Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — H1 2021 Earnings Presentation
60 slides from Bank Of Ireland's earnings presentation, Jun 30, 2021
Slide 1: 2021 Interim Results Announcement
20 21 2021 Interim Results Announcement 30 June 2021
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Slide 3: Group CEO Francesca McDonagh
3 Bank of Ireland 2021 Interim Results Group CEO Francesca McDonagh
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Slide 5: Strong performance in H1 2021
5 Strong performance in H1 2021 Bank of Ireland 2021 Interim Results H1 2021 €465m • Operating profit pre-impairment +72% vs H1 2020 Underlying profit • Total income +14%; higher net interest income, business income and valuation items Performance before tax • Strong UK performance; operating contri
Slide 6: Customers, Colleagues and Communities remain at the core of our strategy
6 Customers, Colleagues and Communities remain Bank of Ireland 2021 Interim Results at the core of our strategy Serving Customers Enabling Colleagues Supporting Communities IBCB Colleague Survey 2 €1bn in new Irish Net Promoter Score Sustainable lending €4m Begin Together mortgage lending improved+3
Slide 7: Irish economic data supports improved outlook
7 Irish economic data supports improved outlook Bank of Ireland 2021 Interim Results Economic & Housing Pulse1 indices above Economic sentiment rebounds as economy reopens; pre-pandemic levels housing market sentiment particularly strong 120 • Bank of Ireland Economic Pulse at 89.3 in July, ahead of
Slide 8: Strong outlook as economic activity broadens
8 Strong outlook as economic activity broadens Bank of Ireland 2021 Interim Results 20.8% Ireland Outlook for Irish economy continues to improve • Recovery continued in H1 2021 – multinational sector leading recovery (GDP +10.7% y/y 11.0% in Q1 2021) 6.5% – domestic economy expected to perform stron
Slide 9: Prioritising the digital experience for customers
9 Prioritising the digital experience for customers Bank of Ireland 2021 Interim Results High level of digital adoption Simplifying the digital journey Digital customers more active supports BOI’s transition towards and engaged a Digital Relationship Bank AGR 9.4% C 40% 38% 31% 25% 131m 75% 114m Pro
Slide 10: Transformation is delivering tangible benefits to customers
10 Transformation is delivering tangible benefits to Bank of Ireland 2021 Interim Results customers and improved business outcomes End-to-End programme has enhanced key customer journeys, reduced costs and improved operational risk Continuing to enhance our digital journeys Digital mortgage originat
Slide 11: 13% reduction in cost base since 2017
11 13% reduction in cost base since 2017 Bank of Ireland 2021 Interim Results Consistent progress Broad based cost reduction Shift to digital-led savings • Costs reduced by €127m vs. H2 2017, • 11% reduction in FTEs since Jun 2020 • Previous focus on business model changes net of wage inflation and
Slide 12: Strategic progress with significant improvement in UK performance in H1
12 Strategic progress with significant improvement in UK Bank of Ireland 2021 Interim Results performance in H1 Retail UK H1 2019 H1 2020 H1 2021 52% improvement in operating profit in H1 2021 vs H1 2020 Net interest income £250m £239m £268m • 12% increase in net interest income Other income (£6m) £
Slide 13: Wealth & Insurance delivering organic growth
13 Wealth & Insurance delivering organic growth Bank of Ireland 2021 Interim Results Rebound in performance in H1 2021, but remains 37% 35% impacted by restrictions of Group Bank channel Business penetration • Operating profit grew 27% in H1 2021 vs H1 2020 Income (34% H1 2020) • Positive investment
Slide 14: Strategy supported by two significant acquisition opportunities
14 Strategy supported by two significant Bank of Ireland 2021 Interim Results acquisition opportunities J&E Davy (“Davy”) KBC Ireland Agreement reached in July on MOU agreed in April to acquire acquisition of wealth management performing loan assets and and capital markets businesses deposit liabili
Slide 15: Our Responsible and Sustainable Business strategy
15 Our Responsible and Sustainable Business strategy 1 Bank of Ireland 2021 Interim Results is fundamental to our purpose of enabling our customers, colleagues and communities to thrive Pillar 1 Pillar 2 Pillar 3 Enabling all Enhancing Supporting the Colleagues to Thrive Financial Wellbeing Green Tr
Slide 16: Looking forward
16 Looking forward Bank of Ireland 2021 Interim Results • Strong growth opportunities in all our markets as economies recover from COVID-19 • Changing market dynamics in our Irish franchise offer further opportunities to sustainably Growth grow our businesses opportunities • UK business turnaround,
Slide 17: Group CFO Myles O'Grady
17 Bank of Ireland 2021 Interim Results Group CFO Myles O’Grady
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Slide 19: H1 2021 financial summary
19 H1 2021 financial summary Bank of Ireland 2021 Interim Results • Underlying profit before tax €465m; strong recovery in performance • Total income 14% higher • Costs reduced by 4% • €1m IFRS 9 impairment charge • Net lending growth €0.4bn ex planned UK deleveraging • NPE ratio 5.5% including bene
Slide 20: Strong recovery in H1 2021 financial performance
20 Strong recovery in H1 2021 financial performance Bank of Ireland 2021 Interim Results H1 2020 H1 2021 • Operating profit pre-impairment +72% (€m) (€m) • Net interest income 2% higher Net interest income 1,063 1,080 Business income 266 282 • Business income2 +8% with easing of COVID-19 restriction
Slide 21: Net interest income +2%
21 Net interest income +2% Bank of Ireland 2021 Interim Results Net interest income • Pricing discipline maintained €1,063m €1,052m €1,080m - Loan asset spread1 16bps higher H1 2021 vs H1 2020 294bps 278bps 284bps • Application of negative interest rates on deposits and reduction in UK funding costs
Slide 22: New customer lending +12%
22 New customer lending +12% 1,2 Bank of Ireland 2021 Interim Results New lending1 by division Lending trends in H1 2021 €6.5bn €5.8bn • All divisions demonstrating solid recovery €2.3bn – Corporate new lending grew 38% €2.4bn – Retail Ireland 15% higher with growth across all €1.1bn €1.5bn portfoli
Slide 23: Business income +8%
23 Business income1 +8% Bank of Ireland 2021 Interim Results H1 2020 H1 2021 Total other income +€163m vs H1 2020 (€m) (€m) • Wealth and Insurance increased 5% vs H1 2020 reflecting Wealth and Insurance 100 105 higher new business income and existing book income Retail Ireland 103 101 • Retail Irela
Slide 24: Operating expenses -4%
24 Operating expenses -4% Bank of Ireland 2021 Interim Results Cost Movement €35m reduction in costs reflects • Broad-based cost reduction while we continue to (€23m) invest in our business (€12m) – Staff costs -6% – Depreciation charge -14% €872m €837m • Absorbed wage inflation and higher pension c
Slide 25: €1m impairment charge reflecting improved economic condition
25 €1m impairment charge reflecting improved Bank of Ireland 2021 Interim Results economic condition IFRS 9 models Group management Loan loss experience and macro-economic update adjustment portfolio activity €9m (€8m) (Net €0m) • Improved economic outlook • Net release of €8m while • Muted loan los
Slide 26: NPEs reduce to 5.5%
26 NPEs reduce to 5.5% Bank of Ireland 2021 Interim Results Non-performing exposures NPE movements • NPEs reduced by €0.1bn to €4.4bn and NPE ratio decreased 20bps to 5.5% 6.3% 4.4% 5.7% 5.5% • Irish residential mortgage NPE transaction successfully completed in H1 2021 (€0.3bn) €0.2bn €581m • Gover
Slide 27: Asset quality remains strong
27 Asset quality remains strong Bank of Ireland 2021 Interim Results Group loan book by portfolio Diversified balance sheet with strong credit quality n Consumer • Mortgage portfolios 56% of Group loan book €5.2bn n UK mortgages €22.1bn 7% n Property and • Non-property SME and corporate diversified
Slide 28: Strong accretion in capital ratios
28 Strong accretion in capital ratios Bank of Ireland 2021 Interim Results Fully Loaded CET1 ratio RWAs €48.0bn 15bps (25bps) RWAs 90bps €48.9bn (30bps) 20bps 14.1% 13.4% Dec 20 Organic Capital 1 NPE transaction Loan Growth / RWA2 Transformation Other / Pension Jun 21 investment Headroom to 2021 CET
Slide 29: Updating guidance for improved 2021 outlook
29 Updating guidance for improved 2021 outlook Bank of Ireland 2021 Interim Results Profitability Asset Quality Capital • H2 2021 total income expected • Subject to no material change • End 2021 CET1 ratios expected to be c.5% higher vs H1 2021 in the economic conditions to increase by c.30bps – 50b
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Slide 31: Appendix
31 Bank of Ireland 2021 Interim Results Appendix
Slide 32: Appendix
32 Appendix Bank of Ireland 2021 Interim Results Page No. • BOI overview - customer loans / new lending volumes 33 • Ireland mortgage loan book 34 • Income statement – Net interest income analysis 35 – Structural hedge, liquid assets and negative interest rates 36 – Interest rate sensitivity 37 • As
Slide 33: Overview of customer loans
33 Overview of customer loans Bank of Ireland 2021 Interim Results Profile of customer loans1 at Jun 2021 (Gross) Ireland UK RoW Total Total Composition (Jun 21) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 22.5 22.0 0.0 44.5 56% Non-property SME and corporate 10.3 5.2 4.8 20.3 26% SME 7.0 1.8 0.0 8.8 11%
Slide 34: Ireland mortgages: €22.4bn
34 Ireland mortgages: €22.4bn Bank of Ireland 2021 Interim Results New lending volumes and market share Ireland mortgages (gross) 25% €23.7bn €23.0bn €22.9bn €22.4bn 23% 23% €9.5bn €11.1bn €12.2bn €12.6bn €4.4bn €3.2bn €2.9bn €2.5bn €1.0bn €0.9bn €1.0bn €9.8bn €8.7bn €7.9bn €7.3bn H1 19 H1 20 H1 21
Slide 35: Net interest income analysis
35 Income statement Bank of Ireland 2021 Interim Results Net interest income analysis H2 2019 H1 2020 H2 2020 H1 2021 Average Gross Gross Average Gross Gross Average Gross Gross Average Gross Gross Volumes Interest Rate Volumes Interest Rate Volumes Interest Rate Volumes Interest Rate (€bn) (€m) (%)
Slide 36: Structural hedge, liquid assets and negative interest rates
36 Structural hedge, liquid assets and negative Bank of Ireland 2021 Interim Results interest rates Structural hedge & liquid assets Structural hedge 1 Liquid assets 2 • Interest income from structural hedge and liquid assets reducing as a result of the negative interest rate environment Average €35
Slide 37: Interest rate sensitivity
37 Interest rate sensitivity Bank of Ireland 2021 Interim Results The table below shows the estimated sensitivity of the Group’s income (before tax) to an instantaneous and sustained 1% parallel movement in interest rates Dec 20 Jun 21 Estimated sensitivity on Group income (1 year horizon) (€m) (€m)
Slide 38: Payment breaks
38 Payment breaks Bank of Ireland 2021 Interim Results Overview of total payment breaks granted and remaining outstanding as at 30 June 2021 % returned % with approved Total payment Total payment Payment breaks Payment breaks % of payment Ireland to pre-COVID-19 additional breaks granted breaks expo
Slide 39: Non-performing exposures by portfolio
39 Non-performing exposures by portfolio Bank of Ireland 2021 Interim Results Non-performing Non-performing Impairment loss Advances Impairment loss Composition (Jun 21) (€bn) exposures exposures as % of allowance (€bn) allowance as % of (€bn) advances non-performing exposures Residential Mortgages
Slide 40: Portfolio by stage
40 Portfolio by stage Bank of Ireland 2021 Interim Results Gross carrying amount Composition (Jun 21) Impairment loss allowance ILA % (before impairment loss allowance) of gross Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Sectoral analysis by stage loans €m €m €m €m €m €m €
Slide 41: Non-property SME and corporate by stage
41 Non-property SME and corporate by stage1,2 Bank of Ireland 2021 Interim Results Gross carrying amount Composition (Jun 21) Impairment loss allowance ILA % (before impairment loss allowance) of gross Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Sectoral analysis by stage l
Slide 42: Residential mortgages & consumer loans
42 Residential mortgages & consumer loans Bank of Ireland 2021 Interim Results Gross loans by stage Residential mortgages Residential Mortgages Consumer • Mortgage portfolios 56% of Group loan book €44.7bn €44.5bn – Average LTV of 58% on stock €5.3bn €5.2bn €2.2bn €1.9bn €0.1bn – 88% of the portfoli
Slide 43: Non-property SME and corporate & property and construction
43 Non-property SME and corporate & property Bank of Ireland 2021 Interim Results and construction Gross loans by stage Non-property SME and corporate • 26% of Group loan book, well diversified by geography Non-property SME and corporate Property and construction and sector €19.9bn €20.3bn €1.1bn •
Slide 44: Forward looking information – macro-economic scenarios
44 Forward looking information – macro-economic scenarios Bank of Ireland 2021 Interim Results Ireland United Kingdom 30 June 2021 2021 2022 2023-2025 2021 2022 2023-2025 Central scenario - 45% probability weighting GDP growth1 4.7% 4.9% 3.0% 5.4% 5.5% 1.8% GNP growth1 6.1% 4.7% 2.6% n/a n/a n/a Une
Slide 45: ILA sensitivity to macro-economic scenarios
45 ILA sensitivity to macro-economic scenarios Bank of Ireland 2021 Interim Results The following table indicates the approximate extent to which impairment loss allowance (ILA), excluding Group management adjustments, would be higher or lower than reported were a 100% weighting applied to the centr
Slide 46: Ireland mortgages
46 Ireland mortgages Bank of Ireland 2021 Interim Results Continued proactive arrears management >90 days arrears1 >90 days arrears • Bank of Ireland is significantly below the industry Industry Average average for both Owner Occupier (31% of industry average) and Buy to Let (28% of industry average
Slide 47: Capital and liquidity
47 Capital and liquidity Bank of Ireland 2021 Interim Results Dec 2020 Jun 2021 Liquidity (€bn) (€bn) • Funding and liquidity remains strong from stable customer deposits and MREL issuance Customer loans 77 77 Liquid assets 31 46 Customer deposits: €90.6bn Other assets 26 27 • Net growth of €2bn pri
Slide 48: Ordinary shareholders' equity and TNAV
48 Ordinary shareholders’ equity and TNAV Bank of Ireland 2021 Interim Results Dec 2020 Jun 2021 Movement in ordinary shareholders’ equity (€m) (€m) Ordinary shareholders’ equity at beginning of period 9,625 8,587 Movements: Profit / (Loss) for the period (707) 341 Dividend paid to ordinary sharehol
Slide 49: Capital – strong Fully Loaded and Regulatory CET1 ratios
49 Capital – strong Fully Loaded and Regulatory CET1 ratios Bank of Ireland 2021 Interim Results Capital ratios – Jun 2021 Regulatory ratio Fully Loaded ratio (€bn) (€bn) Total equity 10.3 10.3 Less Additional Tier 1 (1.0) (1.0) Deferred tax 2 (0.8) (1.1) Intangible assets and goodwill (0.5) (0.5) F
Slide 50: Regulatory capital requirements
50 Regulatory capital requirements Bank of Ireland 2021 Interim Results Pro forma CET1 Regulatory Capital Requirements 2020 2021 2022 Pillar 1 – CET1 4.50% 4.50% 4.50% Pillar 2 Requirement (P2R) 1.27% 1.27% 1.27% Capital Conservation Buffer (CCB) 2.50% 2.50% 2.50% Ireland Countercyclical buffer (CCy
Slide 51: Risk weighted assets (RWAs) / leverage ratio
51 Risk weighted assets (RWAs) / leverage ratio Bank of Ireland 2021 Interim Results Customer lending average credit risk weights – Jun 20211,2 EBA Transparency Exercise 2020 (Based on regulatory exposure class) Country by Country Average IRB risk weights Residential Mortgages – Jun 2020 EAD3 RWA Av
Slide 52: Transformation investment / operating expenses
52 Transformation investment / operating expenses Bank of Ireland 2021 Interim Results Transformation Investment: €1.4bn (2016-2021) Transformation investment Average of €275m p.a. • Average annual investment of €275m from 2018-2021; equates to CET1 capital of c.50-60bps €410m • Investment of €149m
Slide 53: Cost income ratio: Jun 2021
53 Cost income ratio: Jun 2021 Bank of Ireland 2021 Interim Results Headline vs. Adjusted H1 2021 Pro forma H1 2021 Headline adjustments Pro forma (€m) (€m) (€m) Net interest income 1,080 – 1,080 Other income – Business income 282 – 282 – Additional gains 2 (2) – – Other valuation items 34 (34) - To
Slide 54: Return on tangible equity (RoTE)
54 Return on tangible equity (RoTE) Bank of Ireland 2021 Interim Results H1 2021: Headline vs. Adjusted H1 2021 Additional gains H1 2021 Adjusted for CET1 Headline & valuations items, Adjusted ratio at 13.0% (€m) net of tax (€m) Profit for the period 341 – Non-core items including tax 58 – Coupon on
Slide 55: Defined benefit pension schemes
55 Defined benefit pension schemes Bank of Ireland 2021 Interim Results Group IAS19 Defined Benefit Pension (Deficit) / Surplus Total Group Defined Benefit Pension Scheme Assets (%) 2.10% 2.00% €7.1bn €7.2bn €7.2bn €8.4bn €8.9bn €8.9bn 1.60% 1.30% 1.25% 58% 55% 65% 65% 0.80% 69% 65% €0.21bn 17% 21%
Slide 56: Forward looking statement
56 Forward looking statement Bank of Ireland 2021 Interim Results 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
Slide 57: Contact Details
57 Contact Details Bank of Ireland 2021 Interim Results For further information please contact: • Group Chief Financial Officer Myles O’Grady tel: +353 12 50 8900 ext. 43291 myles.ogrady@boi.com • Investor Relations Darach O’Leary tel: +353 12 50 8900 ext. 44711 darach.oleary@boi.com Owen Callan tel
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