Permanent Tsb Group Holdings Plc · EURONEXT:PTSB
Permanent Tsb — Irish Life & Permanent — FY2010 Earnings Presentation
52 slides from Permanent Tsb's earnings presentation, 2011
Slide 1: 2010 Final Results
PAGE 1 FINAL RESULTS 2010: 2010 FINAL RESULTS
Slide 2: Forward looking statement
Forward looking statement PAGE 2 A number of statements we make in our presentation and in the accompanying slides will not be based on historical fact, but will be “forward-looking” statements within the meaning of the US Private Securities Litigation Reform Act of 1995. Actual results may differ m
Slide 3: Index
Index PAGE 3 SECTION: PAGE: Business review Review of life business 05 Review of banking business 11 Strategic agenda & Summary 18 Financial Review Group earnings 21 Funding 26 Arrears 27 Loan impairments 29 Capital 31 Outlook 33 Additional information 34 2010 FINAL RESULTS
Slide 4: Business Review
Business Review PAGE 4 Life* profits recover OVERALL RESULTS IN-LINE WITH 2009 Impairments rise in bank Overall result -€197m Operating profit y 57% LIFE PERFORMANCE RECOVERY Business retention improving Net interest income improved** BANK MANAGING KEY CHALLENGES Retail deposits strong
Slide 5: Life & Fund Management Business
Life & Fund Management Business PAGE 5 Profitability - recovery Retention - improvement Sales – ahead 2010 FINAL RESULTS KEVIN MURPHY: GROUP CHIEF EXECUTIVE
Slide 6: Life: Recovery in Profitability
Life: Recovery in Profitability PAGE 6 2010 €m ▲% New business earnings Margins flat New business 52 +2 Reduced pension sales offset In-force 108 +112 by strong investment inflows Operating profit 160 +57 In-force earnings Strong risk profits Lower persistency variance 2010 FINAL RESULTS
Slide 7: Life: Retention Improved
Life: Retention Improved PAGE 7 Retail: Returning to long term lapse assumptions Retail Lapses peaked Q1 2009 Lapses v LTA 2010 2009 Change Significant improvement during year Quarter 1 134% Budget impact on Q4 performance 192% +58% Actions on: Quarter 2 123% 159% +36% Seller / distributio
Slide 8: Life: Sales Recovery
Life: Sales Recovery PAGE 8 Retail Life Sharp declines in 2008 & 2009 but stabilised in 2010 2009 2010 2011 2012 Demand driven by strong consumer confidence and by RETAIL DECLINE STABLE RECOVERY GROWTH improvement in equity markets CORPORATE DECLINE DECLINE STABLE RECOVERY Corporate Life D
Slide 9: Life: Sales Ahead
Life: Sales Ahead PAGE 9 Overall sales y 6% 2010 €m ▲% Single premium life sales y 1% Investment bonds y 20% Retail 146 (8) Pension z 5% Corporate 137 (16) Annual premium life sales z 20% Low salary growth and ILIM & ILI 289 +34 recruitment SME cash-flow weak Total 572 +6 ILIM contin
Slide 10: Life: Outlook
Life: Outlook PAGE 10 SALES: >>> Recovery in line with expectations RETENTION: >>> Back to normal variances PROFITABILITY: >>> Sustained recovery 2010 FINAL RESULTS KEVIN MURPHY: GROUP CHIEF EXECUTIVE
Slide 11: Banking Business
Banking Business PAGE 11 Funding – responding to debt crisis Impairments – increased provisions Profitability – pricing and cost cutting actions Strategy – sector restructure 2010 FINAL RESULTS KEVIN MURPHY: GROUP CHIEF EXECUTIVE
Slide 12: Bank: Funding 2010
Bank: Funding 2010 PAGE 12 Retail deposit growth via branches and Deposit Mix - Dec 2010 broker distribution Corporate deposits Outflows similar to H1 2010 Impacted by Sovereign and bank Corporate deposits downgrades €5bn term debt issuance to end Aug. Funding ratios Retail deposits Dec
Slide 13: Bank: PLAR 2011 & Funding Strategy
Bank: PLAR 2011 & Funding Strategy PAGE 13 Prudential Liquidity Assessment Review (PLAR) To be completed by end March Target ratios to be achieved by 2013 Deposit funding dominant Reduced loan to deposit ratio target Limited wholesale funding component De-leveraging actions Contracti
Slide 14: Bank: Loan Book
Bank: Loan Book PAGE 14 Loan Balances Loan book z 3% in 2010, constant currency basis Gross new lending €615m in 2010 Low level of redemptions impacting level of new lending UK book closed to new business Total Loan Book* €37.6bn (Dec 2009: €38.9bn) * Before impairment provisions 2010 FINAL
Slide 15: Bank: Loan Arrears
Bank: Loan Arrears PAGE 15 Reductions in ROI consumer finance PTSB ROI Residential Mortgage Arrears Cases and UK residential arrears ROI residential arrears cases continuing to rise > 90 days: up 67% <90 days: up 18% <90 days: flat in H2 Impairment provisions at €420m, y 12% on 2009 driv
Slide 16: Bank: Profitability - Margins & Costs
Bank: Profitability - Margins & Costs PAGE 16 Margins Margin higher for 2010 SVR increases Government guarantee Costs Continuing cost reductions Voluntary redundancy programme in Q1 2011 280 FTEs staff Cost €45m Annualised saving of €31m 2010 FINAL RESULTS KEVIN MURPHY: GROUP CHIEF E
Slide 17: Bank: Outlook
Bank: Outlook PAGE 17 Back to basics Deposit driven business Lean operation with high level of automation Transactions + approvals On-line service Sales focused branch distribution model supported by: Customer analytics 2013 Targets Net interest margin > 100bps Impairment charge norm
Slide 18: Strategic Agenda
Strategic Agenda PAGE 18 PCAR / PLAR Consolidation INBS + Anglo deposits EBS Irish Life International 2010 FINAL RESULTS KEVIN MURPHY: GROUP CHIEF EXECUTIVE
Slide 19: Summary
Summary PAGE 19 LIFE - STRONG PROFIT GROWTH BANKING - MANAGING KEY CHALLENGES STRATEGY - MAKING PROGRESS 2010 FINAL RESULTS KEVIN MURPHY: GROUP CHIEF EXECUTIVE
Slide 20: Financial Review
Financial Review PAGE 20 Earnings Funding Credit quality & impairment provisions Capital Outlook 2010 FINAL RESULTS DAVID MCCARTHY: GROUP FINANCE DIRECTOR
Slide 21: Group Earnings
Group Earnings PAGE 21 2010 2009 Change Operating profit flat on 2009 €m €m % Life business continuing to recover Operating (loss) / profit Bank continuing to suffer from • Life 160 102 57 worsening economic conditions • Banking (364) (270) (35) with higher funding costs and increased impairme
Slide 22: Life Earnings
Life Earnings PAGE 22 2010 2009 Change Life new business volumes z 8%, offset €m €m % by strong sales in ILIM New business 52 51 2 Overall sales y 6% Total expected return 131 122 Experience variances 18 (70) Life (excl. ILIM) new business margin: Assumption changes (41) (1) APE: 11.5% (FY 0
Slide 23: Life Variances & Assumptions
Life Variances & Assumptions PAGE 23 Experience Variances Assumption Changes Experience variances Improved persistency but 2010 2009 2010 2009 pensions business slower to recover €m €m €m €m Very strong risk result in Persistency (9) (66) (62) (42) Corporate business due to positive income prote
Slide 24: Bank Earnings
Bank Earnings PAGE 24 2010 2009 Change €m €m % Net interest income ahead given mix of funding Net interest income 402 375 7 Net interest margin 86bps excluding cost Other income* 39 41 of ELG scheme Government guarantee (110) (29) Government guarantee in line with Invest. return / other (3) 6
Slide 25: Net Interest Margin
Net Interest Margin PAGE 25 Margin Movement BPS Net Interest Margin - Run-rate FY 2009 83 Cost of Funds Book Cost Retail deposit funding (12) % % Customer accounts 35 2.1 Wholesale funding (3) Long-term 26 2.1 Asset re-pricing 24 32 1.0 ECB Other (6) Short term 7 2.4 100 1.8 FY 2010 86 Asset Yields
Slide 26: Funding
Funding PAGE 26 €5bn term debt issuance in 2010 December 2010 - Total €43bn No access to senior unsecured markets from Aug 2010 Other funding secured via bi-lateral repo & ABS transactions Deposits z 6% yoy Retail continue to grow y12% Corporate outflows due to Sovereign and bank downgra
Slide 27: Arrears - UK Mortgages
Arrears - UK Mortgages PAGE 27 CHL Mortgage Arrears Cases BTL accounts for 94% of Capital Home Loans (CHL) portfolio Closed for new business since early 2008 Arrears down 42% in Dec 2010 against peak in Q1 2009 CHL 3+ month arrears - 2.0% at Dec 2010 Industry average 3+ month arrears* - 2.
Slide 28: Arrears - ROI Residential Mortgages
Arrears - ROI Residential Mortgages PAGE 28 PTSB ROI Residential Mortgage Arrears Cases 49% increase in total arrears cases in 2010 > 90 days arrears cases increase 67% in 2010 Cases > 90 days in arrears 11,500 at Dec 2010 out of total portfolio of c. 178,000 < 90 days arrears cases up 18%,
Slide 29: Impairment Model
Impairment Model PAGE 29 Slower economic recovery Higher level of impairments House prices peak to trough decline Model assumptions 40% HPI at December 2010 38% Assumption increased to 43% Commercial property Further valuation declines Impacts performing and non-performing loans 20
Slide 30: Impairment Charge
Impairment Charge PAGE 30 2010 2009 Specific Collective Total Total €m €m €m €m ROI mortgages 187 56 243 154 UK mortgages 25 2 27 33 ROI commercial 80 25 105 99 Consumer finance 5 40 45 90 297 123 420 376 Collective provisions: are determined on a portfolio basis generally using a statistical roll-r
Slide 31: Capital - Life
Capital - Life PAGE 31 Regulatory Capital Movement €m Minimum solvency requirement Jan 2010 685 for Irish Life Assurance of €401m (Dec 09: €413m) covered 1.75 Capital from existing business 327 times (Dec 09: 1.6 times) New business strain (75) Strong cash-flow generation Net capital release 252
Slide 32: Capital - Bank
Capital - Bank PAGE 32 Basel II Dec 10 Dec 09 Robust group capital position to absorb €m €m expected defaults Core Tier 1 ratio of 10.6% (Dec 09: Tier 1 capital 1,681 1,858 11.3%) Total required capital 1,265 1,313 Basel II minimum total capital requirement of 8% Total RWAs 15,809 16,411 Sur
Slide 33: Earnings Outlook
Earnings Outlook PAGE 33 Life Banking Risks / Uncertainties 2010 FINAL RESULTS DAVID MCCARTHY: GROUP FINANCE DIRECTOR
Slide 34: Additional Information
Additional Information PAGE 34 Page 35. Group total (loss) after tax - EV basis 36. Group operating (loss) after tax - EV basis 37. Group operating EPS - EV basis 38. Group IFRS (loss) after tax 39. Group IFRS and EV basis results reconciliation 40. Bank non-interest income 41. Bank asset portfolio
Slide 35: Group Total (Loss) After Tax - EV Basis
Group Total (Loss) After Tax - EV Basis PAGE 35 2010 2009 Pre-tax Tax Post-tax Post-tax €m €m €m €m Operating (loss) (197) 30 (167) (182) Investment fluctuations 49 - 49 (53) Economic assumptions (51) 4 (47) (27) Other changes (38) 5 (33) (17) Total (loss) (237) 39 (198) (279) 2010 FINAL RESULTS
Slide 36: Group Operating (Loss) After Tax - EV Basis
Group Operating (Loss) After Tax - EV Basis PAGE 36 2010 2009 Pre-tax Tax Post-tax Post-tax €m €m €m €m Life assurance 160 (17) 143 90 Banking (364) 47 (317) (246) Associate 9 - 9 (2) Other (2) - (2) (24) Operating (loss) / profit (197) 30 (167) (182) 2010 FINAL RESULTS
Slide 37: Group Operating EPS - EV Basis
Group Operating EPS - EV Basis PAGE 37 2010 2009 €m €m Operating (loss) / profit (197) (196) Taxation 30 14 (Loss) / profit after tax (167) (182) Average no. of shares 276m 276m EPS (60)c (66)c Note: “own shares” included for EPS calculation 2010 FINAL RESULTS
Slide 38: Group Total (Loss) After Tax - IFRS Basis
Group Total (Loss) After Tax - IFRS Basis PAGE 38 2010 2009 €m €m Life assurance & investment 167 93 IFRS Life Earnings Movement 2010 Banking (364) (270) €m General Insurance 9 (2) New business effect (6) Other (2) (26) Interest on insurance VIF 61 Expected profit on Inv. contracts 70 167 (190) (205
Slide 39: IFRS / EV Reconciliation
IFRS / EV Reconciliation PAGE 39 2010 S’Holders Total (Loss) / Equity Profit after Tax €m €m Embedded Value basis 2,045 (198) Investment business • Value of in-force (635) 28 • Deferred costs & fees 140 (3) • Restatement of liabilities 63 (9) Own shares adjustment - 13 VIF loan 17 17 Other / Tax (14
Slide 40: Bank Non-Interest Income
Bank Non-Interest Income PAGE 40 2010 2009 €m €m Fees & Comms (rec’d) 54 54 Fees & Comms (payable) (12) (10) 42 44 Trading income (3) (3) Investment return (3) 6 36 47 Note: Bancassurance Embedded Value operating profit €8m [2009: €14m] included in life assurance 2010 FINAL RESULTS
Slide 41: Bank Asset Portfolio
Bank Asset Portfolio PAGE 41 Asset Portfolio December 2010 Category €bn % Total bank asset portfolio of €4.7bn Sovereign Bonds The portfolio is made up of €2.9bn AAA 1.0 35 Sovereign Bonds (61%), €1.2bn Bank A 0.1 3 FRNs (27%) and €0.6bn Prime RMBS BAA/BA/B 1.8 62 (12%) 94% of the Prime RMBS i
Slide 42: Impaired Loans
Impaired Loans PAGE 42 December 2010 June 2010 December 2009 Balances Total Loans Balances Total Loans Balances Total Loans €m % €m % €m % Residential mortgages • ROI 992 3.8 736 2.7 415 1.5 • UK 111 1.5 105 1.3 75 1.0 Commercial mortgages 280 11.9 217 9.1 171 7.2 Consumer finance 155 11.3 160 10.5
Slide 43: Non-Performing Loans
Non-Performing Loans PAGE 43 December 2010 June 2010 December 2009 Balances Total Loans Balances Total Loans Balances Total Loans €m % €m % €m % Residential mortgages • ROI 2,417 9.2 1,858 6.9 1,342 4.9 • UK 258 3.4 265 3.3 258 3.4 Commercial mortgages 471 20.1 378 16.2 307 12.9 Consumer finance 184
Slide 44: Bank Regulatory Capital
Bank Regulatory Capital PAGE 44 Basel II Capital Dec 10 Dec 09 €bn €bn Available capital Basel II minimum total capital Tier 1 3.8 3.9 requirement of 8% Tier 2 1.2 1.2 Surplus capital of €416m Total capital 5.0 5.1 Strong capital position to absorb expected defaults Deductions* (3.3) (3.3) Tot
Slide 45: Life: Embedded Value Movement
Life: Embedded Value Movement PAGE 45 Required Net Worth VIF Total Capital €m €m €m €m Opening 1 Jan 2010 566 1,076 1,642 634 Operating profit 252 (109) 143 Investment fluctuations 21 28 49 Economic assumptions (48) 1 (47) VIF loan 100 (117) (17) Capital & other movements (13) (11) (24) Closing 31 D
Slide 46: Life Asset Quality
Life Asset Quality PAGE 46 Non-linked Debt Securities Rating €m % Non-linked liabilities matched with debt AAA 1,366 77 securities of appropriate duration AA 171 10 Majority high quality sovereign bonds A / BAA 234 13 1,771 100 Shareholders’ Net Worth Insurance & investment assets €m % Deposits
Slide 47: Life New Business Margin
Life New Business Margin PAGE 47 2010 2009 APE Sales 2010 2009 New Business Contribution €m €m €m €m Life 37 40 Life 320 348 ILIM 252 191 ILIM 15 11 Margin - APE % % Life 11.5 11.4 PVNBP* Sales ILIM 6.1 5.9 2010 2009 €m €m Margin – PVNBP* % % Life 2,288 2,398 Life 1.6 1.6 ILIM 2,520 1,908 ILIM 0.6 0
Slide 48: Life Operating Costs
Life Operating Costs PAGE 48 2010 2009 €m €m Retail & Corporate 165 169 ILIM 14 14 Other 10 7 189 190 IFRS adjustment (9) 1 180 191 2010 FINAL RESULTS
Slide 49: Life & Investment Sales
Life & Investment Sales PAGE 49 Recurring Premium Single Premium 2010 2009 2010 2009 €m €m €m €m Retail 78 85 689 736 Corporate 84 117 525 471 ILIM - - 2,520 1,908 ILI - - 371 252 Total 162 202 4,105 3,367 APE Basis 162 202 410 337 PVNBP Basis 703 939 4,105 3,367 2010 FINAL RESULTS
Slide 50: Retail & Corporate Life Sales
Retail & Corporate Life Sales PAGE 50 Retail APE Sales Corporate APE Sales 2010 2009 Change 2010 2009 Change €m €m % €m €m % Products Products Pension 68 82 (17) DC pension 76 98 (22) Protection / Risk 40 43 (7) Protection / Risk 14 25 (44) Investments 30 25 20 Annuities 24 18 33 Savings 8 9 (11) PR
Slide 51: Other Operating Activities
Other Operating Activities PAGE 51 2010 2009 €m €m Cornmarket / IPSI 14 4 Corporate costs (16) (30) (2) (26) Associate 9 (2) 7 (28) 2010 FINAL RESULTS
Slide 52: Contact Information
Contact Information PAGE 52 Please contact our Investor Relations Department for any further information or visit our group website at www.irishlifepermanent.ie Contact details: Barry Walsh barry.walsh@irishlife.ie +353 1 704 2678 Orla Brannigan orla.brannigan@irishlife.ie +353 1 704 1345 2010 FINAL
Irish Life & Permanent — FY2010 Earnings Presentation on 6ix