Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — FY2018 Earnings Presentation
60 slides from Bank Of Ireland's earnings presentation, February 2019
Slide 1: 2018 Results Announcement
2018 Results Announcement 31 December 2018
Slide 2: Slide 2
Slide 3: Group CEO Francesca McDonagh
2 Bank of Ireland 2018 Results Announcement Group CEO Francesca McDonagh
Slide 4: Slide 4
Slide 5: 2018 Highlights
4 2018 Highlights Bank of Ireland 2018 Results Announcement €935m • NIM of 2.20% Profitability Underlying profit • Net impairment gains of €42m before tax • NPEs reduced by 24% to €5.0bn; NPE ratio now at 6.3% • New lending €15.9bn, increase of 13% vs. 2017 Growth €1.3bn • New Irish mortgages; Growt
Slide 6: Economic backdrop
5 Economic backdrop Bank of Ireland 2018 Results Announcement Irish credit growth emerging Annual % Change 4 0 -4 -8 2012 2013 2014 2015 2016 2017 2018 Stock of lending to households1 Stock of lending to businesses (non-financial corporations)1 Solid growth in Ireland; UK growth also House price gro
Slide 7: Focused on execution of our strategy to 2021
6 Focused on execution of our strategy to 2021 Bank of Ireland 2018 Results Announcement Our ambition 2018 has been While there are …we are committed to is clear transformational challenges ahead… delivering our strategy • Investor Day – June • Cultural change • Brexit and the global • Growing and 2
Slide 8: Three Strategic Priorities
7 Three Strategic Priorities Bank of Ireland 2018 Results Announcement Transform Serve customers Grow sustainable the Bank brilliantly profits
Slide 9: Transform the Bank
8 Transform the Bank Bank of Ireland 2018 Results Announcement Culture Systems Business model 2018 Progress Target Outcomes • Defined the culture we want – ambition, purpose and values being embedded across organisation • Technology transformation continues to progress • Strengthened culture oundati
Slide 10: Serve Customers Brilliantly
9 Serve Customers Brilliantly Bank of Ireland 2018 Results Announcement Embedding voice of customer Investing in digital and New brand strategy in our businesses physical channels 2018 Progress Target Outcomes • Listening to our customers and taking action • Significant improvement in – 200+ front l
Slide 11: Grow Sustainable Profits
10 Grow Sustainable Profits Bank of Ireland 2018 Results Announcement 2018 Progress 2021 Target Headline RoTE of 8.5% Improved profitability RoTE in excess of 10% Adjusted RoTE of 7.2%1 Cost base of c.€1.7bn Cost reduction of 3% / €48m Efficient business Costs reduce every year: 2018-2021 vs. 2017 C
Slide 12: Retail Ireland – well positioned to grow
11 Retail Ireland – well positioned to grow Bank of Ireland 2018 Results Announcement • Unlocking growth Investor Day – Supporting home building and buying Strategic – Building out wealth and insurance business Initiatives • Improving customer experience and driving efficiency • Market share maintai
Slide 13: Retail UK – focused on increasing returns
12 Retail UK – focused on increasing returns Bank of Ireland 2018 Results Announcement • Committed to the UK, focused on increasing returns Investor Day – Investing in businesses that are generating above-hurdle returns Strategic – Improving returns in businesses with potential to meet return and ef
Slide 14: Corporate and Markets – strengthening customer relationships
13 Corporate and Markets – strengthening Bank of Ireland 2018 Results Announcement customer relationships • Retain established market-leading positions in core markets Investor Day – Support housing and economic development in Ireland Strategic – Scale UK business Initiatives • Selectively expand Ac
Slide 15: Group CFO Andrew Keating
14 Bank of Ireland 2018 Results Announcement Group CFO Andrew Keating
Slide 16: Slide 16
Slide 17: Key areas of focus
16 Key areas of focus Bank of Ireland 2018 Results Announcement Income Transformation Capital generation, growth of cost base investment and return Target is to increase RoTE to in excess of 10% by 2021
Slide 18: Underlying profit before tax of €935m
17 Underlying profit before tax of €935m Bank of Ireland 2018 Results Announcement FY 20171 FY 2018 • Net interest income of €2,146m, reduction of €102m vs. (€m) (€m) 2017 reflecting lower NIM (2018: 2.20%) primarily due to lower liquid assets income, cost of securities issued in Total income 3,049
Slide 19: Net lending growth of €1.3bn
18 Net lending growth of €1.3bn Bank of Ireland 2018 Results Announcement Group loan book movement Net lending growth of €1.3bn • New lending of €15.9bn; an increase of 13% vs. 2017 • Redemptions of €14.6bn; 3% reduction vs. 2017 €15.9bn (€14.6bn) • Expect further net lending growth in 2019, while m
Slide 20: NIM – Strong commercial discipline on pricing
19 NIM – Strong commercial discipline on pricing Bank of Ireland 2018 Results Announcement 2018 – Q4 NIM Movement NIM – 2.20% in 2018 • Maintaining strong commercial discipline on pricing e.g. (3bps) (10bps) recent price adjustments on Irish mortgages • Competitive pressures in UK mortgage market dr
Slide 21: Sustainable business income
20 Sustainable business income Bank of Ireland 2018 Results Announcement FY 20171 FY 2018 • Business income of €672m, increasing from €662m in 2017; (€m) (€m) – Retail Ireland: reduction vs. 2017 due to strategic customer Retail Ireland 287 267 initiatives and solutions – Wealth and insurance: inves
Slide 22: Costs have reduced by 3% / €48m
21 Costs have reduced by 3% / €48m Bank of Ireland 2018 Results Announcement Operating expenses to reduce further Transformation of cost base • Operating expenses (before levies and regulatory charges) of €1,852m reduced by €48m (3%) vs. 2017 • Expect operating expenses, including transformation inv
Slide 23: Transformation programme is delivering expected efficiencies
22 Transformation programme is delivering Bank of Ireland 2018 Results Announcement expected efficiencies Actions Outcomes • €32m (4%) reduction in staff costs; 55% of optimised spans and layers redesign completed Simplifying our • FTEs are 5% lower than Dec 2017, Senior Management roles reduced by
Slide 24: 24% improvement in NPE levels
23 24% improvement in NPE levels Bank of Ireland 2018 Results Announcement Non-performing exposures Asset quality continues to improve • Non-performing exposures (NPEs) of €5.0bn, a reduction of 11.4% 8.3% 6.3% €1.5bn (24%) during 2018 €4.4bn re • NPE ratio reduced by 200bps to 6.3% duction • Reduct
Slide 25: Capital and liquidity available to support growth
24 Capital and liquidity available to support growth Bank of Ireland 2018 Results Announcement Strong liquidity ratios Dec 2017 Dec 2018 (€bn) (€bn) • Liquidity Coverage Ratio: 136% • Net Stable Funding Ratio: 130% Customer loans 76 77 • Loan to Deposit Ratio: 97% Liquid assets 24 25 Wealth and Insu
Slide 26: Strong capital generation and position
25 Strong capital generation and position Bank of Ireland 2018 Results Announcement Fully loaded CET1 ratio 1.8% (0.4%) (0.6%) (0.7%) (0.4%) 0.1% 13.6% 13.4% 1 Jan 18 Organic Loan growth / Transformation Regulatory Capital 2018 Other Dec 18 CET1 capital RWA investment Demand2 Dividend CET1 (post IFR
Slide 27: Strategic investment and rigorous allocation of capital
26 Strategic investment and rigorous allocation Bank of Ireland 2018 Results Announcement of capital Investment / allocation of capital in 2018 Growth in • CET1 of c.200-250bps to accommodate c.20% in loan book growth over 4 years 1 loan book (2018 – 2021) 200-250bps • Net lending growth of €1.3bn i
Slide 28: Delivering attractive and sustainable returns
27 Delivering attractive and sustainable returns Bank of Ireland 2018 Results Announcement Return on Tangible Equity (RoTE) In excess of 10%2 6.9% 7.2%1/2 2017 2018 2021 1 See slide 56 for calculation 2 Calculated on a CET1 Ratio of 13%
Slide 29: Outlook
28 Outlook Bank of Ireland 2018 Results Announcement Growth Efficiency Returns • Net lending growth while • Costs to reduce further in • Continue to generate strong maintaining commercial 2019 organic capital discipline on risk and pricing • Expect further reduction in • Dividend to increase • Conti
Slide 30: Appendix
29 Bank of Ireland 2018 Results Announcement Appendix
Slide 31: Appendix
30 Appendix Bank of Ireland 2018 Results Announcement Slide No. • BOI Overview – Business profile 31 – Historic financial results 33 – Profile of customer loans 35 – Gross new lending volumes 36 • ROI mortgage loan book 37 • UK mortgage loan book 38 • Income Statement – Divisional performance 40 – I
Slide 32: BOI Overview: Ireland
31 BOI Overview: Ireland Bank of Ireland 2018 Results Announcement Ireland’s leading retail and commercial bank Retail Ireland Corporate Ireland Consumer Business Wealth Corporate Property Banking Finance Ireland • #1 Corporate • Disciplined Unique customer Bank in Ireland approach to risk franchise
Slide 33: BOI Overview: UK / International
32 BOI Overview: UK / International Bank of Ireland 2018 Results Announcement Attractive UK and International businesses provide diversification and further opportunities for growth Retail UK Corporate UK / International Partnerships Northern Ireland Niche Businesses Corporate Acquisition Banking UK
Slide 34: BOI Overview: Income Statement
33 BOI Overview Bank of Ireland 2018 Results Announcement Income Statement FY 2014 FY 2015 FY 20163 FY 20174 FY 2018 (€m) (€m) (€m) (€m) (€m) Total income 2,974 3,272 3,126 3,049 2,805 – Net interest income 2,358 2,454 2,298 2,248 2,146 – Other income (net) before additional gains 448 591 677 727 65
Slide 35: BOI Overview: Summary Balance Sheet
34 BOI Overview Bank of Ireland 2018 Results Announcement Summary Balance Sheet Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 (€bn) (€bn) (€bn) (€bn) (€bn) Customer loans1 82 85 78 76 77 Liquid assets 25 24 21 24 25 Wealth and Insurance assets 16 16 17 17 17 Other assets 7 6 7 6 5 Total assets 130 131 123 123
Slide 36: Profile of customer loans at Dec (Gross)
35 BOI Overview Bank of Ireland 2018 Results Announcement Profile of customer loans1 at Dec 18 (Gross) ROI UK RoW Total Total Composition (Dec 2018) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 23.7 21.7 0.0 45.4 58% Non-property SME and corporate 10.8 4.62 4.1 19.5 24% SME 7.6 1.6 0.0 9.2 11% Corporate 3.
Slide 37: Gross new lending volumes
36 Gross new lending volumes Bank of Ireland 2018 Results Announcement Retail Ireland Retail UK Corporate Banking €5.7bn €5.3bn £5.2bn £4.6bn €4.4bn €2.3bn €2.0bn €1.1bn €3.6bn £3.3bn €0.4bn €0.5bn £3.2bn €1.1bn €1.1bn €0.7bn €1.2bn €2.9bn €2.9bn €1.1bn £1.6bn £1.1bn €0.9bn €0.6bn £0.2bn £0.2bn 2017
Slide 38: ROI Mortgages: €23.7bn
37 ROI Mortgages: €23.7bn Bank of Ireland 2018 Results Announcement New Lending volumes and Market Share ROI Mortgages (gross) €24.3bn €24.1bn €23.7bn 27% 27% 25% €5.3bn €7.3bn €9.5bn €7.2bn €5.8bn €4.4bn €2.0bn €2.3bn €1.4bn €11.8bn €10.9bn €9.8bn 2016 2017 2018 Dec 16 Dec 17 Dec 18 n New Lending V
Slide 39: UK Mortgages: £19.4bn/€21.7bn
38 UK Mortgages: £19.4bn/€21.7bn Bank of Ireland 2018 Results Announcement UK Mortgages (gross) UK Mortgages (gross) £20.4bn £20.0bn £20.4bn £20.0bn £19.4bn £19.4bn £2.2bn £2.0bn £1.7bn £8.5bn £9.6bn £10.4bn £7.4bn £7.5bn £7.5bn £4.0bn £3.3bn £2.7bn £10.8bn £10.6bn £10.2bn £7.9bn £7.1bn £6.3bn Dec 1
Slide 40: Slide 40
Slide 41: Income Statement: Divisional performance
40 Income Statement Bank of Ireland 2018 Results Announcement Divisional performance Underlying profit / (loss) before Additional gains / Underlying profit / (loss) Year ended Dec 18 tax and additional gains / (losses) (losses) before tax (€m) (€m) (€m) Retail Ireland 665 (16) 649 Wealth and Insuran
Slide 42: Interest Rate Sensitivity
41 Interest Rate Sensitivity Bank of Ireland 2018 Results Announcement The table below shows the estimated sensitivity of the Group’s income (before tax) to an instantaneous and sustained 1% parallel movement in interest rates Dec 17 Dec 18 Estimated sensitivity on Group income (1 year horizon) (€m)
Slide 43: Net interest income analysis
42 Income Statement Bank of Ireland 2018 Results Announcement Net interest income analysis H1 2017 H2 2017 H1 2018 H2 2018 Average Gross Gross Average Gross Gross Average Gross Gross Average Gross Gross Volumes Interest Rate Volumes Interest Rate Volumes Interest Rate Volumes Interest Rate (€bn) (€m
Slide 44: Non-core items
43 Non-core items Bank of Ireland 2018 Results Announcement FY 2017 FY 2018 (€m) (€m) Cost of restructuring programme (48) (111) – Transformation investment costs1 (48) (93) – Other restructuring charges2 - (18) Gain on disposal of Property - 7 Gross-up for policyholder tax in the Wealth and Insuran
Slide 45: Transformation Investment
44 Transformation Investment Bank of Ireland 2018 Results Announcement 2016-21 investment: €1.4bn Increasing our investment to support growth and drive efficiencies Average of €275m p.a. • Scope: Culture, Systems, Business Model • Average annual investment of €275m from 2018-2021; equates to CET1 ca
Slide 46: Non-performing exposures by portfolio
45 Non-performing exposures by portfolio Bank of Ireland 2018 Results Announcement Non-performing Non-performing Impairment Impairment loss Advances Composition (Dec 18) (€bn) exposures exposures as % loss allowance allowance as % of (€bn) of advances (€bn) non-performing exposures Residential Mortg
Slide 47: ROI Mortgages: arrears management
46 ROI Mortgages Bank of Ireland 2018 Results Announcement Continued proactive arrears management >90 days arrears1 >90 days arrears Industry • Bank of Ireland is significantly below the industry average Average for both Owner Occupier (28% of industry average) and Buy to Let (28% of industry averag
Slide 48: Debt Securities at fair value through OCI (FVOCI)
47 Debt Securities at fair value through other Bank of Ireland 2018 Results Announcement comprehensive income (FVOCI) ROI UK France Other Dec 18 Dec 171 (€bn) (€bn) (€bn) (€bn) (€bn) (€bn) Sovereign bonds 2.6 - 0.8 2.6 6.0 7.5 Senior debt - - 0.3 1.9 2.2 2.1 Covered bonds 0.2 0.4 0.9 2.2 3.7 3.1 Sub
Slide 49: UK Customer Loans £27.9bn (€31.2bn)
48 UK Customer Loans £27.9bn (€31.2bn) Bank of Ireland 2018 Results Announcement UK Mortgages – £19.4bn UK Mortgages Analysis – £19.4bn • Total UK mortgages of £19.4bn; (NPEs: 2%) Scotland, Wales, £1.1bn £0.7bn – Average LTV of 62% on total book (2017: 62%) Greater – Average LTV of 72% on new mortga
Slide 50: Capital: CET1 ratios – Dec 2018
49 Capital Bank of Ireland 2018 Results Announcement CET1 ratios – Dec 2018 Regulatory ratio Fully loaded ratio (€bn) (€bn) Total equity 10.1 10.1 Less Additional Tier 1 (0.8) (0.8) Deferred tax1 (0.4) (1.1) Intangible assets and goodwill (0.7) (0.7) Foreseeable dividend2 (0.2) (0.2) Expected loss d
Slide 51: Capital Guidance and Distribution Policy
50 Capital Guidance and Distribution Policy Bank of Ireland 2018 Results Announcement • The Group expects to maintain a CET1 ratio in excess of 13% on a regulatory basis and on a fully loaded Capital basis by the end of the O-SII phase-in period1 Guidance • This includes meeting applicable regulator
Slide 52: Regulatory Capital Requirements
51 Regulatory Capital Requirements Bank of Ireland 2018 Results Announcement Pro forma CET1 Regulatory Capital Requirements Set by Range 2017 2018 2019 2020 2021 Pillar 1 – CET1 CRR 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% Pillar 2 Requirement (P2R) SSM 1% – 2.25%2 2.25% 2.25% 2.25% 2.25% 2.25% Capital C
Slide 53: Risk Weighted Assets (RWAs)
52 Risk Weighted Assets (RWAs) Bank of Ireland 2018 Results Announcement Customer lending average credit risk weights – Dec 20181/2 EBA Transparency Exercise 2018 (Based on regulatory exposure class) Country by Country Average IRB risk weights EAD3 RWA Avg. Risk Residential Mortgages – June 2018 (€b
Slide 54: Defined Benefit Pension Schemes
53 Defined Benefit Pension Schemes Bank of Ireland 2018 Results Announcement Group IAS19 Defined Benefit Pension Deficit Mix of BSPF* Defined Benefit Pension Scheme Assets (%)1 2.20% 2.10% 2.00% 1.60% €4.0bn €5.5bn €5.6bn €1.19bn 45% 61% 72% 11% €0.45bn €0.48bn €0.23bn 21% 44% 23% 18% 5% Jun 16 Dec
Slide 55: Ordinary shareholders’ equity and TNAV
54 Ordinary shareholders’ equity and TNAV Bank of Ireland 2018 Results Announcement 2017 2018 Movement in ordinary shareholders’ equity (€m) (€m) Ordinary shareholders’ equity at beginning of period 8,612 8,859 Movements: Profit attributable to shareholders 664 620 Impact of adopting IFRS 9 - (31) D
Slide 56: Cost income ratio: Dec 2018
55 Cost income ratio: Dec 2018 Bank of Ireland 2018 Results Announcement Headline vs. Adjusted FY 2018 Pro forma FY 2018 Headline adjustments Pro forma (€m) (€m) (€m) Net interest income 2,146 - 2,146 Other income – Business income 672 - 672 – Additional gains 9 (9) - – Other valuation items1 (22) 5
Slide 57: Return on tangible equity (RoTE)
56 Return on tangible equity (RoTE) Bank of Ireland 2018 Results Announcement 2018: Headline vs. Adjusted Adjustments Additional gains, 2018 “Normalised” 2018 & valuations impairment impairment Adjustment for 2018 Headline items1, gains, net of adjustment, net CET1 Ratio Adjusted (€m) net of tax tax
Slide 58: Forward-Looking statement
57 Forward-Looking statement Bank of Ireland 2018 Results Announcement This document contains forward-looking statements with respect to certain of the Bank of Ireland Group plc (the ‘Company’ or ‘BOIG plc’) and its subsidiaries’ (collectively the ‘Group’ or ‘BOIG plc Group’) plans and its current g
Slide 59: Contact Details
58 Contact Details Bank of Ireland 2018 Results Announcement For further information please contact: • Group Chief Financial Officer Andrew Keating tel: +353 76 623 5141 andrew.keating@boi.com • Investor Relations Darach O’Leary tel: +353 76 624 4711 darach.oleary@boi.com Kate Butler tel: +353 76 62
Slide 60: Slide 60