next year could easily come at a number that exceeds 10%.
With that in mind, and weighing in our current market position, we have chosen our focus areas for the next few years very carefully. We talk about financial aggregation, bancassurance, and customer journey being key themes for growth, for the group. We say that we aim to increase our market share in targeted client segments on the back of this. I'll explain this a little bit better, in the next slide. Operational efficiency is still very much a focus, of our group. We are the smallest out of the three systematically important banks in Iceland and do not enjoy the same scale in our banking operations. And the focus will be on further diversifying our income streams and operating shared offices and services for the group.
Sustainability, which is an important part of our journey as we intend to act as a role model. By promoting responsible and profitable business practices which take into account the environment, the economy, and the society in which we live and work. Then finally, the Arctic region, which we say is an area of growth for us. Iceland is very well positioned to become the Financial Hub in the Arctic, as I will explain later on. Now, when put into the context of the first focus area, financial aggregation, bancassurance, and customer journey. The recent organizational changes hopefully become more understandable to you. The integration of further insurance into our business, which is effectively the full bancassurance approach, and the emphasis on Customer Experience in all areas of the bank by formation of a special CX function.
You will hear more about this and our customer-centric focus from the Head of Retail Banking, Ida Brá Benediktsdóttir, and Head of the newly formed unit, Customer Experience, Steinunn Hlíf Sigurdardóttir. On operational efficiency, I mentioned that we are the smallest of the systemically important banks in Iceland, and do not enjoy the same scale in our banking operations. It is therefore ever more important that we continue to focus on the operational efficiency and leverage on our key strength, which is the diversification of our income streams. As you can see from this slide, we enjoy considerably more diversification in the income stream.
We see from this slide that the Fee and Commission Income and the Insurance Income is now considerably larger part of our overall operating income. As our CFO, Ólafur Hrafn Höskuldsson will explain, those two items, Fee Income and Insurance Income, are moving closer to covering most of our operating costs as opposed to only covering half of the cost two years ago. Now, to operate in a responsible and sustainable manner is a heart of what we do, and in recent years there have been many important milestones in our sustainability journey, as you can see from this slide.
For example, on equal salaries, latest measurements shows that the bank pays equal pay for equal valuable jobs within the margin of only 0.1%. We're of course extremely proud of our recent initiative when it comes to maternity and paternity leave. Which we think will balance the equality between women and men within our firm. This year, we published our first Green Financing Framework and issued our inaugural Green Bond. Among our next steps is to measure the greenhouse gas emission from our balance sheet and set targets for reduction in alignment with the Paris Agreement. Now on to the Arctic region, t he countries around the Arctic Circle share similar characteristics, both economically and socially. These are mainly rural areas.
They share the same climate, culture, and enjoy plentiful resources, as you can see from this slide. The emergence of the Arctic region as an economic zone is a recent but natural development. We believe that Arion has a lot to offer when it comes to financial services in the Arctic region as our Deputy CEO and Head of CIB, Ásgeir H. Reykfjörð, will explain in his presentation. The population of the region is around 10 million, or 0.1% of the world's population, but still with significant impact globally in certain areas. And that means that this area is in demand for advanced international banking services.
Talking about that and looking at the areas of competitiveness for financial services. Iceland is uniquely positioned to become the Financial Hub in the Arctic, whether it's the business environment. Being a member of EEA since 1994, and favorable tax environment, the infrastructure, where obviously renewable energy plays a vital role, and our location. Human capital with high educational levels, the financial sector being strongly capitalized but also with well-established access to international capital markets, or the strong reputation of this country. I would say that the same arguments make for a good investment case in a financial institution in Iceland. Sophisticated financial operations relative to the size of the population.
Now, before I hand over to our Chief Economist, Erna Björg Sverrisdóttir. I want to summarize my presentation by saying that Arion has made good progress in turning its business around. From worst in class, effectively, to best in class when it comes to profitability. The improvement was achieved without growing the Risk Exposure Amount, with a disciplined approach to costs, use of capital, and the right business strategy. Our business model and Capital Generation capabilities then went through a live stress test last year. When we probably underestimated the greater strength of the bank and the countercyclical gains from market activity in times of turmoil, as our Head of Markets, Margrét Sveinsdóttir, and Ásgeir H. Reykfjörð will go in more detail into.
As the Arion team went after a good business strategy two years ago and had the discipline and endurance to execute on it. We believe that our current focus as the largest Fintech provider on the island, is a highly effective strategic approach. To offering financial services in a rapidly changing environment. Before you hear more details about our strategy from our management team. I now hand over to our Chief Economist, Erna Björg Sverrisdóttir. She will discuss the operating outlook from an economic standpoint. Erna, please join.
Thank you, Benedikt, g ood morning, everybody. My name is Erna Björg Sverrisdóttir, and I'm the Chief Economist of Arion Banki. Essentially, it means that I'm responsible for the bank's official economic forecast, a task I've found quite challenging in the current environment, to say the least. Not only are you trying to answer questions that are better suited for an epidemiologist, pharmacologist, or a politician, you're also dealing with the fact that some of the Icelandic economic relationships have been turned on their head. Which means that the economic forecasts have had varying degrees of success and leading. At least in my case, to the ever-classic joke of why did God invent economists being told at many family gatherings. The answer, by the way, is to make weathermen feel good about themselves, and when you're living in Iceland, that's a bit harsh.
Anyway, there are two things that I want to draw your attention to on this graph. First, the drop in GDP was smaller than anticipated. The economy shrank by 6.5% in 2020, while most analysts had expected around 8% contraction. Second, the economy is recovering faster in 2021 than previously forecast. Why did analysts underestimate the economy? To answer that question, we must start at the beginning, in this case, the year 2019. Tourism had just suffered a blow in the form of WOW air's bankruptcy. The second-largest Icelandic airline at that time, leading to a 14% drop in tourist arrivals. Still, the tourism industry remained the largest export sector by far, generating 35% of the economy's total export revenues.
Its direct contribution to GDP was 8%, and 14% of the labor force was directly employed in the industry. Due to this dependency on tourism, you can understand why analysts were so pessimistic at the beginning of the pandemic. The economic shock of going from these 2 million tourists to this, it is massive. Basically, the pandemic set the industry back by over 10 years, wiping out 13,000 jobs in the process. The result was historically high unemployment rate. It peaked in January this year, then close to 12%, the highest rate ever recorded in Iceland. Faced with this situation, both the government and the Central Bank took on a range of actions in order to soften the economic blow.
Here, those of you who know our economic story might stop and stare and wonder, "Wait a minute, rate cuts in Iceland? What about inflation? What about the Króna? What about the classic Icelandic way to reset the economy by devaluing the currency?" Well, in short, we didn't. Of course, this is a very special economic shock. It is very different from the financial crisis and other recessions stemming from overheating of the economy. I would also like to believe that we have at least somewhat matured. Of course, there are fluctuations. We will always have fluctuations, but there are signs that indicate that we are not the same boom and bust economy as of the past.
This time around, the Central Bank had ample FX reserves at its disposal, which it used to stop spirals from forming on the FX market. Thus, stabilizing the exchange rate and, to some extent, inflation. This created an unusual situation on the labor market, at least in the Icelandic context, because the labor market became very divided. In the past, efforts were made to maintain high employment level at the expense of price and exchange rate stability, meaning that most households, they suffered a loss of purchasing power. This time, however, those who didn't lose their jobs, they experienced rise in real wages, housing price increases, and lower interest rates, leading to a relatively small drop in consumption, considering that unemployment had reached unprecedented heights.
This development, more than anything, surprised analysts and is one of the main reasons why the economy proved so resilient last year. Even though the drop in exports was massive and much larger than any other advanced economies experienced. The economic downturn is not that much deeper than in other high-income countries. Therefore, it is safe to say that Iceland was successful in minimizing the negative economic impact of the pandemic. Which brings us to this year. The year kind of began on a dark note, and the economy continued to shrink. I left for maternity leave at the end of March, and just before that, we had published a new economic outlook called The Darkest Hour Is Always Before Dawn or something similar like that.
At that time, we had expected the majority of 2021 to be, well, kind of the Darkest Hour, at least for the labor market. When I returned seven months later, it was almost like stepping into another economy. Unemployment has fallen much faster than any dared to hope for, reaching 5% in September or pre-pandemic levels. Payment card turnover and private consumption have grown rapidly over the past months. According to the latest turnover figures, total turnover in the economy, excluding the pharmaceutical industry, has increased by 7% compared to the same period in 2019. Finally, due to domestic inflationary pressures, among other things, the Central Bank has raised its interest rates, with the latest rate hikes just announced today, so they're not here on this graph. As you can see, there's never a dull moment.
This trend that you see here, it is set to continue. That is, there are certain factors at play that are likely to lay the foundation for a strong domestic demand going forward. First, unemployment has more than halved since the beginning of the year, and it is expected to continue to decline and be on average 4% over the next three years. Second, wages are on the rise. In the first nine months of the year, the wage index rose by 9% between years, both due to wage increases and shorter working hours. We expect the labor market to remain relatively tight with 5% wage increases on average over the next three years. Finally, it's not only household consumption that is driving the domestic demand because the corporate business is overall doing well.
The corporate bond market is perking up, issuance has increased, and regular business investment has increased by 16% in the first half of this year, and that is for the first time since 2017. This is very important because these are the corporates who employ a large part of the population. These are the corporates who create the foundation for future growth. If we take all of this together, it means that domestic demand will continue to increase throughout the forecast period, and the growth is expected to remain slightly above its long-term average. Now, the housing market has definitely not been immune to this development here, and of course, to this new interest rate environment that we've been living in for the past year and a half. Housing prices have increased sharply since March, pushing inflation well above the Central Bank of Iceland's inflation target.
Price increases are expected to continue, but at a slower pace as of the second half of next year. The same goes for inflation. It is expected to peak in the first half of next year before subsiding and hopefully reaching the inflation target in early 2023. Now, due to this higher inflation, more persistent inflation than previously forecasted, the Central Bank has raised its interest rates. Now, with the latest hike, we're up to 1.25 percentage points since May, and they have also, at the same time, tightened mortgage regulations. Because inflation is expected to remain high for quite some time and the slack in the economy is narrowing at a quicker rate than the Central Bank anticipated, further rate hikes are to be expected.
However, yet again, we find ourselves in an uncharted territory here in Iceland because the share of indexed household debt has been falling rapidly, coming down to 50%. As more and more households choose non-indexed mortgages, often bearing variable rates, the monetary policy is becoming more effective. Meaning that fewer rate hikes should be needed in order to achieve the same success as before. Well, now you'll see that I've spent quite a lot of time talking about domestic demand, falling unemployment. It goes without saying that this all depends on a very important assumption, and that is strong recovery in the tourism industry. We are on the right path, as you can see, but still, the outlook remains highly uncertain as it depends on the path that the pandemic takes and the political responses. Things are quick to change.
We should know that here in Iceland, as just last week, COVID measures were tightened two times. This uncertainty is reflected in the forecasts, as you can see. Just for next year, they range from 1 million- 2 million tourists visiting the country. Our forecast lies somewhere in the upper range because it is our opinion that Iceland, as a tourist destination, has the means to grow at a relatively quicker rate than many comparable countries. Due to its vast land area, pristine nature, and reliable data in the battle against COVID. However, even though tourism is and will remain highly important for the Icelandic economy, I want to talk about our other export sectors because I genuinely believe that in 10 or 20 years, we will have a very different economy. This is a development that has already started.
Just to give you a very quick example, this has been one of the biggest news in Iceland this fall, the huge increase in capelin quotas. It's shaping up to be the biggest season since 2003. Don't get me wrong, this is great news for the Icelandic economy, and the export revenues alone could amount to ISK 70 billion. With all due respect to the capelin, you almost don't even see it in the grand scheme of things. What you do see, however, and I really want to draw your attention to, is this. It's other exports, because the fact is, and this is often forgotten, that 1/3 of Iceland's other exports is something else, something other than tourism, marine products, and aluminum.
The plans, let me tell you, they are very ambitious, for example, in fish farming, pharmaceutical, intellectual property sector, just to name a few. If anything, I would say that the official forecasts are rather moderate. This is so important, this development, for a small open economy like Iceland to nurture exports. To create a more diverse means of generating foreign currency and thus creating a more stable environment for the Króna. Last year, despite the export shock, the current account surplus prevailed, largely thanks to other exports and as well as drop in imports. This year, imports have increased more than exports, again, the strong domestic demand, leading to what we believe to be a temporary current account deficit. Of other things that are currently supporting the Króna, the most important ones are the positive Net International Investment Position.
We are actually net lenders to the world, not net borrowers like we've almost always been, and the Central Bank's large FX reserves. Which are still ample even though they have been used during the pandemic to stabilize the exchange rate. This, if you remember earlier when I was talking about there are signs that we are not the same boom and bust economy, here we have one of those signs. Finally, just to sum it up, the economy is on the right track, and we are hopeful for a continued strong recovery. However, you probably all heard the saying, "When the facts change, I change my mind." Well, in the current environment, the facts change very often, sometimes weekly, sometimes even daily, leading to very different economic forecasts. However, as you can see on this graph, they all tell the same story.
The big picture remains the same, that when life gets closer to normal, Iceland has the infrastructure, it has the labor force, it has the natural resources to recover quickly. It's all there, and I really hope that my presentation has been able to do the story of the Icelandic economy justice because it is a very good story to tell. If not, let me remind you by showing you four of my favorite graphs. The falling unemployment, the emerging of the fourth pillar of exports, the positive Net International Investment Position, and the Central Bank's FX reserves. We are starting a new chapter, and we have a lot of good things going for us. Relatively favorable debt position in the private sector.
We are a young nation, and we have one of the best funded pension systems in the world. A system that is fully funded rather than pay-as-you-go. At the same time, aging populations and pension commitments are some of the major challenges faced by other economies. Talk about challenges, of course, the biggest one, climate change. Here Iceland can and actually should be at the forefront with its natural resources and renewable energies. I think this is the perfect place for me to stop. Thank you all for listening. I would like to welcome Ásgeir H. Reykfjörð Gylfason, Deputy CEO and MD of Corporate & Investment Banking to the stage, t hank you.
Thank you, g ood morning, all and thank you for joining our Capital Markets Day. Our presentation today is twofold. In the first half, we would like to refresh on the goals and targets we introduced in our Capital Markets Day in 2019. In the second half, we'd like to share how we are looking at the future and the tasks at hand. Our external message in 2019 was quite simple. The bank needed to address mispricing in its corporate loan book. Further, the bank needed to implement a new way of thinking about corporate assets on its balance sheet. The bank needed to act more as an intermediary or facilitator when it came to corporate assets.
While doing so, the bank needed to forge stronger relationships with its core clients and depart from those relationships, who did not or who were not beneficial for both parties. This way of thinking has resulted in a step change in the bank's earning power, relationship building, and capacity to generate results for our clients. In an environment that was deeply impacted by the pandemic, resulting in the lowest interest rates levels we have seen in Iceland. Our bank has been on a clear positive trajectory, both in terms of our net interest margin and in return on equity allocated towards our corporate business. Throughout this period, we have managed to raise our Net Interest Margin from 2.8%-3.6%. Beating our long-term target of 3.3% measured on a 12-month rolling basis towards our corporate business.
This fact, as well as increased activity in our overall business, has resulted in the ROE of our corporate business rising from 6.9% in Q3 2019 to just north of 25% in the last quarter. This remarkable performance has been during a very challenging environment that provided much less visibility for us and our clients. In 2019, we were losing clients, and we were being outperformed by our peers. Since the implementation of our strategy, the bank has gained momentum, and we are experiencing a record demand for our services from new and established clients. While our peers have held their strong operational performance, we have significantly improved our profitability and are now outperforming the competition in terms of returns. Two years ago, we showed you a picture on where we stood in terms of ROE on our corporate loan portfolio.
It showed the picture that our portfolio was returning 3% ROE. At the same time, we had a target of 10% ROE. On the left here, you can see the ROE of our 100 largest exposures at year-end 2019. On the right side, you can see our 100 largest exposures by the end of this quarter. In more simple terms, two years ago, 80% of Arion's 100 largest clients returned ROE below 10% or below target. Two years later, our 100 largest clients returned ROE above our 10% target. It should be noted that this picture shows the ROE from our business with the impairments that the pandemic brought about. I could spend more time refreshing up on what we put forward two years ago.
In short, the corporate business has either exceeded those targets, met them, or improved significantly since then. Better financing and an improved run rate of the bank have also contributed significantly to this fact. This was difficult work, and I want to thank the bank's exceptional employees and dedicated employees on the project, on the progress. Sorry, I want to finish one more thing. We believe that our loan portfolio is overall well-positioned for future cycles, including the likely scenario of continuing rising interest rates, both in terms of ISK and in FX. The vast majority of the corporate portfolio, or more than 95% in fact, are in floating rate debt that should benefit from this scenario.
During the progress that we, when we amended the bank's overall strategy, we wanted the bank to reflect a strong financial partner for any financial service need by our clients. During the change of our CIB Business, we have created a culture that is built on accountability, transparency, efficiency, teamwork, and the highest standard of market conduct. This culture has become what the market expects of us and is the force that will drive us going forward. To work at this part of the bank, one must celebrate this culture, and the people do. Our employee net promoter score has risen from negative territory when we had our last Capital Markets Day to the best in class in the past two years. The number of well-suited applicants for open positions has multiplied.
With a clear focus, strategy, and path, we have created the foundation for a much more profitable bank. In the next 24 months, we will be even more focused on improving our service level to leverage on the digital solutions the bank has already created. We want to double our SME book in the Capital Region, and we want to grow our bancassurance ratio among corporates significantly. With that said, I want to switch our focus to the present and the future. I've copied a quote from the S&P's report, which was released about a month ago, where it stated that one of the bank's deficiencies was its lack of geographical diversification. This is true, and we will increase our foreign exposure when the time is right and on our terms.
Our improved FX financing that Ólafur will discuss has made available for us growth opportunities in this area. For Arion to operate abroad, it needs to meet our strategic view and have the right risk and return profile. We mainly operate outside of Iceland in sectors where we can add value based on our expertise, where we are continuing to support our clients wherever they operate. Or where we believe that the local market is underbanked and shares the same economic characteristics as our local market. We believe that to be the Arctic region and the Arctic Circle, which is very well shown by the fact that 75% of our foreign exposure is within what we call the Arctic region. I referred to Benedikt's discussions earlier about the Arctic region and why it is attractive to us.
We foresee that we will grow in the Arctic in the medium term, and we have already identified opportunities there. An important part of the economic history of the Arctic region is the fact that many of these nations were in fact Green long before that term was even introduced in world finance, and Iceland is the prime example of that. As discussed in Benedikt's presentation, the bank issued its first Green Bond this year, and ESG has been at the heart of what Arion does for a very long time. Our Green Financing Framework is robust, and we see growth opportunities in this space. A recent transaction done on the back of this Green Financing was with one of Iceland's leading exporters, Norðurál.
We are happy to add Norðurál to our client base with a $120 million financing assisting the company in value enhancing their product. Which has one of the lowest carbon footprints among such producers worldwide. Now turning our focus back to Iceland and what's happening in the Icelandic economy in terms of corporate activity. I can say that Iceland is developing quite fast in terms of foreign direct investments. To put it short, there are very exciting times ahead for Icelandic corporates. To look back on the timeline on this slide, it's interesting to see how fast these things have been developing in recent past. Iceland's history past its independence can be described by decades of public concessions. It was basically up until 2005 that foreigners did not show up with their capital and know-how unless receiving some support from the government.
Following the global financial crisis, we saw alternative investment funds investing in the aftermath of the collapse of the banking system. During that time, these funds built up extensive knowledge of the local economy, built relationships, and some have continued to operate in the country. After having successfully lifted capital controls, there was a breakthrough, mainly through the listed capital markets. We started to see foreign investment vehicles in treasuries as well as the equity market. Now interestingly, during a global pandemic, we've had a breakthrough year for foreign direct investment without any public concessions. These are investments in infrastructure, tourism, fish farming, data centers, and healthcare related businesses mostly. The deals differ, but they all share the same characteristics. The foreign investors bring expertise and capital, and they need to partner up with local capital and local human capital.
Now, what does this mean for us? The bottom line here is that these foreign investors will always need a local banking partner, and Arion has in the past years on multiple occasions shown its capabilities to be that local partner. We see opportunities to expand further on this front, and we aim to continue to be the investors' first choice when it comes to their Icelandic ventures. Now, as Erna discussed earlier, we've seen the emergence of the economy's third pillar, what we have termed the IP industry. Since 2013, the foreign currency income of the IP-based industry has more than doubled. In 2020, a total of 16% of our foreign currency income was from this industry and 7% of our GDP.
When we set out the bank's new credit strategy, we decided to emphasize on business with growth companies and exporters. The local companies that operate in this emerging sector of our economy export around 100% of their products and services, and they meet our criteria for multi-product clients. A significant portion of these companies that make up the IP industry in Iceland already bank with Arion, including Controlant. A company that we at Arion are very proud to have worked with since its early days, and is now paving the way for a successful distribution of the COVID-19 vaccine around the world. This is one of the areas where we will keep our focus on because we believe that this will be the area that will be the fastest growing for at least a decade.
Now, we've seen the Icelandic equity market maturing this year. In the middle, you can see the accumulated turnover of the equity market, which to date is around 90% higher than in the previous two years. My colleague, Margrét Sveinsdóttir, MD of Markets, will discuss this in much more detail. I want to point out the fact that Arion Corporate Finance has been at the forefront of this development since 2008, and Arion Corporate Finance is the best-in-class Iceland has to offer. The numbers speak for themselves. If you only look at the equity market, Arion Bank's Corporate Finance has advised on more than half of the IPOs of domestic companies since 2011, and on all of the international listings since 2018.
This is a big and important part of our franchise value, and demand for the bank services have also risen significantly. Fees have grown by more than 100% since 2019. If you look at the third-party work on a standalone basis, growth is more than 400% for the first nine months of 2021 as compared to the whole year of 2019. The corporate finance team also supports significant other business for the bank by creating new clients through M&A and assisting our clients to grow. Now I want to draw your attention to where we are in terms of the Icelandic credit cycle. We have targeted our corporate loan book in the past to be in line with economic growth over the longer term.
We do not use this benchmark as neither carrot or stick when it comes to adding on exposures. Our main task is to choose our sectors and partners carefully. Next year, we are likely to see nominal GDP growth around 10% or north of that. We're starting to see pickup in the banking system when it comes to corporate loan growth. If we would not have followed our strategy of distributions and syndications, our loan book would now be approximately ISK 50 billion bigger than it is today. This for syndications and sales with over eight gives us ample opportunity to participate, be it by direct lending, syndications, bond issuance, or by direct sale of exposures. Our clients should benefit from banking with Arion.
We stay committed to use all of our resources and processes we have set up in the recent years to choose our projects wisely during this growth without compromising the profitability we have achieved. The key takeaway from all of this is that the plan that we set out in 2019 has been a success. Our focus in the beginning was inward. We've been adding on new clients, growing in profitability. We're in a great position to push forward, and we see ample opportunities in the environment that we work in. Thank you for your attention.
My name is Margrét Sveinsdóttir. I arrived at Arion Bank in 2009 as managing director of the asset management, and since the organizational changes in 2019, I've been the MD of markets. I've been working in 30+ years in the industry and still excited about the business. I think it's taking part of the evolution of an industry and now with the ever-changing technical solutions that is still exciting. I remember when I started my career, the share prices, they were advertised weekly in the Icelandic newspapers. Now, of course, you have the ever-changing share prices at your fingertips and can trade on the go. A lot of changes, and a lot of opportunities as well. I am very proud to represent the markets division and the dedicated and highly experienced employees of the division.
We have a strong position in every business area and multiple sources of revenue in the business. As you know, Stefnir, the fund management company of the bank, is included in the financials of markets in the financial accounts. I will also be talking about Stefnir and including in my presentation. Arion Banki is the biggest or the Arion Group is the biggest asset management house in Iceland. There's just under ISK 1,300 billion in assets under management. That represents roughly 40% of GDP. Asset management is a very scalable business. As you can see on the picture, we have increased the economies of scale around 40% over the last couple of years.
As Benedikt mentioned this morning, sustainability is one of the focus areas of the bank. Both Stefnir and Arion Banki are members of PRI, the Principles for Responsible Investment. We have incorporated the ESG factors into our investment processes. Stefnir offers both Green Funds and ESG-related funds. Through our very strong international partners, we also offer ESG solutions to investors. The focus now on the asset management side is more towards the product development, alternative strategies because in the low-interest rate environment that Erna showed you this morning, even though it's still picking up, investors are looking for return. They're willing to take on more risk and look into other asset classes.
You probably saw in our Q3 reports that alternatives can generate very favorable performance-based revenue and a very important revenue stream in the business. We are committed to and I believe the success of the asset management is the partnership approach to our clients and the long-term relationship that we have with them. I will talk about that a little bit more later on. The capital markets business is also very strong. With the highly experienced team, the equity focus of the bank, the strong balance sheet, this is the top brokerage, especially on the equity side in Iceland. You can see there on the bar chart that we have over, I think it's 23% market share in the equity trading on Nasdaq Iceland over the past years.
Usually, we enjoy number one in market share, although this year, as you can see, we're number two currently. That is because we were not able to take part in the huge transactions that took place in the Arion stock earlier this year. Just to look a little bit more into the asset management side, we have a broad diversified asset base or asset allocation into diverse asset classes, which is very important, since we manage in our wealth management side portfolios for High Net Worth clients, for institutional, for professional investors, Stefnir Funds. Stefnir has a broad selection of funds, catering both to retail clients as well as institutions. They enjoy a very strong position, especially on the equity side and the balanced funds, on the Icelandic market.
Overall, we have over 80% of our investors they are institutional. Both where we manage their assets and as well as into buying into our products. Even though the retail clients only represent about 20% of investments, we have a strong and robust private banking side. As you can see, it has enjoyed a healthy growth over the last couple of years. I think that's mainly twofold. Ásgeir mentioned this morning the strong corporate finance division in the bank. With the change in strategy in 2019, the focus now much more on cooperation within the bank, cooperation for the benefit of our clients to generate new, different investment opportunities. This is really important, and that's how we have been able to broaden our client base and offer them solutions.
We take sort of a holistic approach to the especially High Net Worth clients that need multiple financial solutions. We are very well positioned to continue on that journey. Let's look a little bit more on the institutional side and why we think that we can grow there even though it still represents a majority of our client base. For a number of years, we have projected the size of the pension system. As Erna mentioned this morning, it is a very strong pension system, fully funded, and we do expect it to grow over the next decades, a healthy growth. We have favorable demographics, and as Erna, as you saw this morning, she projected a fairly positive outlook for Iceland.
As you can see on the picture on the right, our institutional asset management has been growing parallel to the pension system, and we don't anticipate that to change, so that we will be able to take part in the growth. Both Stefnir with these fund selections and the product development, and the bank with the products that we have and our partnerships with very strong international fund management companies, we are very well positioned to take part in this growth. It's also the unique, I say, partnership with pension funds. We do have a full-service operation for Five pension funds where we operate both the asset and the liability side.
Of course, these are separate legal entities with their boards, but one is the largest pension scheme, and that's a pension scheme that Arion Banki has. It's the largest in the market for supplementary pension, for third pillar pension, and which is only increasing with increased contributions into the pension system. Then we have a year-long relationship with Frjálsi Pension Fund, which is the fifth largest pension fund in Iceland and the largest fund that offers membership to those that can actually choose their pension. Many or most of the employees in Iceland are bound by union contracts to pay into certain Pension Funds, but still a lot of self-employed people, managers can actually choose.
This partnership is not only good for Arion Banki with the growing assets under management, fees for our services, but it's also very positive for the Pension Fund members and their pensions because the relative fees that the fund pays has been going dramatically down over the past years so that this is sort of a win-win situation. It's a growing business for Arion Banki. It's very good for the Pension members that pay less and get then a higher return for their pension. It also, I believe, why Pension Fund members choose to come to the funds that are operated within Arion Banki is our service, our convenient service. We introduced pensions to the Arion app.
I think it's almost exactly a year ago that we did so, and it actually has transformed the Customer Experience in pensions. I don't think it's. Well, Pensions have really not been something that you have been thinking of as your assets because it's sort of hidden, and you're basically annoyed to have to pay the premium every month. Now this has transformed the way that people think about their pensions because they can see it just on the go and say, "Whoa, my pensions have increased," or sometimes decreased if the markets are down. I know that Benedikt has gotten phone calls and said, "Well, why is my pension going down?
You're supposed to take care of it." That's exactly what we want, for people to actually pay attention, know what they have, and know how their pensions are managed. You can actually new membership have increased. People are transferring pensions to the Pension Funds run by Arion Banki. You can do transactions, and you can even change portfolio strategies within in the app. I think this is a big part of why I think that this is really a backbone of our business going forward. This is also true for the security side, trading side. I'm really pleased, and I've been waiting a long time for this to come into the Arion app, is the trading of Icelandic equity on the Nasdaq and the funds of Stefnir.
This again has transformed the experience and the activity that investors do with us. In the middle here, you have a few of the Stefnir Funds, and you see the Arion Star there, where we actually launched the app. You notice there had already been an interest in the market because of the successful IPOs, the low interest environment, and people looking for more returns. When we launched the app, it really took a turn upwards and has been so since. It's evident that people only want to sort of interact with their devices now because in the middle there, you see the Stefnir International Funds, and they had not been on our online platform until last year, and it was almost a flat line until it came onto the digital platforms.
It sort of took off, and people could see the return of the fund. They could decide even paying monthly, and a lot of people are paying and generating wealth by monthly investments. This has really been sort of transforming the way people trade with us. On the equity side, this has really been an exciting journey. On the graph here at the bottom, you can see where the app features came in, even though it had already increased and people were more excited about the equity market. It was not until maybe a couple of years ago that people actually started sort of the retail investor to invest in the markets.
They were still sort of held back by the financial crisis, but fortunately, this has now gotten their attention. Our online features, the online bank and the app, this year represent 15% of all equity trades on Nasdaq Iceland, which is quite considerable. This is something that we are excited to take further to add features and service retail clients. I've got to mention that the Pension side of the app was nominated or got an award as the best technical solution last year from the Icelandic Web Awards, so we are keen on going forward with this. With the strong foundations that we have both in the asset management side and capital markets, we look forward to the road ahead.
We are committed to our leadership in the industry, in asset management, in capital markets. We are well-positioned to take part in the growth of the ever-growing pension industry in Iceland. We will continue our partnership approach with our core clients. We will continue on the ESG journey. We definitely will leverage the group. Ásgeir mentioned bancassurance. That is something that we are keen on taking forward to our clients, the insurance products. We definitely will leverage on the successful digital platforms that we introduced this year and last. More importantly, this is also very beneficial and has increased our operational efficiency.
With both the digital solutions and other technical solutions, we have the digital end-to-end processes for our operations and that's where our focus will also be in the coming years. That's it from me. I will now hand over to my colleague, Ida Brá Benediktsdóttir. Thank you.
Thank you Margrét, g ood to see you all here today. Yeah, my name is Ida, and I have been in this role for now since 2017, so maybe that's the reason I always have that number or that year as a reference. Last time we met on this occasion, I went through our digital journey and how it has already started to impact our operations in a big way. Shortly afterwards, the pandemic arrived, and it's safe to say it has had a considerable impact on our business, like everyone else's, and accelerated the journey that we were already on.
Today, I want to tell you how we will continue to build on our successful digital journey, among other things, to change our operations and streamline our business even further. Also, how our key themes, as Benedikt mentioned earlier, bancassurance, operational excellence, Customer Experience, and financial aggregation will support results and the growth of the retail bank going forward. Just a snapshot of the retail bank, our active customer base is 120,000. That is around 30% market share with individuals in Iceland. We are focusing on customers in the Capital Areas and those in the larger municipalities in the countryside. Our loan book is ISK 550 billion, 91% towards individuals and 9% to SMEs, mainly in the countryside. We have 44 million interactions with our clients yearly, of which 99% are digital.
73% of our core products are sold through digital channels. We are a customer-centric company, and we look and listen to the voices of our customers every day. So, we can do better today than yesterday, continuously improving our bottom line and Customer Experience. The bank's most important product are residential mortgages, for they account for almost half of the loan book of the bank and 80% of the retail bank loan book portfolio. Our aim is to offer competitive prices that our customers can rely on always. The residential mortgages, they have 35% risk weight, and they are delivering the bank's ROE target. Arion Banki has always been at the forefront when it comes to residential mortgages since we transformed the market in 2017.
Our loan portfolio has increased by 62% in the past five years, although we have sold a part of the portfolio. Through digitalization, you can see here that the throughput has tripled during the time since 2016, though with less overhead and less FTEs, leading to a massive increase in productivity. We have continued to lead the innovation in the mortgage market, both in terms of new product and flexibility tailored to our target client segments. You can see examples here on the slide. We offer summer holidays for your mortgage. We have G reen mortgages, and then we have loans for individuals with foreign income, and this has been very popular among Icelanders that live or work abroad.
We are seeing a huge shift in the type of mortgages. Demand for non-indexed mortgage has risen mainly due to lower interest rates. This has strengthened the position of the banks at the cost of the Pension Funds, and we believe that this is going to remain this way. Arion Banki completed its first international covered bond issue by an Icelandic bank now this September solely backed up by our residential mortgages and at very favorable rates. However, continued development of the Icelandic FX Króna swap market is very important for the bank being able to pass this funding benefits onto the mortgage borrowers. I know that my colleague, the CFO, Ólafur, will talk about that more later. Are there still opportunities for further streamlining this product?
We believe it is possible. The credit decision on mortgages today is manual, although everything facing the customer is digital. I foresee that mortgages with low LTVs or just a simple refinancing could be processed automatically. This is not a particularly complicated credit decision. In addition, there are great opportunities in the digitalization of the government part of the lending process, and that is already underway, and it would be even more beneficial if the market itself could be issued digitally. We would need to see a change in the legislation for that to happen.
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Here is another example how we have completely changed the setup of a product to become the most efficient. I believe, in the market, and also offering the best Customer Experience. The car solution that we are offering is completely straight-through process. Although car loans are not a proportionally large part of our loan book, this is a success story worth telling. Arion Banki has increased its market share in car lending in recent years, and you can see there on the slide that this has doubled since 2016. These are only loans to individuals, helping us to reach out to new customers by attractive rates due to this low-cost base.
We have also introduced car loans, green car loans that now contribute to 25% of all new car lending, and these loans are financed with deposits. Another story is our consumer finance, where we use automatic credit algorithm to process our decisions, and this algorithm has already processed over 5 million applications. Currently, the proportion of the consumer loans that are automatically approved are 80%, but our goal is to be 90%. The same here, although this loan portfolio is not a significant part of the bank's total loan portfolio, it gives a very good returns, and we would like to see this portfolio grow. Now over to the funding side.
The bank's deposit base has strengthened in recent years, and the newly introduced Green Deposits were a very well-received change in the market with growth beyond our expectation. We are seeing steady increase in deposits, but the pandemic had a great impact. While customers remained at home, their savings and deposits increased despite that they were increasing in their savings like in the securities, real estate, and cars. We started with a Green Deposits account in June last year, the first one in Iceland, and I believe among the first one in the world to do so. Green Accounts are for people who want to contribute towards a greener future. The account supports the UN Sustainable Development Goals, and you can see which one over there, the five one over there.
Deposits are extremely important in our funding, but since travels and other foreign spending has increased again. We don't foresee the same growth in deposits, but as Erna mentioned, the young demographic and the strong GDP growth will continue to support the deposit growth. Digital services are changing customer behavior. Use of the traditional channels have decreased, and the digital services are taking over. Now more than 99% of all our customer touch points are digital. Visits to the traditional branches continue to drop during the pandemic, and they went down 50%. At the same time, we saw digital use and the use of like the service center and other channels increase, though not as much as the drop in the branches.
We were well-prepared for these situations with our digital solution and our highly capable employees that adapted quickly to these changing circumstances. When our customers are not visiting the branches, we need to offer personalized recommendation using analytics on all touch point, and I believe my colleague Steinunn will go through that in more detail later on. Our app has been voted the best financial app in Iceland for five years now. As we have been adding new convenient solution, as Margrét mentioned, the pension and the securities, we feel and we see that the engagement is increasing, the daily interactions. Visits to the online bank is stagnating while the app is surging and is up 58% since 2017.
What is also important part of our journey is that those who use the app more than 20 times per month, that number is increasing. And that is supporting our vision to become a financial aggregator and preparing us for introduce broader customer journeys into our app. How does this increased efficiency affect the bottom line? As mentioned earlier, digitalization and automation has led to increased sales as well as increased efficiency. In order to capture this increase in efficiency, we had to do some drastic changes to our branch network. The branches have gone from being transactional to service and now sales and advice. The proportion of value-added visits to the branches are increasing every day.
This approach has created opportunities to reduce the number of branches by 38%, the FTEs by 42%, and the square meter by 61%. This is already visible in our operating expenses with more favorable cost-to-income ratio, and the ROE is always well above the bank's target. I have been going through now the recent development on operational excellence, and I would like to turn to the things that we will be focusing on for the next year or so, target client segment and bancassurance. As an example of a targeted client segment is Arion Premía. For a diversified bank like Arion Banki, Net Worth Individuals are the most valuable customers for the bank. With a wider product range in retail, asset management, and investment banking.
These clients often have more complex needs than the regular clients, and sometimes they do not necessarily fit into the boxes that with the automated solution, especially within lending. Therefore, we created Arion Premía. Arion Premía is a digitally driven and assisted service but also guarantees a premium service of experienced staff to those valuable clients. Our new app solution with the equities and the securities and pension therein is supporting this service by great means. Target client segment will become more important for us going forward. Now towards the bancassurance. Our ownership story of Vörður is a success story. We bought the company in 2016 and merged it with Okkar Life Insurance.
The company has, over the past years, demonstrated strong profitability with ROE above 20%, and over the past five years, it has grown and increased their market share from 14%-17%. We have, over the past couple of years, been looking into strategic options for the company. Either to sell it, list it, merge it with other insurer, or further integrate it into our business, and that is what we have decided to do now. This is a high return business with a considerable scope for further growth and synergies for the group. Earlier this year, the capital treatment of Vörður was amended, which resulted in a roughly 1/3 deduction of capital requirement, which further enhanced the profitability of the business in terms of ROAK. In the following slides, I will go through why we believe so much in this bancassurance model.
As mentioned, we have 44 million interactions with our clients through our network, mostly through digital channels. While Vörður has 600,000 interactions with their clients yearly. We both have a larger customer base and more frequent interaction with our customers due to Vörður. And that is just due to the nature of the business, but that is something that we would like to change. The bank has, as I already told you, delivered a strong story in digital sales with more than 73% of our core products sold through those channels . The plan is to build on the bank's success and include Vörður into our online platforms to be able to further cross-sell.
As previously mentioned, our app has continuously been voted as the best app in Iceland, and our digital journey has been seen the most successful out of the Icelandic banks. This experience can be valuable to Vörður. The insurance sector has been lagging the banking sector in terms of digitalization over the past years. There are significant opportunities for insurance company to enhance the use of digital channels and lower customer acquisition and sales costs, as well as enhancing product development and the frequency of customer engagement. Vörður position in this regard is completely different if we look at it as the smallest insurer or whether we integrate it with a large financial group. To utilize the experience of our digital journey to boost competitive advantage in the coming digitalization of the insurance sector.
We have been working together in recent years, but in small steps digitally. And by using the referral system from the branch network to the sales representatives of Vörður. Since this May, now we have Vörður representatives in all our major branches. We see huge opportunities in increased cooperation. Arion has around 30% market share with individuals, while Vörður has around 18%, and the bancassurance ratio is 32%. Meaning that 32% of Arion clients are also clients of Vörður, and this number is 18% for corporates. Vörður has a stronger foothold with individuals rather than business, where they have 10% market share. There we see also a great potential. We are in this journey to gain market share in a profitable way.
This is a goal aimed to enhance the longer-term strength and the profitability of the group. The bancassurance model is one of the fastest-growing segments within insurance. How do we get there? The plan is, in line with our renewed strategy of the group, to be a financial aggregator with a broad range of financial and insurance products under a strong brand. Extending the relationship with our customer, lower customer acquisition cost, and enhance customer loyalty. Although the main objective is to gain market share and increase the bancassurance ratio. We also foresee increased cost efficiency and economies of scale with using Arion infrastructure for Vörður, and that should lead to competitive advantage to drive profitable growth.
We have experience with that, as Margret mentioned earlier, with the set. With the setup, with Stefnir, o ur fund management company, and the pension funds that we are operating. I'm going to the final slide now. Where are we heading? We aim to continue to build on our strength in creating digital journeys. And develop them from product journeys into broader customer journeys, and develop the bancassurance model to maintain our leadership as the best digital bank in Iceland. Although we have shown great results in automation and efficiency in the last few years. There are still opportunities in automation and digitalization of our end-to-end processes.
We are already working with third parties, but by continuing that journey, as well as using third-party software solution. We aim to gradually increase the customer engagement and strengthen our role as becoming a financial aggregator. We want to focus on target client segments and is Premía an example of that. The Premía service is a promising start, and we aim to build on that to grow our market share in our target client segment. Finally, by doing all these things, we will continue to be an important part of our customer financial and daily lives, offering holistic Customer Experience across the group.
increase value both for our customers and shareholders. Thank you.
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Good morning, everyone. It's nice to be with you all today, as this is my first time joining you as a part of the management team of Arion. I and Ida forgot to introduce myself. I feel I should do the introduction formally. My name is Steinunn Hlíf Sigurðardóttir, and I am the Managing Director of a newly formed division here within the bank called Customer Experience. And I am going to tell you about what relevant and convenient Customer Experience means to us here at Arion.
After all the interesting presentations about business developments that we have gone through this morning. Customer Experience can seem like a soft issue, but let me tell you, in a very competitive and disruptive environment that most industries face today, including ours, relevant and convenient Customer Experience can be a competitive advantage, bringing value both to the customer and our business. Customer expectations are changing fast. You don't have to do extensive research to find support of this, but in this digital era that we live in. It is becoming increasingly simple and convenient to access products and services. And we can all probably relate to that when buying something from the comfort of our sofa or watching Netflix without having to think about what to watch. Because they already found most of the stuff that I'm interested in and recommend it to me.
This reality of how easy and simple it has become to have access to things you need when you need them and are relevant to you. Has, in recent years, massively impacted the tolerance for customers to go through hoops when choosing a partner to do business with. Today, customers' expectations are clear. They want value, personalization, simplicity, convenience, and since they are the one who keep us in business, they are in the driver's seat. That does not mean that companies don't benefit from this as well. Simplifying processes drives efficiency and effectiveness, personalization's drive growth and loyalty, and digital access drives convenience. As I said earlier, you don't have to do extensive research on why focusing on Customer Experience is a good business.
If you focus on the banking industry, huge investments have been made in recent year in digital service. As you are all probably aware of, but unfortunately, they are often lacking sufficient focus on the overall needs and customer expectations. The Economist published a Global Banking Survey last July, revealing a dramatic shift in priorities for executives. Today, Customer Experience and digital marketing are top priorities for executives according to the study. Multiple research also have pointed out that the financial institutions that have invested in the Customer Experience in banking. Have higher rate of recommendation, greater share of wallet, and are more likely to upsell and cross-sell products and services to existing customers. Our digital journey began in 2016, but in the last couple of years. Arion has invested heavily in data, analytics, automation, which defines modern-day marketing.
By taking the steps of creating the new division, Customer Experience, we are putting even greater focus on the customer journey and simplifying and automating processes. With the aim to simplify banking and further increase our customer access to related financial products, such as insurance, pensions, and investment by targeted segmentation through data. That is because we believe, in order to remain leaders in digital, we need to continue creating a unique, relevant, and convenient customer journey for our clients. We've already embarked on the journey of using data and analytics to create value for our customers. The Premía service Ida told you about is a good example of how we use the power of data to target client segments with the aim to increase loyalty and drive growth within the profitable segment.
Leveraging our digital platforms alongside personalized service when needed allows us to offer our extensive product offering in a convenient and relevant way for our clients. Recent developments on our journey is also the ability to offer our clients personalized recommendation through different digital platforms. We are in the position to now be able to tailor messages towards our customer base. Specific audience, either by using the mobile app banners within the Arion app or cross-platform banners on our online platforms. We can even personalize recommendations or action for each customer. Even though we are in the early stages of automation of these personalized recommendations, we are proud of what we've already accomplished, and aim for further automation and personalization going forward. As Ida pointed out, the footfall to our branches is dropping, and our customers are engaging with us in a different way.
The digital platforms keep on building momentum, and to humanize our service. It's important that we can stay relevant by communicating with them where they are, and that is on our digital platforms. The digital convenience is not something that is uniquely targeted at a specific age group. As we can see when looking at 90-day digital activity on our platforms. At the age of 18 to 65, we see about 90% of the customers use digital platform within a 90-day period. So, communicating with the clients where they are is of great importance to us. We have invested heavily in our digital journey throughout the last years, especially in retail, and our app has consistently been chosen the best mobile banking solution in Iceland. We know that the competition is working hard, and with open banking and Fintech solutions, new players will arise.
Our focus will stay in our digital channels, and more effort will be put in the Customer Experience to secure our place as the leader in digital. As Ásgeir mentioned earlier, investments in digital platforms for our commercial business is also important. Although we are currently lacking in digital solutions today, we aim to simultaneously roll out solutions for our commercial business as we do in retail. We are proud of the dramatic increase we've seen in the digital sales in Arion. And as the results set out to prove, how convenient and simple processes are preferred by our customers. Digital sales have increased steadily over the past years, and accounted for about 73% of our total core product sales in 2020, expecting to rise once again these years , as Ida pointed out earlier.
We aim to increase this ratio to 90% by year-end 2024. Based on a yearly international benchmark study. We have among the highest proportion of digital sales among international banks. This journey we have been on moving our onboarding processes online will continue in order to increase automation and digital sales even further. There is no doubt that the world is changing and customer demands are changing. That leaves an opportunity for Arion to be a partner to our customers, tailoring individual experiences to the customer needs. Use data to humanize financial service in a digital world and be a champion for positive progress in Iceland going forward. As we have heard from my colleagues here today.
Our goals going forward, as I said, we aim to drive 90% of our total core product sales before 2024 through digital and straight-through processes. Increasing efficiency and freeing up resources to focus on more complex and personalized service where needed. We aim to have a fully automated personalized recommendation system in place to offer relevant products, and services to our clients through digital platforms. That is where our clients choose to do most of their business, and that is where we will offer them relevant products available at their convenience. We will monitor our progress closely by actively listening to the voice of our customers, and by monitoring our key metrics. As I said before, our digital journey began around 2016. We have accomplished a lot, but the fun part is that it's never over.
Banking has gone through massive changes in recent years, and the landscape will most likely, yet again, be different in, say, five years' time. It has been said when thinking about customer centricity, that when you're too busy looking on the inside of your organization, remember that your ass is facing the customer. It is extremely important to never lose focus on them. Focusing on the customer is what we have set out to do, and delivering a fantastic Customer Experience is what we aim to accomplish. On that note, I want to hand over to the CFO, Ólafur Hrafn Höskuldsson. Thank you.
Thank you, Steinunn, and thank you all for participating today in this discussion. Maybe just a short introduction as well. As well as Steinunn, I recently joined, took over this position earlier this year as CFO, but I've been with the bank since mid-2019, Heading Strategy and Development. As the final presenter today, my aim is to summarize some of those key messages and themes from my colleagues, and relate these to the financials of the group today and outlook going forward. I want to start off with a slide that's a little bit busy but focusing on the key four messages that will guide the rest of my presentation. Firstly, the robust earnings trajectory over the past couple of years is largely a testament to the strategic execution presented in our last Capital Markets Day in 2019.
This momentum has allowed us to release significant capital to our shareholders this year, mainly through buybacks. Secondly, the evolution of our earnings profile again reflects this direction that we set out in our Capital Markets Day in 2019. This is reflected in an enhanced income over Risk Exposure Amount and an increased importance of Fee and Commission Income in our business profile. The strategic direction going forward through financial aggregation, bancassurance, and customer journey focus. As presented by my colleagues earlier, are going to support this growth in these areas further going forward.
Thirdly, over the past couple of years, we have greatly simplified the balance sheet of the group. And this has been done, for example, through a very successful disposal of non-core assets. As well as through mortgages becoming a larger part of the total loan book. With selective and strategic growth in our corporate loan book, as described by my colleague Ásgeir earlier. Lastly, this momentum and in combination with a very robust funding profile. Allows for an ambitious plan for capital optimization into next year. Highlighting some of the key trends from 2019 in terms of financial KPIs. Clearly, return on equity over the period has demonstrated a very strong trajectory. A 15.2% ROE in the first three quarters this year and a 19.5% return on optimized common equity Tier One.
Very pleasingly, as you can see in the top middle graph, this is a result of an improved return on allocated capital for all four business areas. With all showing an improved return on allocated capital since 2019. Corporate & Investment Banking was a clear focus in our 2019 strategy. As described previously by our Head of CIB, the turnaround in this area has been a key driver for the operational improvements of the group. Loan growth over the period has been characterized by managed and strategic growth in corporate, and robust growth in mortgages. In terms of capital, we have distributed ISK 25.5 billion in the first three quarters this year. And are aiming for ISK 35.5 billion in capital release before the year-end.
This marks a clear milestone in our capital optimization strategy, and we are committed to take larger steps in the coming year. Just looking at the relative capital release of our business compared to some of our European peers. Here we present an overview of selected peers in the Nordics and the rest of Europe. All of which were restricted from capital release until early this year, just as ourselves. As highlighted in this picture, the capital release for the year represents the highest amount in terms of percentage over Risk Exposure Amount for these European peers at 4.6%. Now moving on to my second key message, that the evolution of our income composition is a clear reflection of our plans that we set out in our Capital Markets Day in 2019.
The clear focus there was to increase the overall income on our Risk Exposure Amount, our lending business, primarily. The key KPI there is the operating income we generate as a percentage of our Risk Exposure Amount. This has improved over the period from a region of 6%-6.5% to around 8% area over the past quarters. The key driver for this has been the momentum in our diverse fee businesses. Which have increased from just under 70% from the first quarter 2019 to the third quarter 2021. Again, our CIB business has been a strong driver for this momentum, along with our very strong asset management business. As well as a robust financing dynamic in our retail bank. Sorry.
This momentum is then reflected in the fact that Fee and Insurance Income now cover 85% of operating expenses in the third quarter this year. In terms of the last nine months, it's 73% of operating expenses. This is a clear improvement from 2019 for the same period, where these income streams covered 47% of our operating costs. As has been described by my colleagues in previous presentation. Financial aggregation, bancassurance, and customer journey focus are key themes for growth for the group going forward. These should all support this trajectory going forward. The aim is to build a more robust and holistic client relationship with product suite through an efficient distribution channel, and a longer-term client relationship. This should drive enhanced ancillary business as well as supporting longer-term Net Interest Margin management.
Now focusing on our Net Interest Margin. During the period from 2019, we have of course experienced, as our Chief Economist presented, a dramatic shift in our rate environment, with policy rates going from 4.5% in early 2019 down to below 1% in the period. During this dramatic shift in our operating environment, we have managed to retain a relatively stable Net Interest Margin. This has been primarily achieved through a careful management of the asset side of our business. As the deposit margins, as highlighted in this graph, have decreased with an effective 0% floor on deposits.
It is fair to say that the strategic realignment and the direction set in our 2019 Capital Markets Day. Specially for our Corporate & Investment Bank, has assisted this NIM management. Going forward, as our economy is expecting a relatively sharp, and we saw that today as well, policy rates increase. While in practice, of course, there are a number of unknowns determining the eventual impact on our Net Interest Margin, we are currently guiding to around ISK 200 million-ISK 300 million net impact for each 25 basis points increase. Now moving to my third key message. This is the simplification of our balance sheet. In 2019, the net book value of held-for sale non-core assets were a significant part of the group's equity and operating profile.
At the end of 2018, the book value of those assets accounted for close to ISK 24 billion, and the 2019 contribution to ISK 13 billion in negative P&L impact. We anticipate that following the sale of Valitor, the remaining value of Held-for-Sale Assets will be under ISK 2 billion. During the period, significant strides have been made in simplifying this part of the group. Following a long sales process, the successful sale of Valitor was announced in July this year. We are very pleased with the result, and we anticipate closing before the year-end, although the final timing is dependent on the ICA. Over the period, we have also managed to exit virtually all of the travel operations of TravelCo. Which we took ownership of post-execution of pledges in 2019.
This has been a very successful execution during what has been a difficult period for the tourism industry. Continuing the message of simplification and de-risking, I want to take a quick look at our loan book. In line with the direction set in 2019, the growth in corporate loan book has been managed carefully and strategically. Most of the growth over the period has therefore been in the mortgage business. With loans to individuals now representing 56% of our loan book, up from 48% at the start of 2019. Over the medium term, we anticipate that normalized expected loss or cost of risk will trend towards 4 basis points for mortgages and 35 basis points for corporates. Based on the current loan book composition. This will translate to a through-the-cycle cost of risk for around 20 basis points.
During the period, we have of course also seen a significant impact of the pandemic on the loan book. At the end of the second quarter 2020, we had close to 12% of our loan book in moratorium. We have continued over the past month to see a strong improvement, and at the end of Q3 2021, only around 0.5% of the loan book was left in moratorium, with around 5% of loans previously in moratorium categorized in forbearance while now performing. It is important to note that this forbearance marking, will remain in this categorization for those loans for two years until the marking is removed. It is also important to note that out of those loans that are categorized as non-performing in moratorium or forbearance, currently 84% are collateralized by real estate.
Now looking at our operating expenses, where we continue to see strong trends across the board. In this overview, we have looked at each main item based on the cost-to-income ratio to operating income. Firstly, in terms of salaries, a key focus over the period has been on enhancing efficiencies in this area. As mentioned by Benedikt earlier, we are also introduced a revised incentive scheme. Which better aligns the interest of employees and shareholders and reduce the pressure on fixed salaries. In this picture, we highlight the underlying salary trend, where the ratio of salaries to operating income has decreased from 31% in 2018 to 23% at the end of the third quarter this year.
We have also, for illustrative purposes, accounted for the potential impact of payouts. Related to the incentive scheme for this year, which have not yet been accounted for. Which could increase this ratio to 26%. Again, this increase reflects the fact that the earnings momentum of the business is strong. And the cost item, this cost item would not have materialized should that not have been the case. In terms of IT investment, we have also seen a positive trend. Over the past two years, the bank has undertaken its largest IT project to date with a change of core banking system to Sopra.
Clearly, this has impacted the investment over the period, and it is a strong testament to the group's strong position. In terms of digital offering relative to peers that, as has been described by my colleagues. We have managed to retain our leadership during this period. With the Sopra implementation completed, we now look forward to continuing to drive our development of the business through IT investment. The group is in a very strong position to build on the current position, and drive further financial aggregation. And customer journey focus through digital development. It is therefore clear that we do not aim for this line of IT investment to continually come down. IT costs, capitalized and expensed, now represent around 10% of operating income.
If we include IT-related salaries, this ratio is around 12%, and we see this range as a fair guidance for our IT investment commitment, in the medium term going forward. Housing costs continue to decline, and as has been described by my colleagues previously. This trend we are expecting to continue. Reduced reliance on branches and an efficient use of our housing will be a focus going forward. 100 employees of a Vörður insurance company moving into our head office later this year is a part of that journey. Moving on to my last key message, which focuses on the robust funding and capital position. The period has seen a strong inflow of client deposits, with 38% increase from the start of 2019.
This is a reflection, firstly, of course, of an industry trend over the period. But also, a focused internal drive for broader client relationship, closer tying deposits and lending business. In combination with a managed and strategic growth in our loan book, this deposit trajectory has supported a sharp reduction in our loans to deposit ratio. Which has decreased from 179% at the start of 2019 to down to 140% at the end of the third quarter this year. This has strengthened our funding profile, and both supports growth ambitions going forward, as well as our capital release plans. The customer journey and financial aggregation drive of the group will further support our deposit gathering momentum going forward.
Another potential funding driver for the medium term is tied to our recent inaugural Euro covered bond. Following a very successful Euro senior issue in July, we successfully opened the Euro covered market for Icelandic issuers in September. As we have highlighted in previous correspondence, this was a very successful execution, and the financing terms were the best achieved by an Icelandic issuer for a long time. Firstly, this issue provides a clear benefit for our FX lending business. As described by my previous speakers, the group sees opportunities for further diversifying lending business. And build on our position to participate in the emergence of the Arctic region. Being materially more favorable than senior unsecured funding costs, this funding source will support this ambition in the near term.
We do, however, also see a potential secondary avenue of interest for this funding source, and this is to play a part in the Icelandic Króna mortgage business. I hope you bear with me of going into a little bit of details here, but I find this interesting. Currently, the key source of ISK mortgage funding is through the ISK covered market. The bank is of course a long-standing participant in that market, and anticipates being a regular issuer going forward. This market, however, is a shallow funding pool with few very similar investors. Having access to a broader investor pool for this very strong asset class is therefore very interesting for us. Both from the perspective of issuers and lenders, but also from the perspective of our clients, the mortgage borrowers. There are effectively two ways for this to materialize.
Firstly, for foreign investors to participate in the domestic issuance, as has been the case, for example, in Denmark. Secondly, for issuers such as ourselves, having a liquid FX Swap market to be able to swap the Euro exposure into ISK over the bond term. We have strong examples from other countries such as Norway, Sweden, Canada, and Australia. Where Euro covered is a significant part of the overall covered bond issuance for banks. A key project for the near term, therefore, is to explore this avenue further and whether the FX swap market can be established in Iceland again. This clearly requires parties to emerge on the other side of the Swap. We see two main avenues for that taking place.
Firstly, as my colleague described earlier, the pension fund system in Iceland is growing fast and the ever-increasing foreign investment part of that portfolio. Managing this exposure against the regulatory limits and the Pension Fund obligations, which are of course in Icelandic krónur, will become more of a focus. Having an effective Swap market should therefore be of value for the pension funds. Secondly, borrowers issuing in Icelandic krónur with requirements in FX. Such as the fisheries industry, could be a counterparty for this Swap. The bottom line is that this inaugural Euro covered issue serve both near term and potential future profile benefits for the group and serves as a key project in the near term. Finally, before handing back over to Benedikt, our CEO, I wanted to quickly review our capital position and surplus capital.
As described in our third quarter results, we have to date released ISK 26 billion to shareholders through buybacks and dividends. Today, we have around ISK 50 billion in surplus capital before accounting for the finalization of Valitor. Which would take that number to close to ISK 60 billion. We have already announced the aim to continue this year buybacks with further ISK 10 billion in buybacks this year. We are committed to optimizing the capital position, and we see the current operating momentum, and funding position constructive for this plan in the near term. This therefore is a priority going into 2022, as Benedikt will further outline next, t hank you.
Thank you, Ólafur and thank you all, the speakers, management team, for great presentations. I hope that you resonate as well with our kind of future two-three-year strategy as we saw you react on over the last two years. If we look at our financial targets, which is effectively where we guide our investors, and guide our business kind of goals. There is, as Ólafur mentioned, there has been a strong momentum, earnings momentum in our business. It's clear that even with the capital release that we've been having ongoing in recent quarters, we merely briefly are able to reduce the CET 1 ratio because of the strong capital generation, and we need to take more decisive steps.
At the same time, I hope that you noticed that in today's presentations, the word growth comes in more than before. Like, Erna explained in her economic analysis, there is an unusual situation going on here where we're seeing an exceptionally high nominal GDP growth materializing in the next few years. We are already seeing kind of the first impact of that because the business investment, as she pointed out, has been exceptionally strong this year. That is now seen in our loan growth. Which as you can see is yellow from a financial target because we are now experiencing higher loan growth than the nominal GDP growth this year.
The good thing about having turned this business around, and created operations that consistently delivers above 10% ROE is that we can easily manage that growth from a capital standpoint. That's why we are pretty confident guiding for next year that we will be very committed to reaching the only kind of financial target that I showed you. We hadn't reached two years ago, which we discussed two years ago, which is the normalization of our capital structure. We wanna bring the CET 1 ratio down to the 17% level as soon as possible. That obviously includes a substantial management buffer on top of the regulatory requirements.
As you saw in our earnings profile last year where we had, as I talked about the effective live stress test of our business. If we had operated at 70% CET 1 ratio at the outset of the COVID pandemic. We would merely have briefly dipped into our management buffer and then immediately gone above the 17% target again. Then the question becomes how do we you know what kind of loan growth will we be seeing next year? I’m sure that it’s gonna be higher than what we’ve seen in the last two years.
It's effectively only in the third quarter when we saw this massive pickup in corporate loan growth. On the back of what we are saying is a fairly optimistic outlook for the economy for next year. This is underpinned by effectively all sectors, especially the IP related sector. Which is going through still some large investments on all fronts. I'm sure that the bank will play a key role there, having built a first in best-in-class CIB operations. Which will use its own balance sheet to support this growth but also use third party capital markets syndication to facilitate this loan growth. We are currently conducting a buyback which will most likely expire before year end.
Let me preempt a question that I'm sure will come up as we move into Q&A. Whether there will be kind of an extraordinary event to get us down to the 17% ratio. Even though there is no firm commitment here today, I must say that extraordinary general meeting is usually called upon on the back of extraordinary events. And a completion of the sale of Valitor could easily be defined as such an event.
As you can see from our financial accounts, we have been reserving half of our profits this year. For retained or for dividend payments of next year, and those 50% of the profits are not included in our capital ratios. That means that we will be seeing a substantial dividend payment on our EGM or on our AGM next year. Then I'm sure that we will continue to use buybacks as means to distribute capital.
You saw the positive impact of that from one of the slides that I had in my deck where the EPS growth. Has been quite spectacular, I would say, over the last few quarters on the back of improved earnings, but also on the back of lower outstanding shares. The guidance is very much for moving quickly down to the 70% and at the same time we're saying it's not gonna impair our business and it's not gonna impair our ability to grow our business and grow the loan book. Which I'm sure that we will be seeing, maybe for the first time in two years, a growth in our Risk Exposure Amount.
The loan growth in the last two years has predominantly come from, or only come from, the markets book. Whereas the corporate book was shrinking for the first one and a half year and is now growing. With that, I conclude. Again, I thank all the speakers for their presentation. Thank you for coming and joining us and almost 300 people watching this event live. Thank you all for your kind of interest and patience. I know it's more difficult to get kind of the energy from this room through the live webcast, but I can assure you we are very focused and eager to continue to deliver good results for our shareholders.
Now we will be asking the management team to join us up here, and I will be asking our Chief Legal Counsel, Birna Hlín, to moderate the Q&A session. I urge all of you to, if you haven't submitted your questions, to do that now, and we will make sure that we answer all your questions, t hank you.
Thank you Benedikt, w e have received question online, and there's still time to submit questions, so please do. I will start with online question and then we can take questions from the audience who are here in the room. The first question I point to Benedikt and Ida primarily. It's from Rahul Shah from Tellimer, and it goes like this, Arion as an aggregator, does this mean you will increasingly offer and sell third party products? If so, how will you minimize the cannibalization risk, e.g., if third party product sales result in a loss in market share of your in-house products?
Should I maybe start by answering this? This is a very relevant question, and we talked about the ever-changing environment of bank. And this is the imminent kind of risk to a business model of a bank. I would say one of the things that we've already done, and we are agnostic about is that we have already partnered up with Fintech companies that are offering our solutions on a white label basis. We think that that's important to kind of increase our outreach. We do not look at as kind of our financial aggregation approach as being a kind of a closed box approach where we do not cooperate with third parties.
The third-party cooperation is actually both to kind of sell our products on a white label basis, but also to, as the question relates to sell other products on our platform. I'm sure that, as we, for example, develop our premium services, that there will be kind of relevant third-party solutions. That our clients will feel kind of the convenience of negotiating or buying through our channels. Do you wanna add anything, Ida, to?
No, you know, when someone is doing things better than you are, and there's a better Customer Experience, you know, I think you should not be afraid of letting them into your platform. We are doing this with Leiguskjól, where we offer rental guarantees. They are doing that much better than we do. We have increased the market share by working with them, and we actually invested in that company.
Maybe Kristján?
Sorry, j ust to add a little bit to this. I think there are just a lot of opportunities for products, to adding products. Third party products, to our distribution channels from products which are not cannibalizing our own products. I think we have, like we presented earlier, we have a lot of engagement with our clients. But those can be used to sell products which are not in our portfolio. I think that's before we even talk about any products cannibalizing our own, I think that's the key point.
Thank you, w e have also a question from Maria Semikatova, and it's quite long. So, I think I will cut it down into more questions. The first question is maybe for Benedikt or Ólafur. Why didn't you upgrade ROE target despite strong performance and commitment to reduce excess capital?
It's a very good question. I think the best answer to that is that we are now going through a fairly kind of enhanced exercise of business planning. We're going through a new business cycle approach, taking up a very different approach where we try to link our business or our strategy better to the business planning cycle. That's an ongoing work but which we will complete before year-end, and it will need board involvement, obviously, and board approval. This is part of the ICAAP process. So, you know, I think the best answer to this is that once we've completed that, we will be coming out next year with potentially a revisit of our financial targets.
Yeah, I think that's correct. I think we're of course, as our economist explained, we're in a very ever-changing environment. I think what we're doing in the business planning now is to sort of sensitivity test all those different dynamics that we are operating under. Yeah, like Benedikt said, we're not discounting the possibility of increasing this in the future, although we're retaining it for now, at least.
Some of the kind of comparable banks that we had on our slides have, f or example, kind of ROE targets that are in the 15% range. That's motivating for us for sure.
Thank you, f or Ida Brá Benediktsdóttir. What is the ambition for insurance income growth in coming years?
Well, I think this is the same in that we are just working on this now. It has not been completely finalized. We need, of course, the approval from the board of Vörður for this. Vörður will remain an independent company, and this is also in the budgeting right now. We have ambitious plans.
Thank you, Ásgeir what are your growth ambitions in the Arctic Region, and where do you see the share of foreign lending in several years?
The growth of foreign lending, given that the right opportunities arise, will probably be in the next 24 months. Somewhere around twofold the number that we already have, or in the range of 15%.
Okay, Margrét do you expect any changes in the competitive environment from the proposed increase in foreign allocations for Pension Funds?
Well, we have always had competition, and it has been increasing. Over the last couple of years in the pandemic. Foreign Asset managers have come less to Iceland but are starting to come again. We see this as an opportunity because we do offer Foreign Assets through our partners, the international asset managers. As well as Stefnir has their own international funds. I think we are in a position to take part in the increasing foreign positions of, for example, the Pension Funds.
All right, t he final question on new Fintech entrants, disruptions. Which areas at Arion are most at risk? It's possibility of payments, wealth, lending, others.
If I start maybe and ask my colleagues to chip in. Payment's disruption has already happened, and we are seeing various different applications or channels being used here locally. At the same time, the payments market is extremely competitive and is evolving very much into kind of as a service business. That's why we kind of strategically decided to exit our Valitor holding. We feel that a more kind of IT-focused, globally focused enterprise is better suited to continue developing that business. I think, you know, the biggest disruptor that we see elsewhere is very much around the kind of the most profitable retail product, which are the markets.
That is something that we really need to take into account, and that's why we felt it was very important to take on that initiative for the covered bond financing. Because we have seen, and we regularly have a look at business plans or new companies, Fintech companies, which we kind of are made available to us as an investment case. Where we see investment cases that are increasingly kind of focused to this challenger bank approach with you know favorable deposit rates coupled with the markets business. All of these business plans are really reliant on the Euro covered bond financing and the FX Swap market then, which obviously we have in place in Norway.
That would be, I would say, the biggest threat from a Fintech standpoint. But at the same time, as we talked about, we have invested into Fintechs and cooperated with them. And we see that as part of our evolution and our kind of staying on focus and make sure that we do not kind of operate in a Silo without weighing all these changing factors into play. The PSD2 will come in effect in May next year, and that will be a considerable change. We, however, see that it's sort of gradual development. We, for example, tried doing an aggregation solution through a third-party kind of data provider with obviously the consent of our clients.
It was a bit surprising to see how small adoption of that service we had. Eventually, the other banks closed down on the data availability and that's why we had to close this service down. We invested in it and it's on standby once PSD2 is available. I don't know. Do you wanna add anything?
Maybe just as to reason that we want to be an aggregator. You know, to be in the reason for that we would like to be in an aggregator. Financial aggregator is to be in the driver's seat, so to say. You know, that's our answer to this. Of course, there will be Fintech companies that want to, it's an attractive business.
We have no more questions online, but please from the audience, if you want to shoot, g o ahead.
Just speak.
Yeah, just speak, and I will ask the person answering to repeat the question, so the online participant can hear it.
Just to reiterate for Ásgeir, maybe a little bit more on the Arctic kind of approach that you presented. Can you give us a little bit more flavor on the strategic kind of plan there? Is it more following current customers abroad? Or is it direct penetration to the markets or maybe even external growth via acquisitions, or a little bit more on the big plan there.
The question comes from Sveinn at Landsbankinn about the Arctic Region and the approach. Whether this is to support the clients in their growth kind of or in their journey into the Arctic, or whether this is kind of based on specific kind of operations within different countries, Ásgeir.
Yeah, a s you might have noticed, we've been sort of teasing the Arctic Circle now for over two years. I think the first time that Benedikt mentioned this was in 2019 or in a or.
Some of the quarterly.
Or some of the quarterly results. What we're effectively doing and what we have been doing is that we didn't find attractive the rates. That were being offered when we were looking into various options around two years ago. As all of the other Icelandic banks, we've been quite active in the seafood industry in Canada, the U.S., and also the Faroe Islands. By way of that, we have managed to set up an important relationship on those ends. We've also been looking into specific companies in these areas that we have been studying.
When you saw a significant rise in yields when COVID hit. We actually went about and looked into some of those names, and bought some of them at very attractive prices. However, regarding whether I do not expect us to directly penetrate these markets without by setting up a shop there immediately. I just don't think that today you don't necessarily need to do that. But we will be looking into building stronger, even stronger relationships that we have and gaining foothold on the back of the seafood experience that we've had. For the time being, what we're most interested in is the Faroe Islands, and we've been adding on or looking into various opportunities there.
I'd like to point to the fact that a part of what I talked about was the fact that we have this growth of the IP sector, and that growth is all global. It's not in any way towards the Icelandic market. We see that we will be following some of these companies on their journeys, and that will probably be outside of the Arctic. We've spent time to study the environment in Alaska, parts of Canada, and the Faroes mostly, and also Greenland. If that answers to your question.
Anyone else?
If I can maybe add slightly to the Arctic story and Greenland, which is a growing country, 56,000 inhabitants or 58,000. This area has recently come into focus; I would say geopolitical focus for the reason being that this is one of the largest mining opportunities to be found globally. Even though Iceland is not particularly has any particular expertise in mining, there is a lot of service that would come with that. You saw in my presentation a third of rare earth minerals are to be found there and the rare earth minerals are the engine for the energy transformation, the batteries in the cars and the phones and things like that.
If you look at the infrastructure that Iceland has to offer, we have more than 35 harbors, decent harbors that can service Greenland. If you look at Iceland there. It has probably the best connectivity to Greenland of all airlines. Our shipping companies have regular routes there. Our construction companies operate there already, and most of the kind of fresh daily food is delivered from Iceland, vegetables, for example, to the area. Apart from that, I think this is an extremely interesting opportunity to further develop and evolve the tourism industry in Iceland. Because if you look at Iceland as a destination, it's very accessible. You can do the round trip in a few days and see most of the things.
Greenland is a totally different experience. Iceland is almost like a miniature land, when you come there. An Arctic experience, but in much larger size. That will be a great opportunity for Iceland as well.
Okay, i f there are no further questions, I think our time is up.
Mm-hmm.
We will just close the session, t hank you all.
Yeah, t hank you very much for joining us today.