Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — Investor Day (June 2018)
99 slides from Bank Of Ireland's investor day presentation, Jun 13, 2018
Slide 1: Bank of Ireland Group Investor Day
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Slide 2: Contents
Contents Section Sub-section Page number 1. Vision and Strategic Aspiration 3 2. Serve Customers Brilliantly and I. Retail Ireland 17 Grow Sustainable Profits II. Corporate Banking 32 III. Markets and Treasury 43 IV. Retail UK 49 3. Transform the Bank 63 4. Financial Outlook 79 5. Summary and Conclu
Slide 3: Vision and Strategic Aspiration
Vision and Strategic Aspiration Francesca McDonagh Group CEO
Slide 4: Today's focus
Today’s focus • Unlocking growth in our Irish business: • Supporting house building and home buying Growth • Building out our wealth and insurance business • Group loan book expected to grow by c. 20% by 2021 • Accelerating and broadening our multi-year transformation programme Transformation • Enco
Slide 5: Ireland's transformation over the next 20 years underpins our growth ambitions
Ireland’s transformation over the next 20 years underpins our growth ambitions Ireland 2040 growth expectations Implications • Significant growth in house Overall building +1m +20% population Population in top • Significant growth in mortgage four cities +0.22m +50% and SME lending outside Dublin1 E
Slide 6: Strong Irish economic outlook
Strong Irish economic outlook GDP growth well above Euro area average Economy to continue creating jobs 4.5% 3.6% 3.4% 2.7% 2.4% 2.36 2.0% 2.33 1.7% 1.5% 2.29 2.25 2018 2019 2020 2021 2018 2019 2020 2021 Ireland GDP (annual real growth) Employment (m) Euro area GDP (annual real growth) Strong housin
Slide 7: Economic outlook in UK remains positive despite Brexit
Economic outlook in UK remains positive despite Brexit Stable macro-economic backdrop Supportive outlook for consumer banking GDP growth • GDP growth expected despite 1.6% 1.5% 1.6% 1.5% Macroeconomic Brexit uncertainties conditions 2018 2019 2020 2021 • Rising interest rates GDP (annual real growth
Slide 8: Evolving banking landscape
Evolving banking landscape Changing customer behaviours, Technology-led opportunities Efficiency as a critical preferences and expectations including Open Banking competitive advantage Regulatory framework Ireland’s National Rising interest rates Development Plan; Brexit 8
Slide 9: From restructuring phase to growth phase
From restructuring phase to growth phase Sustainable profitability Improved returns Funding base transformed NIM (%) 1.84% 2.29% 175% 1,078 100% 6.9%1 (564) 2010 2017 (13.7%) 2013 2017 2013 2017 Underlying profit before tax (€m) RoTE (%) Loan to deposit ratio (%) Robust capital position Dividends re
Slide 10: Strong businesses with clear competitive strengths in attractive markets
Strong businesses with clear competitive strengths in attractive markets Bank of Ireland Retail Ireland Corporate Banking Retail Ireland Markets and Retail Treasury Ireland Retail Retail UK Ireland Largest lender to the Ireland’s leading Strong track record of A diverse portfolio of Irish economy co
Slide 11: Three strategic priorities
Three strategic priorities Transform the Serve Customers Grow Sustainable Bank Brilliantly Profits 11
Slide 12: Transform the Bank: accelerating and broadening scope; investment increasing to €1.4bn
Transform the Bank: accelerating and broadening scope; investment increasing to €1.4bn from €0.9bn Culture Systems Business model Purpose: ‘Enabling our customers, Transforming core and customer Simplified organisation; portfolio colleagues and communities to facing technology; pivoting shape; reneg
Slide 13: Serve Customers Brilliantly: investing in customer propositions, channels and brand
Serve Customers Brilliantly: investing in customer propositions, distribution channels and brand Embedding voice of Investing in digital New brand strategy customer in our and physical businesses channels Target outcomes • Significant improvement in customer satisfaction and advocacy • Straight thro
Slide 14: Grow Sustainable Profits: unlocking growth in our Irish business
Grow Sustainable Profits: unlocking growth in our Irish business Retail Ireland Corporate Banking Markets and Treasury Target outcomes • National Champion Bank in Ireland with selective international diversification • Leading supporter of house building and home buying in Ireland • Building out weal
Slide 15: Grow Sustainable Profits: committed to UK and focussed on increasing returns
Grow Sustainable Profits: committed to UK and focussed on increasing returns Focussed on increasing returns • Investing in businesses that are generating above-hurdle returns • Improving returns in businesses with potential to meet return and efficiency hurdles • Repositioning: credit card portfolio
Slide 16: 2021 financial targets
2021 financial targets Improved profitability Efficient business RoTE in excess of 10% Cost base of c. €1.7bn in 2021 Robust capital position Sustainable dividends CET1 ratio in excess of 13.0% Dividend payout ratio of c. 50% over time 16
Slide 17: Retail Ireland
Retail Ireland Gavin Kelly CEO, Retail Ireland
Slide 18: Ireland's leading retail and commercial bank
Ireland’s leading retail and commercial bank • Ireland’s largest lender with a unique customer franchise Divisional overview • #1 or #2 market share in all principal product lines • Diversified income from a loyal customer base Competitive • Extensive distribution network strengths • Ireland’s only
Slide 19: Ireland's largest lender with a unique customer franchise
Ireland’s largest lender with a unique customer franchise >2 million €5.3bn 1 in 3 customers lending in 2017 payments across Consumer, largest lender to the in Ireland Business and Wealth Irish economy Retail Ireland Consumer Business Wealth Extensive distribution network • 265 branches • >1,000 sta
Slide 20: Retail Ireland divisional financial overview
Retail Ireland divisional financial overview Key financial metrics (2017) • Largest lender in Ireland: strong Customer loans €35bn market share in residential mortgages and business lending Customer deposits €44bn • Stable funding base: historically strong deposit franchise with 29% market share; li
Slide 21: Consumer: growing digital customer base, extensive product reach
Consumer: growing digital customer base, extensive product reach Strong customer 1.7m Leading market shares across age segments relationships active customers with 44% 38% 39% 34% 33% 30% 35% average tenure 15 years 84% have a current account 15-17 18-24 25-34 35-44 45-54 55-64 >65 BoI market share
Slide 22: Consumer: positive economic outlook
Consumer: positive economic outlook Outlook Opportunity • Housing supply increasing to meet demand: 19k units completed in 2017 vs low of 8k in 2012/13; household credit growth turned positive in H2 2017 • Consumer confidence growing: +6.2% year-on-year Q1 2018 • Employment growing: 2.23m persons em
Slide 23: Business: Ireland's leading bank for business and enterprise
Business: Ireland’s leading bank for business and enterprise Longstanding 200k • Loyal customers: average tenure of 17 years customer relationships SME customers • 95% of small business loans fulfilled through direct channels 87% current account penetration Helping businesses to Sector specialists •
Slide 24: Business: diversified portfolio positioned for growth
Business: diversified portfolio positioned for growth Opportunity SME market annual gross new lending Market outlook Opportunity €bn c. 7.0 • Positive trading environment: two thirds of 5.1 businesses on a growth trajectory 4.6 3.5 • Credit growth turning positive notwithstanding Brexit 2.6 2.8 2.2
Slide 25: Wealth and insurance: Ireland's only bancassurer
Wealth and insurance: Ireland’s only bancassurer Serving customers for Comprehensive product portfolio • Broad range of products across wealth and >100 years 2% insurance 7% Protection • c. 500k customers, 580k policies Savings and Investment 30% 19% • c. 20% life and pensions market share Regular P
Slide 26: Wealth and insurance: significant growth opportunities
Wealth and insurance: significant growth opportunities Key market trends Market insights Opportunity • Favourable Irish demographics, Growing household net worth Under-penetrated bank base rising incomes and employment; €bn Penetration of qualifying BoI customers, 20181 growing household net worth 8
Slide 27: Ambition and strategic priorities
Ambition and strategic priorities Ambition National Champion Bank in Ireland Transform the Serve Customers Grow Sustainable Bank Brilliantly Profits Building on… Going to… • Leading distribution network • Digitally enabled bank; best mobile experience • Strong digital adoption across sales and servi
Slide 28: Transform the Bank
Transform the Bank Initiatives Key actions and outcomes Automate and • Drive Brilliant Basics programme; continuous Driving efficiency simplify customer process improvements journeys • Redesign and digitise high-priority journeys • Extensively deploy AI and robotics Improved customer Reduced cost to
Slide 29: Serve Customers Brilliantly
Serve Customers Brilliantly Initiatives Key actions and outcomes Leverage technology • Upgrade online functionality and launch Increase in mobile app transformation mobile app in H1 2019; new look and feel; functionality in H1 2019 personalisation tools • Building API foundations for Open Banking +5
Slide 30: Grow Sustainable Profits
Grow Sustainable Profits Initiatives Key actions and outcomes • Grow mortgage and consumer lending Re-enter broker market selectively in Q4 2018; deploy award-winning UK mortgage platform; maintain pricing discipline • Personal loans via mobile app during 2019 Increase in mortgage loan book Mainta
Slide 31: Distinctive franchise – well positioned to grow
Distinctive franchise – well positioned to grow Deep customer Proven distribution Operating in a growing Strategic initiatives and relationships with an capabilities; a market; demographic investment to improve extensive footprint at diversified, universal trends create strong customer experience, t
Slide 32: Corporate Banking
Corporate Banking Tom Hayes CEO, Corporate Banking
Slide 33: Ireland's #1 corporate bank
Ireland’s #1 corporate bank • Leading corporate bank, strongly positioned across all core business segments Divisional overview • Diversified business model with consistent pricing and risk discipline • Low cost, agile, scalable business model Competitive strengths • Deep and longstanding customer r
Slide 34: Combined Corporate Banking and Markets and Treasury financial overview
Combined Corporate Banking and Markets and Treasury financial overview Income statement (2017) Balance sheet (2017) Net interest income €575m Net customer lending €13.3bn Other income €231m Deposit volume €10.3bn Total income €806m Operating expenses (€205m) Operating profit €601m Impairments (€48m)
Slide 35: Leading corporate bank, strongly positioned across all core business segments
Leading corporate bank, strongly positioned across all core business segments #1 c. 400 c. €13bn corporate bank in employees drawn volumes in Ireland 2017 Corporate Banking Corporate Banking Property Leveraged Corporate Banking Ireland Finance Acquisition Finance UK 60% 85% 5 5 of Ireland’s top comm
Slide 36: Positive market fundamentals
Positive market fundamentals Corporate Banking Property Leveraged Acquisition Corporate Banking Ireland Finance Finance UK • Positive economic • Enduring investor • Strong leveraged loan • Large, mature market outlook appetite for Irish real volumes in Europe and with significant growth estate (inve
Slide 37: Corporate Banking Ireland – full-service bank with longstanding customer relationships
Corporate Banking Ireland – full-service bank with longstanding customer relationships Key strengths Diversified portfolio • Longstanding, deep relationships: 60% with Other1 Services tenure >10 years; minimal customer churn Utility 13% 18% Customers • Relationships with c. 60% of Ireland’s top 5% P
Slide 38: Property Finance – domestic leader
Property Finance – domestic leader Key strengths Supporting every segment of the market • >5 years average length of 8% Office customer relationship 18% Retail 42% Customers • 2017 new business sources: 2017 Residential 65% domestic; 35% international 32% Other investors Our disciplined approach to
Slide 39: Leveraged Acquisition Finance – leading player in targeted mid-markets
Leveraged Acquisition Finance – leading player in targeted mid-markets Key strengths Excellent loan loss history through the cycle 6.0 6.7 6.3 5.7 • c. 200 lending relationships, principally as 4.0 4.6 4.0 3.7 4.4 4.3 3.1 3.5 lead arranger; limited concentration risk 2.1 2.3 2.8 (average exposure c.
Slide 40: Corporate Banking UK – niche, sector-focussed business positioned for growth
Corporate Banking UK – niche, sector-focussed business positioned for growth Key strengths Selective focus on specialist sectors • Five specialist sector teams 10% Technology • Collaborative banking partner Media 18% Customers 33% 37% • 58 relationships (42 new since January 2017 Business Services 2
Slide 41: Corporate Banking: positioned for growth while maintaining leadership in Ireland
Corporate Banking: positioned for growth while maintaining leadership in domestic Irish market Corporate Banking Ireland Property Finance • Maintain #1 corporate bank position in • Maintain domestic leader position Initiatives Ireland • Strengthen dedicated origination capability • Leverage close re
Slide 42: Corporate Banking: positioned for growth in selected international markets
Corporate Banking: positioned for growth in selected international markets Leveraged Acquisition Finance Corporate Banking UK • Expand and grow our Leveraged • Grow our sector specialist Corporate Initiatives Acquisition Finance business globally Banking UK business • Continue to leverage market lea
Slide 43: Markets and Treasury
Markets and Treasury Sean Crowe CEO, Markets and Treasury
Slide 44: Expert management of financial risks for customers and the Group
Expert management of financial risks for customers and the Group • Global Markets: leading treasury service provider, supporting and leveraging the Group’s Divisional overview customer franchise to generate capital-light income • Group Treasury: optimising the Group’s balance sheet and safely managi
Slide 45: Supporting customers – market leading treasury service provider
Supporting customers – market leading treasury service provider Leveraging the Group’s franchise to Foreign exchange serve c. 700 corporate and institutional Interest rate hedging customers, c. 30k business customers and c. 100k personal customers Treasury solutions • Offices in Dublin, London, Belf
Slide 46: Managing the Group's treasury risks
Managing the Group’s treasury risks Supporting the Group Innovation • Centralised treasury risk management 1st Winner of • Managing risk using simple and liquid products IFR’s 2017 • Proven track record of innovation and balance Synthetic European sheet optimisation Credit Risk Financial transfer •
Slide 47: Liquidity available to support growth
Liquidity available to support growth Key balance sheet metrics 2017 position €bn Strong liquidity ratios FY 2017 • Net Stable Funding Ratio: 127% Customer loans 76 • Liquidity Coverage Ratio: 136% Liquid assets 24 • Loan to Deposit Ratio: 100% BoI Life and other assets 23 Total assets 123 Customer
Slide 48: Supporting and leveraging growth in our core economies and the Group
Supporting and leveraging growth in our core economies and the Group Strong customer franchise built on expert advice and customer service Operating in favourable environment, evolving with customers and leveraging economic growth Managing treasury risks safely with capacity to fund future balance s
Slide 49: Retail UK
Retail UK Des Crowley CEO, Retail UK
Slide 50: BoI committed to the UK market – strategy is focussed on increasing returns
BoI committed to the UK market – strategy is focussed on increasing returns • Distribution of consumer products via partners with trusted brands (e.g., Post Office and AA) Divisional overview • Universal bank in Northern Ireland • Strong niche businesses in attractive segments (e.g., Northridge) • L
Slide 51: Retail UK offers diversification beyond Ireland through trusted brands and intermediaries
Retail UK offers diversification beyond Ireland with distribution through trusted brands and intermediaries Over 40 c. 3 million €22.6bn €18bn years in Great Britain customers across own total mortgage book retail deposits brand and partnerships Retail UK Partnerships Northern Ireland Niche Business
Slide 52: Significant presence in the UK and distribution partnerships with trusted brands
Significant presence in the UK and distribution partnerships with trusted brands 1 PO partnership Acquisition of First Rate Marshall begins (extended PO personal (FX) Car and Leasing (car partnership in 2008, renewed loans First branches Asset Finance in 2012) Re-entry into finance) begins launched
Slide 53: Partnerships with the Post Office
Partnerships with the Post Office First Rate Exchange Services €16bn 940k #1 Perpetual joint deposit book savings customers travel money venture with Post business, 24% Office (50% share) market share Our business €6.6bn 700k lending book lending customers (mortgages, cards, loans) 11,500 93% Innova
Slide 54: Post Office relationship provides a flexible business model
Post Office relationship provides a flexible business model Ongoing renewal • Contract renewed for a • Current contract runs to further 4 years to 2018 minimum 2023 2004 2008 2012 2018 • 10-year joint venture established • Contract renewed to 2023 Scope: products and services Split of responsibiliti
Slide 55: Partnership with AA, universal bank in Northern Ireland and strong niche businesses
Partnership with AA, universal bank in Northern Ireland and strong niche businesses in attractive segments Bank of Ireland UK mortgage AA partnership Northern Ireland business €0.4bn deposit book Full service retail and €1.6bn book size with €22.6bn total mortgage business banking 148k customers boo
Slide 56: Retail UK business includes BoI (UK) plc and legacy branch portfolios in wind down
Retail UK business includes separately regulated and capitalised BoI (UK) plc, and legacy branch portfolios in wind down Of which: Legacy branch Dec 2017 Product Retail UK BoI (UK) plc1 (wind down) Mortgages €22.6bn €18.1bn €4.5bn Commercial lending €3.0bn €1.9bn2 €1.1bn3 Gross Consumer unsecured €1
Slide 57: Strategic challenges impacting RoTE
Strategic challenges impacting RoTE Income Statement (2017, €m) Strategic assessment Net interest income 579 • Challenged returns in certain Interest mortgage segments and credit income cards given market dynamics Other income 9 • Higher funding cost vs high street Share of JVs / associates 39 Fundi
Slide 58: Credit card market dominated by large players; deposits: large, stable market
Credit card market dominated by large players; deposits: large, stable market Market trends Observations and outlook Implications for BoI Credit card acquisition mix, quarterly Credit card market dominated by • Disadvantaged by small scale in 100% large banks and supermarkets / manufacturing loyalty
Slide 59: Mortgages: large, attractive market; competition in mainstream lending likely to remain challenging
Mortgages: large, attractive market; competition in mainstream lending likely to remain challenging Market trends Observations and outlook Implications for BoI Mortgages new lending, £bn p.a. Market continues to grow but • Overall market size presents 247 257 competition in mainstream lending opport
Slide 60: Auto finance: emerging growth in rental propositions; personal loans: continued growth
Auto finance: emerging growth in rental propositions; personal loans: continued growth in consumer credit Market trends Observations and outlook Implications for BoI Auto finance new lending, £bn p.a. Emerging growth in PCP / rental market in auto • Opportunity to exploit full finance product manufa
Slide 61: Initiatives underway to double RoTE
Initiatives underway to double RoTE Strategic initiatives Key actions Mortgages • Manage mix away from mainstream remortgage market • Develop propositions to satisfy under-served segments of the market with attractive returns • Continue to invest in digitisation / automation Personal lending Invest
Slide 62: BoI committed to the UK market – strategy is focussed on increasing returns
BoI committed to the UK market – strategy is focussed on increasing returns UK mortgage business Northern Ireland The UK is a large, Distribution via partners Strategic challenges Clear actions underway to attractive and adjacent with trusted brands; presently leading to lower increase returns: inve
Slide 63: Transform the Bank
Transform the Bank Steve Collier Transformation Programme Director
Slide 64: Steve Collier, Transformation Programme Director
Steve Collier, Transformation Programme Director My experience Learnings and perspectives • >35 years banking experience • Transformation is hard work and requires the right people, level of focus and investment • Deep expertise driving business-led Transformation (Distribution, Digital and Direct •
Slide 65: Transform the Bank: broaden scope, increase investment, accelerate benefits
Transform the Bank Broaden the scope of Increasing Accelerate our transformation our investment the benefits • Culture • From c. €0.9bn to • Support growth • Systems c. €1.4bn through 2021 • Improve customer • Business Model experience • Drive efficiency 65
Slide 66: Increasing investment to support growth and drive efficiency
Increasing investment to support growth and drive efficiency Broadening the scope of Transformation SYSTEMS BUSINESS MODEL CORE BANKING PLATFORM • Simplified organisation • Portfolio shape CUSTOMER FACING TECHNOLOGY • Strategic e.g., Channels, Mortgages sourcing Wealth & Insurance + c. €0.25bn + c.
Slide 67: Accelerate the benefits
Accelerate the benefits Support growth Drive efficiency + 20% c. 65%1 c. €90bn c. €1.9bn c. 50% c. €76bn c. €1.7bn €1,789m €111m 2017 2021 2017 2018 2019 2020 2021 Loan book Loan book growth Operating expenses Transformation investment charge Cost income ratio • Unlocking growth in our Irish busines
Slide 68: Systems Transformation
Systems Transformation Expand the scope of transformation Culture Systems Business Model • Transforming core and customer facing technology • Pivoting investments to unlock customer benefits sooner 68
Slide 69: Incumbents are constrained by complex legacy; future leaders transform systems across all layers
Incumbents are constrained by complex legacy; future leaders transform systems across all technology ‘layers’ – core and beyond From complex, legacy… … to flexible and scalable across ‘layers’ • >1k business applications with varying CHANNELS SECURITY INFORMA- levels of overlap TION Customer Partner
Slide 70: Systems Transformation will support growth, improve customer experience and drive efficiency
Systems Transformation will support growth, improve customer experience and drive efficiency Example outcomes What this means in practice Customer • Generate market leading customer loyalty and experience Experience • Enable customers to self-serve for key needs • Serve our customers brilliantly: th
Slide 71: Delivering customer and simplification benefits while building resilient foundations
Delivering customer and simplification benefits while building resilient foundations – our roadmap will evolve Outcomes Delivered 2017-18 2019 2020-21 + Agile, Customer DevOps, ‘app New Mobile Regular updates to expand 3 factory’ App customer self service options Experience delivery model Deposits &
Slide 72: Delivered 2017-18: Data and Analytics – single customer record in place
1 Delivered 2017-18: Data and Analytics – single customer record in place, enables ‘Single View of the Customer’ functionality What we have delivered What it means for the business • Systematically cleansed data and de-duplicated • Sophisticated segmentation, credit analysis (e.g., customer records
Slide 73: Delivered 2017-18: Simplification and Automation – UK Mortgage digitisation
2 Delivered 2017-18: Simplification and Automation – UK Mortgage digitisation improves customer experience, origination and cost What we have delivered What it means for the business • 100% digital application process for all • Top 5 UK lender for ‘Application to Offer’ speed customers, brokers and
Slide 74: Delivery in 2018-19: Customer experience – DevOps enabled App Factory
3 Delivery in 2018-19: Customer experience – ‘DevOps’ enabled ‘App Factory’ to deliver on-going customer enhancements What we will deliver in the near-term What it means for the business • New BoI mobile app launch H1 2019 leveraging • New features address most frequent customer Temenos Edge capabil
Slide 75: Business Model Transformation
Business Model Transformation Expand the scope of transformation Culture Systems Business Model • Simplified organisation • Portfolio shape • Renegotiated strategic sourcing arrangements 75
Slide 76: Simplifying our Organisation – leaner, agile organisation
Simplifying our Organisation – leaner, agile organisation • Organisation re-designed to get closer to the customer • Goal to increase proportion of customer facing staff to c. 60% • Recruitment frozen since 2018 (excluding client-facing roles) • Head Office Functions zero-based From 10 layers… • 28
Slide 77: Sourcing Strategically – reduction of third-party spend
Sourcing Strategically – reduction of third-party spend Reduce demand through better • Contractor fees reduced by c 70% design • Professional fees reduced by c 20% Reduce number of preferred partners • Travel costs reduced by c 15% • Property – reduced number of non- Renegotiate with branch location
Slide 78: Transform the Bank
Transform the Bank Broaden the scope of Increasing Accelerate our transformation our investment the benefits • Culture • From c. €0.9bn to • Support growth • Systems c. €1.4bn through 2021 • Improve customer • Business Model experience • Drive efficiency 78
Slide 79: Financial Outlook
Financial Outlook Andrew Keating Group CFO
Slide 80: Track record of delivery
Track record of delivery The Group is in a strong financial position and dividends have recommenced Transformation of funding base Asset quality substantially improved 175% €14.7bn 100% €4.0bn 2010 2017 2013 2017 Loan to deposit ratio Impaired loans Return to sustainable profitability Robust capital
Slide 81: Summary 2018 outlook – on track
Summary 2018 outlook – on track • Expect modest net loan growth; weighted towards H2 Income • Expect NIM to be broadly in line with exit NIM in 2017 (2.24%) Operating expenses • Costs to reduce from 2017 level • Further improvement in asset quality in 2018 and beyond Asset quality • Impairment charg
Slide 82: Key areas of focus to 2021
Key areas of focus to 2021 Opportunities Income Transformation of Capital generation, growth cost base investment and return 82
Slide 83: Loan book growth – outlook
Loan book growth – outlook Loan book growth Outcome Retail Ireland Retail UK Corporate Dec-17 €35bn €28bn €13bn Guidance + c. 20% + c. 10% + c. €4bn c. 20% Loan book growth c. €7bn c. €3bn c. €4bn loan book growth 2018-2021 • Loan book growth supported by the macro-economic outlook, the quality of o
Slide 84: Net interest margin – maintaining strong commercial discipline
Net interest margin – maintaining strong commercial discipline Net interest margin Net interest margin drivers 269 bps 272 bps 284 bps 249 bps 222 bps 2.19% 2.20% 2.29% 2.11% 55 bps 1.84% 17 bps 28 bps 18 bps 19 bps 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Loan asset spread Liquid asset spr
Slide 85: Increasing business income from wealth management and insurance
Increasing business income from wealth management and insurance FY 2017 Outlook (€m) Business income: €662m Retail Ireland 317 • Expect overall business income to Bank of Ireland Life 177 grow on the back of GDP growth • Increasing fee income from wealth Retail UK 1 management and insurance Corporat
Slide 86: Increasing our investment to support growth and drive efficiencies
Increasing our investment to support growth and drive efficiencies From €0.9bn To €1.4bn Average of €275m p.a. Average of €200m p.a. €200m €100m €100m 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2021 • Scope: Systems • New scope: Culture, Systems, Business Model • 2016-20 investment: €0.9bn •
Slide 87: Costs will decrease every year in absolute terms
Costs will decrease every year in absolute terms c. 65%1 c. 50% c. €1.9bn c. €1.7bn €1,789m €111m 2017 2018 2019 2020 2021 Operating expenses Transformation investment charge Cost income ratio 1 See appendix for calculation 87
Slide 88: Maintaining our risk appetite discipline
Maintaining our risk appetite discipline Impaired loans (balances under provision) Net impairment charge on customer loans 175bps 59bps 32bps 21bps 2bps €14.7bn €12.6bn €1,665m €9.6bn €6.2bn €4.0bn €542m €296m €176m €15m Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 2013 2014 2015 2016 2017 RoI mortgage arrear
Slide 89: Strong capital generation and position
Strong capital generation and position Sustainable profitability continues to be the Capital has increased rapidly in recent years key driver of organic capital generation 2bps €1.2bn €1.1bn €1.1bn €0.9bn 13.8% 11.3% 12.3% 9.3% 6.3% 2014 2015 2016 2017 2013 2014 2015 2016 2017 Underlying PBT Fully l
Slide 90: Strategic investment and rigorous allocation of capital
Strategic investment and rigorous allocation of capital Investment / allocation of capital • CET 1 of c. 200-250 bps to accommodate growth of c. 20% in loan book Growth in loan book over 4 years (2018 – 2021) 1 200-250bps Organic capital generation Transformation • Transformation Programme expanded:
Slide 91: Focussed on delivering attractive and sustainable returns
Focussed on delivering attractive and sustainable returns Target is to increase RoTE to in excess of 10% by 2021 In excess of 10%2 6.9%1 2017 2021 • Growth in net interest income and reduction in costs will be the main drivers of the increase in RoTE • Risks: Weaker economic activity; slower than ex
Slide 92: Our strategy will enable us to achieve our financial targets
Our strategy will enable us to achieve our financial targets Financial Targets – 2021 Improved Efficient Robust capital Sustainable profitability business position dividends • RoTE in excess of • Cost target of • CET1 ratio in excess • Increase prudently and 10% by 2021 c.€1.7bn in 2021 of 13% progr
Slide 93: Summary and Conclusion
Summary and Conclusion Francesca McDonagh Group CEO
Slide 94: Today's focus
Today’s focus • Unlocking growth in our Irish business: • Supporting house building and home buying Growth • Building out our wealth and insurance business • Group loan book expected to grow by c. 20% by 2021 • Accelerating and broadening our multi-year transformation programme Transformation • Enco
Slide 95: Appendix
Appendix Bank of Ireland Group C()
Slide 96: Key macro assumptions for our financial plan
Key macro assumptions for our financial plan Metric 2018 2019 2020 2021 • Irish GDP expected to grow well above Euro area average GDP 3.5% 2.8% 2.6% 2.6% • Credit growth returning after many Employment years of deleveraging 2.1% 1.7% 1.4% 1.4% growth • Euro interest rates expected to rise Ireland fr
Slide 97: Return on tangible equity (RoTE) – 2017: Headline vs. pro-forma
Return on tangible equity (RoTE) – 2017: Headline vs. pro-forma As Reported Additional Gains, ‘Normalised’ FY 2017 FY 2017 valuations items, impairment Pro-forma (€m) net of tax net of tax (€m) Profit for the year 692 Non-Core items, net of tax 208 Coupon on Additional Tier 1 securities (55) Prefere
Slide 98: Cost income ratio 2017: Headline vs. pro-forma
Cost income ratio 2017: Headline vs. pro-forma As Reported Pro-forma FY 2017 FY 2017 adjustments Pro-forma (€m) (€m) (€m) Net interest income 2,248 - 2,248 Other income - Business income 662 - 662 - Additional gains 74 (74) - - Other valuation items 65 (65) - Total income 3,049 (139) 2,910 Costs - O
Slide 99: Forward-looking statement
Forward-looking statement This document contains forward-looking statements with respect to certain of the Bank of Ireland Group plc (the ‘Company’ or ‘BOIG plc’) and its subsidiaries’ (collectively the ‘Group’ or ‘BOIG plc Group’) plans and its current goals and expectations relating to its future