Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — FY2004 Earnings Presentation
56 slides from Bank Of Ireland's earnings presentation, May 2004
Slide 1: Year End Results to 31 March 2004
Year End Results to 31 March 2004
Slide 2: Forward Looking Statement
Forward Looking Statement 2 This presentation contains certain forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995 with respect to certain of the Group’s plans and its current goals and expectations relating to its future financial condition and performan
Slide 3: Financial Highlights
Financial Highlights 3 • Profit before Tax of €1267m +8% • Profit before Tax in Constant Currency +11% • Alternative EPS of 106.7c +8% • Underlying Alternative EPS +10% • Dividend +12% • ROE 23.7% - 11th consecutive year above 20% • 13th successive year of profit growth
Slide 4: Strong Group Performance
Strong Group Performance 4 MARKET ENVIRONMENT RESULTS HIGHLIGHTS March 2003 Growth • Global Economic Uncertainty • Strong Organic Growth 2003/2004 • Positive Portfolio Management • Historically Low Short Term Interest Rates • Currency Volatility Efficiency • Relentless Cost Management March 2004 • S
Slide 5: Double Digit 5 Year Compound Annual Growth
Double Digit 5 Year Compound Annual Growth 5 106.7 110 45 41.4 99.2 93.4 100 40 37.0 90 84.5 33.0 35 80 54 29.0 68.0 49.3 30 70 48.3 26.6 41 23.5 60 54.3 25 23.8 18.4 21.4 50 32.3 Dividend per Alternative EPS 20 19.6 40 26.5 share 16.14 15 30 5 yr CAGR = 15% 12.56 49.9 52.7 5 yr CAGR = 18% 10 43.5 4
Slide 6: Financial Highlights
Financial Highlights Bank of Ireland Group
Slide 7: Financial Highlights
Financial Highlights 7 11% PBT Growth in Constant Currency Mar 04 Mar 03 % €m €m Change Profit on Ordinary Activities before Exceptional Items* 1267 1177 8 Alternative EPS** (Cent) 106.7 99.2 8 Underlying Alternative EPS *** (Cent) 108.7 99.2 10 Dividend (Cent) 41.4 37.0 12 Return on Equity* # 23.7%
Slide 8: Underlying Alternative EPS Calculation
Underlying Alternative EPS Calculation 8 Double Digit Growth Mar 04 Mar 03 % Change Alternative EPS 106.7c 99.2c +8 Incremental Irish Government Levy 1.9c - UKFS Sterling Profit (translation impact) 1.9c - Change in Accounting Policy (1.8c) - Underlying Alternative EPS 108.7c 99.2c +10
Slide 9: Exceptional Items
Exceptional Items 9 6 months Sept 03 Mar 04 Mar 03 €m €m €m 33 Sale of share in State Street Alliance 36 - (1) UKFS Business Improvement Programme (14) - (3) Restructuring of UK IFAs (118) (143) (1) Other (1) - - Exit from Perot JV - (9) - Active Business Services - (12) 28 Pre Tax (97) (164) 23 Pos
Slide 10: Strong Capital Base
Strong Capital Base 10 €510m Share Buy Back Since Feb 2003 Sept 03 Mar 04 Mar 03 % % % 4.2 Equity / Assets* 4.0 4.4 10.5 Total Capital 11.3 11.1 7.6 Tier 1 Capital 7.2 8.0 7.0 Tier 1 Excluding Life 6.6 7.3 75 Equity Element of Tier 1 75 75 Sept 03 Mar 04 Mar 03 Growth Constant €bn €bn €bn % Currency
Slide 11: Group Balance Sheet
Group Balance Sheet 11 19% Growth (18% in Constant Currency) Restated Restated Sept 03 Mar 04 Mar 03 €bn Assets €bn €bn 9.4 Bank Loans 7.8 7.5 61.5 Customer Loans 67.6 57.0 14.6 Debt Securities 15.7 12.3 6.9 Other 8.3 7.3 92.4 99.4 84.1 6.1 Life Assurance 7.0 5.2 98.5 106.4 89.3 Liabilities 16.9 Ban
Slide 12: Group Profit & Loss a/c
Group Profit & Loss a/c 12 3% Positive gap between Income and Cost growth 6 months Sept 03 Mar 04 Mar 03 % Constant €m €m €m Change Currency % 852 Net Interest Income 1744 1729 1 4 611 Other Income 1234 1188 4 6 1463 Total Income 2978 2917 2 5 794 Costs 1654 1662 (1) 2 46 Loan Losses 86 100 (14) (14
Slide 13: Net Interest Margin
Net Interest Margin 13 17 basis points decline 6 months Sept 03 Mar 04 Mar 03 % % % 2.38 Domestic 2.43 2.65 1.93 Foreign 1.87 1.99 2.20 Group 2.21 2.38 • Lower interest rate environment -6 • Increase in wholesale funding -9 • Cost of share buyback programme -2 • UKFS back book repricing -3 • Other +
Slide 14: Other Income +4%
Other Income +4% 14 + 6% in constant currency • Prior Year Lease Unwinds -2% • UK IFA Sales -1% • Sale of Active Business Services -1% • Reduced Profit from Property Disposals -1% • Change in Accounting Policy +2% • Asset Management Services +2% • Positive Investment Variance in Life Business +5%
Slide 15: Group Costs
Group Costs 15 Strong Cost Management Performance 6 months Constant Sept 03 Mar 04 Mar 03 % Currency €m €m €m Change % 474 Staff 965 955 1 4 236 Administrative 506 525 (4) (1) 75 Depreciation 164 159 3 5 9 Goodwill 19 23 (17) (9) 794 1654 1662 (1) 2
Slide 16: Cost / Income Ratios
Cost / Income Ratios 16 Positive Group & Divisional Trends 6 months Sept 03 Mar 04 Mar 03 % % % 53.0 Group 54.4 55.8 53.8* Retail ROI (Including Life) 53.9 56.4* 49.6 Asset Mgmt. Services 47.9 49.6 33.2* Wholesale Financial Serv. 35.4 35.2* 55.2* UK Financial Services 55.0 56.2* Excludes Goodwill Am
Slide 17: Loan Loss Charge
Loan Loss Charge 17 Prudent and consistent approach to credit management 6 months Sept 03 Mar 04 Mar 03 €m* €m* bps** €m* bps** 46 Group Total 86 14 100 18 68 Specific 134 21 114 20 4 General 4 1 16 3 (21) NDSP (39) (6) (25) (4) (5) Recoveries (13) (2) (5) (1) * Loan Loss Charge (€m) ** Charge/Avera
Slide 18: Asset Quality
Asset Quality 18 Remains very satisfactory Sept 03 Mar 04 Mar 03 % Change €376m Balances under Provision (BUP) €375m €320m +17% €467m Loan Loss Provisions (LLP)* €472m €480m -2% 124% Coverage Ratio (LLP/BUP) 126% 150% 0.73% LLP as a % of Loans 0.67% 0.79% * Includes non designated specific provision
Slide 19: Business Review
Business Review Bank of Ireland Group
Slide 20: Profit Before Tax by Division
Profit Before Tax by Division 20 6 months* Sept 03 Mar 04 Mar 03* % Constant €m €m €m Change Currency % 202 Retail Republic of Ireland 419 390 7 7 73 Bank of Ireland Life 147 87 69 69 189 Wholesale Financial Services 371 367 1 2 182 UK Financial Services 373 359 4 12 58 Asset Management Services 125
Slide 21: Retail Republic of Ireland
Retail Republic of Ireland 21 Profit Before Tax up 7% 6 months* Sept 03 Mar 04 Mar 03* % €m €m €m Change 445 Net Interest Income 909 861 6 138 Other Income 287 270 6 583 Total Income 1196 1131 6 353 Operating Costs 724 687 5 28 Loan Loss Provision 53 54 (2) 202 Profit before Tax 419 390 7 * Restated
Slide 22: Retail Republic of Ireland: Strong Performance
Retail Republic of Ireland 22 Strong Performance + 6% Net Interest Income • Total Income +6% + 6% Other Income – Continued Strong Volume Growth ¾ Resources +7% ¾ Mortgages +29% +20% ¾ Other Lending +13% – Strong Momentum in Business Lending – Margin Contraction of 22 basis points ¾ Lower Interest Ra
Slide 23: Retail Republic of Ireland
Retail Republic of Ireland 23 • Costs +5% – Salary +4% – Other Costs +7% • Asset Quality – Loan Loss Charge 23bps (28bps Mar 03) – Improving Quality Profile • Strong Advances & Resources growth set to continue tempered by low interest rate environment and wholesale funding levels
Slide 24: Bank of Ireland Life
Bank of Ireland Life 24 Recovery in world equity markets 6 months Sept 03 Mar 04 Mar 03 % €m €m €m Change 19 New Business 51 55 (7) 35 Existing Business 73 65 12 26 Expected Return 54 56 (4) 6 Experience Variances 14 11 27 3 Operating Assumption Changes 5 (2) - 3 Shareholder Returns 8 10 (20) 57 Ope
Slide 25: Bank of Ireland Life
Bank of Ireland Life 25 Good sales momentum in the second half of the year • Operating Profits marginally ahead – impacted by reduced sales of Special Savings • New Business Sales - Including SSIPs -12% - Excluding SSIPs +19% • Very strong Profit Before Tax growth on the back of rising equity market
Slide 26: Wholesale Financial Services
Wholesale Financial Services 26 11% profit growth excluding one-off gains 6 months** Sept 03 Mar 04 Mar 03** % €m €m €m Change 133 Net Interest Income 292 261 12 175 Other Income* 331 344 (4) 308 Operating Income 623 605 3 102 Operating Costs 221 213 4 17 Loan Loss Charge 31 25 24 189 Profit before
Slide 27: Wholesale Financial Services
Wholesale Financial Services 27 Profit Before Tax Analysis 6 months** Sept 03 Mar 04 Mar 03** % €m €m €m Change 71 Corporate Banking 158 160 (1) 78 Global Markets 143 146 (2) 40 Other* 70 61 15 189 371 367 1 Underlying Corporate Banking PBT +13% Underlying Global Markets PBT +6% * Includes Davy, IBI
Slide 28: Wholesale Financial Services
Wholesale Financial Services 28 • Total Income (including Share of Associates/JV) +3% – 12% Growth in Net Interest Income – Excellent out-turn from Corporate in view of level of significant once-off gains last year – Strong performance from Global Markets despite lower exceptional trading gains as i
Slide 29: Wholesale Financial Services
Wholesale Financial Services 29 18% of Group Loan & Advances to Customers* (€12.4bn) • Risk Management – Strong Asset Quality - well diversified book – Loan Loss charge of 26 basis points (Mar ’03 : 20bp** and Sept ’03 : 29bp**) – Modest Proprietary Trading – Sound Governance, Controls & Risk Cultur
Slide 30: UK Financial Services (Sterling)
UK Financial Services (Sterling) 30 Strong Profit Growth in a period of transition 6 months* Sept 03 Mar 04 Mar 03* % Stg£m Stg£m Stg£m Change 209 Net Interest Income 417 406 3 81 Other Income 171 178 (4) 290 Total Income 588 584 1 160 Operating Costs 323 328 (1) 1 Loan Losses 2 14 (86) 129 Operatin
Slide 31: UK Financial Services
UK Financial Services 31 Year of change & progress • Costs – £15m pa savings from IFA rationalisation completed June 2003 – Business Improvement Programme to save £30m pa launched Sept 2003 • Strong volume growth • Margin attrition of 20 basis points • Other Income impacted by IFA rationalistation &
Slide 32: UK Financial Services
UK Financial Services 32 Profit Before Tax Analysis 6 months* Sept 03 Mar 04 Mar 03* % Stg£m Stg£m Stg£m Change 82 Personal Lending UK 156 145 8 (Mortgage Business) 48 Business Banking 99 84 18 (NI & GB Business Banking) (2) Consumer Banking 0 (3) - (B&W Branches & CdV) (1) Other 4 6 (33) 127 259 23
Slide 33: Asset Management Services
Asset Management Services 33 Strong Profit Performance 6 months Sept 03 Mar 04 Mar 03 % €m €m €m Change 2 Net Interest Income 3 5 (40) 125 Fee Income 258 233 11 127 Operating Income 261 238 10 63 Operating Costs 125 118 6 64 Operating Profit 136 120 13 6 Goodwill 11 7 57 58 Profit before Tax 125 113
Slide 34: Asset Management Services
Asset Management Services 34 BIAM - Assets Under Management up 4% on Average 6 months 6 months Full Year Full Year Sept 03 Mar 04 Mar 04 Mar 03 €bn €bn €bn €bn Opening AUM 42.7 50.6 42.7 57.1 Net Cashflow 1.4 1.0 2.4 6.1 Performance 6.5 5.9 12.4 (20.5) Closing AUM 50.6 57.5 57.5 42.7 In addition Iri
Slide 35: Asset Management Services
Asset Management Services 35 BIAM - Global Footprint March 2004 March 2003 €57.5bn €42.7bn 9% 6% 4% 3% 4% 4% 40% 2% 43% 1% 43% 41% €24.4bn Ireland €18.2bn Ireland €22.8bn North America €18.0bn North America €4.9bn UK & NI €3.0bn UK & NI €2.1bn Japan €1.2bn Japan €2.3bn Australia €1.6bn Australia €1.
Slide 36: Asset Management Services
Asset Management Services 36 • BIAM Growth % – Assets Under Management €57.5bn +35 – Continuing to Develop Global Footprint – Very Positive Jaws between Income & Cost Growth • Iridian (61%) – Full 12 months V’s 7 months – Assets under Management US$9.8bn +17 – Business Operating Model successfully e
Slide 37: UK Post Office Joint Venture
UK Post Office Joint Venture 37 Initial indications are very positive • 50/50 Joint Venture signed 19 March 2004 • Total investment £134m (including acquisition costs) • Unsecured Loan product piloted January 2004 with National Launch March 2004 – Initial indications are very positive • Further prod
Slide 38: Outlook
Bank of lreland Group
Slide 39: Outlook: Retail Republic of Ireland and Bank of Ireland Life
Outlook 39 Retail Republic of Ireland Bank of Personal Banking Business Banking Mortgages Ireland Life • Mature ‘seed corn’ • Re-structure already • Build on 29% • Strong momentum • Increase cross sell paying off growth in starting new year from 3x to 4x over • Strong pipeline 2003/2004 • Confidence
Slide 40: Outlook: Wholesale Financial Services and Asset Management
Outlook 40 Wholesale Financial Asset Management Services Services • New management team in • Global demand for services is Corporate Banking strong • Strong Pipeline • Expanding both geographic and product footprint • Niche International lending showing strong growth • Building significant presence
Slide 41: Outlook: UK Financial Services and JV with UK Post Office
Outlook 41 UK Financial Services JV with UK Post Office • Strategic Review Completed • JV signed in March 2004 - 14% Mar 03 cost base cut - 47% C/I target • Personal Loan Product national roll out well under way • New Strong Management Team • Early signs are promising • Positive impact already visib
Slide 42: Summary: Past, Present, Future
Summary 42 Past Present Future • Another excellent • Strong momentum in • High single/low performance in the all divisions double digit growth year to March 2004 in Alt EPS (excluding • Operate in two the impact of the • Profit before tax +8% strongest economies PO) for the year to in Europe March 2
Slide 43: Supplementary Information
43 Supplementary Information
Slide 44: Index - Supplementary
Index - Supplementary 44 • Geographic analysis • Economic Outlook • Volume Growth • Asset Quality • UK Financial Services (Euro)
Slide 45: Geographic Analysis
Geographic Analysis 45 Profit Shareholder Base March 2004 March 2004 56% Republic of Ireland 18% Republic of Ireland 16% UK 27% UK 19% Europe / Other 17% Rest of World US 20% 27% Retail
Slide 46: Economic Outlook – Ireland
Economic Outlook – Ireland 46 Consensus forecasts suggest steady growth Actual Forecast % Growth 2003 2004 2005 GDP 1.4 3.9 5.3 GNP 3.3 3.7 5.0 Consumer Spending 1.9 3.3 4.4 Exports -5.8 4.2 6.7 Inflation 3.5 2.0 2.5 Unemployment 4.6 4.8 4.7 Source: Consensus
Slide 47: Economic Outlook – UK
Economic Outlook – UK 47 Very encouraging prospects Actual Forecast % Growth 2003 2004 2005 GDP 2.2 3.3 2.8 Consumer Spending 2.5 3.1 2.5 Inflation 2.8 2.5 2.5 Unemployment 3.1 3.0 3.0 Source: Consensus
Slide 48: Volume Growth: Constant Currency
Volume Growth: Constant Currency 48 Lending Resources P.I.T. Average P.I.T. Average % % % % Increase Increase Increase Increase Group 15 11 11 5 Republic of Ireland 21 15 9 6 UK 14 11 2 (1)
Slide 49: UK Financial Services (Sterling)
UK Financial Services (Sterling) 49 Loans & Advances to Customers (€34bn) Sept 03 Mar 04 Mar 03 % Stg £bn Stg £bn Stg£bn Change Residential Mortgages 11.0 - Standard 10.9 10.9 - 2.9 - Non Standard Buy to Let 3.4 2.3 48 1.5 Specialised 1.8 1.2 50 15.4 16.1 14.4 12 5.6 Commercial Loans 6.2 5.2 19 21.0
Slide 50: Group Loan Book €70.7bn
Group Loan Book €70.7bn* 50 Well diversified book with no undue risk concentrations Group R.O.I. UK International % % % % Residential Mortgages 51 17 34 - Business & Other Services 12 4 2 6 Personal Lending 9 7 2 - Construction & Property 8 3 4 1 Manufacturing 7 3 2 2 Other Lending 4 3 - 1 Commercia
Slide 51: Asset Quality
Asset Quality 51 Residential Other Total Mortgages Lending Mar 04 Mar 03 Mar 04 Mar 03 Mar 04 Mar 03 €m €m €m €m €m €m Balances under Provision Ireland 3 3 217 199 220 202 UK 16 16 34 36 50 52 International - - 105 66 105 66 19 19 356 301 375 320 Loan Loss Provision (LLP) General & Specific Ireland
Slide 52: Asset Quality: Loan to Value
Asset Quality 52 Loan to Value – New Business Residential Mortgages: Republic of Ireland Average Loan to Value Mar 04 Mar 03 – Owner Occupied 71% 66% – Investors 66% 69% Residential Mortgages: UKFS Personal Lending Average Loan to Value – Standard 58% 58% – Specialised 76% 70% – BTL 73% 72%
Slide 53: Republic of Ireland Residential Mortgages
Republic of Ireland Residential Mortgages 53 Arrears Balance Profile 1-6 mths 6-12 mths 12+ mths Total 2004 (%) 0.8 0.2 0.2 1.2 2003 (%) 1.1 0.3 0.2 1.6 New Business LTV’s <75% 75-90% 91-92%* 93 - 100%** 2004 (%) 44 37 16 3 2003 (%) 53 35 11 2 Book LTV’s <75% 75-90% 91-92%* 93 - 100%** 2004 (%) 62 3
Slide 54: UK Residential Mortgages
UK Residential Mortgages 54 Arrears Balance Profile 1-6 mths 6-12 mths 12+ mths Total 2004 (%) 1.1 0.1 0.1 1.3 2003 (%) 1.3 0.2 0.1 1.6 New Business LTV’s <75% 75-90% 91-95% >95% 2004 (%) 51 42 5 2 2003 (%) 58 38 3 1 Book LTV’s <75% 75-90% 91-95% >95% 2004 (%) 54 35 7 4 2003 (%) 53 32 9 6
Slide 55: UK Financial Services (Euro)
UK Financial Services (Euro) 55 6 months* Sept 03 Mar 04 Mar 03* % €m €m €m Change 299 Net Interest Income 601 628 (4) 116 Other Income 246 275 (11) 415 Total Income 847 903 (6) 229 Operating Costs 466 507 (8) 1 Loan Losses 2 21 - 185 Operating Profit 379 375 1 3 Goodwill 6 16 - 182 Profit before Ta
Slide 56: For Further Information
For Further Information 56 Please Contact Fiona Ross Head of Group Investor Relations Mick Stewart Manager, Group Investor Relations Tel: +353 1 604 3502 Fax: +353 1 661 5105 Email: investor.relations@boimail.com Website: www.bankofireland.ie/investor