Slide 1: Backing Our Customers: Annual Financial Results 2019
BACKING OUR CUSTOMERS Annual Financial Results for the financial year ended 31 December 2019 and Investor Update AIB Group plc
Slide 2: Forward looking statement
Forward looking statement This document contains certain forward looking statements with respect to the financial condition, results of operations and business of AIB Group and certain of the plans and objectives of the Group. These forward looking statements can be identified by the fact that they
Slide 3: Agenda
Agenda 1 2019 Year in review – Colin Hunt Presenting today Colin Hunt 2 2019 Financial results – Donal Galvin Chief Executive Officer 3 2020 – 2022 Strategic update – Colin Hunt Donal Galvin Chief Financial Officer 4 2020 - 2022 Financial targets & outlook – Donal Galvin 5 Questions and Answers 3
Slide 4: 2019 Year in review
1 2019 Year in review Colin Hunt Chief Executive Officer 4
Slide 5: 2019 - year in review
2019 - year in review Strengthening customer proposition and digital leadership Competitive product range, improved customer experience and enhanced fintech capability High quality new lending Greater than 98% of new lending at strong/satisfactory credit quality Significant NPE reduction
Slide 6: 2019 Financial results
2 2019 Financial results Donal Galvin Chief Financial Officer 6
Slide 7: Financial highlights 2019
Financial highlights 2019 Pre-exceptional PBT €1,091m Profit before tax €499m includes €592m exceptional items Net Interest Income €2,076m broadly stable NIM 2.37%; higher customer loan yields and widening spread between customer loans and deposits Costs €1,504m(1), up 5% year on year; renewed f
Slide 8: Income statement
Income statement Summary income statement (€m) FY 2019 FY 2018 Net interest income 2,076 2,100 Other income 619 626 Net interest income broadly stable Total operating income 2,695 2,726 Other income €619m – net fee and Total operating expenses (1) (1,504) (1,431) commission income up 3% Bank lev
Slide 9: Net interest income (NII) & net interest margin (NIM)
Net interest income (NII) & net interest margin (NIM) NIM – material movements (3 bps) impact NII & NIM (7 bps) impact NIM 2.55% 6 bps (3 bps) Net interest income broadly stable; NIM 2.37% FY 19 5 bps (5 bps) 2.47% (4 bps) 2.47% (2 bps) (4 bps) (3 bps) 2.37% Higher loan yields 3.45% (2018: 3.42%
Slide 10: Other income
Other income Net fee & commission income (€m) 472 457 71 71 45 53 85 84 Fee and commission income €472m, up 3% year 45 50 on year 211 214 FY 2018 FY 2019 Customer accounts Credit related fees Card Other fees & commission Customer related FX Payzone joint acquisition €2m Other Income / expectat
Slide 11: Costs
Costs Operating expenses (1) (€m) 1,504 Costs €1,504m, up 5% year on year 1,431 171 Total Depr 138 €229m 63 58 Factors impacting costs 500 Total G&A €563m 501 • increased depreciation from investment programme - €33m • wage inflation 774 • elevated cost of NPE work out unit 730 • heightened cost
Slide 12: Balance sheet
Balance sheet Balance sheet (€bn) Dec 2019 Dec 2018 Performing loans 58.8 56.8 Performing loans increased €2bn (3%) Non-performing loans 3.3 6.1 Gross loans to customers 62.1 62.9 Sustainable new lending €12.3bn (exceeding Expected credit loss allowance (1.2) (2.0) redemptions €11.7bn) Net loans
Slide 13: Gross performing loans
Gross performing loans Performing loans Performing loans (€bn) Mortgages (€bn) Personal (€bn) 5% +2.2% 2.8 12% +0.3% 29.1 2.7 +3.4% 29.0 58.8 58.8 56.8 €58.8bn 49% 56.8 34% Dec-18 Dec-19 Dec-18 Dec-19 Mortgages Corporate & SME Property Property (€bn) Corporate & SME (€bn) Personal 6.5 +7.2% 7.0 18.6
Slide 14: New lending
New lending Continuing increase in new lending New lending across all asset classes(1) Drawdowns (€bn) Mortgages (€bn) Personal lending (€bn) 12.3 12.1 +2% +8% +13% 2.2 2.4 2.8 3.0 1.1 0.9 Dec-18 Dec-19 Dec-18 Dec-19 5.4 5.0 Property (€bn) Corporate & SME (€bn) -4% +5% 4.5 4.9 2.0 6.4 6.2 1.9 Dec-18
Slide 15: NPE 5.4% of gross loans: FY19 milestone achieved
NPE 5.4% of gross loans: FY19 milestone achieved NPE trajectory (€bn) c.5% milestone achieved 9.6% 6.1 1.0 0.7 0.3 0.3 1.8 0.8 5.4% 3.3 0.4 0.2 4.6 4.8 4.8 2.7 NPE Redemptions Write-offs / Net flow to NPE Portfolio disposals NPE Dec-18 Restructures Dec-19 UTP including >90 DPD Collateral Disposals P
Slide 16: NPE provision coverage
NPE provision coverage NPEs (€bn) NPE - Mortgages (€bn) NPE PDH(1) – €1.9bn Arrears profile 27% 22% 6.1 2.3 1.0 37% 0.3 45% 1.4 27% 1.8 0.2 0.4 3.3 12% 0.4 0.4 6% 2.3 0.2 2.0 Not Past Due < 90DPD 3.3 1.6 >90 < 180DPD > 180DPD 2.3 (1) excludes UK Dec-18 Dec-19 Gross Net NPE Collateral* PDH BTL NPE Lo
Slide 17: Funding structure
Funding structure Total funding (€bn) MREL issuance (€bn) c. €5bn €88.9bn €94.9bn +6% Well positioned to 4.1 meet expected MREL 4.4 NBFI (1) requirements 27.1 25.4 Corporate / SME Customer accounts €71.8bn 76% of total funding: €2.6bn 4.3 executed in • Retail +7% 2019 40.6 • Corporate / SME +8% 37.8
Slide 18: Capital ratios
Capital ratios Capital ratios fully loaded (%) €51.4bn RWAs €54.2bn RWAs(1) Strong capital ratio - CET1 16.4%(2) • reflects profit generation +70bps 19.1 19.6 • proposed dividend -40bps 1.0 1.9 0.6 1.3 17.5 16.4 FY 2018 FY 2019 post TRIM Total CET1 AT1 T2 CET1 movements (%) 17.5 (20bps) 17.3 +70bp
Slide 19: 2020-2022 Strategic update
3 2020-2022 Strategic update Colin Hunt Chief Executive Officer 19
Slide 20: AIB today
AIB today 20
Slide 21: Purpose-led market leader
Purpose-led market leader Our purpose is to back our 2.8m 325 9,520 3,800 customers to achieve their CUSTOMERS LOCATIONS ACROSS IRELAND AND THE UK EMPLOYEES SUPPLIERS dreams and ambitions 1.5m ACTIVE DIGITAL CUSTOMERS # IN IRELAND FOR 1.3m 1.9m No. 1 banking franchise in Ireland ACTIVE MOBILE DAILY
Slide 22: Simplified structure to support strategy
Simplified structure to support strategy CUSTOMER FIRST SIMPLE & EFFICIENT RISK & CAPITAL TALENT & CULTURE SUSTAINABLE COMMUNITIES UK 12% Operating contribution Retail CIB 54% Corporate, 34% €1.3bn (1) Retail Institutional & Business AIB UK Banking Banking UK 15% Gross loans CIB 26% €62.1bn Retail B
Slide 23: Retail Banking - leading retail bank in Ireland
Retail Banking - leading retail bank in Ireland Leading provider of financial products and services to personal and SME customers in Ireland: 59% 54% €36.6bn >2.5m of gross of operating loan book customers Leading market shares in key segments loans contribution Stock 43% 36% 36% 31% 23% 20% No. 1
Slide 24: CIB – leading corporate and business bank
CIB – leading corporate and business bank A well-established business with growth opportunities: 26% 34% €16.2bn >7,000 of gross of operating customers Proven business model & customer proposition loan book loans contribution 1 established business lines Corporate, Institutional & Business Banking:
Slide 25: AIB UK
AIB UK 15% 12% £7.8bn 300k AIB UK loan book customers of gross of operating AIB UK Strategy loans contribution Sector focused – Business bank in selective sectors • clear market and Healthcare customer Renewable energy and infrastructure AIB proposition Hotels & Leisure Lean & efficient
Slide 26: Irish economic backdrop
Irish economic backdrop Upward revisions to economic growth*; risks remain Employment levels rising as unemployment decreases Household deposits build as indebtedness falls % €bn % 230 120 2,400 16 10 210 8.2 8.2 2,300 14 100 190 8 6.3 2,200 12 170 6 80 2,100 10 150 3.7 3.9 3.9 130 4 3.1 3.3 3.0 2,0
Slide 27: Outlook for new lending
Outlook for new lending Outlook for market new lending Mortgages SME Consumer lending €bn Market size €bn Market size €bn Market size Total new lending Total new lending Total new lending 31.4% 23% 5.6 ~6 ~13 36% 9.6 ~4 3.5 2019 2022 2019 2022 2019 2022 AIB current market share Outlook for AIB loan
Slide 28: Strategic evolution
Strategic evolution 28
Slide 29: Strategic evolution - key elements to build a better AIB
Strategic evolution - key elements to build a better AIB AIB challenges Strategic Pillars to address Key actions 1. Customer First Enhance the customer proposition, Legacy continue to drive digital overhang Reduce complexity, through 2. Simple & Efficient automation and product rationalisation Produ
Slide 30: Track record of successful strategic investment
Track record of successful strategic investment Modular IT architecture has transformed digital ways to bank Digital ‘Front to Back’ 2015-2019 Daily customer interactions Personal digital engagement & processes 148K Mobile Interactions No.1 Irish Banking app Complete, consistent & connected custom
Slide 31: Investment focus to deliver simplification
Investment focus to deliver simplification Digital ‘Front to Back’ Strategy 2015-2019 Relentless Simplification 2020-2022 Transformational Results Improving Customer Experience & Efficiency Consolidated position as Ireland’s leading digital bank Mobile interactions at digital leadership levels Cos
Slide 32: 1. Customer First
1. Customer First Being at the heart of our customers’ financial lives is the foundation of our sustainable business model Customer First Pillar Outcomes Mobile platform AIB customer demographic profile Put our customers at the heart of our organisation >2m 21% Provide for the full range of thei
Slide 33: 2. Simple & Efficient
2. Simple & Efficient Digitisation of credit, sales and service processes and product rationalisation will reduce complexity and resource needs Simple & Efficient Pillar Outcomes 1 Changed SME Credit Delivery Model 3 Retail Product Rationalisation Drive efficiency through technology enablement in
Slide 34: 3. Risk & Capital
3. Risk & Capital Maintain focus on asset quality; Investment in models and IT resilience enhances risk profile and capital efficiency Risk & Capital Pillar Outcomes Sustainment & Resilience imperative Maintain strong risk management, high Investment in IT system resilience asset quality and robus
Slide 35: 4. Talent & Culture
4. Talent & Culture Culture transformation, a diverse talent pool and simplified organisation design are key outcomes Talent & Culture Pillar Outcomes Employees’ skills and capabilities are Gender Balanced Management Cultural transformation aided by Culture Board appropriate to deliver the strateg
Slide 36: 5. Sustainable Communities
5. Sustainable Communities Sustainable Communities Pillar Outcomes Climate action: Supporting the transition Climate Action Economic & Social Inclusion to a low-carbon economy Priorities Priorities Supporting transition to a low-carbon economy Backing our customers to start-up & grow Economi
Slide 37: AIB 2022 – simplify, streamline and strengthen
AIB 2022 – simplify, streamline and strengthen Strong and resilient balance sheet Sustainable profits; generating and returning capital to shareholders Excellent customer experience with competitive products and efficient processes Appropriate cost base for a leaner, simpler and more agile business
Slide 38: 2020-2022 Financial targets and outlook
4 2020-2022 Financial targets and outlook Donal Galvin Chief Financial Officer 38
Slide 39: Medium term targets (2022) and Guidance (2020)
Medium term targets (2022) and Guidance (2020) Medium-term targets by 2022 Guidance 2020 Net interest income c. €2bn Cost inflation c. 2-3% Focused Appropriate Deliver Normalised cost of risk cost(1) capital sustainable c. 20-30bps discipline target returns €1.5bn CET1(2) > 14% RoTE(3) > 8%
Slide 40: Medium term target: Operating expenses €1.5bn
Medium term target: Operating expenses(1) €1.5bn Operating Expenses(1) €1.5bn – medium term target Reduction in staff costs c. -€90m by 2022 €m 9,520 Planned 16% reduction (>1,500) in FTEs by 2022 1,275 c.750 FTE reduction from legacy issues <8,000 (e.g. work out unit, tracker) 1,050 Staff 774 C
Slide 41: Investment: 2020-2022
Investment: 2020-2022 Investment: 2020-2022 Simplify and automate business credit processes Strategic Expansion of customer self-service capability on mobile €m Significant IT investments in either system replacement or 400 stabilisation; Payments and Treasury platforms complete Resilience R
Slide 42: Medium term target: CET1 >14%
Medium term target: CET1 >14% Capital requirements Capital headwinds Pro- Pro- forma forma TRIM Regulatory Capital requirements FY 2019 2020 2021 Buffers – potential Systemic Risk Buffer (SRB) Pillar 1 4.50% 4.50% 4.50% Basel IV Pillar 2 requirement (P2R) 3.15% 3.00% 3.00% Calendar provision
Slide 43: Capital update
Capital update Ordinary dividend ordinary dividend pay-out ratio of attributable Over the last couple of years we have made material progress in reducing our profit of 40-60% NPEs and have met the c. 5% milestone we set ourselves. While there is some additional clarity on our future capital requir
Slide 44: Medium term targets by 2022 – simplify, streamline and strengthen
Medium term targets by 2022 – simplify, streamline and strengthen Control costs(1) at €1.5bn CET1(2) > 14% Deliver returns needed to run RoTE(3) > 8% the business 1) Costs before bank levies and regulatory fees and exceptional items 2) Fully loaded 3) RoTE = (PAT – AT1) / (CET1 @ 14% of RWAs) 44
Slide 45: Appendix
Appendix 45
Slide 46: Medium term target: Return on Tangible Equity (RoTE) >8%
Medium term target: Return on Tangible Equity (RoTE) >8% RoTE: RoTE target: Return / Equity > 8% by 2022 (PAT – AT1) / (CET1 @14% of RWAs) Deliver sustainable returns in the medium term % PAT – AT1 Return on CET1 @ 14% >8 of RWAs CET1 @ 14% of 4.5 RWAs RoTE (2019) RoTE (medium term) Medium t
Slide 47: Capital ratios
Capital ratios Transitional capital ratios Fully loaded capital ratios Dec 19 Dec 18 Dec 19 Dec 18 Total risk weighted assets (€m) 52,121 51,596 Total risk weighted assets (€m) 51,999 51,439 Capital (€m) Capital (€m) Shareholders equity excl AT1 and dividend 13,023 12,903 Shareholders equity excl AT
Slide 48: Credit ratings
Credit ratings AIB Group plc (HoldCo) Baa2 BBB BBB- Long term issuer rating Outlook Positive Stable Stable Investment grade AIB p.l.c. (OpCo) A2 BBB+ BBB+ Long term issuer rating Outlook Stable Stable Stable Investment grade 48
Slide 49: Average balance sheet
Average balance sheet FY 2019 FY2018 Average Volume Interest Yield Average Volume Interest Yield €m €m % €m €m % Assets Customer loans 61,405 2,117 3.45 60,879 2,082 3.42 Investment securities 16,755 195 1.17 15,313 226 1.47 Loans to banks 9,319 22 0.24 8,654 22 0.26 Interest earning assets 87,479 2
Slide 50: Investment securities
Investment securities Key components €bn Analysis of government securities €bn 8.0 10.0 8.4 6.3 7.0 6.0 5.3 5.0 5.3 5.0 4.0 1.7 1.1 1.0 0.8 2.0 1.1 0.9 0.4 0.0 0.1 0.1 0.5 0.5 0.2 Government Supernational Euro bank Non Euro bank 0.0 securities banks and gov securities securities Ireland France Italy
Slide 51: Loans to customers
Loans to customers €bn Performing Loans Non-Performing Loans Loans to Customers Gross loans (1 Jan 2019) 56.8 6.1 62.9 New lending 12.3 - 12.3 Redemptions of existing loans (10.7) (1.0) (11.7) Portfolio disposals - (1.8) (1.8) Write-offs / restructures - (0.3) (0.3) Net flow to NPE (0.3) 0.3 - Forei
Slide 52: Asset quality by portfolio
Asset quality by portfolio €bn Mortgages PDH BTL Personal Property Corporate & SME Total FY 2019 Customer loans 31.5 29.0 2.5 3.0 7.3 20.3 62.1 of which NPEs 2.3 2.0 0.3 0.2 0.4 0.4 3.3 ECL on NPE 0.5 0.5 0.1 0.1 0.1 0.2 0.9 ECL / NPE coverage % 22 21 22 60 35 32 27 FY 2018 Customer loans 32.3 29.0
Slide 53: Asset quality
Asset quality Credit quality (€bn) Asset quality continues to improve in FY 2019 89.1% of the loan book is strong / satisfactory, up €3.0bn 62.9 62.1 (+5.7%) 6.1 3.3 5.4% 9.6% 3.5 98% of new lending flow is strong / satisfactory 4.5 7.2% 5.5% 95% of the loan book is performing, up from 90%
Slide 54: Asset quality - Mortgages
Asset quality - Mortgages Credit quality (€bn) RoI mortgages 32.3 Dec-18 Dec-19 31.5 20% 3.3 22% 2.3 7% 10% 14% 2.4 1.8 6% 21% 8% 30% 27% 56% 52% €31.0bn €30.2bn 26.6 82% 27.4 87% Tracker Variable Fixed Strong improvement in asset quality 87% of portfolio is strong / satisfactory, up 5% Dec 18 D
Slide 55: Asset quality - Personal
Asset quality - Personal Credit quality (€bn) Strong improvement in asset quality 3.1 3.0 85% of portfolio is strong / satisfactory, up 5% 11% 60% 50% 0.3 0.2 6% Personal €3.0bn comprises €2.3bn in loans and overdrafts and 0.3 9% 0.3 9% €0.7bn in credit card facilities Demand for personal lo
Slide 56: Asset quality - Property
Asset quality - Property Credit quality (€bn) Strong improvement in asset quality 7.9 29% 7.4 90% of portfolio is strong / satisfactory, up 16% 1.4 18% 35% 0.4 5% 0.4 NPEs €0.4bn reduced by €1.0bn due to disposals and redemptions 0.6 5% / repayments 8% 6.6 90% 5.9 74% Dec 18 Dec 19 Strong / Sa
Slide 57: Asset quality – Corporate & SME
Asset quality – Corporate & SME Credit quality (€bn) 93% of portfolio is strong / satisfactory, up 4% 19.6 20.3 €0.7bn of new lending to the energy sector 36% 32% 0.4 2% 1.0 1.2 5% 1.0 5% 6% 18.9 93% 17.4 89% Dec 18 Dec 19 Strong / Satisfactory Criticised NPE ECL/NPE coverage 57
Slide 58: Asset quality – internal credit grade by ECL staging
Asset quality – internal credit grade by ECL staging Dec 2019 Dec 2018 €m Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Strong 42,123 329 - 2 42,454 39,148 923 - 3 40,074 Satisfactory 11,346 1,452 - - 12,798 10,923 1,262 - - 12,185 Total strong / 53,469 1,781 - 2 55,252 50,07
Slide 59: Loan book analysis and interest rate sensitivity
Loan book analysis and interest rate sensitivity Concentration by sector (%) FY 2019 Concentration by location (%) FY 2019 Agriculture 3 Republic of Ireland 76 Energy 2 United Kingdom 15 Manufacturing 5 Property & construction 12 North America 5 Distribution 8 Rest of World 4 Transport 3 Total 100 F
Slide 60: Contacts
Contacts Our Investor Relations Department will be happy to facilitate your requests for any further information Name Email Telephone Niamh Hore niamh.a.hore@aib.ie +353 1 6411817 Head of IR Janet McConkey janet.e.mcconkey@aib.ie +353 1 6418974 Siobhain Walsh siobhain.m.walsh@aib.ie +353 1 6411901 P