Aib Group Plc · EURONEXT:A5G

Aib — The Irish Economic April 2020

20 slides from Aib's investor presentation, April 2020

  1. Slide 1: The Irish Economic Update: Deep Covid-19 recession beckons, but economy can rebound quickly

    The Irish Economic Update: Deep Covid-19 recession beckons, but economy can rebound quickly April 2020 Oliver Mangan Chief Economist AIB 1

  2. Slide 2: Strong growth by Irish economy over 2013-2019 period

    Strong growth by Irish economy over 2013-2019 period  Very severe recession in Ireland in 2008-2009. GDP fell by nearly 9.5% and GNP down 12%  Collapse in construction activity and banking system, severe fiscal tightening, high unemployment. Ireland entered a 3 year EU/IMF assistance programme fro

  3. Slide 3: But coronavirus to cause short, deep recession in H1 2020

    But coronavirus to cause short, deep recession in H1 2020  Tourism and travel took earliest hit when restrictions imposed and people reluctant to go out/travel – hotels/restaurants/bars accounts for 8% of Irish employment. But many other businesses now closed  Consumer spending being impacted as m

  4. Slide 4: Most data show economy was performing well pre-virus

    Most data show economy was performing well pre-virus  Robust jobs growth of 2.9% yoy in 2019, matching rates seen in previous years  Unemployment rate held at 4.8% in February, with Live Register continuing to decline in early 2020  Housing completions up strong 18% yoy to over 21k in 2019  Furt

  5. Slide 5: Notably, survey data improved over winter

    Notably, survey data improved over winter 65 AIB Irish Mfg and Services PMIs Consumer Confidence (ESRI - KBC) 120 Services 60 100 55 80 Manufacturing 50 60 45 40 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Feb-19 Feb-20 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Feb-19 Feb-20 Source: Refinitiv Source:

  6. Slide 6: Strong jobs growth, unemployment rate below 5%

    Strong jobs growth, unemployment rate below 5% % Employment (YoY, %) Modified Final Domestic Demand and Employment 6 % % 8.00 5.0 Private 6.00 4.0 4 3.0 4.00 2 2.0 2.00 Total 1.0 0.00 0 0.0 Public -2.00 -1.0 -2 -4.00 -2.0 -4 -6.00 -3.0 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4 2016 Q4 2017 Q4 2018

  7. Slide 7: Large Irish export base performs very well

    Large Irish export base performs very well Exports as % of GDP  Ireland a very open economy – exports, driven Finland by large scale FDI, are a huge part of economy UK  Exports rise strongly in recent years, helped by Germany France large FDI inflows Italy  Total exports rose by 10.4% in 2018 and

  8. Slide 8: Solid domestic economy – grew by 3% in 2019

    Solid domestic economy – grew by 3% in 2019  Construction sees strong recovery since 2013. Output % Construction Output (Volume, 3 Qtr Moving Average, YoY% Change) 20 up nearly 12% on average in 2016-18 period  Slowdown in non-residential construction activity last 16 year – construction output up

  9. Slide 9: House building on the rise, but still at quite a low level

    House building on the rise, but still at quite a low level  Housing completions up 18% yoy to over 21,000 units 40,000 Irish Housing Activity in 2019, a moderation on 2018’s 25% growth rate 35,000  Housing commencements by further 17% in 2019 to 30,000 25,000 26,000 units 20,000  Planning permiss

  10. Slide 10: House price inflation slows sharply

    House price inflation slows sharply  House prices declined by a very sharp 55% between % 5 National House Price Inflation % 25 their peak in late 2007 and early 2013 4 20  House prices have since rebounded as big housing 3 15 shortage emerged after 90% fall in home building 2 10  1 5 Prices up 85

  11. Slide 11: AIB Model of Estimated Housing Demand

    AIB Model of Estimated Housing Demand  Rising headship rates added circa Calendar Year 2017 2018 2019 2020 2021 8,000 per year to housing demand in 2002-2011 period Household 28,000 28,500 28,000 28,000 28,000  Shortage of housing, high rents, Formation tighter lending rules saw average of which h

  12. Slide 12: Govt debt ratios fall, private sector deleverages

    Govt debt ratios fall, private sector deleverages Government Debt Ratios (%) % 130 % 10 Gov Debt Interest (% GDP) 120 Gen Gov Net Debt /Modified Gross National Income Ratio 8 110 100 6 90 80 4 70 General Gov Gross Debt/GDP Ratio 2 60 50 2011 2012 2013 2014 2015 2016 2017 2018 2019(f) 2020(f) 2021(f)

  13. Slide 13: Public finances will be impacted by Coronavirus

    Public finances will be impacted by Coronavirus General Government Balance* (% GDP)  (Pre-Coronavirus Outbreak Forecast) Budget deficit declined sharply over last decade, 2 with small €170m surplus recorded in 2018 0  Budget surplus rose to €1.4bn or 0.4% of GDP in -2 2019 as taxes continued to ex

  14. Slide 14: But key medium-term growth drivers still in place

    But key medium-term growth drivers still in place  Favourable medium-term drivers of strong Irish 5 Irish, Eurozone & UK Inflation (HICP Rates) growth remain in place 4  Eurozone House building picking up from still low output 3 UK levels – big focus for next government 2  Government spending sup

  15. Slide 15: Brexit: EU-UK trade talks expected to be difficult

    Brexit: EU-UK trade talks expected to be difficult  EU and UK agreed on revised Brexit deal at last October’s Heads of State Summit  NI to remain within Single Market for goods and have dual EU-UK customs system  UK left the EU on Jan 31st 2020 in orderly exit. Transition period in place until en

  16. Slide 16: Key points about any EU-UK Free Trade Agreement

    Key points about any EU-UK Free Trade Agreement  Any FTA will be much inferior to the EU Single Market, involve extra large admin costs  Significant restrictions on trade will come into play in a FTA– new customs procedures, compliance with onerous rules of origin requirements, more regulations et

  17. Slide 17: Exporters and Importers will be impacted by FTA

    Exporters and Importers will be impacted by FTA  UK outside EU Customs Union after transition period ends so both exports and imports will need paperwork, even if tariff free trade is agreed under FTA that implies no Customs Duties  Need to get Customs Registration Numbers in both Ireland (EORI) a

  18. Slide 18: Agri-food industry very dependent on UK market

    Agri-food industry very dependent on UK market Share of Exports by Industry Destined for the UK (ESRI)  Food and Beverages account for 25% of Irish exports to UK 50%  Around 40% of Irish food 45 % 40% exports go to the UK – key 35% market for beef and cheese 30 %  Main EU tariffs relate to food 2

  19. Slide 19: FTA expected to lower growth rate of Irish economy

    FTA expected to lower growth rate of Irish economy  Multiple hits to the Irish economy if there is a no EU-UK Trade deal at end of transition period: further sharp fall in sterling, likely recession in UK, disruption to trade/supply lines, tariffs, new administration and regulatory costs etc  Shar

  20. Slide 20: Risks to the Irish economy

    Risks to the Irish economy  Main near-term risk is obviously the coronavirus – will weigh heavily on growth this year, with impact dependent on length of outbreak and extent to which the economy can rebound  Highly open nature of Irish economy means it is particularly vulnerable to a global slowdo

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