Slide 1: Backing our Customers
Backing our Customers Half-Yearly Financial Results 2020 for the six months ended 30 June 2020 AIB Group plc
Slide 2: Forward looking statement
Forward looking statement This document contains certain forward looking statements with respect to the financial condition, results of operations and business of AIB Group and certain of the plans and objectives of the Group. These forward looking statements can be identified by the fact that they
Slide 3: H1 2020: pre-provision operating profit €0.4bn; loss €0.7bn
H1 2020: pre-provision operating profit €0.4bn; loss €0.7bn Effective COVID-19 crisis management - living our purpose of backing our customers Swift and supportive action to protect our customers, colleagues and communities Multiple measures introduced to help customers through the peak of the
Slide 4: AIB strength and agility evident during Q2
AIB strength and agility evident during Q2 COVID-19 supports in action Backing our customers when most needed • Supporting cashflow needs • Implementing payment breaks • Postponement of fees Operationally resilient with minimal disruption • 81% of workforce working remotely seamlessly and secure
Slide 5: Payment breaks – process of roll-off and roll-over underway
Payment breaks – process of roll-off and roll-over underway Payment breaks – Retail Banking (# of accounts) Mortgages (000s) Retail Banking payment breaks granted Currently in place €2.1bn 5 21 8 17 13 7 c.64k c.47k 3 • 48% remain on PB1 Mar-20 Apr-20 May-20 Jun-20 Jul-20 • 27% rolled off Personal (
Slide 6: AIB is well positioned to play a leading role in the recovery
AIB is well positioned to play a leading role in the recovery COVID-19 Fiscal support Programme for government (PFG)(2) – AIB opportunity July Stimulus Package of €7.4bn Backing our customers Pledging to do more Income supports extended to 2021 Aiding the re-booting of the economy as AIB €5b
Slide 7: Irish economy starts to emerge from lockdown
Irish economy starts to emerge from lockdown Strong GDP growth expected in 2021, but off a low base due to impact of Unemployment rate (COVID-adjusted) spikes to 28.2% in April, but falls COVID-19 in 2020 to an estimated 17% by July % 10 % 30 6.3 5.7 4.8 25 5 3.5 4.5 20 0 15 2020 2021 2022 -5 10 5 -
Slide 8: Pick-up in activity since easing of restrictions
Pick-up in activity since easing of restrictions 550 Weekly card spend (€m) Increase in customer activity and digital adoption 500 Shift from cash 450 38%* reduction 66%* increase 400 in volume of in volume of 2019 ATM Digital Wallet 350 2020 withdrawals payments 300 250 * versus H1 2019 Jan Feb Mar
Slide 9: New lending impacted by lower economic activity
New lending impacted by lower economic activity Total new lending down 27%; Retail Banking new lending down 13% Outlook for new lending in H2 H1 2020 new lending €4.4bn Retail Banking • Consensus estimates for 2020 new mortgage market lending €6bn - €7bn • Retail sales rebound across multiple cons
Slide 10: Crisis validates strategy to simplify, streamline and strengthen
Crisis validates strategy to simplify, streamline and strengthen STRATEGIC PILLARS SUSTAINABLE CUSTOMER FIRST SIMPLE & EFFICIENT RISK & CAPITAL TALENT & CULTURE COMMUNITIES Backing in time of need Digital adoption continues Business continuity and Positive organisational Advancing ESG agenda resilie
Slide 11: Targets remain unchanged
Targets remain unchanged Strategic COVID- Going update 19 forward Growing Irish economy Significantly Sustainability Digitisation changed operating environment Strong AIB Longer term impact Accelerating franchise and continues to evolve balance sheet trends Challenges and opportunities Proven and pr
Slide 12: Financial Performance
_— Financial —- Performance
Slide 13: Financial performance H1 2020
Financial performance H1 2020 Operating profit €0.4bn; loss after tax €0.7bn €1.2bn ECL charge reflecting changes to macro-economic scenarios and staging impact on loan book from COVID-19 Total income decreased 13% to €1.2bn Net Interest Income €967m reduced 8% and Other Income €220m reduced 31%
Slide 14: Income Statement
—— Income Statement
Slide 15: Income statement – Pre-provision operating profit €0.4bn
Income statement – Pre-provision operating profit €0.4bn Summary income statement (€m) H1 2020 H1 2019 Net interest income reduced 8% Net interest income 967 1,050 impacted by the lower interest rate environment Other income 220 319 Total operating income 1,187 1,369 Other income €220m – down 31
Slide 16: Net interest income down 8% on H1 2019
Net interest income down 8% on H1 2019 NII €967m down €83m / 8% from H1 2019 impacted by: NII – material movements • +€24m: lower cost of customer accounts offset by (€83m reduction in NII / 18bps reduction in NIM) • -€54m: lower customer loan income from reduced volumes and lower interest rate en
Slide 17: Other income – COVID-19 impact lowers fees & commission 16%
Other income – COVID-19 impact lowers fees & commission 16% Net fee & commission income (€m) Other income €220m down 31% 230 Fee and commission income €192m, down €38m (16%) 36 192 from H1 2019 predominantly due to reduced economic 7 activity: 24 26 37 18 • customer account fees reduced due to 2
Slide 18: Costs – stable and well-managed in H1
Costs – stable and well-managed in H1 Operating expenses (1) (€m) Costs €747m, in line with H1 2019 744 747 108 Factors impacting costs 136 • increased depreciation €28m 243 • lower FTEs partially offset by wage inflation 243 • COVID-19 related expenditure (sanitation, technology to facilitate r
Slide 19: ECL and Asset Quality
ECL and Asset Quality
Slide 20: ECL charge €1.2bn – conservative, forward looking and comprehensive
ECL charge €1.2bn – conservative, forward looking and comprehensive Conservative, forward looking and comprehensive – Expected Credit Loss (ECL) of €1.2bn in H1 2020 • Conservative and forward looking 1 • changes in macro economic indicators in line with external data €0.7bn • five scenarios with
Slide 21: Overview – stage 2 increases, coverage increases
Overview – stage 2 increases, coverage increases Loan book* by Staging & Coverage (€bn) ECL movements (€bn) 4% 2.4 62.0 2% 60.5 4% 0.1 32% 3.3 27% 3.7 0.4 4.0 32% 5% 10.5 7% 1.2 0.3% 0.7 0.9% 1.2 2% 27% 7% 54.7 46.3 0.8 0.9 5% 0.9% 0.2 0.4 0.1 0.3% Dec-19 Jun-20 ECL Stock - Macroeconomic Staging Pos
Slide 22: Outlook for macroeconomic environment has deteriorated
Outlook for macroeconomic environment has deteriorated 1 New macroeconomic scenarios reflect a more negative economic environment - increased ECL €0.7bn H1 2020 – Base case scenario (55%) 2020 2021 2022 Significant changes to GDP and unemployment Irish GDP -7.5% 6.3% 3.5% • GDP to decline sharply
Slide 23: Downward stage migration in COVID-19 impacted sectors
Downward stage migration in COVID-19 impacted sectors 2 Impact of downward staging movements - increased ECL €0.4bn Loan book* by Staging & Coverage (€bn) Stage 2 increased by €6.5bn to €10.5bn (17% of the loan book at HY 2020) of which: • €4.1bn relates to Corporate & SME 62.0 2% 4% Hotels, Bar
Slide 24: Post model adjustments - payment breaks
Post model adjustments - payment breaks 3 Impact of post model adjustments - increased ECL €0.1bn Post model adjustments €131m primarily relates to: €42m increase in ECL - Payment breaks in Retail Banking - Mortgages and Personal €67m increase in ECL - Mortgage (PDH) deep arrears portfolio Payme
Slide 25: Balance Sheet
— Balance Sheet
Slide 26: Balance sheet – strong funding & liquidity to support economic recovery
Balance sheet – strong funding & liquidity to support economic recovery Balance sheet (€bn) June 2020 Dec 2019 Assets Performing loans decreased €2.0bn (-3%) Performing loans 56.8 58.8 Sustainable new lending €4.4bn was exceeded by Non-performing loans 3.8 3.3 redemptions €5.3bn Gross loans to c
Slide 27: Gross performing loans – redemptions contribute to 3% decline
Gross performing loans – redemptions contribute to 3% decline Personal (€bn) Performing loans Performing loans (€bn) Mortgages (€bn) 4% 12% -1% 2.8 -11% 29.1 28.8 58.8 58.8 -3% 2.5 €56.8bn 51% 56.8 56.8 33% Dec 19 June 20 Dec 19 June 20 Mortgages Corporate & SME Property Property (€bn) Corporate & S
Slide 28: New lending €4.4bn down 27%; Retail Banking down 13%
New lending €4.4bn down 27%; Retail Banking down 13% New lending Q2 impacted by lower economic activity New lending across all asset classes(1) declined in H1 2020 New lending (€bn) Mortgages (€bn) Personal (€bn) -17% 6.0 -18% 1.3 -27% 1.3 1.1 4.4 0.5 0.4 0.9 H1 2019 H1 2020 H1 2019 H1 2020 2.4 1.5
Slide 29: NPE normalisation remains a priority
NPE normalisation remains a priority NPEs (€bn) NPE – €3.8bn 6.3% Arrears profile 5.4% 3.8 0.5 0.3 3.3 42% 46% 0.3 0.8 0.4 0.4 0.6 6%6% 0.2 0.2 Not Past Due < 90DPD >90 < 180DPD > 180DPD NPE ROI Mortgages – €2.2bn 2.3 2.2 Arrears profile 44% NPEs Defintion of Net flow to NPEs Redemptions NPEs 49% De
Slide 30: Funding and Capital
Funding and Capital
Slide 31: Strong funding driven by increased customer deposits
Strong funding driven by increased customer deposits Total funding (€bn) MREL target (% of RWAs) €94.9bn €97.9bn +5% 4.2 4.1 NBFI (1) €5bn MREL 27.8 issued 27.1 Customer accounts (including €75.7bn AT1 €625m Corporate / SME 77% of total funding: executed in 30.0% 27.1% 2020) • Retail +8% • Corporate
Slide 32: Reported CET1 (FL) 16.4% in excess of >14% target
Reported CET1 (FL) 16.4% in excess of >14% target Reported - Capital ratios fully loaded (FL) (%) €52bn RWAs Reported CET1 (FL) ratio 16.4% €50bn RWAs • 6.7% buffer to MDA / SREP of 9.69% 20.5% 21.1% 1.9 2.2 Transitional CET1 ratio 20.2% 1.3 2.5 • 10.5% buffer to MDA / SREP of 9.69% 17.3 16.4
Slide 33: Capital – medium-term target: CET1 >14%
Capital – medium-term target: CET1 >14% Capital requirements Dec 2020(1) Capital outlook Pillar 1 4.50% Dec 2020 capital requirements – Under Article 104a 1.31% Pillar 2 requirement (P2R) 3.00% - 1.31% = 1.69% of current P2R (3.00%) can now be met with hybrid capital Capital Conservation Buffer (C
Slide 34: Guidance (2020) and medium-term targets (2022)
Guidance (2020) and medium-term targets (2022) Guidance 2020 Medium-term targets by 2022 • Net interest income c. €1.9bn • Other Income c. €420m • Cost inflation c.2% Focused Appropriate Deliver cost(1) capital sustainable • Cost of risk c. 235-250bps discipline target returns • New lending to reduc
Slide 35: Appendices
Appendices
Slide 36: Average balance sheet
Average balance sheet H1 2020 H1 2019 Average Volume Interest Yield Average Volume Interest Yield €m €m % €m €m % Assets Customer loans 60,417 1,004 3.33 61,577 1,058 3.47 Investment securities 17,417 72 0.82 16,666 106 1.28 Loans to banks 14,571 (4) (0.05) 7,643 16 0.41 Interest earning assets 92,4
Slide 37: Net interest margin (NIM)
Net interest margin (NIM) NIM – material movements (8 bps) impact NII & NIM (7 bps) impact NIM 2.41% 3 bps (6 bps) 2.25% (3 bps) 2.30% (3 bps) (5 bps) (2 bps) 2.10% Q4 19 Cust. Loan yields / Invest sec. Exc. Liq. inc. Exc. Liq. vol Invest sec. Jun-20 Deposits vol. yields vol NIM excl. excess Euro li
Slide 38: Loan book by Staging and Coverage
Loan book by Staging and Coverage June 2020 Stage 1 Stage 2 Stage 3* Total Loan book by Staging – €60.5bn loan exposures Gross loan exposures (€bn) exposure Mortgages 26.2 2.5 2.3 31.0 Stage 2 loan exposures increased by €6.5bn to Personal 2.1 0.4 0.2 2.7 €10.5bn (17% of the loan book at June 2020
Slide 39: Stage 2 movements
Stage 2 movements June 2020 Gross loan exposures (€bn) Stage 1 Stage 2 Stage 3* Total exposure The majority of the Stage 2 loan exposures increase (€6bn) is (excluding Mortgages & Personal) primarily due to movement in certain sectors in Property and Property & Construction 4.3 2.3 0.4 7.1 Corpora
Slide 40: Loans to customers
Loans to customers €bn Performing Loans Non-Performing Loans Loans to Customers Gross loans (1 Jan 2020) 58.8 3.3 62.1 New lending 4.4 - 4.4 Redemptions of existing loans (5.0) (0.3) (5.3) Write-offs / restructures - (0.1) (0.1) Net flow to NPE (0.8) 0.8 - Foreign exchange / other movements (0.6) 0.
Slide 41: Asset quality by portfolio
Asset quality by portfolio €bn Mortgages PDH BTL Personal Property Corporate & SME Total Jun 2020 Customer loans 31.0 28.7 2.3 2.7 7.2 19.6 60.6 Total ECL cover (%) 3% 9% 7% 4% 4% of which NPEs 2.2 1.9 0.3 0.2 0.5 0.8 3.8 ECL on NPE 0.6 0.5 0.1 0.1 0.2 0.3 1.2 ECL / NPE coverage % 28 28 26 61 39 32
Slide 42: Asset quality –total portfolio
Asset quality –total portfolio Credit quality (€bn) Asset quality has been impacted by the deterioration in the economic outlook as a result of COVID-19 in H1 2020 62.1 60.6 87.4% of the loan book is strong / satisfactory, down €2.4bn 27% 3.3 5.4% 32% 6.3% (-1.7%) 3.5 3.8 5.5% 3.8 6.3% 97% of
Slide 43: Asset quality - Mortgages
Asset quality - Mortgages Credit quality (€bn) RoI mortgages 31.5 Dec-19 Jun-20 31.0 22% 2.3 7% 28% 2.2 7% 1.8 1.6 5% 21% 27% 6% 26% 26% 52% 48% €30.2bn €30.0bn 27.4 87% 27.2 88% Tracker Variable Fixed Portfolio €31bn declined €0.5bn in H1 2020 • Total new lending €1.1bn declined 18%; ROI down 16%
Slide 44: Asset quality - Personal
Asset quality - Personal Credit quality (€bn) Portfolio has been negatively impacted by COVID-19 in Q2 with demand for personal new lending reducing significantly in April and 3.0 May. June volumes indicate a return to pre COVID-19 application 6% activity. 60% 0.2 2.7 0.3 9% 61% 8% 84% of portfoli
Slide 45: Asset quality – Property & construction
Asset quality – Property & construction Credit quality (€bn) Property sector was impacted by COVID-19 as construction activity 7.4 stalled on both residential and commercial sites during the lockdown. 35% 7.2 0.4 5% 39% 7% 87% of portfolio is strong / satisfactory, down from 90% Dec 19 0.4 0.5 5%
Slide 46: Asset quality – Corporate & SME
Asset quality – Corporate & SME Credit quality (€bn) Portfolio has been negatively impacted by COVID-19 in Q2 with demand for new lending reducing significantly 20.3 19.6 32% 2% 0.4 32% 0.8 4% 88% of portfolio is strong / satisfactory, down from 93% Dec 19 1.0 5% 8% 1.6 18.9 88% 17.2 93% Dec 19 Ju
Slide 47: Asset quality – internal credit grade by ECL staging
Asset quality – internal credit grade by ECL staging* Jun 2020 Dec 2019 €m Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Strong 35,531 1,955 - 2 37,488 42,123 329 - 2 42,454 Satisfactory 9,785 5,581 - - 15,366 11,346 1,452 - - 12,798 Total strong / 45,316 7,536 - 2 52,854 53,
Slide 48: Investment securities – debt securities €19.3bn
Investment securities – debt securities €19.3bn Key components €bn 9.7 7.0 5.3 5.3 1.7 1.6 1.0 1.1 Government Supernational banks Euro bank securities Non Euro bank securities and gov agencies securities Dec-19 Jun-20 €19.3bn up from €16.5bn up €2.7bn mainly due to €2.8bn increase in Irish Governm
Slide 49: ECL– sensitivities
ECL– sensitivities Jun 2020 Downside Downside scenario Downside scenario (‘Persistent Upside scenario (‘Failed virus plus scenario (‘Persistent EU/UK trade second (‘Virus €m Reported Base virus’) talks’) wave’) eliminated’) ECL allowance 2,441 2,270 2,908 2,736 3,519 1,984 Delta to reported (171) 46
Slide 50: Reported capital ratios
Reported capital ratios Transitional capital ratios Fully loaded capital ratios Jun 20 Dec 19 Jun 20 Dec 19 Total risk weighted assets (€m) 50,395 52,121 Total risk weighted assets (€m) 49,763 51,999 Capital (€m) Capital (€m) Shareholders equity excl AT1 and dividend 12,361 13,023 Shareholders equit
Slide 51: Credit ratings
Credit ratings AIB Group plc (HoldCo) Baa2 BBB BBB- Long term issuer rating Outlook Stable Negative Negative Investment grade AIB p.l.c. (OpCo) A2 BBB+ BBB+ Long term issuer rating Outlook Stable Negative Negative Investment grade 51
Slide 52: Loan book analysis and interest rate sensitivity
Loan book analysis and interest rate sensitivity Concentration by sector (%) H1 2020 Concentration by location (%) H1 2020 Agriculture 3 Republic of Ireland 76 Energy 3 United Kingdom 15 Manufacturing 5 Property & construction 12 North America 5 Distribution 9 Rest of World 4 Transport 3 Total 100 F
Slide 53: Contact details
Contact details Our Investor Relations Department are happy to facilitate your requests 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 Siobhain Walsh siobhain.m.walsh@aib.ie +353 1 641190