Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — FY2013 Earnings Presentation
60 slides from Bank Of Ireland's earnings presentation, December 2013
Slide 1: 2013 Results Announcement
2013 Results Announcement 31 December 2013
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Slide 3: 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 5: 2013 progress, Financial Results, Priorities for 2014 and beyond
2013 progress 1 Richie Boucher, CEO Financial Results 2 Andrew Keating, CFO Priorities for 2014 and beyond 3 Richie Boucher, CEO 3
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Slide 7: 2013 progress
2013 progress Richie Boucher
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Slide 9: Business highlights 2013
Business highlights 2013 2013 - a year of further substantial progress Strategic position strengthened - New Ireland retained Addressed the 2009 Preference Shares “step up” Safely managed ELG expiry - significant economic benefits Taxpayers rewarded and repaid - considerable cash returns and
Slide 10: Financial highlights 2013
8 Financial highlights 2013 Underlying earnings power is being rebuilt Operating profit pre impairment Defaulted loan volumes 10% E18.3bn 1.20% 1.34% 1.65% 2.03% E17.7bn c17.1bn E16.9bn E685m 4% 3% E380m Jun 12 Dec 12 Jun 13 Dec 13 E187m E37m H1 2012 H2 2012 H1 2013 H2 2013 -6% n Operating profit pr
Slide 11: Reimbursing and rewarding taxpayer support
Reimbursing and rewarding taxpayer support Jan 09 - Mar 14 Risk to the State dealt with c.14% - ELG expired Shareholding Since 2009, c.€4.8bn cash invested by the State Cumulative c.€6bn cash returned to the State State continues to hold valuable c.14% equity shareholding c.E4.8bn c.E6bn c.E
Slide 12: Economic environment
10 Economic environment Improved economic climate with favourable outlook ROI annual real GDP growth UK annual real GDP growth 2.6% 2.2% 1.8% 0.2% 0.3% 0.3% 2012 2013(f) 2014(f) 2012 2013 2014(f) Source: CSO, Forecasts 2013-2014 Reuters Consensus Source: ONS, Forecast 2014 Reuters Consensus ROI numb
Slide 13: Strong franchise positions - Ireland
Strong franchise positions - Ireland Leading bank in a consolidating market Comprehensive multi-channel distribution c.250 branches c.1,700 c.640k online customers c.300k 24 x 7 platform Self-service c.50% current accounts mobile customers devices active online Wealth Consumer Management incl. Busin
Slide 14: Strong franchise positions - international diversification
12 Strong franchise positions - international diversification 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.550k + Current
Slide 15: Supporting and benefiting from Irish economic recovery
Supporting and benefiting from Irish economic recovery Ambition to lend c.E33bn gross into the Irish economy, 2013 - 2017 Supporting Irish businesses Lending to homebuyers and supporting homeowners Receiving over 1,000 credit applications per week, Receiving over 1,000 mortgage applications 85%
Slide 16: Delivering on our targets
14 Medium term targets Delivering on our targets Metrics 2010 Target 2013 Status Loans and advances €114bn c.€90bn €85bn On track to customers1 Balance Sheet Group loan / deposit ratio 175% 120% 114% ✔ Capital - Core / Common Buffer maintained over ✔ 9.7% 12.3% Equity Tier 1 ratio2 regulatory
Slide 17: Financial Results
Financial Results Andrew Keating
Slide 18: Group Income Statement
16 Group Income Statement €930m improvement in underlying performance Total income growth of €784m (42%) Dec 12 Dec 13 Change €m €m €m Delivered net interest income growth of €378m (22%) driven by higher NIM, partially offset by lower average Net interest income 1,755 2,133 378 interest earning as
Slide 19: Income Statement momentum
Income Statement momentum Key financial metrics continuing to improve H1 2012 H2 2012 H1 2013 H2 2013 Metrics Change Change Change €m €m €m €m Net interest income 840 915 968 1,165 Other income (net) 247 248 - 319 323 ELG fees (212) (176) (99) (30) Total income 875 987 1,188 1,45
Slide 20: Divisional analysis
18 Divisional analysis All divisions are improving their performance Retail Ireland Retail UK Operating profit pre impairment Operating profit pre impairment E154m E262m E159m E77m E103m E51m E2m E13m H1 2012 H2 2012 H1 2013 H2 2013 H1 2012 H2 2012 H1 2013 H2 2013 BOI Life Corporate & Treasury Opera
Slide 21: Net interest margin (NIM)
Net interest margin (NIM) NIM target of >2% achieved Significant net interest margin momentum continued Net interest margin trend 2% NIM achieved despite low interest rate environment +83bps Reflects the Group’s focus on: 2.03% Repricing lending and deposit portfolios 1.65% More efficient ba
Slide 22: Interest earning assets
20 Interest earning assets Pace of decline in loan assets is slowing Loan assets Point in time loan volumes - 2013 movements1 E93bn (E5.0bn) Loan asset reduction primarily reflected: (E1.6bn) (E1.7bn) E0.3bn E85bn Planned deleveraging in 2012 Redemptions exceeding new lending in 2013 New Ire
Slide 23: ELG fees
ELG fees ELG fees reduced by E259m in 2013 E LG expired on 28 Mar 2013 ELG fees FY E388m FY E129m N o adverse impact on deposit volume or pricing strategy E212m ELG fees are reducing quickly, in line with expectations E176m Projected average covered liabilities: 2014: €4bn E99m 2015: €1.
Slide 24: Operating expenses
22 Operating expenses Focused on cost control - E57m cost reduction in 2013 Reduced operating costs (ex Pension) by E120m Pension costs 13,100 11,800 IAS19 (Revised) impact E1,568m 2012 2013 E1,448m Pension costs under 102 121 E771m previous standard E691m Impact of revised 11 40 standard Pension Le
Slide 25: Asset Quality
Asset Quality
Slide 26: Loans and advances to customers - €93bn
24 Loans and advances to customers - E93bn1 Portfolio profile2 Geographic profile2 UK Mortgages 29.5% SME & Corporate 23% ROI UK 52% 44% ROI Mortgages 29.5% Property & Construction 15% Consumer RoW 3% 4% 1 Loans and advances to customers of €92.8bn at 31 Dec 13 are before impairment provision of €8.
Slide 27: Defaulted loans and Impairment charges
Defaulted loans and Impairment charges Defaulted loan volumes reduced by E1.2bn Defaulted loan volumes Defaulted loan volumes 10% E18.3bn Reduced by €1.2bn or 6% since Jun 13 E17.7bn All major asset classes improved c17.1bn E16.9bn 4% Loan portfolios continue to perform in line with expectatio
Slide 28: ROI Owner Occupied Mortgages: €20.4bn
26 ROI Owner Occupied Mortgages: €20.4bn Defaulted loan volumes reduced in H2 2013 - the first time since 2008 Net change in defaulted loan volumes2 Profile of assets (> 90 days past due and / or impaired) 93% of loans on a capital and interest repayment basis E364m 54% or €11.0bn are ECB Tracke
Slide 29: ROI Buy to Let Mortgages: €6.3bn
ROI Buy to Let Mortgages: €6.3bn Pace of flow into default continues to decline Net change in defaulted loan volumes2 Profile of assets (> 90 days past due and / or impaired) 65% of loans on a capital and interest repayment basis E251m (52% at Dec 12) Portfolio size has reduced by €407m or 6% in
Slide 30: UK Residential Mortgages: £21bn / €25bn
28 UK Residential Mortgages: £21bn / €25bn Continues to perform strongly Standard £9.2bn Buy to let £8.3bn Self cert £3.3bn £210m £178m £176m £183m £178m £168m £140m £146m £146m £55m £55m £51m £44m £34m £34m £31m £27m £28m Dec 12 Jun 13 Dec 13 Dec 12 Jun 13 Dec 13 Dec 12 Jun 13 Dec 13 n Defaulted lo
Slide 31: SME & Corporate loans: €21bn
SME & Corporate loans: €21bn Defaulted loans reducing ROI SME - E10bn UK SME - £2bn / E3bn Corporate - E8bn E2.9bn E2.8bn E2.7bn E1.1bn E1.3bn E1.4bn E0.9bn E1.2bn E0.6bn E0.6bn E0.6bn E0.6bn E0.3bn E0.3bn E0.4bn E0.4bn E0.2bn E0.2bn Dec 12 Jun 13 Dec 13 Dec 12 Jun 13 Dec 13 Dec 12 Jun 13 Dec 13 n D
Slide 32: Property & Construction: €16.8bn
30 Property & Construction: E16.8bn Defaulted loans reducing Investment property - €13.6bn Land and development - €3.2bn E5.9bn E5.8bn E5.6bn E3.2bn E3.0bn E2.8bn E2.1bn E2.2bn E1.9bn E1.9bn E1.9bn E1.9bn Dec 12 Jun 13 Dec 13 Dec 12 Jun 13 Dec 13 n Defaulted loans Provision stock n Defaulted loans P
Slide 33: Funding & Capital
Funding & Capital
Slide 34: Balance Sheet
32 Balance Sheet1 Restructuring complete - capital, liquidity and infrastructure available to support planned growth Loans Dec 10 Dec 13 Change Ebn Ebn Ebn Planned deleveraging of loan book complete; ahead of time and below assumed cost Assets Loans and advances 115 85 (30) Customer deposits Liqui
Slide 35: Deposits
Deposits Stable retail oriented deposit franchises Deposit strategies leverage the strength of our franchises Deposit franchises and scale of our distribution E75bn E74bn Retail Ireland - €1bn increase in deposit volumes Retail UK - £3bn reduction in 2013 reflecting the planned reduction of ex
Slide 36: Wholesale funding
34 Wholesale funding Significantly reduced requirement Monetary Authority funding Wholesale funding €7bn of ECB funding repaid in 2013 E39bn E3bn IBRC Repo transaction (€3bn) terminated on a no-gain / no-loss basis in Feb 13 Repaid an additional €4bn of LTRO borrowings E12bn E27bn Remaining
Slide 37: Access to capital and funding markets
Access to capital and funding markets Consistently accessing markets across the capital structure - significantly reducing cost 2013 IFR Issuer of Issuance: Nov 12 - Jan 14 the Year 4 issues Senior secured debt €3.0bn 3, 5 and 7 year duration 2 issues Senior unsecured debt €1.25bn 3 and 5 ye
Slide 38: Capital
36 Capital Robust capital ratios Balance Sheet Assessment / AQR addressed Capital ratios Jun 13 - Jan 14 14.2% (0.3%) Updated expected loss treatment incorporated at Dec 13 (1.5%) (1.7%) 0.3% 12.3% 1.3% R WA - AQR adjustments applied at Dec 13 Impairment charges reflects, amongst other things,
Slide 39: Priorities for 2014 and beyond
Priorities for 2014 and beyond Richie Boucher
Slide 40: Recap on progress - 2011 - 2013
38 Recap on progress - 2011 - 2013 Strong track record of delivery Transformed profile, availability and cost of funding base Improved loan to deposit ratio from 175% to 114% Restructured Asset quality - reduced defaulted loans by €1.2bn since Jun 13 Balance Sheet Shared solution to DB pensi
Slide 41: Priorities for 2014 and beyond
Priorities for 2014 and beyond Total focus on delivering these priorities Continue to support and benefit from the Irish and UK economic recovery Continue to develop relationships with existing and new customers Utilising our multi-product, multi-channel offering in Ireland and our partnership
Slide 42: 2013 - a year of further substantial progress
40 2013 - a year of further substantial progress Strong Franchise Positions Priorities are clear
Slide 43: Additional Information
Additional Information
Slide 44: Additional Information
42 Additional Information Slide No. EU Restructuring Plan 43 Summary Balance Sheet 44 Loans and advances to customers 45 Defaulted loans and impairment provisions 46 ROI Owner Occupied Mortgages - book profile 47 ROI Buy to Let Mortgages - book profile 48 Available for Sale Financial A
Slide 45: EU Restructuring Plan - Summary of 2013 Amendments
EU Restructuring Plan - Summary of 2013 Amendments Strategic position enhanced through retention of New Ireland In July 2013, the European Commission approved amendments to the Group’s EU Restructuring Plan Second largest life and pension provider in Ireland New Ireland Distribution through comp
Slide 46: Summary Balance Sheet
44 Summary Balance Sheet Dec 12 Dec 13 Group Balance Sheet Ebn Ebn Net loans and advances to customers1 93 85 Liquid assets 30 27 IBRC repo transaction 3 - BOI Life assets 13 14 Other assets 9 6 Total assets 148 132 Customer deposits 75 74 Wholesale funding 39 27 - Private Sources 24 1
Slide 47: Loans and advances to customers
Loans and advances to customers ROI UK RoW Total Total Profile at 31 December 20131 €bn €bn €bn €bn % Mortgages 26.7 25.0 - 51.7 56% Non-property SME and corporate 12.9 5.3 3.3 21.5 23% - SME 10.3 3.3 - 13.6 15% - Corporate 2.6 2.0 3.3 7.9 8% Property and construction 8.8 7.6 0.4 16.8 18% - Investme
Slide 48: Defaulted loans & impairment provisions
46 Defaulted loans & impairment provisions Loans and advances to customers Advances Defaulted Loans1 Defaulted Loans as Impairment Impairment Provisions Composition and impairment €bn €bn % of advances provisions €bn as % of defaulted loans Residential mortgages 51.7 4.4 8.5% 2.0 46% ROI 26.7 3.
Slide 49: ROI Owner Occupied Mortgages - book profile
ROI Owner Occupied Mortgages - book profile Up to date book Arrears book Number of Accounts (145k) Number of Accounts (16k) Early Arrears 1% Late Arrears 2% Forbearance & Overpayment 90% 4% Resolution - Consensual / Legal process 3% 9 out of 10 mortgage accounts are in the up to date book Early
Slide 50: ROI Buy to Let Mortgages - book profile
48 ROI Buy to Let Mortgages - book profile Up to date book Arrears book Number of Accounts (27k) Number of Accounts (8k) Early Arrears 2% Late Arrears 7% 78% Forbearance & Overpayment 5% Resolution - Consensual / Legal process 8% 8 out of 10 mortgage accounts are in the up to date book Early arr
Slide 51: Available for Sale Financial Assets
Available for Sale Financial Assets ROI UK Spain Other Dec 13 Dec 12 Carrying value Ebn Ebn Ebn Ebn Ebn Ebn Sovereign Bonds 6.4 0.1 - 0.1 6.6 5.6 Covered Bonds 0.1 0.5 0.9 1.2 2.7 3.2 Senior Debt 0.8 - - 1.5 2.3 1.6 Subordinated Debt 0.1 - - - 0.1 0.1 Asset Backed Securities - 0.2 0.1 0.1 0.4 0.5 To
Slide 52: Capital: Basel III impacts
50 Capital: Basel III impacts Fully loaded Ratio at 31 Dec 13 Transitional RATIO AT 1 JAN 14 CT1 / CT1 / CT1 / CT1 / RWAs CET1 RWAs CET1 CET1 Capital CET1 Capital Ebn Ratio Ebn Ratio Ebn Ebn % % Basel II ratio at 31 Dec 13 56.4 6.9 12.2% 56.4 6.9 12.2% - Deferred Tax 1 (1.2) (1.5) (1.2) - - Pension
Slide 53: Divisional performance
Divisional performance Other Retail Bank of Retail Corporate Group reconciling Year ended Group Ireland Ireland Life UK & Treasury Centre items1 31 December 2013 Em Em Em Em Em Em Em Underlying operating profit / (loss) before impairment 421 107 231 619 (310) (3) 1,065 charges on financial assets Im
Slide 54: Other income analysis (net)
52 Other income analysis (net) Net other income 2012 2013 €m €m Retail Ireland 278 302 Bank of Ireland Life 133 131 Retail UK 40 3 Corporate and Treasury 147 151 Group Centre and other (15) 5 Business Income 583 592 Other items (see below) (88) 50 Net other income 495 642 Other items Transfer from a
Slide 55: Non-core items
Non-core items 2012 2013 Non-core items €m €m Impact of changes to pension benefits in the Bank sponsored defined benefits scheme - 274 Charges arising on the movement in credit spreads on the Group’s own debt and deposits (297) (154) accounted for at ‘fair value through profit or loss’ Cost of rest
Slide 56: Ordinary Stockholders' Equity and Tangible Net Asset Value
54 Ordinary Stockholders’ Equity and Tangible Net Asset Value Dec 12 Dec 13 Movement in ordinary stockholders’ equity €m €m Ordinary stockholders’ equity at beginning of period 8,367 6,759 Movements: Loss attributable to stockholders (1,835) (487) Dividends paid on preference stock (196) (240) F
Slide 57: Contact details
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 te
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Slide 60: Bank of Ireland regulatory and registered office information
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.