Aib Group Plc · EURONEXT:A5G

Aib — Debt Investor Presentation (October 2019)

42 slides from Aib's debt investor presentation, October 2019

1. Slide 1: Investor Presentation – AT1

   Investor Presentation – AT1 AIB Group plc

2. Slide 2: Disclaimer

   Disclaimer NOT FOR DISTRIBUTION TO ANY U.S. PERSON OR TO ANY PERSON OR ADDRESS IN THE U.S. IMPORTANT: You must read the following before continuing. The following applies to the presentation materials contained in this document, and you are therefore advised to read this carefully before reading, ac

3. Slide 3: Disclaimer

   Disclaimer The risks and uncertainties referred to above include: (i) the performance of the markets in Ireland and the wider region in which the Issuer operates; (ii) changes in political, social, legal or economic conditions in the markets in which the Issuer and its customers operate; (iii) the I

4. Slide 4: Disclaimer

   Disclaimer By purchasing, or making or accepting an offer to purchase, any Securities (or a beneficial interest in such Securities) from the Issuer and/or any of the Managers, each prospective investor will thereby represent, warrant, agree with and undertake to the Issuer and each of the Managers t

5. Slide 5: Contents

   Contents  AT1 - Transaction overview 6  Key Financials - H1 2019: 12  Overview – macro and new lending 14  P&L 16  Balance Sheet & NPEs 20  Funding & capital 24  Appendix 28 5

6. Slide 6: AT1 – Transaction overview

   AT1 – Transaction overview AIB Group plc

7. Slide 7: Executive summary

   Executive summary  PerpNC [●] €[●] Fixed Rate Reset Additional Tier 1 Perpetual Contingent Temporary Write-Down Securities  Issued by AIB Group plc (HoldCo), in line with group structure and resolution strategy Offering  Semi-annual, discretionary, non-cumulative coupons summary  6 month par cal

8. Slide 8: Mitigating principal write-down risk

   Mitigating principal write-down risk Robust buffer to trigger H1, 2019 - Buffer to trigger (FL, %)  Capital position remains particularly strong at 17.3% CET1 fully loaded (20.3% CET1 transitional) at H1 2019  Temporary write-down loss absorption mechanism 17.3%  7.0% CET1 trigger  Distance to t

9. Slide 9: Mitigating distribution risk

   Mitigating distribution risk Very strong buffers to MDA and robust ADI capacity CET1 MDA (Transitional, %) CET1 MDA (Fully loaded, %) CET1 MDA (Fully loaded, %) includes unfilled AT1/T2 includes unfilled AT1/T2 assumes AT1/T2 buckets filled 20.3 6.6% 3.9% 17.3 17.3 5.8% 13.7 13.4 11.55 2.13 1.85 11.

10. Slide 10: SREP – minimum CET1 requirement

    SREP – minimum CET1 requirement Minimum CET1 requirement 11.55% - FY 2019 SREP – CET1 requirements (%) FY 2019 FY 2020 FY 2021 Pillar 1 – CET1 4.5 4.5 4.5 Pillar 2 requirement (P2R) 3.15 3.15 3.15 Capital conservation buffer (CCB) 2.5 2.5 2.5 Other systemically important institution (OSII) 0.5 1.0 1

11. Slide 11: Summary Term Sheet

    Summary Term Sheet Issuer  AIB Group plc Description  Fixed Rate Reset Additional Tier 1 Perpetual Contingent Temporary Write Down Securities (the “Securities”) Ranking  Direct, unsecured, unguaranteed and deeply subordinated obligations of the Issuer and rank pari passu, without any preference,

12. Slide 12: Key Financials – H1 2019

    Key Financials – H1 2019 AIB Group plc

13. Slide 13: Financial highlights H1 2019

    Financial highlights H1 2019 Solid operational and financial performance  Pre-exceptional PBT €567m  NIM 2.46%; widening spread between customer loans and deposits  Costs €744m, up 6% year on year; renewed focus on cost discipline  New lending €6bn up 8%; mortgage lending up 8%  NPE(1) €4.7bn (

14. Slide 14: Growing Irish economy

    Growing Irish economy Continuing positive market dynamic Irish economic growth* improving; Brexit risk remains Total employment levels rising as unemployment falls % 10 2,400 8.2 14 2,200 5 3.7 3.9 3.3 9 3.1 2.7 2,000 1,800 4 0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2018* 2019 2020 2013 2013 2014 20

15. Slide 15: Delivering continued momentum

    Delivering continued momentum Increased new lending; leading market shares Continuing increase in new lending New lending across all asset classes(1) Drawdowns (€bn) Mortgages (€bn) Personal lending (€bn) 6.0 1.2 1.3 5.5 0.4 0.5 H1 2018 H1 2019 H1 2018 H1 2019 2.4 2.5 Property (€bn) Corporate & SME

16. Slide 16: Income statement

    Income statement Pre-exceptional PBT €567m; underlying business performing well Summary income statement (€m) H1 2019 H1 2018* Net interest income 1,050 1,049  Net interest income stable Other income 319 322 Total operating income 1,369 1,371  Other income €319m – fees and Total operating expenses

17. Slide 17: Net interest margin (NIM)

    Net interest margin (NIM) In excess of 2.40%+ medium-term target NIM – material movements  NIM 2.46% 4 bps 1 bps (4 bps)  Higher loan yields (3.47%) offset by 2.50% 2.48% (2 bps) (2 bps) 2.46% • lower investment securities yields • cost of MREL issuance • IFRS 16 lease impact H1 2018 Q4 18 Loan Yi

18. Slide 18: Other income

    Other income Net fee and commission income, up 6% Net fee & commission income (€m) 217 230  Fees and commissions €230m, up 6% 35 36 24 year on year 23 36 37 • customer accounts and credit 20 26 related fee income increase 103 107 driven by higher volumes of transactions H1 2018 H1 2019 Customer acc

19. Slide 19: Costs

    Costs Renewed focus on cost discipline Operating expenses (1) (€m)  Costs €744m, up 6% year on year 51%(2) 744 54%  Factors impacting costs: 702 338 351 • wage inflation 3% and higher average FTE 364 393 • elevated cost of our work out unit H1 2018 H1 2019 • increased depreciation from investment

20. Slide 20: Balance sheet

    Balance sheet New lending growth supported by strong liquidity and capital ratios Balance sheet (€bn) Jun 2019 Dec 2018 Performing loans 58.0 56.8 Non-performing loans 4.7 6.1  Performing loans increased €1.2bn Gross loans to customers 62.7 62.9  Sustainable new lending exceeding Expected credit l

21. Slide 21: Gross performing loans

    Gross performing loans Growing at sustainable levels; €1.2bn increase Mortgages (€bn) Growing the performing Personal (€bn) 29.0 loan book €58.0bn 28.9 2.7 2.7 56.8 58.0 Dec-18 Jun-19 Dec-18 Jun-19 Property (€bn) Corporate & SME (ex. property) (€bn) 19.6 18.6 6.5 6.8 Dec-18 Jun-19 Dec-18 Jun-19 Dec-

22. Slide 22: Momentum in NPE reduction continues

    Momentum in NPE reduction continues NPE ratio 7.5%; on track to reach 2019 target of c.5% NPE trajectory (€bn) 31.0 27% 6.1 0.4 26% c.5% 1.0 0.7 4.7 0.8 0.5 0.7 4.6 3.5 NPE NPE BAU activity Portfolio NPE Dec 2019 Dec 2013 Dec 2018 Sale Jun 2019 UTP including >90 DPD Collateral Disposals Probationary

23. Slide 23: Momentum in NPE reduction continues

    Momentum in NPE reduction continues Progress in mortgages – 47% not past due / <90 DPD NPEs (€bn) NPE - Mortgages (€bn) NPE PDH(1) – €2.2bn Arrears profile 27% 21% 6.1 26% 1.0 2.8 4.7 1.4 0.7 0.5 2.2 6.1 36% 0.4 0.9 0.4 47% 0.3 4.7 2.3 3.3 2.8 1.8 11% 6% Not Past Due Dec-18 Jun-19 NPE Net NPE < 90DP

24. Slide 24: Funding structure

    Funding structure €3.3bn MREL issuance complete; investment grade maintained Total Funding (€bn) MREL requirement €92.2bn  MREL requirement 28.22% (based on FY 2017 RWAs) by 2021 Customer  Likely increase in MREL requirement due to regulatory Accounts: 75% of Total Funding effects such as increase

25. Slide 25: Capital ratios

    Capital ratios Solid capital position Capital ratios fully loaded (%)  CET1 17.3% reflects solid €51.4bn RWAs €52.7bn RWAs profit generation +80bps 19.1  TRIM impact 19.0 • AIB Mortgage model – 1.0 1.0 impact estimated 0.6 0.7 c.90bps CET1 17.5 17.3 • Corporate model – no FY 2018 H1 2019 update To

26. Slide 26: Credit ratings

    Credit ratings Investment grade status for AIB Group plc AIB Group plc (HoldCo) Baa3 BBB- BBB- Long term issuer rating Outlook Positive Positive Stable Investment grade    AIB p.l.c. (OpCo) A3 BBB- BBB+ Long term issuer rating Outlook Positive Positive Stable Investment grade    26

27. Slide 27: 2017-2019 medium-term financial targets

    2017-2019 medium-term financial targets Focused on delivering sustainable performance Medium-term Metric targets Targets H1 2019 Commentary Net interest margin 2.40%+ 2.46% Strong NIM, impact of excess Maintain strong and stable NIM, 2.40%+ liquidity and MREL Cost income ratio <50% Below 50% by end

28. Slide 28: Appendix

    Appendix AIB Group plc

29. Slide 29: Capital detail

    Capital detail Transitional and fully loaded capital detail and ratios Transitional capital ratios Fully loaded capital ratios Risk weighted assets (€m) Jun 19 Dec 18 Risk weighted assets (€m) Jun 19 Dec 18 Total risk weighted assets 52,803 51,596 Total risk weighted assets 52,669 51,439 Capital (€m

30. Slide 30: Loans to customers

    Loans to customers Summary of movement €bn Performing Loans Non-Performing Loans Loans to Customers Gross loans (opening balance 1 Jan 2019) 56.8 6.1 62.9 New lending 6.0 - 6.0 Redemptions of existing loans (4.8) (0.5) (5.3) Disposals - (1.0) (1.0) Net movement to non-performing (0.2) 0.2 - Other mo

31. Slide 31: Asset quality by portfolio

    Asset quality by portfolio Continued progress in NPE reduction across all asset classes Corporate & SME €bn Mortgages PDH BTL Personal Property (ex Property) Total H1 2019 Customer loans 31.7 28.9 2.8 3.0 7.8 20.2 62.7 of which NPEs 2.8 2.3 0.5 0.3 0.9 0.7 4.7 ECL on NPE 0.6 0.5 0.1 0.1 0.3 0.2 1.2

32. Slide 32: Asset quality

    Asset quality Improving asset quality in the loan book Credit quality (€bn) NPE deleveraging strategy (€bn) 62.9 62.7 7.5% 60 6.1 9.6% 4.7 7.5% 6 4.5 7.2% 3.9 6.2% 4.7 c.5% 4 40 52.3 54.1 2 83.2% 86.3% 20 0 Jun 2019 - Cash / Restructuring Portfolio sales 2019 0 NPEs redemptions / other & strategic D

33. Slide 33: Mortgages

    Mortgages Improving asset quality; lower NPE Mortgages (€bn) RoI mortgages 32.3 31.7 Dec-18 Jun-19 20% 10% 21% 30 3.3 2.8 9% 2.4 8% 2.1 7% 14% 17% 20 30% 29% 26.6 82% 26.8 84% 10 56% 54% 0 Dec 18 Jun 19 €31.0bn €30.4bn Strong / Satisfactory Criticised NPE Tracker Variable Fixed ECL/NPE coverage • Co

34. Slide 34: Personal

    Personal Lower NPE Personal (€bn)  Portfolio €3.0bn comprises €2.3bn loans and €0.7bn credit card facilities 3.1 3.0  Demand remains strong, increased online approval 3 50% 0.4 11% 9% 52% 0.3 through internet and mobile credit application activity 0.3 9% 0.3 9%  NPE 9% of portfolio down from 11%

35. Slide 35: Property

    Property Improving asset quality; lower NPE Property (€bn)  Portfolio €7.8bn down €0.1bn (2%) due to continued restructuring, write-offs, repayments and the sale of a 7.9 7.8 portfolio of loans 8 29% 31% 1.4 18% 0.9 12%  82% of the portfolio is strong / satisfactory, up 8% from 0.5 6% 6 0.6 8% Dec

36. Slide 36: Corporate & SME (ex property)

    Corporate & SME (ex property) Improvement in asset quality of new lending and reduction in NPE Corporate & SME (ex property) (€bn)  Portfolio €20.2bn, up €0.7bn 19.6 20.2  Overall improvement in asset quality from upward grade 20 5% 31% 0.7 3% 36% 1.0 1.1 6% migration in the portfolio and new lend

37. Slide 37: Asset quality – internal credit grade by ECL staging

    Asset quality – internal credit grade by ECL staging Continued improvement in asset quality across all asset classes* H1 2019 Dec 2018 €m Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Strong 40,563 950 - 12 41,525 39,148 923 - 3 40,074 Satisfactory 11,173 1,332 - 2 12,507 10,

38. Slide 38: Loan book analysis

    Loan book analysis Breakdown by sector and location Concentration by sector (%) Jun 2019 Concentration by location (%) Jun 2019 Agriculture 3 Republic of Ireland 77 Energy 2 United Kingdom 14 Manufacturing 5 North America 5 Property & construction 12 Rest of World 4 Distribution 8 Total 100 Transpor

39. Slide 39: Investment securities

    Investment securities €16.3bn portfolio of debt securities Key components €bn Analysis of government securities €bn 10.0 8.4 8.0 7.9 6.3 6.2 6.0 5.0 5.2 5.0 4.0 1.1 0.9 0.8 1.1 2.0 1.1 0.1 0.1 0.5 0.5 0.7 0.4 0.4 0.0 0.0 Government Supernational banks Euro bank securities Non Euro bank Ireland Nethe

40. Slide 40: Average balance sheet

    Average balance sheet NIM 2.46% H1 2019 H1 2019 H1 2018 (1) Average Volume Interest Yield Average Volume Interest Yield €m €m % €m €m % Assets Customer loans 61,577 1,058 3.47 60,728 1,038 3.45 Investment securities 16,666 106 1.28 15,238 113 1.50 Loans to banks 7,643 16 0.41 8,644 9 0.19 Interest e

41. Slide 41: Return on tangible equity

    Return on tangible equity (PAT – AT1 coupon + DTA utilisation) / (FL CET1 @ 13% + DTA) H1 2019 €m PAT 361 (-) AT1 coupon 18 Profit (1) (+) DTA utilisation 28 Profit on Profit (numerator) 371 CET1 @ RWA 52,669 13% of CET1 at 13% RWA 6,847 RWAs + DTAs (+) DTA 2,676 CET1 Adjusted CET1 (denominator) 9,5

42. Slide 42: Contacts

    Contacts Please contact Investor Relations or Treasury Funding Team for any further information Name Email Telephone Niamh Hore niamh.a.hore@aib.ie +353 1 6411817 Head of IR Janet McConkey janet.e.mcconkey@aib.ie +353 1 6418974 Head of Debt IR Siobhain Walsh siobhain.m.walsh@aib.ie +353 1 6411901 In

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