AIB Group plc · EURONEXT:A5G
AIB — Investor Presentation (October 2016)
18 slides from AIB's investor presentation, October 2016
Slide 1: The Irish Economic Update
The Irish Economic Update Signs of slower growth as Brexit looms October 2016 Oliver Mangan Chief Economist April 2013 AIB aibeconomicresearch.com 1
Slide 2: Strong recovery by Irish economy
Strong recovery by Irish economy Irish economy boomed from 1993 to 2007 with GDP up by over 250% – Celtic Tiger Very severe recession in Ireland in 2008-2009. GDP fell by 8% and GNP down 10% Collapse in construction activity and banking system, severe fiscal tightening, high unemployment. Ireland en
Slide 3: Huge distortions inflate Irish GDP/GNP figures
Huge distortions inflate Irish GDP/GNP figures GDP/GNP no longer reliable measures of output and Economic Growth (% YoY) 30 income in Ireland. Review underway of National A\Cs 25 Exports, imports, industrial production, investment and 20 Real GDP 15 BoP all distorted by activities of some multi-nati
Slide 4: Signs that strong Irish growth rate is slowing
S Signs that strong Irish growth rate is slowing 70 Ireland Mfg and Services PMIs % Core Domestic Spending* (3 Qtr MA, % Yr-on-Yr) 9.0 65 Services 6.0 60 3.0 55 0.0 Manufacturing 50 -3.0 45 -6.0 40 -9.0 -12.0 35 -15.0 30 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Aug-06 Aug-08 A
Slide 5: More mixed tone to recent data
More mixed tone to recent data GDP growth averaged 4% year-on-year in H1 2016 Good manufacturing PMI data in H1 2016 but lower in July/Aug – 51.7 in August Very robust services PMI in 2016 but below its Q1 ten year highs. At 59.7 in August Slower growth in service exports of 5.8% yoy in H1 2016 afte
Slide 6: Strong jobs growth & marked fall in unemployment
Strong jobs growth & marked fall in unemployment Year Average 2013 2014 2015 2016(f) 2017(f) 2018(f) Unemployment Rate % 13.1 11.3 9.5 8.1 7.2 6.6 Labour Force Growth % 0.4 -0.3 0.5 1.2 1.3 1.3 Employment Growth % 2.4* 1.7 2.6 2.7 2.3 2.0 Net Migration : Year to April (‘000) -33.1 -21.4 -11.6 3.0 10
Slide 7: Very large Irish export base performing strongly
Very large Irish export base performing strongly Ireland a very open economy – exports, driven by Exports as % of GDP huge FDI, equated to 108% of GDP in 2013 Finland UK Major gains in Irish competitiveness since 2009, Germany with weakening of euro also helpful France Italy Exports have risen stron
Slide 8: Impact of FDI on economy (Source IDA)
Impact of FDI on economy (Source IDA) KEY FDI IMPACTS ON THE IRISH ECONOMY - 1,200 multinational companies - €125bn Exports (70% of Irish exports) - 175,000 Jobs in FDI, 290,000 in total - 70% of Corporation Tax - €13.5bn Spending on services/materials - €8.5bn in Payroll - 67% of Business R&D expen
Slide 9: Slower growth in domestic economy this year
Slower growth in domestic economy this year Domestic economy contracted by 20% from 2008-12 % Construction Investment (3 Qtr MA, % YoY) 20 Collapse in construction was big drag on GDP - fell 10 from 13.5% of GDP in 2005-07 to 5.3% by 2012 0 Construction has seen steady growth since 2013 – -10 output
Slide 10: House prices rise as shortages emerge in market
House prices rise as shortages emerge in market Housing output fell by 90% but now past the bottom % 5 National House Price Inflation % 25 of cycle 4 20 3 15 Bulk of the new housing stock overhang eliminated 2 10 House prices declined sharply – fell by almost 55% 1 0 5 0 between their peak in late 2
Slide 11: House building rising slowly from very depressed levels
House building rising slowly from very depressed levels Housing completions at 12,700 in 2015, up from 11,000 in 2014 and 8,300 in 2013 Completions up 19% to August 2016. Should reach 15,000 units this year but still at very low levels Annual demand estimated at 25,000-30,000 units Trend in new hous
Slide 12: AIB Model of Estimated Potential Housing Demand
AIB Model of Estimated Potential Housing Demand Calendar Year 2012 2013 2014 2015 2016 2017 2018 Household 14,000 15,000 16,500 19,500 21,500 22,000 23,000 Formation of which Indigenous 20,000 17,500 17,000 17,500 17,000 16,000 15,500 Population Growth Migration Flows -9,000 -5,500 -3,500 -1,500 1,0
Slide 13: Gov debt ratio falling, private sector deleveraging
Gov debt ratio falling, private sector deleveraging Gross Gen Gov Debt (% GDP) 140 % 10 Gov Debt Interest (% GDP) 120 8 100 80 6 60 4 40 20 2 0 2008 2009 2010 2011 2012 2013 2014 2015 2016(f) 2017(f) 2018(f) 0 Source: Dept of Finance/AIB ERU. Note Inflated/Distorted GDP figues from 2015) 1980 1985 1
Slide 14: Budget deficit falls to very low level
Budget deficit falls to very low level Some €30bn (18% of GDP) of fiscal tightening 2 General Government Balance* (% GDP) implemented in 2008-2014 period 0 Budgetary policy turns mildly expansionary -2 in 2015 and 2016 -4 Budget deficit falls sharply in recent years -6 Deficit of under 1% of GDP lik
Slide 15: Brexit is a major headache for Ireland
Brexit is a major headache for Ireland Brexit has serious implications for Ireland given close economic/trade links with UK Trade with UK equates to 35% of Irish GDP. Thus, it is a key trading partner Hence negative impact of Brexit on UK economy will have knock-on effects in Ireland Sterling has al
Slide 16: Brexit likely to curtail rebound of Irish economy
Brexit likely to curtail rebound of Irish economy Euro Trade Weighted Index* Strong rebound by Irish economy 120 Wage growth and very low inflation boosting spending 115 Labour market on steadily improving path 110 105 Construction should continue its recovery from its still 100 very depressed activ
Slide 17: AIB Irish Economic Forecasts
AIB Irish Economic Forecasts % change in real terms unless 2013 2014 2015 2016 (f) 2017 (f) 2018 (f) stated GDP 1.1 8.5 26.3 3.5 3.5 3.0 GNP 4.7 9.2 18.7 5.5 3.0 2.5 Personal Consumption -0.8 1.7 4.5 3.0 3.0 2.5 Government Spending 0.1 5.4 1.1 3.0 1.0 1.0 Fixed Investment -5.4 18.2 32.7 9.5 6.0 5.0
Slide 18: Risks to the Irish economic recovery
Risks to the Irish economic recovery Main risks to Irish recovery no longer internal but external, in particular Brexit Brexit major issue for Ireland given its strong trading links with UK, impact on sterling Recovery in the global economy still quite fragile, with on-going risks and headwinds espe