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Aib — Corporate Update (April 2023)

15 slides from Aib's corporate update, April 2023

1. Slide 1: The Irish Economic Update

   The Irish Economic Update: Strong start to 2023, but slowdown in growth likely, with more binding capacity constraints April 2023 Oliver Mangan Chief Economist AIB 1

2. Slide 2: Economy rebounded very strongly in 2021-22 from COVID

   Economy rebounded very strongly in 2021-22 from COVID  Another very strong rise in GDP in 2022 of 12%, % Consumer Spending (Volume, 3 QTR Moving Average, YoY% Change) 15 following the 13.6% increase seen in 2021  10 Surging inflows of foreign direct investment a key factor 5 in rapid growth of eco

3. Slide 3: Indicators point to slower economic growth this year

   Indicators point to slower economic growth this year AIB Irish Mfg and Services PMIs Ireland Construction PMI 70 70 60 60 50 50 Manufacturing 40 40 30 30 Services 20 20 10 10 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 0 Feb-17 Feb-18 Feb-19 Feb-20 Feb-21 Feb-22 Feb-23 Source: Markit via Refini

4. Slide 4: Though data remained strong in Q1 2023

   Though data remained strong in Q1 2023  As elsewhere, Irish data stronger than expected in Q1 2023, with official growth forecasts revised up  Mfg PMI fell sharply in H2 2022 to below 50 by Nov/Dec. Modest pick-up in Q1 2023, averaged 50.4  Services PMI solid in 2022. Picked up strongly in early

5. Slide 5: Unemployment falls to very low level, inflation now easing

   Unemployment falls to very low level, inflation now easing % Employment (YoY, %) Unemployment Rate 15 8.0 Private 12 7.5 9 7.0 Total 6.5 6 3 6.0 0 5.5 Public -3 5.0 -6 4.5 -9 4.0 Mar 2017 Mar 2018 Mar 2019 Mar 2020 Mar 2021 Mar 2022 Mar 2023 Q4 2016 Q4 2017 Q4 2018 Q4 2019 Q4 2020 Q4 2021 Q4 2022 So

6. Slide 6: Exports perform very strongly in 2021-22 as FDI surges

   Exports perform very strongly in 2021-22 as FDI surges Exports as % of GDP  Ireland is a very open economy – exports, driven by Finland large scale FDI, are a huge part of economy UK  Exports have risen strongly in recent years, helped Germany by very large FDI inflows France  IDA reported record

7. Slide 7: House completions jump, but commencements fall back

   House completions jump, but commencements fall back  Completions amounted to 20,500 in 2020 & 2021, 35,000 Irish Housing Activity just 2.6% down on 2019 level despite lockdowns 30,000  Completions then jumped sharply to 30,000 in 2022, 25,000 helped by rebound from COVID lockdowns 20,000  15,000

8. Slide 8: House prices levelling off

   House prices levelling off  House prices declined sharply, by 55% over 2007-13. % National House Price Inflation Prices have fully recovered - back above 2007 peak level 3.0 % 18.0  Low supply, remote working, strong public/institutional 2.5 2.0 15.0 12.0 demand, enhanced help-to-buy scheme, risin

9. Slide 9: AIB Model of Estimated Housing Demand

   AIB Model of Estimated Housing Demand  Rising headship rates added circa Calendar Year 2020 2021 2022 2023 2024 8,000 per year to housing demand in 2002-2011 period Household 26,000 29,000 28,000 25,000 24,500  Shortage of housing, high rents, Formation tighter lending rules saw average of which h

10. Slide 10: Private sector deleverages, Gov. debt ratios fall to low levels

    Private sector deleverages, Gov. debt ratios fall to low levels Irish Household Debt Ratio % (% of Disposible Income) % Irish Private Sector Credit (Inc Securitisations) as % GNI* 220 350 205 300 190 250 175 160 200 145 150 130 100 115 100 50 85 0 Q3 2002 Q3 2006 Q3 2010 Q3 2014 Q3 2018 Q3 2022 2004

11. Slide 11: Strong growth sees public finances return to surplus

    Strong growth sees public finances return to surplus  Budget deficits in 2020 and 2021 owing to COVID General Government Balance (% GNI*)  6 Tax revenues rose very strongly across the board 4 in 2022; up 21.5% after a 20% rise in 2021 2  Budget target was a deficit of €8bn for 2022, but a 0 surpl

12. Slide 12: Good growth likely in 2023 despite headwinds & capacity issues

    Good growth likely in 2023 despite headwinds & capacity issues  Mounting headwinds and capacity constraints, but solid growth expected by Irish economy in 2023-24 OECD Global GDP Forecasts (Mar 2023)  Strong data in Q1 2023 – PMIs, tax receipts, car sales % Vol 2021 2022 2023 2024  FDI inflows co

13. Slide 13: AIB Irish Economic Forecasts

    AIB Irish Economic Forecasts % change in real terms unless 2020 2021 2022 2023 (f) 2024 (f) stated GDP 6.2 13.6 12.0 4.0 3.7 GNP 2.7 14.7 6.7 3.5 3.3 Modified Final Domestic Demand -6.1 5.8 8.2 3.0 2.8 Personal Consumption -10.9 4.6 6.6 3.0 3.0 Government Spending 11.6 6.5 0.7 2.3 2.0 Fixed Investme

14. Slide 14: Changes to Global Corporate Tax Regime

    Changes to Global Corporate Tax Regime Importance of FDI:  Some 1,800 multinational companies are based in Ireland, accounting for over 300,000 jobs in direct employment  Corporation tax receipts of €22.6bn in 2022 or 27% of total tax revenue – well over 80% comes from MNCs Changes to Corporate Ta

15. Slide 15: Risks to the Irish economy outlook

    Risks to the Irish economy outlook  Very open Irish economy vulnerable to weaker global outlook, including FDI inflows, with concerns about downsizing in the tech sector in particular given big presence in Ireland  High inflation and rising interest rates will weigh on Irish activity in 2023, as e

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