Allied Irish Banks — H1 2006 Earnings Presentation
46 slides from Allied Irish Banks's earnings presentation, August 2006
Slide 1: Interim Results 2006
Interim Results 2006 Interim Results for the half-year ended 30 June 2006 Allied Irish Banks, p.l.c. 1
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: The AIB agenda
The AIB agenda Harvest organic growth opportunities in existing markets Transfer skills internationally to markets where we identify profitable sectors / niches Achieve efficiency and productivity gains driven by a single enterprise support framework 4
Slide 5: Performance highlights
Performance highlights Basic earnings per share 121.2 c - basic adjusted * 93.7 c 29 % Positive income / cost gap 6% Cost / income ratio 2.7 % Impaired loans 0.8 % Dividend 10 % Return on equity 30.4 % Tier 1 capital ratio 8.0 % * Excludes (i) interest rate hedge volatility (ii) profit on bank
Slide 6: Buoyant and diverse momentum
Buoyant and diverse momentum Profit by division AIB Bank RoI €453m 19% Capital Markets €300m 45%* AIB Bank UK €184m 18% Poland €114m 62% AIB Bank RoI 40% Capital Markets 27% M&T €80m 11% AIB Bank UK 16% Poland 10% M&T 7% * 58% (€326m) including profit of certain investment cont
Slide 7: Increasing international profile
Increasing international profile Profit by geography June 2003 June 2006 * 4% 24% 14% 14% 28% 58% 47% 11% ROI USA UK * Continuing operations, excl. profit on disposal of Poland business & bankcentre transactions 7
Slide 8: Positioned in attractive economies
Positioned in attractive economies GDP % 2006 (e) 2007 (f) Ireland 5.5 5.8 UK 2.5 2.5 USA 3.4 2.7 Poland 5.1 5.0 Eurozone 2.3 1.8 8
Slide 9: Irish economy; managing success
Irish economy; managing success Health sustained by strong fundamentals Growing population, positive age profile, full employment, increasing incomes & wealth, plentiful labour supply Issues Mitigants Increasing interest rates high savings ratio (c.14%), SSIA Increasing household debt leve
Slide 10: AIB Bank Republic of Ireland
AIB Bank Republic of Ireland 19% Income / cost gap +4% Income 17%; buoyant customer demand Year on year growth 38% 33% 32% 25% 20% Deposits Total Loans Business Mortgage Personal Lending Lending Lending Over 50,000 more active customers in the 6 months to June Prime competitive position; rei
Slide 11: Capital Markets
Capital Markets 45% 58% (€326m) including profit of certain investment contracts related to Ark Life sale Powerful mix of growth and resilience 10 year unbroken record of annual profit growth*; CAGR 22% Income / cost gap + 13% 13% Corporate Banking 24% 63% Treasury Investment Banking / Allie
Slide 12: AIB Bank United Kingdom
AIB Bank United Kingdom 18% Income / cost gap + 5% Great Britain Deepening and extending our position in chosen markets High quality, high growth franchises Loans 27%; deposits 21% Full service provider; product range, systems 18% & processes 27% 25% more locations in past 4 years 9% Bus
Slide 13: Poland
Poland 62% Income / cost gap + 17% Relentless focus on productivity; cost/income ratio 56.2%, 3 years ago was 80% Customer demand gaining momentum Loans 12%, deposits 7% Well spread across sectors and products Outstanding growth in non-interest income, 34% Top tier asset management fra
Slide 14: M&T
M&T 11% Excellent performance in low growth environment Strong focus on efficiency, cost / income ratio 50.7% Solid asset quality, NPLs .38% AIB shareholding 23.9% 14
Slide 15: Increasing international profile – supported by single enterprise approach
Increasing international profile – supported by single enterprise approach C. 17% of all staff (4,000) and costs (€400m) now in Operations & Technology Business volume growth driving investment; launched Service Quality €400m+ in capital spend to drive down unit cost Core business banking and
Slide 16: Key performance features
Key performance features Double digit growth in all principal franchises Cost / income ratio 2.7% and down in all divisions Investing in our people to underpin rates of retention & recruitment Operating profit 24% Strong asset quality, impaired loans to 0.8% and down / stable in all divisi
Slide 17: John O'Donnell, Group Finance Director
John O’Donnell Group Finance Director
Slide 18: Performance snapshot
Performance snapshot June June ccy change 2005 €m 2006 % 1,764 Total operating income 2,078 17 972 Total operating expenses 1,088 11 Group operating profit 792 before provisions 990 24 42 Total provisions 12 -69 750 Group operating profit 978 29 825 Group profit before tax 1,214 27 72.3c EPS - total
Slide 19: Adjusted basic EPS
Adjusted basic EPS c. % vs June 2005 Basic earnings per share 121.2c 68 IFRS Interest rate hedge volatility 1.7c Ark Life (18.2c) Bankcentre (11.0c) Adjusted basic EPS 93.7c 29 19
Slide 20: Deposit growth
Deposit growth Year on Year to June 2006 % 34 35 30 25 20 20 20 18 15 10 7 5 0 Group AIB Bank Capital AIB Bank Poland RoI Markets UK 20
Slide 21: Loan and risk weighted asset growth
Loan and risk weighted asset growth Year on Year to June 2006 % 35 33 32 30 28 26 25 25 25 Loan growth 21 20 20 RWA growth 15 14 12 10 5 0 Group AIB Bank Capital AIB Bank Poland RoI Markets UK 21
Slide 22: Loan portfolios by sector
Loan portfolios by sector % of Group loan portfolio 31% 29% Dec-05 Jun-06 25% 25% 13% 13% 13% 12% 8% 8% 6% 5% 4% 4% 2% 2% Agriculture Construction & Residential Manufacturing Personal Services Transport & Other Property Mortgages Distribution 22
Slide 23: Property & construction – solid profile
Property & construction – solid profile Underwriting: centralised decision making by sectoral experts Impaired loans: 0.4%, half overall loan book level Diversified by geography, type and borrower 4% 3% Republic of Ireland Northern Ireland 31% Great Britain 53% USA 9% Poland Investment: primar
Slide 24: 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 04 Jun 06 < 75% 66 67 65 > 75% < 90% 26 24 21 > 90% 8 9 14 Total 100 100 100 Strong arrears profile Dec 02 Dec 04 Jun 06 % total mortgage adv
Slide 25: Net interest margin
Net interest margin June June bps 2006 2005 change 2.29% 2.47% -18 Causes of margin attrition Expected future trend Loans growing faster than deposits 9 bps reducing effect Re-investment of customer account funds 5 bps reducing effect Business mix and competition 4 bps unchanged 18 bps 200
Slide 26: Costs – investing to sustain growth
Costs – investing to sustain growth June June Underlying * 2005 €m 2006 change % 630 Staff costs 699 10 277 Other costs 319 14 65 Depreciation & amortìsation 70 7 972 Operating expenses 1,088 11 Heavy investment in people, operations, governance and risk framework Regulatory / compliance and per
Slide 27: Positive jaws in all franchises
Positive “jaws” in all franchises % 30 17% 25 20 6% 4% 15 13% 5% 10 5 0 Group AIB Bank Capital AIB Bank Poland RoI Markets UK Income Costs 27
Slide 28: Cost / income ratio in all divisions
Cost / income ratio in all divisions % 70 65.2 60 56.2 55.1 Jun-05 52.4 Jun-06 51.0 49.4 49.1 49.3 50 47.3 43.5 40 Group AIB Bank Capital AIB Bank Poland RoI Markets UK 28
Slide 29: Widening income / cost gap
Widening income / cost gap % 18 16 14 12 10 8 6 4 Income growth 2 Cost growth 2002 2003 2004 2005 H1 2006 29
Slide 30: Strong asset quality
Strong asset quality December June 2005 2006 1.0 Impaired loans (ILs) % 0.8 5.1 Criticised loans / total loans % 5.1 0.4 Gross new ILs % 0.4 78 Total provisions / ILs % 81 15 Bad debt charge bps 3 30
Slide 31: Impaired loans by Division
Impaired loans by Division As at December 31, 2005 As at June 30, 2006 ILs/ Total ILs/ Total Actual Provisions/ Actual Provisions/ ILs Advances ILs ILs Advances ILs €m % % €m % % 308 0.7 84 AIB Bank ROI 313 0.6 89 132 0.7 78 Capital Markets 50 0.3 106 166 0.9 75 AIB Bank UK 176 0.9 72 262 6.8 72 Pol
Slide 32: Bad debt provisions by division
Bad debt provisions by division June Average June Average 2005 Loans % €m 2006 Loans % 26.3 0.14 AIB Bank ROI 35.4 0.14 6.9 0.10 Capital Markets (37) (0.39) 7.8 0.11 AIB Bank UK 7.5 0.08 4.6 0.26 Poland 6.1 0.31 45.6 0.13 Total 12.1 0.03 2006 full year guidance c. 0.12% 32
Slide 33: Tier 1 capital
Tier 1 capital June 2005 June 2006 25% 30% 75% 70% Equity Preference Shares Tier 1 capital ratio 7.7% 8.0% 33
Slide 34: Funding
Funding % 100 10% 10% 4% 3% 10% Capital 80 13% Senior Debt 24% CDs & CPs 25% 60 Deposits by banks Customer a/cs 40 20 52% 49% 0 2005 H1 2006 34
Slide 35: Outlook – full year 2006
Outlook – full year 2006 H1 underlines buoyant, well spread growth Strong operating momentum and pipelines Bad debt experience exceptional in H1 Now targetting 2006 growth of over 20% in EPS 35
Slide 36: Slide 36
Slide 37: Appendices
Appendices
Slide 38: Loans / deposits by division
Loans / deposits by division Loans Deposits 33 34 28 25 25 21 20 20 18 16 12 12 13 9 10 8 7 7 7 3 Group AIB Bank Capital AIB Bank Poland Group AIB Bank Capital AIB Bank Poland RoI Markets UK RoI Markets UK YTD YoY YTD YoY 38
Slide 39: Loan and risk weighted asset growth
Loan and risk weighted asset growth Year to date % 18 18 16 16 14 12 Loan growth 12 11 RWA growth 10 9 9 8 8 7 6 6 5 4 2 0 Group AIB Bank Capital AIB Bank Poland RoI Markets UK 39
Slide 40: AIB Bank RoI profit statement
AIB Bank RoI profit statement H1 H1 Change 2005 €m 2006 % 637 Net interest income 745 17 183 Other income 212 16 820 Total operating income 957 17 417 Total operating expenses 473 13 403 Operating profit before provisions 484 20 27 Provisions 35 35 376 Operating profit 449 19 4 Profit on disposal of
Slide 41: Capital Markets profit statement
Capital Markets profit statement H1 H1 Change 2005 €m 2006 % 214 Net interest income 239 11 194 Other income 227 15 408 Total operating income 466 13 200 Total operating expenses 202 - 208 Operating profit before provisions 264 26 3 Provisions (34) - 205 Operating profit 298 45 1 Share of results of
Slide 42: AIB Bank UK profit statement
AIB Bank UK profit statement H1 H1 Change 2005 €m 2006 % 247 Net interest income 287 17 74 Other income 75 2 321 Total operating income 362 13 158 Total operating expenses 171 8 163 Operating profit before provisions 191 18 8 Provisions 7 -4 155 Operating profit 184 19 1 Profit on disposal of proper
Slide 43: Poland profit statement
Poland profit statement H1 H1 Change 2005 €m 2006 % 93 Net interest income 112 16 115 Other income 162 34 208 Total operating income 274 26 136 Total operating expenses 156 9 72 Operating profit before provisions 118 58 4 Provisions 4 -2 68 Profit before tax 114 62 43
Slide 44: Group profit statement
Group profit statement H1 H1 2005 €m 2006 35 Net interest income 46 (28) Other income (27) 7 Total operating income 19 61 Total operating expenses 86 (54) Operating loss (67) 69 Share of results of associates – M&T 80 - Profit on disposal of property 90 - Construction contract income 34 15 Profit be
Slide 45: Capital actions H1 2006
Capital actions H1 2006 €m Euro Tier 1 Issue – step up 500 Sterling Tier 1 Issue – non step 500 Bankcentre Development c.30 Sale & leaseback c.70 c.100 Ark Life Profit / change in supervisory deductions c. 300 45
Slide 46: 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. — H1 2006 Earnings Presentation on 6ix