Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — FY2016 Earnings Presentation
55 slides from Bank Of Ireland's earnings presentation, February 2017
Slide 1: 2016 Results Announcement
2016 Results Announcement 31 December 2016
Slide 2: 2016 progress, Financial Results, Priorities for 2017 and beyond
1 2016 progress Richie Boucher, CEO 2 Financial Results Andrew Keating, CFO 3 Priorities for 2017 and beyond Richie Boucher, CEO 1
Slide 3: 2016 Progress
2016 Progress Richie Boucher
Slide 4: Business Highlights
Business Highlights Continuing to deliver on strategic priorities Strength of our customer franchises reflected in our financial performance Continued to be the largest lender to the Irish economy; new lending of €6.7bn to personal Customers and business customers in Ireland Growth in core loa
Slide 5: Underlying PBT of €1,071m
Underlying PBT of €1,071m Total income of €3,105m; 2015 2016 Net interest income of €2,283m, lower than 2015 due primarily to FX translation impact of c.€90m, Total income €3,272m €3,105m the impact of the low interest rate environment and lower liquid asset income Net interest margin 2.19% 2.19
Slide 6: Core loan books growing; NPLs reducing
Core loan books growing; NPLs reducing Core loan books2 grew by €1.7bn in 2016; Dec 15 Dec 16 New lending volumes of €13.0bn3 in 2016 Customer loans (net) decreased by c.€6.2bn primarily due to FX translation impact of €5.4bn and redemptions of €2.6bn relating to; Customer loans (net) €84.7bn
Slide 7: Supportive economic backdrop
Supportive economic backdrop Continued growth expected in Irish and UK economies Irish and UK Economies are growing And creating jobs 4.5% 32.0m 31.9m 31.7m 31.3m 3.2% 3.1% 1.8% 1.6% 1.5% 2.10m 2.07m 2.02m 1.96m 2016e 2017f 2018f 2015 2016 2017f 2018f n ROI GDP n UK GDP n ROI number employed n UK nu
Slide 8: Benefitting from Irish growth with international diversification
Benefitting from Irish growth with international diversification Ireland Gross Customer loans at Dec 2016 (~70% of total income) Consumer, €1.8bn Property and Sustainable market structure Construction, €6.8bn Retail and commercial bank; Ireland’s only bancassurer #1 or #2 market positions acro
Slide 9: Developing our customer channels, processes and propositions
Developing our customer channels, processes and propositions We have made significant progress in transforming our customer franchises… From 50 Enterprise Towns in 2015... Our branches are evolving into business development community hubs driving local commerce We are developing our infrastructu
Slide 10: Core Banking Platforms Investment Programme
Core Banking Platforms Investment Programme Implementation plan for Core Banking Platforms 2016 2017 2018 2019 2020 Outcome Implementing new system Launch to new Critical enabler to achieving Key Activities and data cleansing customers <50% cost income ratio target in medium term Phased migration
Slide 11: Financial Results
Financial Results Andrew Keating
Slide 12: Focussed on growing sustainable profits
Focussed on growing sustainable profits Through revenue growth, margin and cost discipline Net Interest Margin Operating expenses1 €898m €896m €897m €14m €32m 2.21% 2.17% 2.11% 2.27% €898m €882m €865m H1 2015 H2 2015 H1 2016 H2 2016 H2 2015 H1 2016 H2 2016 n Operating expenses FX Translation benefit
Slide 13: Group Income Statement
Group Income Statement Underlying profit before tax of €1,071m Net interest income of €2,283m, lower than 2015 2015 2016 due primarily to FX translation impact of c.€90m, (€m) (€m) the impact of the low interest rate environment and Total income 3,272 3,105 lower liquid asset income Net interest i
Slide 14: Divisional Analysis
Divisional Analysis All trading divisions are contributing to the Group’s profitability Retail Ireland, Retail Ireland €615m Underlying PBT of €615m in Retail Ireland driven by higher operating profits and lower impairments Underlying PBT of €121m in Bank of Ireland Life has been positively impa
Slide 15: Net interest income
Net interest income NIM benefitting from new lending and lower funding costs Net interest margin drivers Net interest income - €2,283m Net interest income lower than 2015 due primarily to 2.21% 2.17% 2.11% 2.27% FX translation impact of c.€90m, the impact of the low interest rate environment and l
Slide 16: Loans and advances to customers
Loans and advances to customers Continued growth in core loan books Group loan book movement in 2016 Core loan books1 grew by €1.7bn in 2016 €1.7bn €2.6bn Customer loans decreased by c.€6.2bn to €78.5bn; €5.4bn primarily due to FX translation impact of €5.4bn and redemptions of defaulted loans,
Slide 17: Other Income
Other Income Business income stable and in line with 2015 Business income 2015 2016 (€m) (€m) Includes fee income from customer activity in our Retail ROI, BOI Life, Retail UK and Corporate & Treasury divisions Retail Ireland 331 319 Business income stable and in line with 2015 Bank of Ireland L
Slide 18: Operating Expenses, Core Banking Platforms Investment, Levies and Regulatory charges
Operating Expenses, Core Banking Platforms Investment, Levies and Regulatory charges Focussed on cost control; continue to invest Operating expenses of €1,747m; FY15 FY16 Broadly flat in 2016 vs. 2015; FX translation benefit of €46m in 2016 Total staff costs 894 877 Operating expenses have rem
Slide 19: Asset Quality
Asset Quality
Slide 20: Non-performing loans and impairment charges
Non-performing loans and impairment charges Significant reduction of €4.1bn (34%) in non-performing loans in 2016 Non-performing loans Non-performing loans - €7.9bn 50% €4.1bn reduction during 2016; 50% reduction in NPLs €15.8bn Redu €1.5bn ction over last two years €12.0bn Reductions in all ass
Slide 21: Non-performing loans by portfolio
Non-performing loans by portfolio Reducing across all asset classes ROI Mortgages UK Mortgages 44% Red 35% Red uction uction €3.9bn €0.7bn €3.0bn €0.7bn €2.2bn €0.5bn €3.2bn €1.3bn €1.2bn €2.3bn €0.8bn €1.7bn €0.8bn €0.7bn €0.5bn €0.5bn €0.5bn €0.3bn Dec 14 Dec 15 Dec 16 Dec 14 Dec 15 Dec 16 n Defau
Slide 22: Funding & Capital
Funding & Capital
Slide 23: Balance Sheet
Balance Sheet Capital and Liquidity available to support growth Dec 15 Dec 16 Strong liquidity ratios (€bn) (€bn) Net Stable Funding Ratio – 122% Customer loans 85 78 Liquidity Coverage Ratio – 113% Loan to Deposit Ratio – 104% Liquid assets 24 21 Customer deposits – €75.2bn BOI Life assets 16
Slide 24: Capital
Capital Strong organic capital generation Transitional CET1 ratio1 movement Strong organic capital generation in 2016; Robust capital 1.5% 0.1% (0.15%) 0.05% (0.2%) ratios; 0.4% T ransitional CET1 ratio of 14.2% F ully loaded CET1 ratio of 12.3% 14.4% 14.2% T ransitional Total Capital ratio
Slide 25: Capital Guidance and Distribution policy
Capital Guidance and Distribution policy Pillar 2 requirements (P2R) Required to maintain a minimum CET1 ratio of 8% on a transitional basis from 1 Minimum January 2017 Regulatory Includes a Pillar 1 requirement of 4.5%, a P2R of 2.25% and a capital conservation Capital buffer for 2017 of 1.25
Slide 26: Priorities for 2017 and beyond
Priorities for 2017 and beyond Richie Boucher
Slide 27: Priorities for 2017 and beyond
Priorities for 2017 and beyond Develop relationships with existing and new customers Leverage our strong retail and commercial franchises in Ireland Selective growth in the UK while closely monitoring the impact of the UK’s decision to leave the European Union Customers Avail of attractive l
Slide 28: Summary
Summary Operating in Diversified Generating and Strong Economies Business Model Protecting Capital Irish and UK economies have Strong retail & commercial Experienced senior leadership been strong and both have franchises; Ireland’s only team proven resilience bancassurer Proven track record
Slide 29: Additional Information
Additional Information
Slide 30: Additional Information
Additional Information Slide No. BOI Overview Business profile 30 Historic financial results 32 Income Statement Divisional performance 34 Net interest income analysis 35 Other income analysis (net) 36 Non-core Items 37 Loans and Advances to Customers 38 ROI mortgage loan book 39
Slide 31: BOI Overview: Business profile
BOI Overview: Business profile Ireland: Leading bank in a growing economy with a well structured market Comprehensive multi-channel distribution c.250 branches c.1,750 74% of consumers are 65% of transactions 700k service calls platform Self-service now digitally active via mobile or tablet monthly
Slide 32: BOI Overview: Business profile
BOI Overview: Business profile Attractive international franchises provide diversification and further opportunities for growth Partnership based consumer banking Acquisition Finance franchise in UK Trusted brand and established customer base Well recognised lead arranger / c.1.3m Savings c.90k PO
Slide 33: BOI Overview: Income Statement
BOI Overview Income Statement1 y/e Dec 12 y/e Dec 13 y/e Dec 14 y/e Dec 15 y/e Dec 16 (€m) (€m) (€m) (€m) (€m) Total income 1,862 2,646 2,974 3,272 3,105 Net interest income 1,755 2,133 2,358 2,454 2,283 Other income 495 642 653 828 842 ELG fees (388) (129) (37) (10) (20) Operating expenses (1,589)
Slide 34: BOI Overview: Summary Balance Sheet
BOI Overview Summary Balance Sheet Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 (€bn) (€bn) (€bn) (€bn) (€bn) Customer loans1 93 85 82 85 78 Liquid assets 33 27 25 24 21 BOI Life assets 13 14 16 16 17 Other assets 9 6 7 6 7 Total assets 148 132 130 131 123 Customer deposits 75 74 75 80 75 Wholesale funding 39
Slide 35: Income Statement: Divisional performance
Income Statement Divisional performance Underlying profit / (loss) before tax Underlying profit / (loss) Additional gains Year ended Dec 16 and additional gains before tax (€m) (€’m) (€m) Retail Ireland 528 87 615 Bank of Ireland Life 121 - 121 Retail UK - € 128 5 133 Retail UK - £ 102 4 106 Corpora
Slide 36: Income Statement: Net interest income analysis
Income Statement Net interest income analysis H1 2015 H2 2015 H1 2016 H2 2016 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 37: Income Statement: Other income analysis (net)
Income Statement Other income analysis (net) 2015 2016 (€m) (€m) Retail Ireland 331 319 Bank of Ireland Life 154 151 Retail UK 9 2 Corporate and Treasury 153 157 Group Centre and Other (21) (8) Business Income 626 621 Other gains VISA Europe share disposal - 95 Liquid asset portfolio rebalancing 173
Slide 38: Income Statement: Non-core items
Income Statement Non-core items 2015 2016 (€m) (€m) Gross-up for policyholder tax in the Life business 11 15 Gain arising on the movement in the Group’s credit spreads 11 5 Investment return on treasury stock for policyholders - 2 Impact of Group’s pensions reviews (2010 and 2013) 4 - Payments in re
Slide 39: Loans and Advances to Customers: New business volumes
Loans and Advances to Customers New business volumes Corporate & Treasury Retail UK Retail Ireland €4.8bn €4.4bn €0.4bn £4.2bn £4.1bn €0.3bn £0.8bn €3.3bn £1.0bn €3.2bn £0.2bn £0.2bn €3.0bn €1.0bn €2.7bn €1.4bn £3.3bn £2.8bn €2.2bn €1.9bn €1.4bn €1.4bn 2015 2016 2015 2016 2015 2016 n Corporate n Acq
Slide 40: ROI Mortgages: €24.3bn
ROI Mortgages: €24.3bn ROI Mortgages (gross) Market share €25.6bn €25.0bn €24.3bn €2.3bn €3.9bn €5.3bn 2015 2016 €8.9bn €8.1bn €7.2bn New Lending Volumes1 €1.4bn €1.4bn €14.4bn €12.9bn Market share 29% 25% €11.8bn Dec 14 Dec 15 Dec 16 n Tracker n Variable Rates n Fixed Rates Trackers reduced by €1
Slide 41: UK Residential mortgages: £20.4bn/€23.9bn
UK Residential mortgages: £20.4bn/€23.9bn UK Residential Mortgages (gross) UK Residential Mortgages (gross) £20.5bn £20.4bn £20.5bn £20.4bn £19.8bn £19.8bn £2.6bn £2.2bn £2.9bn £4.2bn £6.9bn £8.5bn £7.6bn £7.4bn £6.1bn £7.8bn £4.9bn £4.0bn £9.5bn £10.4bn £10.8bn £8.7bn £7.9bn £9.1bn Dec 14 Dec 15 De
Slide 42: Asset Quality: Profile of customer loans at Dec (gross)
Asset Quality Profile of customer loans1 at Dec 16 (gross) ROI UK RoW Total Total Composition (Dec 16) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 24.3 23.9 - 48.2 59% Non-property SME and corporate 11.7 4.12 4.2 20.0 24% SME 8.8 1.9 0.0 10.7 13% Corporate 2.9 2.2 4.2 9.3 11% Property and construction 6.8
Slide 43: Non-performing loans by portfolio
Non-performing loans by portfolio Non-performing loans reducing across all portfolios Impairment Impairment Advances Non-performing Non-performing Defaulted Defaulted Impairment provisions as % of provisions as % Composition (Dec 16) loans loans as % of loans loans as % of provisions (€bn) non-perfo
Slide 44: ROI Mortgages: €24.3bn
ROI Mortgages: €24.3bn Owner Occupied Non-performing loans Portfolio Performance Reduced NPLs1 by €0.8bn to €2.2bn in 2016 32% 34% Defaulted loans component of €1.7bn; down 57% since reported June 2013 peak €1.6bn Continued trend of probationary mortgages returning to €0.4bn €1.2bn performing
Slide 45: UK Customer Loans £28.6bn (€33.4bn)
UK Customer Loans £28.6bn (€33.4bn) UK Mortgages – £20.4bn UK Mortgages Analysis Total UK mortgages of £20.4bn; (NPLs1 - 3%; Defaulted loans - 1%) Scotland, Wales, £0.9bn £0.8bn Average LTV of 62% on total book Greater Average LTV of 71% on new mortgages Northern Ireland, London, £0.9bn £4.3bn
Slide 46: Available for Sale Financial Assets
Asset Quality Available for Sale Financial Assets ROI UK France Other Dec 16 Dec 15 Carrying Value €bn €bn €bn €bn €bn €bn Sovereign bonds 2.3 0.6 0.7 1.6 5.2 5.7 Senior debt - - 0.2 1.5 1.7 1.5 Covered bonds 0.3 0.7 0.6 1.9 3.5 2.2 Subordinated debt 0.3 - - - 0.3 0.3 Asset backed securities - 0.1 -
Slide 47: Capital: CET1 ratios
Capital CET1 ratios Transitional ratio Fully loaded ratio (€bn) (€bn) Total equity 9.4 9.4 Less Additional Tier 1 (0.8) (0.8) Deferred tax1 (0.2) (1.2) Pension deficit 0.2 - Available for sale reserve2 (0.1) - National filters (0.1) - Intangible assets and goodwill (0.6) (0.6) Other items3 (0.6) (0.
Slide 48: Regulatory Capital Requirements
Regulatory Capital Requirements Supervisory Review and Evaluation Process (SREP1) requirement 14.2% Capital Conservation Buffer (CCB) of 2.5% phased in over 4 years from 2016 1.5% O-SII1 Buffer phased in over 3 years from July 2019 +1.5% +P2G OSII +0.5% +1.0% CCB - 1.875% 2.5% 2.5% 2.5% 1.25% CCB Tr
Slide 49: Risk weighted assets (RWA)
Risk weighted assets (RWA) RWA Density1 Customer lending Avg. Credit Risk Weights2/3 (Based on regulatory exposure class) EAD4 RWA Avg. Risk (€bn) (€bn) Weight ROI mortgages 24.8 8.4 34% UK mortgages 23.2 4.6 20% SME 18.0 13.1 73% Corporate 11.2 11.7 105% Other Retail 4.6 2.9 63% 46% 47% Total custo
Slide 50: Ordinary stockholders’ equity and TNAV
Ordinary stockholders’ equity and TNAV 2015 2016 Movement in ordinary stockholders’ equity (€m) (€m) Ordinary stockholders’ equity at beginning of period 7,392 8,308 Movements: Profit attributable to stockholders 940 793 Distribution on other equity instruments – additional tier 1 coupon - (73) Divi
Slide 51: Defined Benefit Pension Schemes
Defined Benefit Pension Schemes Group IAS19 DB Pension Deficit I AS19 requires that the rate used to discount DB pension liabilities be 3.65% selected by reference to market yields on high quality corporate bonds 2.30% 2.20% 1.60% 2.20% with a corresponding duration. However, only a small number o
Slide 52: Defined Benefit Pension Schemes
Defined Benefit Pension Schemes The Group has developed a framework for pension funding and investment decision-making as part of its long-term plan Management of the Group’s sponsored DB pensions position involves a multi-year programme, categorised into 3 broad areas. Activity in these areas i
Slide 53: Reimbursing and rewarding taxpayers support
Reimbursing and rewarding taxpayers support Jan 09 – Dec 16 From 2009 - 2011, c.€4.8bn cash invested by the State Cumulative c.€6bn cash returned to the State c.14% State continues to hold valuable c.14% equity Shareholding shareholding State Aid completely repaid in 2013 + Irish State’s ris
Slide 54: 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 Colin Wallace tel:
Slide 55: Forward-Looking statement
Forward-Looking statement This document contains certain forward-looking statements with respect to certain of the Bank of Ireland Group’s (the ‘Group’) plans and its current goals and expectations relating to its future financial condition and performance, the markets in which it operates, and its