Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — Debt Investor Presentation (June 2023)
57 slides from Bank Of Ireland's debt investor presentation, Jun 30, 2023
Slide 1: HY23 Debt Investor Presentation
HY23 20 Debt Investor Presentation 23 30 June 2023 1
Slide 2: Bank of Ireland Overview
= Bank of Ireland Bank of Ireland Overview
Slide 3: Strong strategic delivery
Strong strategic delivery • Net interest income +68% y/y, total business income +23% y/y Financial €1.0bn • Costs +12%, in line with guidance (like-for-like broadly flat) performance PBT • Strong liquidity with LDR of 79% and a 3% increase in customer balances • Asset quality remains resilient +12%
Slide 4: Irish economy growing; UK moderating
Irish economy growing; UK moderating Shifting interest rate and inflation expectations Irish macro backdrop remains supportive; Irish GDP expected to Ireland 1 outperform EU by c.9ppts (cumulative) over 2023-20252 5.0% 2.9% 2.2% 3.90% Ireland UK 3.37% 3.19% 2.83% 2.80% Unemployment 3.8% (June 2023)
Slide 5: Business line performance
Business line performance Irish Residential +6% 1 Commercially disciplined pricing decisions while market Mortgages Irish mortgage loan book growth share grew to 41% (H122 24%); (ex KBCI portfolio) Everyday +5% y/y Increased customer activity combined with €2.6bn growth (vs end Dec 22) in Retail Ire
Slide 6: ESG fundamental to our strategy
ESG fundamental to our Sustainable strategy Commitment to green transition evidenced by tangible outcomes c.€9.7bn Sustainability related finance +€1.5bn in H1 Financial Wellbeing at the heart of customer interactions UNPRB Financial Health & Inclusion targets set in H1 Colleague Engagement and
Slide 7: Creating value as The National Champion Bank
Creating value as The National Champion Bank Differentiated business model H1 2023 outperforming against 2023 - 2025 annual financial targets 2023-2025 Financial Targets Banking Wealth ROTE c.15% CIR <50% Insurance With market-leading brands serving > 4m customers Dividend pay-out building to c.40%
Slide 8: Operational Performance
= Bank of Ireland Operational Performance
Slide 9: H123 financial performance
H123 financial performance H1 2022 H1 2023 • H123 performance reflects strategic actions, positive business (€m) restated1 (€m) momentum, higher interest rates and continued focus on Net interest income 1,072 1,802 efficiencies Business income 273 350 • Operating profit pre-impairment reflects highe
Slide 10: NII guidance for 2023 upgraded
NII guidance for 2023 upgraded Net interest income movement H123 Performance €419m (€366m) • Net interest income (NII) growth primarily reflects higher rates, €1,802m acquisitions and business momentum: €676m – Liquid asset income supported by growing deposit franchise and €1,072m higher rates – Len
Slide 11: Structural hedge and net interest income sensitivity
Structural hedge and net interest income sensitivity Structural hedge1 • Higher structural hedge volumes in H123 due to growth in customer Period-end €39bn €60bn €66bn current account balances volume • Increased income in H123 reflects higher swap rates and volumes: €374m – Average gross yield on fi
Slide 12: Loan book growth reflects acquisitions and Irish net lending
Loan book growth reflects acquisitions and Irish net lending Group loan book movement €0.8bn (€0.6bn) (€0.2bn) €0.7bn €8.0bn €80.7bn €72.0bn Dec 22 KBCI portfolio Ireland (net lending) International corporate Retail UK Impairment / FX / other Jun 23 and property (net lending) (net lending) Loan book
Slide 13: Total business income 23% higher
Total business income1 23% higher H1 2022 H1 2023 H123 performance (€m) restated (€m) • Retail Ireland reflects higher current account fee income and Retail Ireland 2 71 74 customer activity, partially offset by lower interchange fees Wealth and Insurance 3 80 166 • Wealth and Insurance performance
Slide 14: Operating expenses in line with guidance
Operating expenses in line with guidance Operating expenses movement €25m €93m (€2m) €907m €791m H122 (restated)1 Net reductions / inflation Acquisitions Other H123 (reported)2 H123 performance Non-core • Net efficiencies and lower pension costs have been largely offset • H1 non core costs of €12m b
Slide 15: Impairment charge of €158m in line with expectations
Impairment charge of €158m in line with expectations IFRS 9 models and management adjustments (PMAs) Loan loss experience and portfolio activity (€28m) charge (€130m) charge • Charge of (€53m) related to model updates and updated IFRS 9 • Charge of (€97m) from portfolio activity, reflecting net loss
Slide 16: Diversified loan book and strong asset quality
Diversified loan book and strong asset quality Group loan book segment mix (net) Considered approach to customer lending n Consumer €5.7bn • Disciplined credit underwriting approach based on adherence to prudent risk appetite, credit policies, and portfolio and single-name n Property and 7% concentr
Slide 17: Capital, MREL & Liquidity
= Bank of Ireland Capital, MREL & Liquidity
Slide 18: Net organic capital generation of 180bps
Net organic capital generation of 180bps Fully Loaded CET1 RWAs RWAs €47.5bn €52.0bn 180bps (40bps) (140bps) (60bps) 15.4% 14.8% Dec 221 IFRS 17 / KBCI portfolio Net organic capital2 RWA3 Foreseeable dividend deduction Jun 23 • Net organic capital generation of 180bps H123 (50bps H122) • Foreseeable
Slide 19: Regulatory Ratios
Regulatory Ratios Regulatory CET1 RWAs RWAs €47.5bn €52.0bn (30bps) 180bps (40bps) (140bps) (60bps) 15.9% 15.0% Dec 221 CRD Phasing IFRS 17 / KBCI portfolio Net Organic Capital2 RWA3 Foreseeable Dividend Deduction Jun 23 Regulatory Capital Metrics Dec 22 Jun 23 CET1 • Movement in Regulatory CET1 rat
Slide 20: Strong retail franchise and liquidity metrics
Strong retail franchise and liquidity metrics Growing retail deposit base Customer deposits €99bn €102bn • Increase in volumes primarily due to growth in Retail Ireland of €2.6bn, including KBCI deposit portfolio; Q123 Irish household €11bn €11bn savings ratio at 12%2 €9bn €9bn • 53% of Group custom
Slide 21: Balance sheet
Balance sheet Funding & Liquidity Dec 22 Jun 23 • Liquid assets reduced by c.€5bn; primarily due to the loan and deposit acquisitions from KBCI of c.€6bn, partially offset by higher Customer loans 72 81 wholesale funding volumes of €0.8bn and higher customer deposit Liquid assets 49 44 volumes of €0
Slide 22: Significant buffer to potential MDA restrictions
Significant buffer to potential MDA1 restrictions Regulatory CET1 ratio vs. MDA Threshold • Regulatory CET1 ratio of 15.0% at Jun 2023 c.4.6% MDA MDA c.3.7% Buffer Buffer – Continued phase-in of existing transitional adjustments 0.6% 1.49% n Pillar 1 expected to consume c.25bps per annum in 2023/202
Slide 23: Risk Weighted Assets (RWAs) / Leverage ratio
Risk Weighted Assets (RWAs) / Leverage ratio EBA Transparency Exercise 2022 Country by Country Average IRB risk weights Customer lending average credit risk weights – Jun 2023 1, 2 Residential Mortgages – Jun 2022 (Based on regulatory exposure class) Sweden 3.9% Netherlands 9.7% EAD 3 RWA Avg. Risk
Slide 24: EBA Transparency Exercise 2022: IRB RWA density
EBA Transparency Exercise 20221 Bank of Ireland’s IRB RWA density across major loan portfolios exceeds a wide distribution of European peers IRB RWA: SME Lending 2 IRB RWA: Corporate Lending 3 80% 90% 70% 80% 60% 70% 50% 60% 40% 50% 30% 40% 30% 20% 20% 10% 10% 0% 0% Bank Bank BOI Bank Bank Bank Bank
Slide 25: Regulatory capital requirements
Regulatory capital requirements Pro forma CET1 regulatory capital requirements 2022 2023 2024 Pillar 1 – CET1 4.50% 4.50% 4.50% Pillar 2 Requirement (P2R) 1.27% 1.27% 1.27% Capital Conservation Buffer (CCB) 2.50% 2.50% 2.50% Ireland Countercyclical buffer (CCyB) 0.00% 0.62% 0.93% UK Countercyclical
Slide 26: Credit ratings
Credit ratings Instrument ratings BOIG BOIG (Stand alone (Senior ratings) BOIG GovCo BOIMB (ACS)1 BOIG GovCo BOIG GovCo ratings) Aaa Aaa Aaa C AAA AAA AAA AAA Investment Grade Aa1 Aa1 Aa1 AA+ AA+ AA+ AA+ baa1 A3 Aa2 Aa2 Aa2 AA AA AA AA Stable Stable Aa3 Aa3 Aa3 AA- AA- AA- AA- A1 A1 S A1 A+ A+ A+ A+
Slide 27: Summary highlights
Summary highlights • Strong net organic capital generation of 180bps in H1 2023; expected to be broadly similar in H2 • CET1 ratio comfortably above CET1 guidance of > 14% Capital • Tier 2 index eligible following rating actions; Future capital issuance influenced by market conditions and refinancin
Slide 28: Green Bond Framework
= Bank of Ireland Green Bond Framework 28
Slide 29: Green Bond Framework
Green Bond Framework Green Bonds are an important part of the Group’s Responsible and Sustainable Business Strategy as we look to finance our customers’ transition to the low carbon economy and take an active role in combating climate change through sustainable finance. Key Features Green Bond Frame
Slide 30: Use of proceeds
Use of proceeds Green Bond Principles Eligibility Criteria Impact UN SDG Eligible Category • Residential property with an energy efficiency rating within the Top 15% in Ireland, equivalent to Annual energy Green Buildings BER of ‘B3’ or better efficiency & Energy • Residential property with a date o
Slide 31: Green Bond Allocation Report - December 2022
Green Bond Allocation Report - 31 December 2022 Green Eligible Assets Portfolio Green Liabilities Eligibility Criteria Number of Loans Amount (EUR) ISIN Settlement Date Maturity Date Amount (EUR) Green Buildings 15,389 5,402,836,557 XS2311407352 10-Mar-21 10-May-271 750,000,000 - Residential Green B
Slide 32: Outlook
= Bank of Ireland Outlook 32
Slide 33: 2023 guidance upgraded
2023 guidance upgraded Income Operating expenses NII in H223 expected to be modestly FY23 operating expenses expected higher than H123 to be c.€1.85bn Total business income1 in H223 expected to be broadly in-line with H123 ROTE FY23 expected to be similar to H123 Cost of risk Capital and distributio
Slide 34: Appendix
= Bank of Ireland Appendix 34
Slide 35: Appendix
Appendix Slide No. • BOI overview – customer loans / new lending volumes 36 • Ireland mortgages 37 • UK customer loans 38 • Income statement – Net interest income analysis 39 • Asset quality – Non-performing exposures by portfolio 40 – Portfolio by stage 41 – Non-property SME and Corporate by stage
Slide 36: Overview of customer loans
Overview of customer loans Profile of customer loans1 at Jun 2023 (Gross) Ireland UK RoW Total Total Composition (Jun 23) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 31.2 15.5 0.0 46.7 57% Non-property SME and corporate 10.8 5.1 5.4 21.2 26% Property and Construction 5.0 1.2 1.7 7.9 10% Consumer 2.3 3.6 0
Slide 37: Ireland mortgages: €31bn
Ireland mortgages: €31bn New Lending Volumes and Market Share Ireland Mortgages (gross) 41% €31.0bn €23.0bn €22.9bn €22.4bn €22.5bn 24% €21.9bn 23% 23% 23% €11.1bn €12.2bn €15.6bn €13.1bn €2.4bn €3.2bn €2.9bn €2.5bn €1.3bn €3.1bn €1.0bn €8.7bn €1.6bn €0.9bn €1.0bn €7.9bn €6.8bn €5.3bn €6.0bn H1 2019
Slide 38: UK customer loans £21.8bn (€25.4bn)
UK customer loans £21.8bn (€25.4bn)1 UK Mortgages UK Mortgages Analysis – £13.3bn n Wales • Total UK mortgages of £13.3bn; (NPEs: 2.4%): £0.5bn n South East n Greater London – Average LTV of 56% on existing stock at Jun 2023 £2.7bn £1.3bn – Average LTV of 71% on new UK mortgages in H123 n Scotland •
Slide 39: Net interest income analysis
Income statement Net interest income analysis H2 2021 H1 2022 H2 2022 H1 2023 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) (%) (€bn) (€m) (%) (€bn) (€m) (%) (€bn) (€m
Slide 40: Non-performing exposures by portfolio
Non-performing exposures by portfolio Non-performing Impairment loss Advances Non-performing exposures Impairment loss Composition (Jun 23) (€bn) (€bn) exposures as % of allowance (€bn) allowance as % of advances non-performing exposures Residential Mortgages 46.7 0.9 1.9% 0.2 23% – Republic of Ire
Slide 41: Portfolio by stage
Portfolio by stage Gross carrying amount Composition (Jun 23) Impairment loss allowance (before impairment loss allowance) ILA % of Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total gross loans Sectoral analysis by stage €m €m €m €m €m €m €m €m €m €m Residential Mortgages 41,181
Slide 42: Non-property SME and Corporate by stage
Non-property SME and Corporate by stage1,2 Composition (Jun 23) Gross carrying amount Impairment loss allowance ILA % of Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total gross loans Sectoral analysis by stage €m €m €m €m €m €m €m €m €m €m Non-property SME and corporate – Manufac
Slide 43: Residential mortgages / Consumer loans
Residential mortgages / Consumer loans Gross loans by stage Residential Mortgages Consumer Residential mortgages €38.0bn €46.7bn €5.3bn €5.9bn • Mortgage portfolios 57% of Group loan book €0.9bn €0.2bn – Average LTV of 54% on stock €4.6bn €0.1bn – 89% of the portfolio has LTV < 80% €0.5bn €0.8bn €0.
Slide 44: Non-property SME and Corporate
Non-property SME and Corporate Gross loans by stage ILA movement 3.6% 3.5% €5m €21.5bn €21.2bn (€36m) €1.5bn €1.4bn €4.7bn €5.0bn €783m €14.8bn €752m €15.3bn Dec 22 Jun 23 Dec 22 Stage 1 / 2 Stage 3 Jun 23 n Stage 1 n Stage 2 n Stage 3 ILA % of gross loans Non-property SME and corporate • 26% of Gro
Slide 45: Property and Construction (P&C)
Property and Construction (P&C) P&C lending (€7.9bn)1 Investment loan portfolio (€7.0bn) Irish focused lending with significant equity protection Development Other Investment (€7.0bn) €1.0bn 10% Investment €7.0bn • Geographical exposure1 primarily focused on Ireland (68%) and Office 38% UK (22%), wi
Slide 46: Forward looking information – macro-economic scenarios
Forward looking information – macro-economic scenarios Ireland United Kingdom 30 June 2023 2023 2024 2025-2027 2023 2024 2025-2027 Central scenario – 40% probability weighting GDP growth1 5.4% 4.6% 3.9% 0.0% 1.0% 1.7% GNP growth1 5.0% 4.3% 3.7% n/a n/a n/a Unemployment rate2 4.3% 4.3% 4.5% 4.1% 4.4%
Slide 47: ILA sensitivity to macro-economic scenarios
ILA sensitivity to macro-economic scenarios The following table indicates the approximate extent to which impairment loss allowance (ILA), excluding Group management adjustments, would be higher or lower than reported were a 100% weighting applied to the central, upside and downside future macroecon
Slide 48: Ordinary shareholders’ equity and TNAV
Ordinary shareholders’ equity and TNAV Dec 22 Jun 23 Movement in ordinary shareholders’ equity (€m) restated1 (€m) Ordinary shareholders’ equity at beginning of period 9,933 10,489 Movements: Profit / (Loss) for the period 858 853 Share buy back – repurchase of shares (50) (125) Dividend paid to ord
Slide 49: Wealth and Insurance – IFRS 17 application and restatement of H122
Wealth and Insurance1 – IFRS 17 application and restatement of H122 • On 1 Jan 2023, the IFRS 17 accounting standard related to insurance contracts H1 2022 H1 2022 H1 2023 became effective, replacing IFRS 4. This has a material impact on the recognition, (€m IFRS 4) (€m IFRS 17) (€m IFRS 17) measure
Slide 50: Fully Loaded CET1 ratio
Fully Loaded CET1 ratio Capital ratios – 30 June 2023 Fully loaded ratio (€bn) Fully loaded ratio (€bn) Dec 22 Jun 23 Total Equity 11.9 12.1 Less Additional Tier 1 (1.0) (1.0) Deferred Tax (1.0) (0.9) Intangible assets and goodwill (1.0) (1.0) Foreseeable dividend (0.3) (0.3) Expected loss deduction
Slide 51: Return on Tangible Equity (RoTE)
Return on Tangible Equity (RoTE) HY23: Headline vs. Adjusted Adjustments H1 2023 Additional gains Adjusted for H1 2023 Pension Headline & valuation items, CET1 ratio Adjusted Surplus (€m) net of tax at 14.0% (€m) Profit for the period 853 Coupon on Additional Tier 1 securities (34) Preference share
Slide 52: Cost-to-income ratio: HY 2023
Cost-to-income ratio: HY 2023 Headline vs Adjusted H1 2023 Pro forma H1 2023 Headline adjustments Pro forma (€m) (€m) (€m) Net interest income 1,802 1,802 Other income – Business income 350 350 – Additional gains, valuation and other items 49 (49) (0) Total Income 2,201 (49) 2,152 Costs – Operating
Slide 53: Defined benefit pension schemes
Defined benefit pension schemes Group IAS19 Defined Benefit Pension (deficit)/surplus Total Group defined benefit pension scheme assets (%) 3.80% 3.60% €7.2bn €7.2bn €8.4bn €8.9bn €9.6bn €6.9bn €7.0bn 2.10% 2.00% 1.30% 1.35% 55% 65% 65% 69% 66% 66% 67% 0.80% €0.89bn €0.60bn €0.70bn 21% 23% 23% 21% 2
Slide 54: Corporate Structure
Corporate Structure Holding company Capital / MREL Bank of Ireland Group plc (BOIG) AT1 Tier 2 Senior unsecured 100% The Governor and Company of the Bank of Ireland (GovCo) Senior unsecured Operating subsidiaries 1 Funding 100% 100% 100% New Ireland Assurance Bank of Ireland Mortgage Bank Unlimited
Slide 55: Forward looking statement
Forward looking statement 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 goals and expectations relating to its future
Slide 56: Contact details
Contact details For further information please contact: • Group Chief Financial Officer Mark Spain tel: +353 1 250 8900 ext. 43291 mark.spain@boi.com • Investor Relations Darach O’Leary tel: +353 87 948 0650 darach.oleary@boi.com Eamonn Hughes tel: +353 87 202 6325 eamonn.hughes@boi.com Owen Callan
Slide 57: Slide 57
Bank of Ireland Group — Debt Investor Presentation (June 2023) on 6ix