Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — H1 2012 Earnings Presentation
56 slides from Bank Of Ireland's earnings presentation, August 2012
Slide 1: Interim Results 30 June 2012
Interim Results | 30 June 2012 Bank of treland @ For small steps, for big steps, for life
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Slide 3: Forward-looking statement
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 Bank of Ireland Group’s (the Group) plans and its current go
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Slide 5: Agenda
Group Chief Executive’s Review Group Income Statement Asset Quality Funding & Capital Supplementary Additional Information Information 3
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Slide 7: Group Chief Executive's Review
Group Chief Executive’s Review Richie Boucher
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Slide 9: Overview
Overview External Context Balance Sheet Strengthened Economic backdrop and interest rate environment remain Dec 11 Jun 12 challenging Loans / deposits ratio 144% 136% Progress being achieved on the adjustments necessary to support sustainable economic recovery Term funding ratio (private market)
Slide 10: Focus on Our Key Priorities
6 Focus on Our Key Priorities Restructuring the Balance Sheet Deleveraging ahead of schedule and below assumed cost Deposit franchises resilient Loan to deposit ratio reducing Capital ratios robust Enhancing our Core Franchises Market positions in Ireland and UK strengthening - investments
Slide 11: Focus on Our Key Priorities
Focus on Our Key Priorities Delivering Sustainable Operational Efficiencies off a Lower Cost Base Redundancy programmes recommenced Centralising support functions Leveraging lower cost channels Consolidating premises Investing in systems including payment systems Rebuilding Profitability
Slide 12: Ireland - a 15% Stockholder in Bank of Ireland
8 Ireland - a 15% Stockholder in Bank of Ireland 1 January 2009 - 30 June 2012 Cash Invested by the State Reduce the Risk to the State Cash invested by the State E4.8bn E136bn of liabilities guaranteed in Sep 08 Preference shares (E1.7bn converted E3.5bn Reduced by 74% to E36bn at Jun 12 to or
Slide 13: Focused on Medium Term Targets
Focused on Medium Term Targets Measure 2011 Jun 2012 Target Progress Loans and advances €102bn €98bn c.€90bn to customers1 Group loan / deposit ratio 144% 136% 120% Financial Stability Capital On track 15.1% 14.9% Buffer maintained Core tier 1 ratio for 2014 over regulatory delivery Core t
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Slide 15: Group Income Statement
Group Income Statement Andrew Keating
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Slide 17: Group Income Statement
Group Income Statement H1 2011 H1 2012 Change Total Income €m €m €m E14bn reduction in average interest earning assets Net Interest income 1,034 857 (177) to E132bn Government guarantee fees (239) (212) 27 13bps reduction in net interest margin to 1.20% Other income (net) 212 255 43 E27m reduc
Slide 18: Net Interest Margin
12 Net Interest Margin Net Interest Margin Trend Interest Rate Environment 133bps 133bps Outlook is for lower official interest rates for longer 120bps Sharp reduction since Q4 2011 ECB rate has fallen from 1.5% to 0.75% 3 month Euribor has fallen from c.1.6% to c.0.4% Impacts earnings fro
Slide 19: Government Guarantee (ELG Fees)
Government Guarantee (ELG Fees) Covered Liabilities1 Actions to Reduce ELG Costs at period end Sep 08 - E136bn of liabilities guaranteed - reduction of 74% E136bn since then H1 2012 - E6bn reduction in the level of covered liabilities Re du ct Apr 12 - Bank of Ireland (UK) plc withdrew from sc
Slide 20: Operating Expenses
14 Operating Expenses Operating Expenses Total Costs Costs in line with H1 2011 E843m E842m Lower staff costs offset by investments Ongoing Actions to Reduce Cost E396m E392m Reduction in staff numbers Voluntary parting terms agreed with stakeholders Redundancy programmes have recommenced
Slide 21: Asset Quality
Asset Quality
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Slide 23: Balance Sheet Deleveraging
Balance Sheet Deleveraging Deleveraging Targets on Track Reduc tion E4 6bn / 3 2% Target c.E8b n / 8% E144bn E10bn E7bn E1bn E114bn c.E8bn c.E90bn E98bn Sep 08 Dec 10 Disposals Net FX Jun 12 Net Redemptions Loans Target Redemptions /Other Dec 14 /Other Asset disposal target of E10bn exceeded - ahe
Slide 24: Loans and Advances to Customers
16 Loans and Advances to Customers ROI UK RoW Total Total Profile at 30 Jun 121 €bn €bn €bn €bn % Mortgages 28 29 - 57 54% Non-property SME and corporate 13 7 5 25 24% - SME 11 4 - 15 14% - Corporate 2 3 5 10 10% Property and construction 9 11 - 20 19% - Investment property 7 9 - 16 16% - Land and d
Slide 25: Impairment Charges
Impairment Charges Impairment Charges Overview E1.1bn Impairment charges remain elevated but have reduced from the level in H2 2011 E0.31bn E0.94bn The charge for residential mortgages reflects the economic environment in Ireland and affordability issues E0.84bn E0.31bn Impairment charges in t
Slide 26: ROI Owner Occupied Mortgages: €21bn
18 ROI Owner Occupied Mortgages: €21bn Profile Arrears - greater than 90 days past due 1,016bps Repayment basis is substantially (88%) capital and interest 922bps 57% or €11.7bn are tracker mortgages 717bps 703bps 628bps Asset Quality 566bps 560bps 455bps Vast majority of customers continue to
Slide 27: ROI Buy to Let Mortgages: €7bn
ROI Buy to Let Mortgages: €7bn Profile Arrears - greater than 90 days past due Repayment basis - 49% on capital and interest 2,077bps 81% or €5.5bn are tracker mortgages 1,681bps 1,399bps Asset Quality 1,235bps 1,076bps Significant majority of customers continue to fully meet their 938bps mort
Slide 28: UK Residential Mortgages: £23bn / €29bn
20 UK Residential Mortgages: £23bn / €29bn Impairment Charge & Provisions Profile of UK Residential Mortgages £28bn 6 months ending Jun 11 Dec 11 Jun 12 £25bn Impairment £16m £6m £15m £23bn charge (£) £14bn Annualised charge 12bps 5bps 13bps £11bn £10bn Provision stock £126m £111m £110m Coverage rat
Slide 29: Non-property SME & Corporate Loans: €25bn
Non-property SME & Corporate Loans: €25bn Profile of Loans Impaired Loans & Provision Stock E31bn E2.5bn E27bn E2.3bn E25bn E16bn E1.8bn E12bn E10bn E1.3bn E1.1bn E1.1bn E1.2bn E11bn E11bn E11bn E1.1bn E0.6bn E0.6bn E0.5bn E0.8bn E4bn E4bn E4bn E0.4bn E0.4bn E0.4bn E0.2bn E0.2bn E0.2bn Dec 10 Dec 11
Slide 30: Investment Property Loans: €16bn
22 Investment Property Loans: €16bn Investment Property Loans Impaired Loans & Provision Stock E20bn E17bn E16bn E5.3bn E4.5bn E2.9bn E1.7bn E1.6bn E1.0bn Dec 10 Dec 11 Jun 12 Dec 10 Dec 11 Jun 12 n Impaired Loans Provision Stock Profile 6 months ending Jun 11 Dec 11 Jun 12 Reduction in portfolio
Slide 31: Land & Development Loans: €3.6bn
Land & Development Loans: €3.6bn Land & Development Loans Impaired Loans & Provision Stock E3.2bn E3.1bn E2.9bn E4.4bn E3.7bn E3.6bn E1.8bn E1.6bn E1.4bn Dec 10 Dec 11 Jun 12 Dec 10 Dec 11 Jun 12 n Impaired Loans Provision Stock Profile 6 months ending Jun 11 Dec 11 Jun 12 c.60% ROI; c.40% UK Impa
Slide 32: Consumer Loans: €3.2bn
24 Consumer Loans: €3.2bn Consumer Loans Impaired Loans & Provision Stock E3.7bn E3.3bn E3.2bn E0.37bn E0.34bn E0.32bn E0.32bn E0.28bn E0.26bn Dec 10 Dec 11 Jun 12 Dec 10 Dec 11 Jun 12 n Impaired Loans Provision Stock Profile 6 months ending Jun 11 Dec 11 Jun 12 ROI - 58% / E1.8bn Impairment Charg
Slide 33: Available for Sale Financial Assets
Available for Sale Financial Assets ROI UK Spain Portugal Italy Other Jun 12 Total Dec 11 Carrying Value Ebn Ebn Ebn Ebn Ebn Ebn Ebn Ebn Sovereign Bonds 5.5 - - - - 0.1 5.6 4.5 Covered Bonds - 0.7 1.0 0.1 - 1.4 3.2 3.5 Senior Bank Debt 0.4 0.2 - - 0.3 0.8 1.7 1.4 Asset Backed Securities 0.2 0.3 0.1
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Slide 35: Funding & Capital
Funding & Capital
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Slide 37: Balance Sheet Funding
Balance Sheet Funding Total Liabilities1 Funding Strategy E155bn The Group’s aim is to fund its loan portfolios substantially E145bn E143bn through deposits and term funding while maintaining prudent capital and liquidity ratios E70bn E51bn E53bn Target a loan to deposit ratio of 120% by Dec 2014
Slide 38: Customer Deposits
28 Customer Deposits Group Deposit Growth Deposits increased by E1bn since Dec 11; FX impact BOISS E3bn to E8bn Loan to deposit ratio of 136% at Jun 12 E1bn E8bn Profile is retail oriented Only 30% of deposits covered by ELG E75bn to Access arrangements being revised E80bn Key focus: E64
Slide 39: Wholesale Funding
Wholesale Funding Wholesale Funding Wholesale Funding Profile Increased by €2bn to €53bn at Jun 12 Net Re Increase primarily reflects the IBRC repo transaction payme E70bn nts of E17bn Monetary Authority Funding E8bn No ELA since Dec 11 E53bn €28bn of drawings includes: E51bn E25bn E3bn Fu
Slide 40: Capital
30 Capital Risk Weighted Assets Core Tier 1 Ratio E79bn E67bn E62bn 15.1% 14.9% E71bn E61bn E56bn 9.7% 14.3% 14.0% E8bn E6bn E6bn Dec 10 Dec 11 Jun 12 Dec 10 Dec 11 Jun 12 n Credit Risk n Market & Operational Risk n Capital Requirement Directive basis n PCAR / EBA basis Risk Weighted Assets (RWA) Co
Slide 41: Summary
Summary Operating performance in current period impacted by interest rate environment, Government guarantee costs and economic conditions Pricing leadership demonstrated in materially reducing deposit rates in competitive Irish market Exceeded asset disposal target of €10bn ahead of schedule a
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Slide 43: Additional Information
Additional Information
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Slide 45: Additional Information
Additional Information Divisional Performance Other Income Analysis (Net) Non-Core Charges Summary Balance Sheet Stockholders’ Equity and Tangible Net Asset Value Impaired Loans and Impairment Provisions Basel III / CRD IV Impacts Contact Details 33
Slide 46: Divisional Performance
34 Divisional Performance Retail BIL Retail Corporate & Group Total H1 2012 ROI UK Treasury Centre €m €m €m €m €m €m Total income 486 82 203 346 (217) 900 Operating expenses (429) (46) (194) (96) (77) (842) Operating profit pre-impairment 57 36 9 250 (294) 58 Impairment charges (654) - (198) (86) (4
Slide 47: Other Income Analysis (net)
Other Income Analysis (net) H1 2011 H1 2012 Change Retail & Corporate Banking Businesses €m €m €m Other income increased by €5m in H1 2012 Retail & Corporate Banking Businesses 259 264 5 compared to H1 2011 reflecting current levels of Bank of Ireland Life 90 76 (14) business activity Recurring Bu
Slide 48: Non-Core Charges
36 Non-Core Charges Non-core charges Loan book divestments achieved - 2011/2012 H1 2011 H1 2012 Volume Loss 6 months ending Loan Portfolios €m €m €bn €bn Loss on deleveraging of loan books - (206) UK Mortgages 2.0 (0.2) Gains / (losses) on disposal Project Finance 1.9 (0.2) 74 (14) of business activ
Slide 49: Summary Balance Sheet
Summary Balance Sheet Dec 2011 Jun 2012 Group Balance Sheet Ebn Ebn Loans and advances to customers (after impairment provisions) 102 98 Liquid assets 31 35 IBRC repo transaction - 3 BoI Life assets 12 13 Other assets 10 9 Total Assets 155 158 Customer deposits 71 72 Wholesale funding
Slide 50: Stockholders' Equity and Tangible Net Asset Value
38 Stockholders’ Equity and Tangible Net Asset Value Dec 11 Jun 12 Stockholders’ Equity €m €m Stockholders’ equity at beginning of period 7,351 10,202 Movements: Net new equity raised 2,557 - Profit/(loss) attributable to stockholders 45 (1,094) Dividends paid on preference stock (222) (192) Pen
Slide 51: Impaired Loans & Impairment Provisions
Impaired Loans & Impairment Provisions Loans and advances to customers Advances1 Impaired Loans2 Impaired Loans as Impairment Impairment Provisions Composition and impairment €bn €bn % of advances provisions €bn as % of impaired loans Residential mortgages 56.5 2.4 4.2% 1.5 62%3 ROI 27.6 2.3 8.2
Slide 52: Basel III / CRD IV Impacts
40 Basel III / CRD IV Impacts Deferred Tax Asset Future profits will reduce deferred tax asset Proposed sale of New Ireland Assurance would eliminate Investments in Financials Capital requirement for deduction Definitions Expected to reduce with contributions Pension Deficits (Transition rules Curre
Slide 53: Contact Details
Contact Details For further information please contact: Group Chief Financial Officer Andrew Keating tel: +353 76 623 5141 andrew.keating@boi.com Investor Relations Tony Joyce tel: +353 76 623 4729 tony.joyce@boi.com Ciaran McGrath tel: +353 76 623 4730 ciaran.mcgrath@boi.com Capital Managemen
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Slide 56: Bank of Ireland regulatory and registered office notice
Bank of Ireland is regulated by the Central Bank of Ireland. Bank of Ireland incorporated in Ireland with limited liability. Registered Office - Head Office, 40 Mespil Road, Dublin 4, Ireland. Registered Number – C-1.
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