Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — FY2006 Earnings Presentation
54 slides from Bank Of Ireland's earnings presentation, May 31, 2006
Slide 1: Preliminary Results Announcement
Preliminary Results Announcement For the full year to 31st March 2006 31st May 2006
Slide 2: Forward Looking Statement
2 Forward Looking Statement This document 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 performance a
Slide 3: Brian Goggin, Group Chief Executive
Brian Goggin Group Chief Executive
Slide 4: Year End Highlights
4 Year End Highlights March 2006 March 2005 Change Profit Before Tax €1599m €1220m 31% Underlying Profit Before Tax €1393m €1206m 16% Earnings Per Share 136.4c 103.9c 31% Underlying Earnings Per Share 118.5c 102.3c 16% Impairment Losses 11bps 11bps - Dividend 52.5c 45.6c 15% Return on Equity 24% 23%
Slide 5: 16% PBT growth driven by strong divisional performance
5 16% PBT growth driven by strong divisional performance % of Group Divisional PBT PBT* Growth Excellent growth in Retail, Life and Wholesale Retail Ireland 18% – Strong volume growth 36% – Excellent cost control Life – Excellent asset quality 9% 65% – Strong economic backdrop Wholesale FS 26% 19%
Slide 6: Building on a position of strength
6 Building on a position of strength Profit growth: 16% Dividend growth: 15% 15 years 14 years Consecutive profit growth Consecutive dividend growth ROE: 24% Loan Impairment: 11bps 13 years 12 years Consecutive ROE >20% Consecutive loan impairment <20bps All historical growth figures to 31 March 200
Slide 7: Delivering on commitments
7 Delivering on commitments “Develop a competitive, lower-cost operating model” 1 “Achieve real customer differentiation” 2 “Conclude review of our UK businesses and take action” 3 “Deliver on the UK Post Office Venture” 4 “Create more growth platforms in international businesses” 5
Slide 8: Delivering results
8 Delivering results “Develop a competitive, lower-cost operating model” 1 • Launched Strategic Transformation Programme • Delivering savings ahead of target “Achieve real customer differentiation” 2 • Launched “Changing For You” Customer Programme • More front-line staff, improving branches, innova
Slide 9: Bank of Ireland vision & strategy
9 Bank of Ireland vision & strategy Our Vision: “To be the number one bank in Ireland with dynamic businesses growing internationally” Our Strategy: Maximise returns from our leading position in Ireland Substantially grow our businesses in the UK Grow our portfolio of niche, skill-based busine
Slide 10: Maximising returns from leading position in Ireland
10 Maximising returns from leading position in Ireland PBT by Geography (March 06) 14% • 64% of Group Profit 22% 64% • Leading from a position of strength • Growing market share profitably Ireland UK Rest of World Retail Life Wholesale • Leading positions in • Leading multi-channel • Leading in Corp
Slide 11: Buoyant conditions attract new entrants…
11 Buoyant conditions attract new entrants… Competitive landscape of banking in BOI performance to date Ireland against this backdrop An Post / Fortis Market Share Gains* National Irish Bank 2006 Re-launched - 2000 2006 Gain ESB shops & Mortgages 18% 19% +1 Bank of Scotland Life & pensions 19% 25% +
Slide 12: Maximising returns from leading position in Ireland
12 Maximising returns from leading position in Ireland Building strength in Retail Ireland Delivering results Competition - anticipated & managed Customer Programme initiatives – Free-banking proposition Service – Launching innovative customer Excellence propositions - Business Start-ups “Changi
Slide 13: Maximising returns from leading position in Ireland
13 Maximising returns from leading position in Ireland Favourable backdrop Life business A strong economy Leading multi-channel Growing population distribution network – leading Full employment bancassurance model Significant job creation Strong competitive position Multi-channel distr
Slide 14: Substantially grow our businesses in the UK
14 Substantially grow our businesses in the UK 3 key businesses Poised for profit growth Mortgages • Excellent loan growth – standard +11%, buy- to-let + 36%; specialised +44% • Specialist provider • Winning market share – share of new lending • Broker distribution in buy-to-let 10% • Maintaining ex
Slide 15: Growing niche skilled-based businesses internationally
15 Growing niche skilled-based businesses internationally Re-model & position for Asset Management Services growth Leveraging distribution platform BOI Global Distribution Platform Building portfolio of independent investment engines Iridian Guggenheim BIAM BOI Asset Advisors Securities Manageme
Slide 16: Growing niche skilled-based businesses internationally
16 Growing niche skilled-based businesses internationally Wholesale Building on a strong domestic franchise Financial Services Investing in new capabilities & geographies Corporate Banking Global Markets Leading position in Corporate Banking Leading market position in commercial in Ireland forex
Slide 17: In review
17 In review Growth Delivered on commitments Excellent financial performance Building momentum Investment Efficiency Clear strategy delivering results
Slide 18: Financial Highlights
Financial Highlights John O’Donovan Chief Financial Officer
Slide 19: Financial Reporting
19 Financial Reporting Basis of preparation – Preliminary results to 31 March 2006 • Prepared under IFRS – Comparatives to 31 March 2005 • Statutory accounts reflect IFRS standards applicable from 1st April 2004. • Restated on a Pro-forma basis to include impact of EIR, insurance accounting and cl
Slide 20: Group Income Statement – impact of non-core items
20 Group Income Statement – impact of non-core items Group Income Statement including non-core items Non-core items Mar 06 Mar 05 % Change Mar 06 Mar 05 €m €m €m €m Total Income* 3677 3228 14 Total Income Operating Expenses (2020) (2059) (2) Profit on disposal of B&W branches 176 - Impairment Losses
Slide 21: Financial Highlights
21 Financial Highlights Key Metrics Highlights Mar 06 Mar 05 % Change Excellent profit growth Underlying PBT €1393m €1206m 16% Underlying EPS 118.5c 102.3c 16% Driven by: Cost Income Ratio 57.1% 59.9% (2.8) – Strong loan growth Dividend Per Share 52.5c 45.6c 15% Return on Equity 24% 23% 1 – Cont
Slide 22: Total Income & Operating Expenses
22 Total Income & Operating Expenses Total Income +8% Headline +11% excl Acq & Disp • Strong income growth €3178m €3439m €3047m €3381m • Acquisition and disposal distortion • Income growth drivers: • Strong volume growth • Offset by margin decline • Excellent fee income Mar 05 Mar 06 Mar 05 Mar 06 O
Slide 23: Net Interest Income & Margin
23 Net Interest Income & Margin Net Interest Income Movement Net Interest Margin €m % Mar 06 Mar 05 % % Volume 529 27 Group Net Interest Margin 1.79 1.94 Margin (271) (14) IAS 32 & 39 impact 0.06 - IAS 32 & 39 impact 78 4 Total 336 17 Adjusted Net Interest Margin 1.73 1.94 Drivers of Margin Attritio
Slide 24: Other Income
24 Other Income Negative impact of disposals + 5% excl Disp (6%) Headline and IAS 32 & 39 Impact of IAS 32 & 39 (€78m) impact Other income +5% driven by: € 1207m €1185m €1132m € 1126m – POFS – Bank of Ireland Life – Retail Ireland (Private Banking & Credit Cards) – Impacted by lower BIAM incom
Slide 25: Strategic Transformation Programme
25 Strategic Transformation Programme Cumulative Annual Cost Savings 2005/06 2006/07 2007/08 2008/09 Target: €30m €75m €105m €120m Achieved: €35m Programme Progress Cost savings ahead of target for 2005/06 Implementation Costs €m Headcount reduction Target for programme 210 New streamlined o
Slide 26: Cost Income Ratios
26 Cost Income Ratios* March-05 March-06 70% 62.5% 61.7% 59.9% 60.4% 60% 57.1% 56.7% 56.2% 51.1% 50% 41.4% 39.8% 40% 30% 20% 10% 0% Group RFSI WFS UKFS AMS * Excluding non-core items
Slide 27: Strong Loan & Resources Volume Growth
27 Strong Loan & Resources Volume Growth Divisional volume growth Mar 06 vs Mar 05 Retail Ireland WFS UKFS 50% 46% 40% 35% Commercial Loans 30% 27% Corporate Loans 23% 22% 20% Mortgages Mortgages 15% Business 13% Loans Resources 10% Personal Loans 0% Resources -10% Loans +23% WFS +35% Loans +29% -20
Slide 28: Asset Quality
28 Asset Quality Impairment Losses on Loans Asset Quality Mar 06 Mar 05* €m € 796m €m €m 800 € 710m € 693m 700 Specific 114 138 600 500 IBNYR 10 - 400 € 360m € 343m € 319m NDSP/General - (38) 300 Recoveries (21) (21) 200 100 Total €m 103 79 0 March 06 Sept 05 March 05* Charge on Average Loans 11bps
Slide 29: Strong Capital Base
29 Strong Capital Base Capital Ratios Strong Capital Base Mar 06 Mar 05 % % Total Capital 11.4 10.9 Strong capital position Tier 1 Capital 7.5 7.9 – Tier 1 ratio of 7.5% – Total Capital ratio of 11.4% Asset Growth Adequate capital for planned growth Mar 06 Mar 05 % – 16% annual RWA growth €bn €b
Slide 30: Balance Sheet Funding
30 Balance Sheet Funding March March 06 05 Continued Diversification 11.3% Increased wholesale funding from Senior Debt / ACS 7.2% 35% in March 2005 to 46% in 13.1% 46% CP/CDs March 2006 (Sept 2005 45%) 10.6% 35% Driven by: 21.5% Deposits 17.5% – Impact of sale of Bristol & West by Banks deposit
Slide 31: Business Review
Bank of IrelandGroup C= Business Review
Slide 32: Profit Before Tax by Division
32 Profit Before Tax by Division PBT by Division Group Divisional Profitability*** Mar 06 Mar 05 % €m €m Change Retail ROI 550 465 18 Life AMS 9% Bank of Ireland Life 134 81 65 6% Retail Wholesale FS 386 325 19 36% UKFS* 349 332 5 UKFS 23% Asset Mgmt Services 85 125 (32) Group Centre (111) (122) 9 W
Slide 33: Retail Republic of Ireland
33 36% Retail Republic of Ireland Income Statement statement PBT +19% +18% Excellent profit performance driven by: Mar 06 Mar 05 % – Strong volume growth: €m €m Change – Higher fee income – Aggressively managed costs Net Interest Income 1119 1020 10 – Excellent asset quality – 15bps charge Other I
Slide 34: Bank of Ireland Life
34 Bank of Ireland Life 9% Income Statement (IFRS) PBT +65% Mar 06 Mar 05 % €m €m Change Excellent profit growth – Strong APE sales growth +30% Income* 208 172 21 – Tight cost control +2% – IT enabled efficiency gains Operating Expenses (95) (93) 2 PBT benefited from non-recurring Operating Prof
Slide 35: Wholesale Financial Services
35 Wholesale Financial Services 26% Income Statement PBT +19% Mar 06 Mar 05 % €m €m Change Net Interest Income 454 325 40 Excellent profit growth Other Income 243 278 (13) – Corporate Banking +34% Total Income 697 603 16 • Investment in people & new geographies Operating Expenses (288) (240) 20 de
Slide 36: UK Financial Services (Sterling)
23% 36 UK Financial Services (Sterling) Income Statement PBT +5% Mar 06 Mar 05 % £m £m Change Division refocused – Restructure complete Net Interest Income 493 429 15 – Focus on 3 growth segments Other Income 63 135 (53) Total Income 556 564 (1) Mortgage Business Operating Expenses (329) (366) (
Slide 37: Asset Management Services
6% 37 Asset Management Services Income Statement PBT (32%) Mar 06 Mar 05 % €m €m Change Profit decline as guided Net Interest Income 7 4 50 BIAM: Other Income 215 252 (14) – Continued net fund outflows - Total Income 222 256 (2) €11.3bn Operating Expenses (137) (131) 5 – Slower pace Profit Befor
Slide 38: Summary
38 Summary Delivered excellent profit performance – Strong volume growth – Tight cost control – Margin decline as anticipated – Excellent asset quality Enhanced shareholder value – 16% profit growth – 15% dividend growth Capital strategy to fund business plans – Strong capital position – Abili
Slide 39: In Conclusion
In Conclusion Brian Goggin Group Chief Executive
Slide 40: Looking forward
40 Looking forward Growth Drive profitable growth Deliver improved efficiencies Maintain prudent capital ratios Investment Efficiency Guiding low to mid-teens EPS growth to March 2007
Slide 41: Supplementary
Bank of IrelandGroup C& Supplementary
Slide 42: Supplementary
42 Supplementary Underlying EPS calculation Bank of Ireland Life - Embedded Value Basis Asset Quality Asset Quality (Loan to Value – New Business) Republic of Ireland Residential Mortgages UK Residential Mortgages UK Financial Services Lending & Resources Post Office Financial Servic
Slide 43: Underlying EPS calculation
43 Underlying EPS calculation Mar 06 Mar 05 % Change PBT €1599m €1220m 31 Tax (€303m) (€237m) Minority Interests & Pref. Dividend (€4m) (€3m) A Profit attributable to shareholders €1292m €980m 32 After tax impact of non-core Items (€141m) €9m B Profit attributable to shareholders €1151m €989m exclud
Slide 44: Bank of Ireland Life - Embedded Value basis
44 Bank of Ireland Life - Embedded Value basis (Insurance & Investment business) Mar 06 Mar 05 % €m €m Change New Business 78 59 32 Existing Business 94 81 16 – Expected Return 66 59 12 – Experience Variances 20 18 11 – Operating Ass’n Changes 8 4 Shareholder Returns 5 5 Intra Group Costs (32) (26)
Slide 45: Asset Quality
45 Asset Quality Mar 06 Sept 05 Mar 05 Impaired Loans (€m) Ireland 461 420 391 UK 230 197 225 International 105 76 94 Group 796 693 710 Impairment Provisions (IP) €m Ireland 215 207 209 UK 69 61 80 International 76 75 61 NDSP - - 69 Release from General Provision - - (100) Group 360 343 319 IP as %
Slide 46: Asset Quality: Loan to Value – New Business
46 Asset Quality Loan to Value – New Business Residential Mortgages: ROI Average Loan to Value Mar 06 (12 mths) Mar 05 (12 mths) Owner Occupied 75% 73% Investors 64% 64% Residential Mortgages: UKFS Average Loan to Value Mar 06 (12 mths) Mar 05 (12 mths) Standard 61% 58% Specialised: Self-Certified 7
Slide 47: Republic of Ireland Residential Mortgages
47 Republic of Ireland Residential Mortgages New Business LTVs <75% 75-90% 90-92% 92-100% >100% Mar 06 (%) 48 32 11 9 0 Mar 05 (%) 53 33 10 4 0 Arrears Profile 1-6mths 6-12mths 12+ mths Total Mar 06 (%) 0.4 0.2 0.2 0.8 Mar 05 (%) 0.7 0.2 0.2 1.1
Slide 48: UK Residential Mortgages
48 UK Residential Mortgages New Business LTVs <75% 75-90% 90-95% 95-100% Mar 06 (%) 45 41 8 6 Mar 05 (%) 55 37 6 2 Arrears Profile 1-6mths 6-12mths 12+ mths Total Mar 06 (%) 0.7 0.1 0.1 0.9 Mar 05 (%) 0.7 0.1 0.1 0.9
Slide 49: UK Financial Services Lending & Resources
49 UK Financial Services Lending & Resources Sept 05 Mar 06 Mar 05 % Stg £bn Stg £bn Stg £bn Change Residential Mortgages 11.3 Standard 11.9 10.7 11 Non-Standard: 5.0 - Buy to Let 5.7 4.2 36 3.4 - Specialised 3.9 2.7 44 19.7 21.5 17.6 22 8.3* Commercial Loans 10.4 7.1* 46 28.0 Loan Book 31.9 24.
Slide 50: UK Post Office Financial Services (POFS)
50 UK Post Office Financial Services (POFS) Post Office Financial Services Key Milestones Achieved Operating Loss £m Customer acquisition on target 6 months to Sept 2004 (11) 392,000 (end Mar 2006) 6 months to March 2005 (21) 475,000 (end May 2006) 6 months to Sept 2005 (12) Building busines
Slide 51: Geographic Analysis
51 Geographic Analysis PBT by Geography - Mar 06 Geographic Split of Shareholder Base - Mar 06 14% 20% 18% 22% 21% 29% 64% 12% Ireland 18% Retail 29% Ireland 64% UK 12% UK 22% US 21% Rest of World 14% Europe/Rest of World 20%
Slide 52: Economic Outlook - Ireland
52 Economic Outlook - Ireland Actual Forecast 2005 2006 (e) 2007 (F) 2008 (F) GDP Growth 4.7 6.0 6.0 5.0 GNP Growth 5.4 6.0 6.0 5.0 Consumer Spending Growth 5.6 8 7.5 6.0 Exports Growth 1.8 5.2 5.0 5.0 Inflation 2.5 3.5 3.0 2.5 Unemployment 4.4 4.4 4.3 4.4 Source: Bank of Ireland Global Markets
Slide 53: Economic Outlook - UK
53 Economic Outlook - UK Actual Forecast 2005 2006 (e) 2007 (F) 2008 (F) GDP Growth 1.8 2.2 2.5 2.5 Consumer Spending Growth 1.9 2.0 2.2 2.5 Exports Growth 5.2 5.0 5.0 5.0 Inflation 2.1 2.0 2.0 2.0 Unemployment 2.8 3.0 3.0 3.0 Source: Bank of Ireland Global Markets
Slide 54: For Further Information
For Further Information Please contact: Geraldine Deighan Group Investor Relations Tel: 353-1-6043502 Fax: 353-1-6615105 E-mail: investor.relations@boimail.com