Permanent TSB Group Holdings PLC · EURONEXT:PTSB
Permanent TSB — H1 2016 Earnings Presentation
46 slides from Permanent TSB's earnings presentation, Jul 27, 2016
Slide 1: Interim Results 2016
Interim Results 2016 For the Six Months Ended 30 June 2016 27 July 2016 Interim Results 2016
Slide 2: Forward Looking Statements
Forward Looking Statements A number of statements we make in our presentation, and in the accompanying slides, will not be based on historical fact but will be “forward-looking” statements within the meaning of US Securities legislation. The words "expect", "anticipate", "intend", "plan", "estimate"
Slide 3: Agenda
Agenda H1 Highlights 3 Financial Performance 8 Recap & Outlook 21 Interim Results 2016 2
Slide 4: H1 Highlights
H1 Highlights Jeremy Masding Group CEO Interim Results 2016 3
Slide 5: Financial Highlights
Financial Highlights Profit Before Net Interest Cost Income Impairment Exceptional Items Margin Ratio¹ Write-Back / (Charge) and Tax €117m 143bps 87% €61m H1 2015 €1m H1 2015 100bps H1 2015 86% H1 2015 (€24m) NPLs €6.2bn CET1 Ratio (Fully Loaded) 15.9% Dec 2015 €6.6bn Dec 2015 15.0% System Funding €
Slide 6: Transactional Banking, Savings & Investments
Transactional Banking, Savings & Investments • ‘Explore Account’ launched in June • An innovative current account that rewards customers for regular banking behaviour Current Accounts €3.1bn >2,200 Current Account Balances Explore Accounts Opened +3% Since Dec 2015 Since Launch Retail Rates and Spre
Slide 7: Mortgages, Consumer Finance, Insurance & SME
Mortgages, Consumer Finance, Insurance & SME Mortgages Consumer Finance ‘3in1’ Launch €0.31bn Total Portfolio Size Applications €798m +3% YOY (Gross Loans) Approvals €275m +16% YOY • New Credit Rules to support less documentation implemented • Overhaul of Consumer Finance sales process underway Draw
Slide 8: Arrears and NPLs
Arrears and NPLs ROI Residential Mortgages ROI Residential Mortgage NPLs3,4 Overall Arrears >90 DPD %2 >720 DPD % 2 51% 45% 44% Levels¹ -4% -47% 8.4% 5.4% 49% 55% 56% Since Since Peak June 2015 June 2015 Dec 2015 9.2% 5.5% Dec-14 Dec-15 Jun-16 Treated NPLs Untreated NPLs c.39k Assessmentsa Completed
Slide 9: Financial Performance
Financial Performance Patricia Carroll Interim Group CFO Interim Results 2016 8
Slide 10: Income Statement – Group
Income Statement – Group €m H1 2016 H1 2015 Change • NII and NIM Net Interest Income (NII) 198 167 31 - NII increased by €31m reflecting higher NIM which grew to 1.43% Other Income 9 14 5 - NIM growth primarily driven by reduced Cost of Funds Gain from Visa Europe Share Sale 29 - 29 • Other Income E
Slide 11: Income Statement – Core Bank
Income Statement – Core Bank €m H1 2016 H1 2015 Change Net Interest Income (NII) 210 167 43 Other Income 9 13 4 Gain from Visa Europe Share sale 29 - 29 ELG Fees (3) (9) 6 Total Operating Income 245 171 74 Total Operating Expenses Excluding Regulatory Costs (148) (137) 11 Regulatory Costs (19) - 19
Slide 12: Net Interest Margin
Net Interest Margin NIM and NIM Drivers • Cost of Funds fell from 1.30% in H1 2015 to 0.75% in H1 2016 • Retail Deposit market premium reduced to 12bps (PTSB 46bps v Market 0.82% 0.88% 0.90% 1.00% 1.28% 1.43% 34bps1) 2.48% 2.50% • The cost of Corporate and Institutional Deposits continues to fall 2.
Slide 13: Total Operating Expenses
Total Operating Expenses €m H1 2016 H1 2015 Change • Cost Income Ratio increase due to Regulatory Costs and certain Staff Costs 66 64 2 short-term mandatory projects such as IFRS 9 Staff Pension Costs 5 5 - • Staff Costs increased marginally Total Staff Costs 71 69 2 • Average number of employees br
Slide 14: Asset Quality – Impairment Charge / (Write-Backs)
Asset Quality – Impairment Charge / (Write-Backs) Breakdown by Portfolio (€m) H1 2016 H1 2015 Change • Write-Backs of €61m for H1 2016 compared to a €24m Charge in H1 2015 ROI Home Loans (29) 32 61 ROI BTLs (34) (10) 24 Performance Total ROI Residential Mortgages (63) 22 85 • The Write-Backs include
Slide 15: Asset Quality – NPL Composition
Asset Quality – NPL Composition Included in the below a total of €1.0bn (Dec 2015: €1.0bn) loans that are not impaired and not in arrears > 90 days (€bn) ROI Home Loan NPLs ROI Buy To Let NPLs 4.6 -4% 4.4 -5% 4.2 0.1 0.1 0.1 1.3 1.3 1.2 2.2 52% 57% In Treatment -18% 60% 1.8 1.0 -6% 1.7 1.2 0.1 1.2 0
Slide 16: Asset Quality – NPL Metrics
Asset Quality – NPL Metrics Jun 2016 Dec 2015 Change Total Loan Book • Total NPLs decreased by 6% mainly due to reduced new defaults and sustained loan cures Gross Loans (€bn) 24.8 25.8 1.0 • Total NPLs as % of Gross Loans remains elevated; however, Total NPLs (€bn)5 6.2 6.6 0.4 over 50% of the NPLs
Slide 17: Summary Balance Sheet – Group
Summary Balance Sheet – Group €bn June 2016 Dec 2015 Change Movements in Assets Net Loans 22.2 23.0 (0.8) • Net Loans decreased mainly due to: Treasury Assets 4.5 5.5 (1.0) - repayments and redemptions exceed new business volumes Assets Held For Sale 0.0 0.1 (0.1) in Core Bank loan book; and Other A
Slide 18: Funding
Funding Retail Deposits • Irish Retail Deposits represent 42% of Total Funding €26.3bn €24.6bn • Reduction due to rate actions at manageable levels • IOM1 represents 2% of Total Funding 12% 21% Current Accounts 18% • Represent 13% of Total Funding 10% Corporate & Institutional Deposits • Represent 1
Slide 19: Non-Core Loan Book
Non-Core Loan Book Non-Core Loan Book Summary (€bn) (€m) UK Non-Core Loan Book at Constant Exchange Rate1 CHL IPI2 Total Gross Loans 2,805 260 3,065 Provisions 53 2 55 9.7 Net Loans 2,752 258 3,010 NPLs 110 3 113 NPL% of Gross Loans 4% 1% 4% PCR % 48% 66% 54% RWAs 1,077 118 1,195 4.1 3.1 • Irish Non
Slide 20: Capital
Capital 12.3 CET1 11.9 (€m) TNAV 2,289 2,237 99 (9) (28) (10) 17.1% 17.9% 15.0% 15.9% Dec-15 Jun-16 TNAV at Underlying Exceptional Reserve AT1 TNAV at €bn 5 RWA1 Transitional Fully Loaded Dec 2015 Profit 4 Items Movements Coupon Jun 2016 • Robust CET1 ratios • TNAV increased by €52m - 0.9% increase
Slide 21: Summary
Summary Improved Profitability by over €100m Net Interest Margin improved to 1.43% Impairment Charge down by €85m NPLs declined by €0.4 billion CET1 Ratio increased to 15.9% (Fully Loaded) and 17.9% (Transitional) Interim Results 2016 20
Slide 22: Recap & Outlook
Recap & Outlook Jeremy Masding Group CEO Interim Results 2016 21
Slide 23: Risks & Opportunities
Risks & Opportunities Risks Opportunities Increased Costs Uncertainty Caused Government Housing associated with Commercial Momentum by Brexit Action Plan Regulation ‘Lower for Longer’ Interest Limited Growth of Reducing Improvement in Rate Environment Housing Supply Cost of Funds Collateral Prices E
Slide 24: Priorities for 2016
Priorities for 2016 Developing Clear Returning To Maintaining Effective Maximising Non-Core Building a Safe, Stable Competitive Sustainable Arrears Management Value and Resilient Group Positioning Profitability Identify and Continue to explore Continue to build and Develop a diverse Deepen existing
Slide 25: Appendices
Appendices Trading Conditions 25 Permanent TSB Overview 26 Our Purpose & Strategy 27 Historical Financial Results 28 Medium Term Target 29 Segmental Income Statement 30 Interest Income Analysis 31 Interest Expenses Analysis 32 Tracker Book and Margin 33 Other Income Analysis 34 Impairments – Write-B
Slide 26: Trading Conditions
Trading Conditions 15 GDP to expand to close to 5% in 2016 Unemployment Rate 10 14.0% % change, year on 12.0% 10.2% 5 8.9% 7.8% 0 Net Trade Change in Stocks Investment -5 Government Spending Consumer Spending GDP -10 Dec 12 Dec 13 Dec 14 Dec 15 Jun 16 2000 2003 2006 2009 2012 2015 Recovery in Consum
Slide 27: Permanent TSB Overview
Permanent TSB Overview The Group’s ‘Participation Strategy’ focuses on Retail Personal and Retail SME banking in Ireland. Our products are simple, straightforward, mainstream retail banking products. We have a multi-channel customer offer that provides accessibility and convenience for our customers
Slide 28: Our Purpose & Strategy
Our Purpose & Strategy We will maximise by developing a personal while operating within Our shareholder value banking relationship with the strict boundaries of Purpose over time our customers our risk appetite We set out our Strategic Priorities and Medium Term Financial Targets in our Equity Prosp
Slide 29: Historical Financial Results
Historical Financial Results €m FY 2015 FY 2014 FY 2013 FY 2012 Net Interest Income 358 329 309 300 Other Income 34 38 48 62 ELG Fees (14) (59) (105) (165) Total Operating Income 378 308 252 197 Total Operating Expenses (317) (389) (300) (283) Pre-Impairment Profit / (Loss) 61 (81) (48) (86) Impairm
Slide 30: Medium Term Targets
Medium Term Targets FY 2015 H1 2016 2018 Target Balance Sheet Group LDR 125% 131% <130% Group CET1 Ratio (Fully Loaded) 15.0% 15.9% >11% Income Statement Core Bank NIM 142bps 176bps c.170bps Core Bank Cost:Income Ratio 78% 77%1 c.50% Core Bank Underlying Cost of Risk2 (37bps) (42bps)3 <40bps Core Ba
Slide 31: Segmental Income Statement
Segmental Income Statement Group Core Non-Core €m H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015 Interest Income 294 378 263 294 31 84 Interest Expense (96) (220) (53) (127) (43) (84) Net Interest Income (excl. ELG) 198 167 210 167 (12) - ELG Fees (3) (9) (3) (9) - - Other Income 38 14 38 13 - 1 To
Slide 32: Interest Income Analysis
Interest Income Analysis Gross Average Balances (€bn) Gross Yields1 Interest Income (€m) H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015 Core Bank Tracker 13.7 14.2 X 1.2% 1.2% = 79 82 Core Bank Fixed and Variable 7.4 7.8 X 4.0% 4.2% = 149 162 Consumer Finance 0.3 0.4 X 9.3% 9.2% = 16 17 ROI Non-Cor
Slide 33: Interest Expenses Analysis
Interest Expenses Analysis Average Balances (€bn) Cost of Funds Interest Expense (€m) H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015 Current Accounts X = 3.1 2.8 0.0% 0.0% - 1 Retail Deposits (ex Current Accounts) X = 10.7 11.4 0.7% 1.3% 37 75 Corporate Deposits 2.5 2.9 X 1.6% 2.2% = 20 32 Institut
Slide 34: Tracker Book And Margin
Tracker Book And Margin Gross Irish Tracker Book (€bn) Tracker Margin Impact at H1 2016 (bps) Group Core Bank Average Customer Rate 117 117 14.8 - ECB Repo Rate1 2 2 14.2 13.9 - Average Fixed Spread 115 115 Cost of Funds -75 -66 Net Interest Margin Impact 42 51 1. Average ECB bank rate for the year
Slide 35: Other Income Analysis
Other Income Analysis (€m) H1 2016 H1 2015 Retail Banking And Credit Card Fees 22 22 Brokerage And Insurance 5 4 Other Fee Income 1 1 Total Fee And Commission Income 28 27 Fee and Commission Expense (9) (9) Net Fee And Commission Income 19 18 Net Trading Expense (10) (1) 1 Net Other Operating Income
Slide 36: Impairments – Write-Back Potential
Impairments – Write-Back Potential CSO House Price Index Key Messages -30% 33.2% -35% -35.2% • No significant changes to any house price assumptions in the -40% Group’s impairment models in 2015 -35.7% -45% • Overall property prices increased by 6.9% in the last 12 months; -50% Dublin 4.8%, Rest of
Slide 37: Loan Book Profile
Loan Book Profile June 2016 (€bn) ROI HL ROI BTL UK HL UK BTL CRE Consumer Total Core Non-Core Gross Loans 15.6 5.5 0.2 2.9 0.3 0.3 24.8 21.7 3.1 Performing Loans 11.4 3.8 0.2 2.8 0.2 0.2 18.6 15.6 3.0 NPLs 4.2 1.7 0.0 0.1 0.1 0.1 6.2 6.1 0.1 Provisions Stock 1.5 0.9 0.0 0.0 0.1 0.1 2.6 2.5 0.1 PCR¹
Slide 38: Asset Quality – Arrears Performance
Asset Quality – Arrears Performance Home Loan - # Cases 0-90 DPD Home Loan - # Cases >90 DPD 16.0% 6.0% 12.0% 3.0% 8.0% 4.0% 0.0% 0.0% Jun-12 Dec-13 Jun-15 Jun-16 Jun-12 Dec-13 Jun-15 Jun-16 PTSB Industry PTSB Industry Buy To Let - # Cases 0-90 DPD Buy To Let - # Cases >90 DPD 8.0% 25.0% 6.0% 20.0%
Slide 39: Asset Quality – NPL Definition
Asset Quality – NPL Definition PTSB’s NPL Definition NPLs are defined as: - Loans that are impaired; - Loans which are greater than 90 days in arrears; - Loans which the borrower is considered unlikely to repay the total loan balance without realisation of the underlying collateral; and - Loans whic
Slide 40: Asset Quality – Forbearance Treatments
Asset Quality – Forbearance Treatments €4.5bn in Active Forbearance, 76% NPLs & 71% Home Loan ROI Home Loan in Forbearance - NPLs €2.5bn ROI BTL in Forbearance - NPLs €0.9bn 4% 1% 15% Split Split Trials 4% Trials 30% Term Extension/ Term Extension/ 44% 7% 47% Capitalisation Capitalisation Part Capit
Slide 41: Negative Equity Balances
Negative Equity Balances €1.7bn at June 16, unchanged from Dec 15 ROI Home Loans and Buy-To-Let Mortgages €2.4bn €1.7bn €1.7bn 1.1 0.9 1.0 1.3 0.8 0.7 Dec-14 Dec-15 Jun-16 Performing Non-Performing Interim Results 2016 40
Slide 42: Treasury Portfolio Overview
Treasury Portfolio Overview H1 2016 FY 2015 Gross Gross Treasury Portfolio Mix Asset Type Balance (€bn) Yield%1 Balance (€bn) Yield%2 Debt Securities 2.9 1.4 3.8 2.6 37% Government 2.5 1.4 3.1 3.0 54% NAMA 0.4 0.9 0.7 1.42 Loans and Advances to Credit Institutions 1.7 0.0 1.6 0.1 (Cash and Equivalen
Slide 43: Liquidity
Liquidity Liquidity Buffer (€bn) Liquidity Portfolio Composition Irish RMBS1 5.6 56% 3.8 Credit Line 4% NAMA Government Bonds Bonds Dec 2015 Jun 2016 8% 33% • Increase in the Liquidity Buffer is driven by the secured funding issuance during the period. • Total Liquidity Buffer of €5.6bn made up of c
Slide 44: RWAs
RWAs 42% • RWAs reduced by €0.4bn since the end of last year, around 43% half of which is due to EUR/GBP FX rate on the UK loan book • RWA Intensity relatively stable at 43% • Majority of the Lending Exposures are risk weighted using IRB 12.3 11.9 approach • 35% (Dec 2015: 35%) of the RWAs on Total
Slide 45: Regulatory Capital (1/2)
Regulatory Capital (1/2) 30-Jun-16 31-Dec-15 Transitional Fully Loaded Transitional Fully Loaded €m €m €m €m RWAs 11,903 11,903 12,210 12,260 Capital Resources: CET1 Capital 2,130 1,896 2,086 1,837 Additional Tier 1 94 75 105 79 Tier 1 Capital 2,224 1,971 2,191 1,916 Tier 2 Capital 80 67 91 70 Total
Slide 46: Regulatory Capital (2/2)
Regulatory Capital (2/2) Transitional CET1 % 17.9 17.1 0.70 0.40 (0.30) December 2015 RWA DTA Deduction Profits for the Period June 2016 Fully Loaded CET1 % 0.70 15.9 0.10 15.0 (0.30) 0.40 December 2015 RWA DTA Deduction Profits for the Period Other Prudential Filters and June 2016 reserve movements
Permanent TSB Group Holdings — H1 2016 Earnings Presentation on 6ix