Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — H1 2018 Earnings Presentation
52 slides from Bank Of Ireland's earnings presentation, June 2018
Slide 1: Interim Results Announcement 2018
2018 Interim Results Announcement 30 June 2018
Slide 2: Slide 2
Slide 3: Group CEO Francesca McDonagh
Group CEO Francesca McDonagh
Slide 4: H1 2018 Highlights
H1 2018 Highlights Strong Financial €500m • NIM of 2.23% Underlying profit • Net impairment gains of €81m Performance before tax • NPEs reduced by 10% to €5.9bn; NPE ratio now at 7.5% €7.7bn • Net loan book growth of €0.5bn to €76.6bn Growth 16% increase in • New lending up 16% vs. H1 2017; new Iris
Slide 5: Strong businesses with competitive strengths in attractive markets
Strong businesses with competitive strengths in attractive markets Supportive economic outlook Attractive markets Strong businesses Irish credit growth emerging after many Significant opportunities Unique customer franchises years of deleveraging for growth 2 0 -2 -4 -6 -8 2012 2013 2014 2015 2016 2
Slide 6: Three Strategic Priorities Transform the Bank
Three Strategic Priorities Transform Serve Customers Grow Sustainable the Bank Brilliantly Profits 4
Slide 7: Transform the Bank
Transform the Bank Culture Systems Business Model H1 2018 Progress Target outcomes • Organisation re-design to create a leaner, flatter business is well advanced • Cost base to reduce to c.€1.7bn • Phase 1 of Core Banking Programme completed in April 2018, delivering a in 2021 single customer record
Slide 8: Serve Customers Brilliantly
Serve Customers Brilliantly Embedding voice of customer in Investing in digital and New brand strategy our businesses physical channels H1 2018 Progress Target outcomes • Number of full-service branches increasing by more than 160% • Significant improvement in • Customer facing roles increasing by m
Slide 9: Grow Sustainable Profits
Grow Sustainable Profits H1 2018 Progress 2021 Target Headline RoTE of 9.6% Improved profitability RoTE in excess of 10% Adjusted RoTE of 6.8%1 Cost base of c.€1.7bn Costs reduction of 3% Efficient business Costs reduce every year: 2018-2021 vs. H2 2017 Cost income ratio of c.50% Robust capital posi
Slide 10: Group CFO Andrew Keating
Group CFO Andrew Keating Bank of Ireland Group C@&)
Slide 11: Underlying profit before tax of €500m
Underlying profit before tax of €500m H1 20171 H1 2018 • Net interest income of €1,076m, reduction of €75m vs. H1 (€m) (€m) 2017 reflecting lower NIM (H1 2018: 2.23%) primarily due to the cost of securities issued in advance of TRIM and MREL Total income 1,532 1,398 during H2 2017 – Net interest inc
Slide 12: Key areas of focus
Key areas of focus Transformation Capital generation, Income growth of cost base investment and return 10
Slide 13: Loan book growth of €0.5bn
Loan book growth of €0.5bn Group loan book movement • Net loan book growth of €0.5bn to €76.6bn • New lending of €7.7bn, an increase of 16% vs. H1 2017 €7.7bn €6.6bn • Group redemptions of €7.1bn, in line with H1 2017 • Expect to re-enter Irish mortgage broker market in €0.5bn €0.1bn H2 2018 Total €
Slide 14: Strong commercial pricing discipline
Strong commercial pricing discipline Net interest margin drivers Net interest income • Net interest income of €1,076m, reduction of €75m vs. 285bps 282bps 282bps H1 2017 reflecting lower NIM primarily due to the cost of securities issued in advance of TRIM and MREL during H2 2017 4bps Average intere
Slide 15: Sustainable business income
Sustainable business income H1 20171 H1 2018 • Business income of €323m broadly in line with H1 2017; (€m) (€m) • Retail Ireland: reduction vs. H1 2017 due to strategic Retail Ireland 143 131 customer initiatives and solutions Wealth and Insurance 99 115 • Wealth and insurance: increase vs. H1 2017,
Slide 16: Reducing our cost base
Reducing our cost base Operating expenses to reduce further Transformation of cost base • Operating expenses of €882m reduced by €27m (3%) vs. H2 2017, broadly in line with H1 2017 €887m €909m €882m • Expect operating expenses, including transformation €55m investment charge, to reduce every year to
Slide 17: Asset quality
Asset quality Non-performing exposures Asset quality continues to improve • Non-performing exposures (NPEs) of €5.9bn, a reduction of 10.1% 8.3% 7.5% €0.6bn (10%) during H1 2018 €2.2bn reductio n • NPEs reduced to 7.5% of gross customer loans €8.1bn • Reductions reflect successful resolution strateg
Slide 18: Capital and liquidity available to support growth
Capital and liquidity available to support growth Strong liquidity ratios Dec 2017 Jun 2018 (€bn) (€bn) • Liquidity Coverage Ratio: 139% • Net Stable Funding Ratio: 127% Customer loans 76 77 • Loan to Deposit Ratio: 100% Liquid assets 24 23 Wealth and Insurance assets 17 17 Customer deposits: €76.7b
Slide 19: Strong capital generation and position
Strong capital generation and position Fully loaded CET1 ratio movement Investment / allocation of capital in H1 2018 0.9% (0.2%) (0.3%) 0.3% Growth in loan • Investment of c.20bps 0.2% (0.2%) 1 • Net loan book growth of €0.5bn book 2 Transformation • Transformation investment of €141m (c.30bps) 14.
Slide 20: H2 2018 outlook
H2 2018 outlook Capital generation, Transformation Income growth investment and of cost base return • Net loan book growth while • Operating expenses to • Expect further reductions in maintaining commercial pricing continue to reduce NPEs and risk discipline • Absent a deterioration in • Continue to
Slide 21: Appendix
Appendix Slide No. • BOI Overview • Business profile 20 • Historic financial results 22 • Profile of customer loans 24 • Gross new lending volumes in H1 2018 25 • ROI mortgage loan book 26 • UK mortgage loan book 27 • Income Statement • Divisional performance 29 • Interest Rate Sensitivity 30 • Net
Slide 22: BOI Overview: Ireland
BOI Overview: Ireland Ireland’s leading retail and commercial bank Retail Ireland Corporate / Markets Consumer Business Wealth Corporate Property Banking Finance Ireland Unique customer • #1 Corporate • Disciplined • 1.7m active consumer customers with average tenure 15 years Bank in Ireland approac
Slide 23: BOI Overview: UK / International
BOI Overview: UK / International Attractive UK and International businesses provide diversification and further opportunities for growth Retail UK Corporate UK / International Partnerships Northern Ireland Niche Businesses Corporate Acquisition Banking UK Finance • Over 40 years in • A distribution
Slide 24: BOI Overview: Income Statement
BOI Overview Income Statement FY 2014 FY 2015 FY 20164 FY 2017 H1 2018 (€m) (€m) (€m) (€m) (€m) Total income 2,974 3,272 3,126 3,049 1,398 – Net interest income 2,358 2,454 2,298 2,248 1,076 – Other income (net) before additional gains 448 591 677 727 312 – Additional gains (incl. ELG fees)1 168 227
Slide 25: BOI Overview: Summary Balance Sheet
BOI Overview Summary Balance Sheet Dec 14 Dec 15 Dec 16 Dec 17 Jun 18 (€bn) (€bn) (€bn) (€bn) (€bn) Customer loans1 82 85 78 76 77 Liquid assets 25 24 21 24 23 Wealth and Insurance assets 16 16 17 17 17 Other assets 7 6 7 6 5 Total assets 130 131 123 123 122 Customer deposits 75 80 75 76 77 Wholesal
Slide 26: Profile of customer loans
BOI Overview Profile of customer loans (gross)1 ROI UK RoW Total Total Composition (Jun 2018) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 23.7 22.3 0.0 46.0 59% Non-property SME and corporate 10.7 4.42 4.0 19.1 24% SME 7.8 1.6 0.0 9.4 12% Corporate 2.9 2.8 4.0 9.7 12% Property and construction 5.6 2.4 0.4
Slide 27: Gross new lending volumes in H1 2018
Gross new lending volumes in H1 2018 Retail Ireland Retail UK Corporate Banking £2.6bn €2.7bn €2.5bn €2.1bn €0.8bn €1.0bn £1.9bn €1.9bn £1.6bn €0.6bn €0.2bn €0.5bn €0.2bn £1.3bn €0.5bn €0.4bn €1.5bn €0.5bn €1.4bn €0.7bn £0.9bn £0.5bn €0.5bn €0.3bn £0.1bn £0.1bn H1 2017 H1 2018 H1 2017 H1 2018 H1 201
Slide 28: ROI Mortgages: €23.7bn
ROI Mortgages: €23.7bn New Lending volumes and Market Share ROI Mortgages (gross) 28% 28% €24.3bn €24.1bn €23.7bn 27% 26% €5.3bn €7.3bn 24% €8.6bn €7.2bn €5.8bn €4.7bn €1.2bn €1.0bn €11.8bn €0.8bn €0.8bn €10.9bn €10.4bn €0.6bn H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 Dec 16 Dec 17 Jun 18 n New Lendin
Slide 29: UK Mortgages: £19.8bn/€22.3bn
UK Mortgages: £19.8bn/€22.3bn UK Mortgages (gross) UK Mortgages (gross) £20.4bn £20.0bn £20.4bn £20.0bn £19.8bn £19.8bn £2.2bn £2.0bn £1.9bn £8.5bn £9.6bn £10.0bn £7.4bn £7.5bn £7.7bn £4.0bn £3.3bn £3.0bn £10.8bn £10.6bn £10.2bn £7.9bn £7.1bn £6.7bn Dec 16 Dec 17 Jun 18 Dec 16 Dec 17 Jun 18 n Tracke
Slide 30: Bank of Ireland Group
Bank of Ireland Group @) 28
Slide 31: Divisional performance
Income Statement Divisional performance Underlying profit / (loss) before Underlying profit / (loss) Additional gains 6 months ended Jun 18 tax and additional gains before tax (€m) (€m) (€m) Retail Ireland 352 (7) 345 Wealth and Insurance (formerly BOI Life) 34 - 34 Retail UK – € 113 - 113 Retail UK
Slide 32: Interest Rate Sensitivity
Interest Rate Sensitivity The table below shows the estimated sensitivity of the Group’s income (before tax) to an instantaneous and sustained 1% parallel movement in interest rates Dec 17 Jun 18 Estimated sensitivity on Group income (1 year horizon) (€m) (€m) 100bps higher c.170 c.180 100bps lower
Slide 33: Net interest income analysis
Income Statement Net interest income analysis H2 2016 H1 2017 H2 2017 H1 2018 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 34: Non-core items
Non-core items H1 20171 H1 2018 (€m) (€m) Cost of restructuring programme (17) (51) Gross-up for policyholder tax in the Wealth and Insurance business 1 (2) Cost of corporate reorganisation and establishment of a new holding company (7) - Loss on disposal / liquidation of business activities (5) - (
Slide 35: Transformation Investment
Transformation Investment 2016-21 investment: €1.4bn Increasing our investment to support growth and drive efficiencies Average of €275m p.a. • Scope: Culture, Systems, Business Model • Average CET1 capital investment: c.50-60 bps p.a. • Accounting treatment of annual investment (€275m p.a.): • 40%
Slide 36: Non-performing exposures by portfolio
Non-performing exposures by portfolio Non-performing Non-performing Impairment Impairment loss Advances Composition (Jun 18) (€bn) exposures exposures as % loss allowance allowance as % of (€bn) of advances (€bn) non-performing exposures Residential Mortgages 46.0 3.0 6.4% 0.6 20% – Republic of Ire
Slide 37: ROI Mortgages arrears performance
ROI Mortgages Arrears performance 4 times better than Industry Average >90 days arrears1 >90 days arrears Industry Average • Bank of Ireland is significantly below the industry average for both Owner Occupier (28% of industry average) and Buy to Let (28% of industry average) Industry Average 18.0% >
Slide 38: Debt Securities at FVOCI
Asset Quality Debt Securities at fair value through other comprehensive income (FVOCI) ROI UK France Other June 18 Dec 171 (€bn) (€bn) (€bn) (€bn) (€bn) (€bn) Sovereign bonds 3.4 - 0.8 2.0 6.2 7.5 Senior debt 0.1 - 0.3 1.4 1.8 2.1 Covered bonds 0.2 0.4 0.5 2.1 3.2 3.1 Subordinated debt - - - 0.1 0.1
Slide 39: UK Customer Loans: £28.2bn (€31.9bn)
UK Customer Loans: £28.2bn (€31.9bn) UK Mortgages – £19.8bn UK Mortgages Analysis - £19.8bn • Total UK mortgages of £19.8bn; (NPEs: 2%) Scotland, Wales, • Average LTV of 61% on total book (2017: 62%) £1.0bn £0.7bn • Average LTV of 69% on new mortgages (2017: 72%) Greater Northern Ireland, London, •
Slide 40: CET1 ratios - June 2018
Capital CET1 ratios - June 2018 Regulatory ratio Fully loaded ratio (€bn) (€bn) Total equity 9.9 9.9 Less Additional Tier 1 (0.8) (0.8) Deferred tax1 (0.4) (1.1) Intangible assets and goodwill (0.7) (0.7) Potential dividend deduction2 (0.1) (0.1) Expected loss deduction (0.4) (0.4) Other items3 (0.3
Slide 41: Capital Guidance and Distribution Policy
Capital Guidance and Distribution Policy • The Group expects to maintain a CET1 ratio in excess of 13% on a regulatory basis and on a fully loaded Capital basis by the end of the O-SII phase-in period1 Guidance • This includes meeting applicable regulatory capital requirements plus an appropriate ma
Slide 42: Regulatory Capital Requirements
Regulatory Capital Requirements Pro forma CET1 Regulatory Capital Requirements Set by Range 2017 2018 2019 2020 2021 Pillar 1 – CET1 CRR 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% Pillar 2 Requirement (P2R) – reviewed annually SSM 2.25% 2.25% 2.25% 2.25% 2.25% Capital Conservation Buffer (CCB) CRD 2.5% 1.25% 1.8
Slide 43: Risk Weighted Assets (RWAs)
Risk Weighted Assets (RWAs) Customer lending average credit risk weights – June 20181&2 EBA Transparency Exercise 2017 (Based on regulatory exposure class) Country by Country Average IRB risk weights Avg. EAD 3 RWA Residential Mortgages – June 2017 Risk (€bn) (€bn) Weight Sweden 4.2% Norway 5.1% ROI
Slide 44: Ordinary shareholders’ equity and TNAV
Ordinary shareholders’ equity and TNAV 2017 H1 2018 Movement in ordinary shareholders’ equity (€m) (€m) Ordinary shareholders’ equity at beginning of period 8,612 8,859 Movements: Profit attributable to shareholders 664 350 Impact of adopting IFRS 9 - (113) Dividends on preference equity interests (
Slide 45: Return on tangible equity (RoTE)
Return on tangible equity (RoTE) H1 2018: Headline vs. Adjusted Adjustments H1 2018 H1 2018 Additional gains, & H1 2018 net “Normalised” Adjusted Headline valuations items1, impairment gains, impairment (€m) (€m) net of tax net of tax adjustment, net of tax Profit for the period 377 Non-core items,
Slide 46: Cost income ratio: June 2018
Cost income ratio: June 2018 Headline vs. Adjusted H1 2018 H1 2018 Adjustments Headline Adjusted (€m) (€m) (€m) Net interest income 1,076 - 1,076 Other income – Business income 323 - 323 – Additional gains 10 (10) - – Other valuation items1 (11) 30 19 Total Income 1,398 20 1,418 Costs – Operating ex
Slide 47: Defined Benefit Pension Schemes
Defined Benefit Pension Schemes Group IAS19 Defined Benefit Pension Deficit Mix of BSPF Defined Benefit Pension Scheme Assets (%)1 2.20% 2.30% 2.10% 2.05% 1.60% €4.0bn €5.5bn €5.6bn €1.19bn 45% 61% 61% 11% €0.45bn €0.49bn €0.48bn €0.26bn 21% 24% 44% 18% 15% Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 12
Slide 48: Forward-Looking statement
Forward-Looking statement This document contains forward-looking statements with respect to certain of Bank of Ireland Group plc (‘BOIG plc’) and its subsidiaries’ (collectively the ‘Group’) plans and its current goals and expectations relating to its future financial condition and performance, the
Slide 49: 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 Alan Hartley tel: +353 76 623 4850 alan.hartley@boi.com Niall Murphy tel: +353 76 624 1385 niallj.murphy@boi.com Kate Butler tel: +
Slide 50: Bank of Ireland Group
Bank of Ireland Group @) 48
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