Aib Group Plc · EURONEXT:A5G
Aib — Allied Irish Banks, p.l.c. — FY2005 Earnings Presentation
38 slides from Aib's earnings presentation, February 2006
Slide 1: Preliminary Results 2005
Preliminary Results 2005 Preliminary Results for the year ended 31 December 2005 Allied Irish Banks, p.l.c.
Slide 2: Forward looking statements
Forward looking statements A number of statements we will be making in our presentation and in the accompanying slides will not be based on historical fact, but will be “forward- looking” statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Actual resu
Slide 3: Eugene Sheehy, Group Chief Executive
Eugene Sheehy Group Chief Executive
Slide 4: Performance highlights
Performance highlights Basic earnings per share 151.0 c - adjusted basic * 145.9 c 15% Positive income / cost gap 5% Cost / income ratio 2.5% Impaired loans 1% Dividend 10% Return on equity 20.6% Tier 1 capital ratio 7.2% * Excludes (i) profit on new bankcentre development and (ii) hedge volat
Slide 5: Strength in depth
Strength in depth constant currency Profit before tax AIB Bank Republic of Ireland €779m 24% AIB GB & NI €322m 18% Capital Markets €403m 27% Poland €132m 13% M&T €148m * 16% * after tax figure
Slide 6: AIB Bank Republic of Ireland
AIB Bank Republic of Ireland 24% Underlying profit 15% (pre 2004 investigation charge) Cost / income ratio 51.3% (52.7% in 2004) Reinforcing our no. 1 position in Irish banking Year on year growth 31% 28% 24% 25% 20% Deposits Total Loans Business Mortgage Personal Lending Lending Lending Cus
Slide 7: AIB Bank Great Britain & Northern Ireland
AIB Bank Great Britain & Northern Ireland 18% Cost / income ratio 48.7% (51.5% in 2004) GB Selective business sector focus driving High quality, high growth franchises outperformance Loans 31%, deposits 21% 25% Market share gains in: 18% 11% - private education - legal & accounting - healt
Slide 8: Capital Markets
Capital Markets 27% 16% Corporate Banking 55% 29% Treasury Investment Banking / Allied Irish America Cost / income ratio 47.5% (54.4% in 2004) Outstanding performance in Corporate Banking 33% Loans 29% Solid profit growth in premium Irish franchise > 70% profit from international franchise
Slide 9: Poland
Poland 13% Underlying profit 29% (pre disposal of business in 2004) Cost / income ratio to 65.7% (67.4% in 2004) Performance driven by: Non interest income 10% Tight cost management 3% Further provision reductions 54% Early signs of loan book momentum 4% following flat H1 Personal
Slide 10: M&T
M&T 16% Strong management driving performance in challenging environment Cost management offsetting slow income growth Cost / income ratio 51.2% (53.5% in 2004) Further reduction in non performing loans and provisions US yield curve movements not a material factor
Slide 11: Operations – single enterprise approach
Operations – single enterprise approach Major investment programme underway Core business banking and payment Service Quality system Vendor agreement signed Cross divisional application: staged roll out over 2 years Core retail banking system; implementation 2007 - 2008 Operational Managed E
Slide 12: Strong economic backdrop
Strong economic backdrop GDP % 2005 (e) 2006 (f) Ireland 4.5 5.0 UK 1.8 2.4 USA 3.5 3.4 Poland 3.2 4.0 Eurozone 1.4 2.1
Slide 13: Growing our presence in competitive markets
Growing our presence in competitive markets Ireland • Over 70,000 more customers than in 2004; increases in both business and personal sectors • Improving trend in customer satisfaction Great Britain • Continuing migration from small to mid- market customers • Consistent customer satisfaction un
Slide 14: Key performance features
Key performance features Double digit earnings momentum Income growing faster than costs Strong asset quality Robust capital and funding Developing enterprise wide operating solutions High quality, sustainable growth
Slide 15: John O'Donnell, Group Finance Director
John O’Donnell Group Finance Director
Slide 16: Performance snapshot
Performance snapshot Ccy Change 2004 €m 2005 % 3,220 Total operating income 3,647 12 1,868 * Total operating expenses 2,011 7 Group operating profit 1,352 before provisions 1,636 20 133 Total provisions 143 4 1,219 Group operating profit 1,493 22 1,377 Group profit before tax 1,706 23 127.1c EPS - t
Slide 17: EPS components
EPS components c. Basic earnings per share 151.0 - Profit on new Bankcentre development (4.4) - Hedge volatility under IFRS (0.7) Basic earnings per share – adjusted 145.9 Tax charge 3c lower than expected Profit mix and reversal of prior year provisions Principal cause of variance vs guidance
Slide 18: Buoyant customer demand driving income
Buoyant customer demand driving income 27% 16% 15% 12% 6% Loans Deposits . Net Interest Other income Total Income Operating Net Interest Income Margin -20 bps Organic growth - best use of capital - solid capital and funding positions
Slide 19: Deposit growth
Deposit growth % 20 20 18 17 16 16 14 12 10 8 8 6 4 4 2 0 Group AIB Bank AIB Bank Capital Poland RoI GB & NI Markets
Slide 20: Loan and risk weighted asset growth
Loan and risk weighted asset growth % 35 32 29 29 30 28 27 24 25 25 23 Loan growth 20 RWA growth 15 10 4 4 5 0 Group AIB Bank AIB Bank Capital Poland RoI GB & NI Markets
Slide 21: Loan portfolios by sector
Loan portfolios by sector % of Group loan portfolio 29% 26% 2004 2005 25% 25% 14% 13% 13% 13% 8% 8% 7% 6% 4% 4% 3% 2% Agriculture Construction & Residential Manufacturing Personal Services Transport & Other Property Mortgages Distribution
Slide 22: Property & construction – robust quality
Property & construction – robust quality Typical emphasis 5% Investment (strong covenants) House building / development 41% 54% (pre-sold / pre-let) Contracting (strong track record) Property & construction – by geography Republic of Ireland 4% 2% Northern Ireland 32% Great Britain 53% USA 9% Poland
Slide 23: House mortgages - Republic of Ireland
House mortgages - Republic of Ireland Primary focus on debt service ratio (repayment capacity) New Business Consistent LTVs (% no’s of drawdowns) Dec 02 Dec 03 Dec 04 Dec 05 < 75% 66 67 67 70 > 75% < 90% 26 25 24 17 > 90% 8 8 9 13 Total 100 100 100 100 Strong arrears profile Dec 02 Dec 03 Dec 04 D
Slide 24: Net interest margin
Net interest margin bps 2005 2004 change 2.38% 2.58% -20 Factors affecting net interest margin Single biggest factor remains loans growing faster than deposits Other factors include lower yields on re-investment of customer account funds, business mix and competition 2006 guidance: - 20 bps
Slide 25: Business mix – Republic of Ireland Division
Business mix – Republic of Ireland Division Deposits – mix change reduces margin; term deposits now 53% of total (43% in 2000) 1998 2003 2005 7 yr. growth % of loan book % of loan book % of loan book (%) Branch loans 32 11 7 (6) Home loans 29 34 34 +399 Market / other loans 39 55 59 +545 Total loa
Slide 26: Well contained costs
Well contained costs Underlying * 2004 €m 2005 change % 1,136 Staff costs 1,298 13 578 Other costs 583 -1 145 Depr. & amort. 130 -13 1,859 Operating expenses 2,011 7 “run rate” increase of + 5% Performance compensation + 1% Regulatory / compliance costs + 1% + 7% 2006 full year forecast + 7%
Slide 27: Positive "jaws" in all franchises
Positive “jaws” in all franchises % 14 15% 6% 12 5% 3% 10 8 3% 6 4 2 0 -2 Group AIB Bank AIB Bank Capital Poland RoI GB & NI Markets Income Costs
Slide 28: Cost / income ratio in all divisions
Cost / income ratio in all divisions % 70 67.4 65.7 60 57.7 55.2 2004 54.4 52.7 * 2005 51.3 51.5 48.7 50 47.5 40 Group RoI GB & NI Cap. Mkts Poland * excludes investigation related charges
Slide 29: Income / cost gap; a healthy relationship
Income / cost gap; a healthy relationship % 14 12 10 8 6 4 2 2002 2003 2004 2005 Cost growth Income growth
Slide 30: Strong asset quality
Strong asset quality 2004 2005 1.3 Impaired loans (ILs) % 1.0 5.8 Criticised loans / total loans % 5.1 0.7 Gross new ILs % 0.4 73 Total provisions / ILs % 78 20 Bad debt charge bps 15
Slide 31: Impaired loans by Division
Impaired loans by Division As at December 31, 2004 As at December 31, 2005 ILs/ Total ILs/ Total Actual Provisions/ Actual Provisions/ ILs Advances ILs ILs Advances ILs €m % % €m % % 295 0.8 83 AIB Bank ROI 308 0.7 84 148 1.1 76 AIB Bank GB & NI 166 0.9 75 100 0.8 79 Capital Markets 132 0.7 78 297 8
Slide 32: Bad debt provisions by division
Bad debt provisions by division Average Average 2004 Loans % €m 2005 Loans % 42 0.14 AIB Bank ROI 45 0.11 13 0.11 AIB Bank GB & NI 20 0.13 32 0.27 Capital Markets 35 0.22 29 0.91 Poland 15 0.40 116 * 0.20 Total 115 0.15 * €114m after IFRS adjustment
Slide 33: Tier 1 capital
Tier 1 capital 2004 2005 26% 23% 74% 77% Equity Preference Shares Tier 1 Capital Ratio 8.2%* 7.2% * Tier 1 ratio as at 1 Jan „05
Slide 34: Capital outlook
Capital outlook Tier 1 target zone c. 7% Organic loan growth best use of our capital Internal competition amongst business units Sufficient capital for planned loan growth Internally generated from business and asset disposals Suite of additional options Progressive dividend policy to
Slide 35: Funding
Funding % 100 10% 10% 4% 4% 9% 80 10% Capital Senior Debt 22% 24% CDs & CPs 60 Deposits by banks Customer a/cs 40 20 52% 55% 0 2004 2005 Plan to launch asset covered bond
Slide 36: Summary
Summary Strong 2005 performance in all franchises Business pipelines underpin momentum into 2006 2006 targets - customer demand to fuel income growth - cost growth of c. 7% to reflect controlled investment - income / cost growth +3% - impaired loans charge c. 20 bps Low double digit growth in
Slide 37: Slide 37
Slide 38: Contacts
Contacts Our Group Investor Relations Department will be happy to facilitate your requests for any further information Alan Kelly alan.j.kelly@aib.ie +353-1-6412162 Maurice Tracey maurice.m.tracey@aib.ie +353-1-6414191 Pat Clarke patricia.m.clarke@aib.ie +353-1-6412381 Alma Pearson alma.e.pear
Allied Irish Banks, p.l.c. — FY2005 Earnings Presentation on 6ix