Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — H1 2014 Earnings Presentation
52 slides from Bank Of Ireland's earnings presentation, Jun 30, 2014
Slide 1: Interim Results 30 June 2014
Interim Results 30 June 2014 Vv Bank of lreland@ For small steps, for big steps, for life
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Slide 3: Chief Executive's Review
Chief Executive’s Review Richie Boucher
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Slide 5: Business highlights H1 2014
Business highlights H1 2014 ✔ Profitable and accreting capital; TNAV is increasing ✔ Increasingly favourable macroeconomic environments ✔ Asset quality continues to improve ✔ Largest lender to the Irish economy ✔ Positive momentum across all customer franchises 3
Slide 6: Improved Underlying PBT by over €700m
4 Improved Underlying PBT by over €700m NIM of 2.05% H1 2013 H1 2014 Increased total income by c.€290m / 24% in H1 2014 Net interest Higher Net interest income 1.65% 2.05% margin Lower ELG costs Total income €1,188m €1,475m Significant operating leverage - cost / income ratio of 55% Grea
Slide 7: Accreting capital and increasing TNAV
Accreting capital and increasing TNAV Increased CET 1 capital ratio by 90bps Customer loans reduced by €1.1bn (constant currency - €2.4bn) Dec 13 Jun 14 New lending of €4.3bn in H1 2014; greater than 50% increase vs. H1 2013 Customer Pace of reduction is slowing €84.5bn €83.4bn loans (net) R
Slide 8: Macroeconomies improving; outlook favourable
6 Macroeconomies improving; outlook favourable ROI unemployment and GDP UK unemployment and GDP 14.7% 13.1% 11.5% 10.4% 8.0% 7.6% 6.5% 6.1% 3.4% 2.8% 3.0% 2.5% 1.7% -0.3% 0.2% 0.3% 2012 2013 2014(f) 2015(f) 2012 2013 2014(f) 2015(f) n Annual real GDP growth Unemployment rate (annual average) n Annua
Slide 9: Ireland - Leading bank in a consolidating market
Ireland - Leading bank in a consolidating market #1 or #2 positions across all principal product lines Providing 1 in every 3 mortgages; encouraging new lending trends in Q2 Consumer Tracker mortgages reduced by €0.7bn in H1 2014 Banking Winning new customer relationships, including from exi
Slide 10: International - Progress in H1; momentum building
8 International - Progress in H1; momentum building With our Post Office partner, a leading UK challenger consumer bank with c.3m customers Mortgages: making good progress Post Office partnership - new Mortgage Advisors recruited and deployed New distribution partnership with L&G, under Post
Slide 11: Journey from recovery to growth
Journey from recovery to growth 1 Increasing profitability NIM of 2.05% vs. 1.20% trough - further growth from here will reflect deposit pricing, new lending and interest rates Costs reduced by €500m vs. peak - maintaining cost control while continuing to invest ELG fees - reduced by over 90%
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Slide 13: Chief Financial Officer's Review
Chief Financial Officer’s Review Andrew Keating
Slide 14: Group Income Statement
12 Group Income Statement Greater than €700m improvement in Underlying PBT H1 2013 (€m) H1 2014 (€m) Increased net interest income - €193m higher; reflecting Total income 1,188 1,475 higher NIM offset by lower average interest earning assets Net interest income 968 1,161 Reduced ELG fees - €78m
Slide 15: Net interest income
Net interest income Net interest margin Net interest income - €1,161m 1.65% 2.03% 2.05% In line with H2 2013, with higher NIM offset by lower average interest earning assets 3.23% 3.16% 3.13% NIM 1.65% NIM improved to 2.05% reflecting 1.26% 1.15% Lower funding costs Positive impact of new le
Slide 16: Loans and advances to customers
14 Loans and advances to customers Rate of reduction is slowing Pace of reduction in loan book is slowing; expect pace to slow further as new lending increases H1 2013 H2 2013 H1 2014 €4.3bn new lending in H1 2014; up > 50% vs. H1 2013 €1.1bn Strong new lending performance across our portfolio
Slide 17: Operating expenses
Operating expenses Staff costs H1 2013 H2 2013 H1 2014 (€m) (€m) (€m) Staff costs in line with H2 2013 Post 2013 pensions review, engagement process Staff Costs 351 340 339 underway on future career frameworks and certain aspects of remuneration Pension 79 54 70 Pension costs Pension Costs 83 78
Slide 18: Asset Quality
Asset Quality
Slide 19: Defaulted loans and impairment charges
Defaulted loans and impairment charges Defaulted loan volumes Defaulted loan volumes €18.3bn €0.4bn reduction vs. H2 2013 €17.1bn €16.7bn Expect further reductions in H2 2014 Impairment charges Charges reduced across all loan portfolios Greater than 40% reduction vs. H2 2013; albeit remain e
Slide 20: ROI Owner Occupied mortgages: €20.2bn
18 ROI Owner Occupied mortgages: €20.2bn Defaulted loan volumes Profile of assets €2,151m €2,051m 94% on a capital and interest repayment basis €1,911m 53% or €10.6bn of mortgages are ECB trackers (54% or €11.0bn at Dec 13) €869m €863m €824m Market environment Residential property prices conti
Slide 21: ROI Buy to Let mortgages: €6.0bn
ROI Buy to Let mortgages: €6.0bn Defaulted loan volumes Profile of assets 68% of loans on a capital and interest repayment basis €1,787m (65% at Dec 13) €1,707m €1,745m 76% or €4.6bn of mortgages are ECB trackers (79% or €4.9bn at Dec 13) €994m €1,037m €862m Market environment Private rental m
Slide 22: UK Residential mortgages: £20bn/€25bn
20 UK Residential mortgages: £20bn/€25bn Defaulted loan volumes Profile of assets UK residential mortgage books continue to perform well £507m Market environment £492m £457m Economic conditions continuing to improve £127m £116m £102m Portfolio performance Arrears levels are below the industry
Slide 23: SME & Corporate loans: €21bn
SME & Corporate loans: €21bn ROI SME - €10bn UK SME - £2bn/€3bn Corporate - €8bn €2,880m €2,747m €2,656m €1,115m €1,329m €1,379m €1,358m €725m £553m €593m £476m £344m €449m £241m £238m €244m €279m £152m Jun 13 Dec 13 Jun 14 Jun 13 Dec 13 Jun 14 Jun 13 Dec 13 Jun 14 n Defaulted Loans Provision Stock
Slide 24: Property & Construction: €16.7bn
22 Property & Construction: €16.7bn Investment Property - €13.6bn Land and Development - €3.1bn €5,940m €5,766m €5,689m €3,012m €2,825m €2,755m €2,075m €2,183m €2,321m €1,888m €1,935m €2,004m Jun 13 Dec 13 Jun 14 Jun 13 Dec 13 Jun 14 n Defaulted Loans Provision Stock n Defaulted Loans Provision Stoc
Slide 25: Funding & Capital
Funding & Capital
Slide 26: Balance Sheet
24 Balance Sheet Capital and Liquidity available to support planned growth Customer deposits - €75bn Dec 13 (€bn) Jun 14 (€bn) Account for > 75% of the Group’s funding Customer loans 85 83 Predominantly retail customer oriented Liquid assets 27 26 ROI €36bn, UK €27bn (£21bn) and Corporate €12b
Slide 27: Capital
Capital1 Accreting Capital - 90bps increase in CET 1 ratio in H1 2014 Capital Ratios Capital ratios 16.4% (including 2009 Preference Shares) 13.2% 14.1% Transitional CET 1 ratio of 13.2%; 90bps increase since 12.3% 1 Jan 14 Total Capital ratio of 16.4%; reflects €750m of Tier 2 issuance in Jun 1
Slide 28: Additional Information
Additional Information
Slide 29: Additional Information
Additional Information Slide No. BOI Overview Business profile 28 Historic financials 30 Financial targets 32 Income Statement Divisional performance 33 Other income analysis (net) 34 Non-core items 35 Impact of ECB tracker mortgage loan book 36 Asset quality Profile of custome
Slide 30: BOI Overview
28 BOI Overview Ireland: Leading bank in a consolidating market Comprehensive multi-channel distribution c.250 branches c.1,700 c.55% of customers c.350k 24 x 7 platform Self-service are active online mobile customers devices & mobile channel users Wealth Consumer Management incl. Business Corporate
Slide 31: BOI Overview
BOI Overview Attractive international franchises Challenger consumer banking franchise in GB Leveraged acquisition finance Trusted brand, established customer base and expanding product range Well recognised lead arranger / underwriter c.1.6m c.200k Retail FX c.530k + c.560k + Current Savings Mort
Slide 32: BOI Overview: Income Statement
30 BOI Overview Income Statement1 Jun 14 y/e Dec 10 y/e Dec 11 y/e Dec 12 y/e Dec 13 (6 month) (€m) (€m) (€m) (€m) (€m) Total income 2,802 2,058 1,862 2,646 1,475 Net interest income 2,511 1,983 1,755 2,133 1,161 Other income 634 524 495 642 335 ELG fees (343) (449) (388) (129) (21) Operating expens
Slide 33: BOI Overview: Summary Balance Sheet
BOI Overview Summary Balance Sheet Dec 10 Dec 11 Dec 12 Dec 13 Jun 14 (€bn) (€bn) (€bn) (€bn) (€bn) Net Customer Loans1 115 102 93 85 83 Liquid assets 30 31 33 27 26 BOI Life assets 13 12 13 14 15 Other assets 9 10 9 6 7 Total Assets 167 155 148 132 131 Customer deposits 65 71 75 74 75 Wholesale fun
Slide 34: BOI Overview: Financial targets
32 BOI Overview Financial targets Metrics Target 2013 H1 2014 Status Balance Sheet Loans and advances to c.€90bn c.€85bn c.€83bn On track customers1 Group loan / deposit ratio ≤120% 114% 112% ✔ Common Equity Tier 1 ratio Buffer - Transitional maintained > 10% 12.3%2 13.2% ✔ ELG covered liabilities F
Slide 35: Income Statement: Divisional performance
Income Statement Divisional performance Retail BOI Life Retail Corporate Group Other Group 6 months ended Jun 14 Ireland incl. NIAC UK & Treasury Centre reconciling (€m) (€m) (€m) (€m) (€m) (€m) items1 (€m) Underlying operating profit / 236 69 152 349 (133) (11) 662 (loss) before impairment charges
Slide 36: Income Statement: Other income analysis (net)
34 Income Statement Other income analysis (net) H1 2013 H2 2013 H1 2014 (€m) (€m) (€m) Business income Retail Ireland 145 158 154 Bank of Ireland Life 64 67 71 Retail UK - 7 7 Corporate and Treasury 58 64 66 Group Centre and other 1 (6) (12) Other valuation items Fair value movement on derivative em
Slide 37: Income Statement: Non-core Items
Income Statement Non-core Items H1 2013 H2 2013 H1 2014 (€m) (€m) (€m) Impact of changes to pension benefits in the Bank sponsored schemes - 274 87 (Charges) / gains arising on the movement in credit spreads on the Group’s own debt (88) (66) 8 and deposits accounted for at ‘fair value through profit
Slide 38: Impact of ECB tracker mortgage loan book
36 Impact of ECB tracker mortgage loan book Irish tracker book (gross) Margin impacts Dec 13 Jun 14 (bps) (bps) €16.9bn €15.9bn €15.2bn Customer pay rate (avg) 130 120 - ECB repo rate1 25 15 - Average fixed spread 105 105 Cost of funds2 126 115 Net interest margin 4 5 Dec 12 Dec 13 Jun 14 Volume of
Slide 39: Asset Quality: Profile of customer loans
Asset Quality Profile of customer loans1 at Jun 14 (gross) ROI UK RoW Total Total (€bn) (€bn) (€bn) (€bn) (%) Mortgages 26.2 25.0 - 51.2 56% Non-property SME and corporate 12.4 5.22 3.4 21.0 23% SME 10.0 2.8 - 12.8 14% Corporate 2.4 2.4 3.4 8.2 9% Property and construction 9.0 7.4 0.3 16.7 18% Inves
Slide 40: Defaulted customer loans & impairment provisions
38 Asset Quality Defaulted customer loans & impairment provisions Impairment Impairment Advances Defaulted Loans1 Defaulted Loans Composition (Jun 14) (€bn) (€bn) as % of advances Provisions Provisions as % of (€bn) defaulted loans1 Residential mortgages 51.2 4.3 8.3% 2.0 48% ROI 26.2 3.7 14.1% 1.9
Slide 41: ROI Owner Occupied mortgages - book profile - Jun 14
Asset Quality ROI Owner Occupied mortgages - book profile - Jun 14 Up to date book Arrears book Number of Accounts (145k) Number of Accounts (15k) Early Arrears 1% Late Arrears 2% Forbearance & Overpayment 91% 3% Resolution - Consensual / Legal process 3% 9 out of 10 mortgage accounts are in the u
Slide 42: ROI Buy to Let mortgages - book profile - Jun 14
40 Asset Quality ROI Buy to Let mortgages - book profile - Jun 14 Up to date book Arrears book Number of Accounts (27k) Number of Accounts (7k) Early Arrears 2% Late Arrears 5% Forbearance & Overpayment 78% 5% Resolution - Consensual / Legal process 10% 8 out of 10 mortgage accounts are in the up
Slide 43: Available for Sale Financial Assets
Asset Quality Available for Sale Financial Assets ROI UK Spain Other Jun 14 Dec 13 Carrying Value (€bn) (€bn) (€bn) (€bn) (€bn) (€bn) Sovereign bonds 6.9 0.6 0.2 0.5 8.2 6.6 Covered bonds 0.2 0.5 0.7 1.1 2.5 2.7 Senior debt 0.6 - - 1.7 2.3 2.3 Subordinated debt 0.2 - - - 0.2 0.1 Asset backed securit
Slide 44: Pro-forma Basel III CET 1 ratios
42 Capital Pro-forma Basel III CET 1 ratios Transitional ratio Fully loaded ratio At 30 Jun 14 (€bn) (€bn) Total equity 8.3 8.3 Deferred Tax 1 - (1.5) Pension Deficit 0.8 - Available for sale reserve (0.6) - Significant Investments/NIAC2 (0.1) (0.2) Expected Loss (0.1) (0.3) Removal of National Filt
Slide 45: Defined Benefit Pension Schemes
Defined Benefit Pension Schemes 5.3% Pension deficit of €0.97bn at Jun 14 (€0.84bn at Dec 13) 3.9% 3.65% Increase in deficit since Dec 13 primarily reflects reduction 3.05% in corporate bond yields (€0.7bn), partially offset by asset returns (€0.4bn) and the positive impact in the current period
Slide 46: Reimbursing and rewarding taxpayers support
44 Reimbursing and rewarding taxpayers support Jan 09 - Jun 14 Since 2009, c.€4.8bn cash invested by the State c.14% Cumulative c.€6.0bn cash returned to the State Shareholding State continues to hold valuable c.14% equity shareholding Risk to the State dealt with - ELG expired IBRC promis
Slide 47: Ordinary Stockholders' Equity and TNAV
Ordinary Stockholders’ Equity and TNAV 2013 2014 Movement in ordinary stockholders’ equity (€m) (€m) Ordinary stockholders’ equity at beginning of period 6,759 6,528 Movements: (Loss)/profit attributable to stockholders (483) 343 Dividends paid on preference stock (240) (137) Foreign exchange moveme
Slide 48: Contact details
46 Contact details For further information please contact: Group Chief Financial Officer Andrew Keating tel: +353 76 623 5141 andrew.keating@boi.com Investor Relations Mark Spain tel: +353 76 623 4850 mark.spain@boi.com Ciaran McGrath tel: +353 76 623 4730 ciaran.mcgrath@boi.com Barry McLoughlin
Slide 49: Forward-Looking statement
Forward-Looking statement This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934 and Section 27A of the US Securities Act of 1933 with respect to certain of the Bank of Ireland Group’s (the ‘Group’) plans and its current
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Slide 52: Bank of Ireland regulatory and registered office note
Bank of Ireland is regulated by the Central Bank of Ireland. Bank of Ireland incorporated in Ireland with limited liability. Registered Office - Head Office, 40 Mespil Road, Dublin 4, Ireland. Registered Number – C-1.
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