Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — FY2007 Earnings Presentation
48 slides from Bank Of Ireland's earnings presentation, May 31, 2007
Slide 1: Preliminary Results Announcement
Preliminary Results Announcement For the year to 31st March 2007 31st May 2007
Slide 2: Forward-looking statement
2 Forward-looking statement This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934 and Section 27A of the US Securities Act of 1933 with respect to certain of the Group’s plans and its current goals and expectations relat
Slide 3: Financial reporting
3 Financial reporting Definitions – Abbreviations: • RFSI: Retail Financial Services Ireland (including Retail Republic of Ireland & Bank of Ireland Life) • BIAM: Bank of Ireland Asset Management • UKFS: UK Financial Services • POFS: UK Post Office Financial Services • FRES: First Rate Exchange Se
Slide 4: Brian Goggin, Group Chief Executive
Brian Goggin Group Chief Executive
Slide 5: Year end highlights
5 Year end highlights March 2007 March 2006 Change Underlying profit before tax €1700m €1393m 22% Underlying earnings per share 144.6c 118.5c 22% Profit before tax €1958m €1524m 28% Earnings per share 172.2c 128.5c 34% Impairment losses 9bps 11bps 2bps Dividend 60.4c 52.5c 15% Return on equity 23% 2
Slide 6: Year end highlights
6 Year end highlights % of Group PBT by Division Strong performance across the Group RFSI 45% • Retail 37% Retail Ireland PBT +27% • Life 8% Life operating profit +29% Capital Markets Capital Markets PBT +21% 31% UK Financial Services PBT +26% UKFS 24% % of Group PBT by geography Strategic T
Slide 7: Delivery on a clear and proven strategy
7 Delivery on a clear and proven strategy 12 months to 12 months to 12 months to 31 March 2005 31 March 2006 31 March 2007 Underlying PBT + 5%* + 16% + 22% Underlying EPS + 7%* + 16% + 22% Impairment losses 11bps* 11 bps 9bps Dividend + 10% + 15% + 15% Return on equity 23% 24% 23% Cost / income rati
Slide 8: Restructured, refocused and revitalised
8 Restructured, refocused and revitalised Delivering on a clear and proven strategy Considerable progress made – New operating model established – Strengthened our leading domestic franchise – Revitalised and refocused our UK Division – Established international platforms and delivering growth
Slide 9: Economic fundamentals remain strong in our core markets
9 Economic fundamentals remain strong in our core markets Ireland Irish economy broadly spread Strong economy – fastest growth in eurozone (000s) Employment by sector 2006 2500 - 6% (f) 2007; 5% (f) 2008 GDP broadly spread – employment and output 2000 Significant job creation (+4%) and rising
Slide 10: Going forward
10 Going forward Our priorities: –1 Drive growth from our leading Irish franchise –2 Significantly reposition the geographic earnings profile of the Group: >50% international • Grow United Kingdom as our second core market • Drive significant international expansion with a particular US focus –3 M
Slide 11: Priority 1: Drive growth from our leading Irish franchise
11 Priority 1: Drive growth from our leading Irish franchise Business Banking: GROWTH DRIVER – Significantly strengthened market position – Drive growth in recruitment and cross-sales Wealth Management: GROWTH DRIVER – Very strong market positions – Invest in people, product, innovation and tech
Slide 12: Priority 2: Reposition the Group's geographic earnings profile
12 Priority 2: Significantly reposition the Group’s geographic earnings profile UKFS – drive growth in our second core market Business Banking: GROWTH DRIVER – Broaden distribution - invest further in new Business Bankers – Broaden product capability – increase “share of wallet” Mortgages: EXTEN
Slide 13: UKFS: Consumer Financial Services
13 UKFS: Consumer Financial Services Growing relationship with UK Post Office Contribution in year to March 2007 £41m POFS break-even for H2 Our partnership with Post Office Financial Services (POFS) the UK Post Office Over 1m customers - a growing force in the provision of Significant sales
Slide 14: Priority 2: Leveraging our strengths in Capital Markets
14 Priority 2: Significantly reposition the Group’s geographic earnings profile Leveraging our strengths in Capital Markets Corporate Banking: GROWTH DRIVER – Expand existing product segments, enter new growth segments – Invest in people: talent and capability – Continue to ‘move up the tombstone’
Slide 15: Priority 3: Maximise efficiency through the new Group operating model
15 Priority 3: Maximise efficiency through the new Group operating model Group operating model Cost culture embedded Group Manufacturing platform established Capital Markets - 4,500 employees UKFS - Driving operational processing RFSI efficiencies by consolidating and standardising like activiti
Slide 16: Looking forward over the medium term
16 Looking forward over the medium term Strong and sustained profit growth Drive growth from our leading Irish franchise Significantly reposition the geographic earnings profile of the Group - Focus on UK and US - >50% international Maximise efficiency from new operating model - Achieve mid 40
Slide 17: John O'Donovan, Chief Financial Officer
John O’Donovan Chief Financial Officer
Slide 18: Delivering strong results - Group income statement
18 Delivering strong results - Group income statement Group income statement Non-core items (including non-core items) Mar 07 Mar 06* % Mar 07 Mar 06* €m €m Change €m €m Total income Total income** 4176 3602 16 Gain on disposal of business 358 176 Operating expenses (2159) (2020) 7 activities/proper
Slide 19: Financial highlights
19 Financial highlights Key metrics Highlights Mar 07 Mar 06 % Change Total PBT* €1,958m €1,524m 28 Total EPS* 172.2c 128.5c 34 Excellent performance across Underlying PBT €1,700m €1,393m 22 all key metrics Underlying EPS 144.6c 118.5c 22 Cost / income jaws 7% 5% Cost growth firmly managed Cost
Slide 20: Total income & operating expenses
20 Total income & operating expenses Total income (excluding non-core items) +13% +15% excl Acq & Disp* Strong income growth Impact of acquisitions and disposals €3869m €3747m €3439m €3260m Income growth drivers: - Strong volume growth - Slowing margin attrition Mar 06 Mar 07 Mar 06 Mar 07 Ope
Slide 21: Net interest margin
21 Net interest margin Net interest margin Drivers of margin attrition Mar 07 Mar 06 % % 06/07 05/06 Group net interest margin 1.73 vs vs 1.69 excluding IAS impact 05/06 04/05 IAS 39 impact 0.08 0.06 Balance sheet structure (4bps) (9bps) Group net interest margin 1.77 1.79 Liability spreads +2bps (5
Slide 22: Strategic Transformation Programme
22 Strategic Transformation Programme Cumulative annual cost savings Original 2005/06 2006/07 2007/08 2008/09 target: €30m €75m €105m €120m 2006/07 Achieved: €95m 2007/08 Programme progress 2006/07 target significantly exceeded Implementation costs €m – €95m versus €75m savings achieved in current
Slide 23: Cost / income ratios
23 Cost / income ratios* Cost / income ratios Mar-05 Mar-06 Mar-07 -5% -11% -6% 63% 60% 60% 59% 57% 56% 55% 54% 0% 52% 46% 43% 43% Group RFSI Capital Markets UKFS A strong cost story Excellent efficiency improvements across the Group Significant operating leverage Continued focus on cost
Slide 24: Strong loan & resource volume growth
24 Strong loan & resources volume growth Divisional volume growth March 07 vs March 06 Retail Financial Services Ireland Capital Markets UKFS 50% 47% 45% 40% 35% 34% 33% 30% Resources 25% 22% Business Loans Business Loans 20% 19% 18% Corporate Loans Mortgages Personal Loans 15% 11% 10% 10% 9% Resour
Slide 25: Asset quality
25 Asset quality Impairment losses on loans Asset quality €m Mar 07 Mar 06 1,000 €m €m 900 800 Specific 121 114 700 600 IBNR 1 10 500 €968m 400 €796m Recoveries (19) (21) 300 200 €428m €360m Total 103 103 100 0 Annualised loan loss 9bps 11bps Mar 07 Mar 06 charge Impairment Provisions Impaired Loans
Slide 26: Profile of Loans & Advances to Customers - €125.5bn
26 Profile of Loans & Advances to Customers - €125.5bn % of Group loan portfolio Financial & government Other 2% 7% Distribution 3% Manufacturing Mortgages 6% 47% Personal 7% Services 8% Property - investment & development 20% Group lending Well diversified across portfolios, sectors and geographies
Slide 27: Residential mortgages – 47% of Group loan book
27 Residential mortgages – 47% of Group loan book UK mortgage book Excellent asset quality - 0.54% arrears vs. 0.89% industry £24bn sterling - 2006: 196 repossessions vs. 17,000 industry UK Extended product range to include BTL 58% of 28% Professional BTL - Max. LTV 75% for >£1m; max. loan £20m
Slide 28: Property: investment & development – 20% of Group loan book
28 Property: investment & development – 20% of Group loan book Geographic profile Property lending Ireland International 41% UK Ireland UK 58% UK focus 41% 58% No indirect/direct Rest of exposure to US Rest of sub-prime Worldmarket World 1% 1% Diversified risk Development vs. investment Irelan
Slide 29: Strong capital base
29 Strong capital base Capital ratios Strengthened capital base Mar 07 Mar 06 Sept 06 Strengthened capital ratios % % % Equity tier 1 ratio increased from 4.8% Tier 1 capital 8.2 7.5 7.7 to 5.2% Total capital 11.8 11.4 10.9 – Sale & leaseback of branches and Davy sale added €0.4bn (0.35%) Asset
Slide 30: Balance sheet funding
30 Balance sheet funding March 07 March Continued diversification 6.4% Securitisation 06 11.3% Wholesale funding remained Senior debt 15.5% / ACS unchanged at 46% driven by 46% 13.1% improved loan and resource growth CP/CDs 12.0% 46% alignment Deposits 21.5% Funding maturity profile lengthened 1
Slide 31: Profit before tax by Division
31 Profit before tax by Division PBT by Division Group Divisional profitability*** Mar 07 Mar 06* % €m €m Change Retail Ireland 698 550 27 Life 8% Bank of Ireland Life 148 134 10 Retail Capital Markets 572 471 21 UKFS 37% UKFS 441 349 26 24% Group Centre (159) (111) 43 Underlying PBT 1700 1393 22 Ca
Slide 32: Retail Republic of Ireland
32 37% Retail Republic of Ireland Income statement Retail PBT +27% Mar 07 Mar 06 % Excellent performance €m €m Change – Strong business growth – Firm cost management driving efficiency Net interest income 1311 1119 17 gains – Jaws 8% – Cost / income ratio down 4% to 55% Other income* 377 356 6 – E
Slide 33: Bank of Ireland Life
33 Bank of Ireland Life 8% Income statement (IFRS) Operating profit +29%, PBT +10% Mar 07 Mar 06 % €m €m Change Excellent performance: – APE sales +27% Income* 250 208 20 – Increased market share +1% to 26% Operating expenses (104) (95) 9 Significant efficiency gains – Cost / income ratio down 4
Slide 34: Capital Markets
34 Capital Markets 31% Income statement Corporate Banking Mar 07 Mar 06 % PBT +56% €m €m Change Corporate loan book +18% to €24bn – 65% outside Ireland Growth well spread across all markets Net interest income 671 461 46 and portfolios Investment delivering strong returns Other income*/** 37
Slide 35: UK Financial Services (sterling)
24% 35 UK Financial Services (sterling) Income statement* Mortgages PBT +8% Mar 07 Mar 06 % Standard residential volumes +5% £m £m Change Specialist lending (BTL & self-cert) volumes +17% Net interest income 531 493 8 Margins stabilised during the year Business Banking Other income** 118 91
Slide 36: Summary
36 Summary Delivering successfully on our growth and investment strategies Cost growth firmly contained Low margin attrition Excellent asset quality Strengthened capital position Excellent performance across all key metrics Guiding low double digit underlying EPS growth to March 2008 f
Slide 37: Questions & Answers
Bank of Ireland Group Questions & Answers
Slide 38: Supplementary
Bank of Ireland Group Supplementary
Slide 39: Supplementary
39 Supplementary EPS calculation Bank of Ireland Life - embedded value basis Asset quality Ireland & UK mortgage analysis Geographic analysis: – PBT – Shareholder base Economic outlook – Ireland Economic outlook – UK
Slide 40: EPS calculation
40 EPS calculation Mar 07 Mar 06* % €m €m Change PBT €1958m €1524m 28% Tax (€306m) (€303m) Minority interests & pref. dividend (€16m) (€4m) A Profit attributable to shareholders €1636m €1217m 34% After tax impact of non-core items (€225m) (€66m) B Profit attributable to shareholders €1411m €1151m 23
Slide 41: Bank of Ireland Life - embedded value basis
41 Bank of Ireland Life - embedded value basis (Insurance & investment business) Mar 07 Mar 06 % €m €m Change New business 114 78 46% Existing business – Expected return 83 71 17% – Experience variances 14 20 (30%) – Operating assumption changes - 8 Inter-company payments (36) (32) Operating profit
Slide 42: Asset quality
42 Asset quality Mar 07 Mar 06 Impaired loans (€m) Ireland 517 461 UK 282 230 International 169 105 Group 968 796 Impairment provisions (IP) €m Ireland 263 215 UK 73 69 International 92 76 Group 428 360 IP as % of impaired loans (%) 44% 45% IP as % of PIT loans (bps) 34bps 35bps P&L annualised charg
Slide 43: Residential mortgages
43 Residential mortgages Loan to value – new business Residential mortgages: ROI Average loan to value Mar 07 Mar 06 Owner occupied 74% 75% Investors 63% 64% Residential mortgages: UKFS Average loan to value Mar 07 Mar 06 Standard 57% 61% Specialised: Self-certified 75% 77% Buy to let 72% 71%
Slide 44: Republic of Ireland residential mortgages
44 Republic of Ireland residential mortgages New business LTVs <75% 75-90% 90-92% 92-100% >100% Mar 07 (%) 49 31 7 13 0 Mar 06 (%) 48 32 11 9 0 Arrears profile 1-6mths 6-12mths 12+ mths Total Mar 07 (%) 0.5 0.2 0.2 0.9 Mar 06 (%) 0.4 0.2 0.2 0.8
Slide 45: UK residential mortgages
45 UK residential mortgages New business LTVs <75% 75-90% 90-95% 95-100% Mar 07 (%) 48 40 11 2 Mar 06 (%) 45 40 8 7 Arrears profile 1-6mths 6-12mths 12+ mths Total Mar 07 (%) 0.8 0.2 0.1 1.1 Mar 06 (%) 0.7 0.1 0.1 0.9
Slide 46: Geographic analysis
46 Geographic analysis Geographic split of PBT by geography – Mar 07 shareholder base – Mar 07 11% 23% 17% 29% 60% 26% 19% 15% Ireland 17% Retail 26% Ireland 60% UK 15% UK 29% US 19% Rest of World 11% Europe/Rest of World 23%
Slide 47: Economic outlook - Ireland
47 Economic outlook - Ireland Actual Forecast 2006 2007 (F) 2008 (F) 2009 (F) GDP growth 6.0 6.0 5.0 5.0 GNP growth 7.4 6.2 5.2 5.0 Consumer spending growth 6.2 6.8 6.0 5.5 Exports growth 4.9 6.2 5.5 5.0 Inflation (incl. mortgage interest repayments) 4.0 4.6 2.8 2.0 Unemployment 4.4 4.4 4.5 4.5 Sour
Slide 48: Economic outlook - UK
48 Economic outlook - UK Actual Forecast 2006 2007 (F) 2008 (F) 2009 (F) GDP growth 2.7 2.7 2.4 2.7 Consumer spending growth 2.0 2.4 2.2 2.5 Inflation 2.3 2.3 2.0 2.0 Unemployment 3.0 3.0 3.0 3.0 Source: Bank of Ireland Global Markets