Aib Group Plc · EURONEXT:A5G
Aib — Allied Irish Banks, p.l.c. — H1 2014 Earnings Presentation
37 slides from Aib's earnings presentation, August 2014
Slide 1: Allied Irish Banks, p.l.c. Half-Yearly Financial Results
Allied Irish Banks, p.l.c. Half-Yearly Financial Results For the 6 months ended 30 June 2014
Slide 2: Important information and forward looking statement
Important information and forward looking statement Capital Ratios In compliance with Article 26(2) of the CRR, AIB‟s half yearly financial report 2014 is reporting capital ratios without the benefit of the retained profit in the period. The report also presents the capital ratios on a pro forma bas
Slide 3: Agenda
Group Progress & Performance Slide 5 2014 Half Year Financials Slide 13 Asset Quality Slide 21 Outlook & Summary Slide 30 Appendix Slide 33
Slide 4: Group Progress & Performance
Group Progress & Performance Chief Executive Officer David Duffy
Slide 5: Focused on growth and maximising value for the Irish State
Focused on growth and maximising value for the Irish State H1 2014 Key Highlights Profitable and delivering on strategic objectives Significant improvement in financial performance across key metrics and geographies Provision charges materially reduced with total impaired loans significantly l
Slide 6: Profitable and generating capital
Profitable and generating capital €437m • Operating performance improved with provisions materially lower Profit Before Tax • Operating income 36% higher, costs 9% lower, provisions 88% lower +€1.3bn Year on Year • Underlying performance enhanced by balance sheet management items 160bps • Asset and
Slide 7: Momentum in operating performance continues
Momentum in operating performance continues Positive margin trajectory Continued reduction in operating expenses (1) NIM % (excluding ELG costs) (€m) 1.80% 114% 82% 55% 32bps increase 881 1.60% 900 349 754 1.60% 686 1.45% 306 600 1.40% 297 Other costs 1.28% 532 448 Staff costs 300 389 1.20% 1.00% 0
Slide 8: Balance sheet positioned for growth
Balance sheet positioned for growth Stable funding profile (1) Monetary authority funding returning to normalised levels Customer Accounts (€bn) (€bn) 70 106% 100% 96% 20.0 17.7 Monetary funding 15.0 reduced c.71% ytd 12.7 60 66 67 10.0 65 5.0 3.7 50 Jun-13 Dec-13 Jun-14 % 0.0 Loan to Deposit Ratio
Slide 9: Clear strategic direction
Clear strategic direction Retail, SME and Omni-channel Balance sheet Irish and UK Leading Irish Corporate Sector customer positioned for focused business market shares Strategies strategy growth Domestic Core Bank AIB UK • AIB and EBS brands First Trust Bank • c.2.2 million customers • c.280k custom
Slide 10: Omni channel strategy – adapting to customer preferences
Omni channel strategy – adapting to customer preferences Customers increasingly moving to mobile and online ….. Customers (‘000s) (1) 918 799 517 332 Enhanced Customer Improving Cost Positioned to Limit Experience Efficiency Metrics Disintermediation Dec 12 June 14 Dec 12 June 14 Mobile Customers +5
Slide 11: Leading to momentum in our relationship model
Leading to momentum in our relationship model H1 2014 Lending Approvals (c.€5.6bn) Net Loan Movements (€bn) (€bn) 70.0 RoI AIB UK 68.8 68.0 €1.0 66.0 65.7 64.8 64.6 64.0 €4.6 62.0 60.0 Jun-13 Dec-13 Mar-14 Jun-14 Summary Summary • SME and corporate loan book sizes stable • On track to meet €7-10bn l
Slide 12: 2014 Half Year Financials
2014 Half Year Financials Chief Financial Officer Mark Bourke
Slide 13: Income statement - €1.3bn improvement in performance
Income statement - €1.3bn improvement in performance Income statement €m H1 2013 H1 2014 Change Overall Summary • Growth in sustainable operating performance Net interest income 718 839 +121 ELG fees (123) (32) +91 • Key financial metrics trending positive: Other Income 324 439 +115 – Net Interest m
Slide 14: Broad based profitability improvements
Broad based profitability improvements Return to pre-tax profit (€m) Year on Year Movements 1,000 437 Income – increase of €327m (+36%) • Net Interest income - €121m higher year on year 0 - Stable assets yields - Material reduction in cost of funds (1,000) -838 -849 - Lower interest earning assets €
Slide 15: NIM expansion continued
NIM expansion continued Margin trend Movement in customer yields NIM % (excl. ELG) % 3.50% 3.37% 1.80% 3.27% 1.60% 3.00% 1.60% 1.45% 2.50% 1.40% H1 2013 1.28% 2.07% 2.00% H1 2014 1.20% 1.20% 1.50% 1.39% 1.00% H2 2012 H1 2013 H2 2013 H1 2014 1.00% Customer Loans Customer Accounts Summary Net interest
Slide 16: Cost reduction strategies delivering and ongoing
Cost reduction strategies delivering and ongoing Staff Numbers Period end FTE 10% reduction year on year Downward costs momentum continues 24% reduction since June 2012 • Total operating expenses reduced by €68m (9%) 16,000 15,064 14,000 • Cost reduction across main cost segments 12,718 12,000 11,38
Slide 17: Balance Sheet – fundamentals improving
Balance Sheet – fundamentals improving % Summary Balance Sheet (€bn) Dec 2013 Jun 2014 Change • Balance sheet fundamentals continue to stabilise Gross Loans to Customers 82.8 80.0 -3 • Net loans declining – however loan demand is improving Provisions (17.1) (15.4) -10 Net Loans to Customers 65.7 64.
Slide 18: Funding position stable and improving
Funding position stable and improving 80.0 Funding mix (1) €bn 70.0 Dec 13 Jun 14 Current Accounts €bn 18.3 20.5 Dec 2013 12% (+1%) 65.7 67.0 65.7 June 2014 21% (+4%) 60.0 Deposits €bn 47.4 46.5 64.6 Cost 1.87% 1.39% LDR 100% 96% 50.0 3% (-9%) 40.0 Position Reduction 30.0 Normalising Accelerating 20
Slide 19: Capital ratios strengthening
Capital ratios strengthening (2) Transitional Rules • CRD IV phased in from 1 January 2014 CRD IV Ratios Transitional Basis 1 Jan 14 Jun 14 • €3.5bn 2009 Preference Shares will constitute CET 1 until 31 December 2017 % Total Capital Ratio 17.2% 18.1% • Deferred tax asset deduction will be phased in
Slide 20: Asset Quality
Asset Quality
Slide 21: Loan book composition and credit profile
Loan book composition and credit profile Summary Total loan portfolio profile by value • Gross loans decreased by €2.8bn (3%) since Dec 2013 to €80.1bn at June 2014 – 3% Reduction from Year end 2013 €80.1bn – Combination of loan redemptions, new lending and Residential Mortgages restructuring of imp
Slide 22: Impairment charges and balance sheet provisions
Impairment charges and balance sheet provisions Credit impairment charge €bn Balance Sheet Provisions Movements – H1 2014 1.17 €m 1.2 0.01 0.08 01-Jan-14 DCB AIB UK FSG Total Specific 2,401 2,070 11,427 15,898 0.74 0.45 0.8 0.02 IBNR 828 132 225 1,185 0.14 0.04 Total 3,229 2,202 11,652 17,083 0.27 9
Slide 23: RoI owner occupier mortgages: €30.1bn (2% decrease)
RoI owner occupier mortgages: €30.1bn (2% decrease) Asset profile components by value (€m) Impairment Charge (€m) 500 467 8% 250 35% 57% 96 6 0 H1 2013 H2 2013 H1 2014 Variable Tracker Fixed Summary • 85% of the RoI mortgage portfolio is owner occupier (1) - 2% of the owner occupier portfolio is on
Slide 24: RoI buy to let mortgages: €7.1bn (4% decrease)
RoI buy to let mortgages: €7.1bn (4% decrease) Asset profile components by value (€m) Impairment Charge (€m) 2% 160 141 118 120 36% 80 62% 40 -35 0 -40 H1 2013 H2 2013 H1 2014 Variable Tracker Fixed Summary • 15% of the RoI mortgage portfolio is buy-to-let (1) Impaired Loans (€bn) - 6% of the buy-to
Slide 25: Property and construction: €18.0bn (9% decrease)
Property and construction: €18.0bn (9% decrease) Asset profile components by value (€m) Impairment Charge (€m) 2% 2% 500 452 29% 400 300 272 200 67% 100 28 Land and development Investment property 0 Contractors Housing associations H1 2013 H2 2013 H1 2014 Impaired Loans (€bn) Summary 58% 62% 65% • T
Slide 26: SME / other commercial lending: €13.7bn (unchanged)
SME / other commercial lending: €13.7bn (unchanged) Asset profile components by value (€m) Impairment Charge (€m) 13% 160 144 47% 120 22% 77 80 18% 40 25 Agriculture Hotels & licensed premises Retail / Wholesale Other / Services 0 H1 2013 H2 2013 H1 2014 Summary Impaired Loans (€bn) 64% 66% 66% • Po
Slide 27: Corporate lending: €4.4bn Personal lending: €4.1bn
Corporate lending: €4.4bn Personal lending: €4.1bn Asset quality profile (€m) Asset quality profile (€m) 2% 2% 10% Satisfactory Satisfactory Watch 33% Watch 52% 86% Vulnerable Vulnerable 9% Impaired Impaired 6% Impaired Loans (€m) Impaired Loans (€m) 57% 48% 45% 76% 77% 78% 800 1,600 1,427 1,423 1,3
Slide 28: Targeting prudent growth in an improving economy
Targeting prudent growth in an improving economy Continuing to adopt a risk based approach to new lending • New lending drawdowns of €2.6bn in H1 2014 • Written at appropriate credit grades • Priced to accurately reflect underlying risk profile • Within explicitly defined risk appetite parameters
Slide 29: Outlook & Summary
Outlook & Summary
Slide 30: Continued progress towards medium term targets
Continued progress towards medium term targets Status H2 2013 H1 2014 Target Update CRD IV Fully Loaded CET 1 10.5%(1) 11.8%(1)(2) >10% On track Capital Ratio Net Interest Margin 1.45% 1.60% >2% On track (Ex ELG) Cost / Income 71% 55% <50% On track Ratio Credit Impairment 24bps 279bps <65bps On trac
Slide 31: Delivering our strategic objectives
Delivering our strategic objectives 2012 2013 2014 and Beyond Restructuring Focus on commercial agenda Growth & Profitability ₋ Restructured balance sheet ₋ Pre-provision operating profit Post provision profits during 2014 ₋ Initiated cost reduction Approval of Restructuring Plan ₋ Reduced credit pr
Slide 32: Appendix
Appendix
Slide 33: Customer loan book – sector profile
Customer loan book – sector profile June 2014 ROI Land & Investment SME / Other UK Personal Corporate Total €m mortgages development property commercial mortgages Loans and receivables to customers 37,252 5,529 12,448 13,727 4,112 4,404 2,581 80,053 Impaired 8,875 4,794 5,945 4,352 1,359 416 296 26,
Slide 34: Components of regulatory capital structure
Components of regulatory capital structure (1) 2009 Preference Shares AIB Group • €3.5bn perpetual, non-cumulative Preference Shares CRD IV Transitional Capital Adequacy Information (€m) 1 Jan 14 Jun-14 • 8% fixed non-cumulative annual coupon, no coupon step up, payable either by cash or an issue of
Slide 35: Funding market transactions since regaining market access
Funding market transactions since regaining market access Funding transactions Cr. Card Secured Senior Senior ACS Issuance ACS Issuance ACS Issuance Funding Unsecured ACS Issuance Unsecured Nov 2012 Jan 2013 Sept 2013 Oct 2013 Nov 2013 March 2014 April 2014 AIB Mortgage AIB Mortgage AIB Mortgage AIB
Slide 36: Available for sale portfolio – debt securities
Available for sale portfolio – debt securities Movement June 2014 versus Dec 2013 Components of Government Securities (June 2014) 5.9% 4.3% Irish Government Securitites 4.5% 5.9% Other Government Securities Dec 2013 6.3% Supranational banks & government Jun 2014 agencies Asset Backed Securities 73.1
Slide 37: Criticised loan definitions
Criticised loan definitions Watch The credit is exhibiting weakness but with the expectation that existing debt can be fully repaid from normal cash flows Vulnerable Credit where repayment is in jeopardy from normal cash flows and may be dependent on other sources Impaired A loan is impaired if ther
Allied Irish Banks, p.l.c. — H1 2014 Earnings Presentation on 6ix