Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — FY2005 Earnings Presentation
63 slides from Bank Of Ireland's earnings presentation, March 2005
Slide 1: Year End Results March 2005
Year End Results March 2005 Bank of Ireland Group
Slide 2: Forward Looking Statement
Forward Looking Statement This document contains certain forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995 with respect to certain of the Group’s plans and its current goals and expectations relating to its future financial condition and performance and
Slide 3: Brian Goggin, Group Chief Executive
Brian Goggin Group Chief Executive
Slide 4: Year End Highlights
Year End Highlights Profit Before Tax & Exceptionals +5% Alternative EPS +7% PBT (excluding UK POFS) +10% Alternative EPS (excluding UK POFS) +9% Dividend +10% Return on Equity 22.4%
Slide 5: Robust Divisional Performances
Robust Divisional Performances • Retail Republic of Ireland & Bank of Ireland Life – Excellent Growth in Volumes and Product Sales – Significant Market Share Gain in Life – Considerable Progress in Business Banking • Wholesale Financial Services – Consolidating our Strong Domestic Franchise – Exploi
Slide 6: Progress on Post Office Joint Venture
Progress on Post Office Joint Venture “To provide simple, value-for-money products delivered through a convenient personalised service.” • Proven sales effectiveness model now established • 3 million people on mailing database • 100,000th customer this week • Targeting 400,000 customers by March 200
Slide 7: The Macro-economic Environment
The Macro-economic Environment Ireland UK 2005 (F) 2005 (F) • GDP 6% • GDP 2.8% • Continued low interest rates • Inflation 1.9% • 55,000 new jobs • Unemployment 2.6% • Unemployment 4.2% • Inflation 2.2% • Strong Demographics
Slide 8: Strong Competitive Positioning in Ireland
Strong Competitive Positioning in Ireland Broker/ Face to Face Direct Intermediary Channels Business Lines Business Banking Bancassurance & Investment Life & Pensions Mortgages
Slide 9: Strategic Transformation Programme
Strategic Transformation Programme Cost Savings Stream 2005/06 2006/07 2007/08 2008/09 €30m €75m €105m €120m €120m Initiatives for implementation Retail Ireland (40%) Group Support Services (40%) Process Consolidation (20%) Back office functions Procurement Contact centres Small number of branch clo
Slide 10: Building On An Excellent Performance
Building On An Excellent Performance Looking Forward • Strategic and Financial Momentum • Dynamic Businesses with Growth Potential • Well Positioned in Strong Economies • Optimistic on Business Prospects for 2005/06
Slide 11: Financial Highlights
Financial Highlights John O’Donovan Chief Financial Officer
Slide 12: Financial Highlights
Financial Highlights March 05 March 04 % Change €m €m Profit before Tax & Exceptional Items* 1,333 1,267 +5 Profit before Tax & Exceptional Items* 1,398 1,270 +10 excl. POFS Alternative EPS (Cent)** 114.2 106.7 +7 Alternative EPS** excl. POFS (Cent) 116.9 106.9 +9 Dividend (Cent) 45.6 41.4 +10 Retur
Slide 13: Strong Capital Base
Strong Capital Base Sept 04 March 05 March 04 % % % 3.9 Equity /Assets 3.7 4.0 10.8 Total Capital 10.6 11.3 7.3 Tier 1 Capital 7.6 7.2 6.7 Tier 1 Excluding Life 7.0 6.6 75 Equity Element of Tier 1 68 75 Sept 04 Mar 05 Mar 04 Growth Constant €bn €bn €bn % Currency % 116 Total Assets 126 106 19 20 69
Slide 14: Exceptional Items
Exceptional Items 6 months Sept 04* Mar 05 Mar 04 €m €m €m 31 Sale of Share in euroConex 31 - - Sale of Share in State Street Alliance - 36 - Loan Loss Provision Write Back 100 - - Strategic Transformation Programme (117) - 7 Sale of Chase de Vere / Restructuring of UK IFAs (12) (118) - UKFS Busines
Slide 15: Group Profit & Loss Account
Group Profit & Loss Account 6 months Mar 05 Mar 04 % Constant Sept 04 €m €m Change Currency €m % 922 Net Interest Income 1,898 1,744 9 8 628 Other Income 1,275 1,234 3 3 1550 Total Income 3,173 2,978 7 6 875 Costs 1,807 1,654 9 9 28 Loan Losses 79 86 (8) (8) 29 Associates/JVs 46 29 59 55 676 PBT Pre
Slide 16: Net Interest Income +9%
Net Interest Income +9% €154m increase €m % Volume 306 18 Margins (161) (9) FX 9 - Group 154 9
Slide 17: Strong Growth in Volume
Strong Growth in Volume Retail Financial Services UK Financial Services Mortgages + 27% Mortgages + 9% Business Lending + 23% Commercial Loans +19% Personal Lending + 21% Total Lending +12% Total Lending + 24% Resources + 12% Resources + 2% Wholesale Financial Services Corporate Banking Lending +26%
Slide 18: Net Interest Margin -20 bps
Net Interest Margin -20 bps 6 months Sept 04 March 05 March 04 % % % 2.31 Domestic 2.24 2.43 1.74 Foreign 1.65 1.87 2.07 Group 2.01 2.21 Drivers of Margin Attrition Source of Margin Attrition Wholesale Funding -6bps Retail Ireland -10bps Liability Spreads -3bps UKFS -9bps Back Book Re-Pricing -4bps
Slide 19: Other Income Growth
Other Income Growth Increase March 05 on March 04 +3% Impact of “one-off”* in March 04 +3% Underlying Growth +6% • Mainly driven by : – Corporate Banking Fees – Life Sales – Fee Income in Retail Ireland • But impacted by: – Lower Advice Based Fee Income in UKFS – Lower Fees in Bank of Ireland Asset
Slide 20: Group Costs
Group Costs 6 months Sept 04 Mar 05 Mar 04 % €m €m €m Change 498 Staff 1,016 965 5 289 Administrative 605 506 20 76 Depreciation 161 164 (2) 12 Goodwill 25 19 32 875 TOTAL 1,807 1,654 9* * Excluding UK POFS Group Costs +6%
Slide 21: Cost Income Ratios
Cost Income Ratios 60% 50% 40% 30% 20% 10% 0% Retail ROI Asset Group (ex POFS)* Wholesale FS UKFS (incl. Life) Management Mar-05 53.9% 53.5% 51.0% 35.9% 55.8% Mar-04 54.3% 53.9% 47.9% 35.4% 55.0% * Group including POFS 55.4% in Mar 05 (54.4% in Mar 04)
Slide 22: Loan Loss Charge
Loan Loss Charge* Sept 04 March 05 March 04 €m** bps*** €m** bps*** €m** bps*** 28 8 Group Total 79 11 86 14 68 19 Specific 138 19 134 21 (1) - General (10) (1) 4 1 (27) (8) NDSP (28) (4) (39) (6) (12) (3) Recoveries (21) (3) (13) (2) * Excludes €100m release from general loan loss provisions ** Loa
Slide 23: Asset Quality
Asset Quality Coverage Ratio Coverage Ratio Coverage Ratio (LLP/BUP) 126% (LLP/BUP) 126% (LLP/BUP) 95% €m LLP/Loans 76bps LLP/Loans 61bps LLP/Loans 43bps 500 400 472 433 300 375 319 * 345 335 200 100 0 March 04 September 04 March 05 Balances under provision Loan loss provisions* * After release from
Slide 24: Business Review
Business Review Bank of Ireland Group
Slide 25: Profit Before Tax by Division
Profit Before Tax by Division 6 months Sept 04 Mar 05 Mar 04 % Constant €m €m €m Change Currency % 243 Retail Republic of Ireland 490 419 17 17 59 Bank of Ireland Life 135 147 (8) (8) 216 Wholesale Financial Services 407 371 10 9 200 UK Financial Services 388 373 4 2 64 Asset Management Services 115
Slide 26: Retail Republic of Ireland
Retail Republic of Ireland 32% of Group Divisional Profitability 6 months Sept 04 Mar 05 Mar 04 % €m €m €m Change 492 Net Interest Income 1,018 909 12 151 Other Income* 301 287 5 643 Total Income 1,319 1,196 10 377 Operating Costs 778 724 7 23 Loan Loss Provision 51 53 (4) 243 Profit Before Tax 490
Slide 27: Retail Republic of Ireland
Retail Republic of Ireland Excellent Overall Performance • PBT +17% Net Interest Income +12% • Income +10% Other Income – Volume Growth +5% • Resources +12% • Mortgages +27% • Personal Lending +21% +24% • Business Lending +23% – Margin Attrition of 34bps • Product Spreads • Wholesale Funding – Stron
Slide 28: Bank of Ireland Life
Bank of Ireland Life 9% of Group Divisional Profitability 6 months Sept 04 Mar 05 Mar 04 % €m €m €m Change 24 New Business 59 51 16 45 Existing Business 81 73 11 28 – Expected Return 59 54 9 13 – Experience Variances 18 14 29 4 – Operating Assumption Change 4 5 (20) 3 Shareholder Returns 5 8 (38) (1
Slide 29: Bank of Ireland Life
Bank of Ireland Life • Strong Growth in Operating Profit +17% • New Business Profitability +16% • APE Sales +13% • Market Share 24% – Up by 3 percentage points • Prudent Underlying Actuarial Assumptions • Excellent Financial Strength – Solvency Cover 2.7 times
Slide 30: Wholesale Financial Services
Wholesale Financial Services 27% of Group Divisional Profitability 6 months Sept 04 Mar 05 Mar 04 % €m €m €m Change 160 Net Interest Income 302 292 3 190 Other Income* 392 331 18 350 Total Income 694 623 11 116 Operating Costs 249 221 13 18 Loan Loss Provision 38 31 23 216 Profit Before Tax 407 371
Slide 31: Wholesale Financial Services
Wholesale Financial Services Profit Before Tax - Business Analysis 6 months Sept 04 March 05 March 04 % €m €m €m Change 101 Corporate Banking 182 158 15 64 Global Markets 127 143 (11) 51 Other* 98 70 40 216 WFS 407 371 10 * Includes First Rate Enterprises, Davy and IBI Corporate Finance
Slide 32: Wholesale Financial Services
Wholesale Financial Services • Total Income + 11% – Strong growth in lending volumes and fee based income – Satisfactory performance by Global Markets in challenging market conditions – Excellent out-turn from First Rate’s FX JV with the UK Post Office – 3 months contribution from Burdale (acquired
Slide 33: Wholesale Financial Services
Wholesale Financial Services 18% of Group Loan & Advances to Customers* (€15bn) Risk Management – Strong Asset Quality - well diversified book with no undue risk concentrations – Loan Loss Charge of 26 bps (Mar 04 26bps and Sep 04 26bps) – Modest Proprietary Trading – Lower VaR usage – Sound Governa
Slide 34: UK Financial Services (Sterling)
UK Financial Services (Sterling) 25% of Group Divisional Profitability 6 months Sept 04 Mar 05 Mar 04 % Stg£m Stg£m Stg£m Change 205 Net Interest Income 414 417 (1) 81 Other Income 164 171 (4) 286 Total Income 578 588 (2) 161 Operating Costs 323 323 - (9) Loan Losses (10) 2 134 Operating Profit 265
Slide 35: UK Financial Services
UK Financial Services 6 months Sept 04 March 05 March 04 % Stg £m Stg £m Stg £m Change 62 Personal Lending UK 131 156 (16) (Mortgage Business) 64 Business Banking 118 99 19 (GB Business Banking & NI) 2 Consumer Banking 6 0 (B&W Branches & Chase de Vere) 6 Other 10 4 150 134 265 259 2
Slide 36: UK Financial Services
UK Financial Services • Income – Strong lending growth in both Business Banking (+19%) & Mortgages (+9%) – Net Interest Income impacted by Mortgage Back Book re-pricing, base rate increases, redemption income and competitive pressures • Costs – Tight cost management resulting in flat cost growth – B
Slide 37: Asset Management Services
Asset Management Services 7% of Group Divisional Profitability 6 months Sept 04 Mar 05 Mar 04 % €m €m €m Change 2 Net Interest Income 4 3 33 133 Fee Income 252 258 (2) 135 Operating Income 256 261 (2) 65 Operating Costs 130 125 4 70 Operating Profit 126 136 (7) 6 Goodwill 11 11 - 64 Profit Before Ta
Slide 38: Asset Management Services
Asset Management Services BIAM – Assets under Management 6 months 6 months Full Year Full Year Sept 04 Mar 05 Mar 05 Mar 04 €bn €bn €bn €bn Opening AUM 57.5 55.7 57.5 42.7 Net Cashflow (2.0) (11.5) (13.5) 2.4 Performance 0.2 2.7 2.9 12.4 Closing AUM 55.7 46.9 46.9 57.5
Slide 39: Asset Management Services
Asset Management Services YoY % Change • BIAM – Assets Under Management €46.9bn (18%) – Net outflows due to poor relative EAFE investment performance and departures from investment team – Investment Team swiftly reorganised after departures • Iridian – Assets Under Management US$10.3bn 5% – Further
Slide 40: BIAM - Global Footprint
Asset Management Services BIAM - Global Footprint March 2004 March 2005 €57.5bn €46.9bn 2% 5% 2% 4% 4% 4% 8% 8% 42% 21% 60% 40% 42% Ireland 40% North America 60% Ireland 21% North America 8% UK & NI 4% Japan 8% UK & NI 4% Japan 4% Australia 2% Other 5% Australia 2% Other
Slide 41: UK Post Office Financial Services
UK Post Office Financial Services 6 months Sept 04 Mar 05 Mar 04 Stg£m Stg£m* Stg£m 2 Operating Income 5 - 8 Operating Costs 29 - - Loan losses 3 - (6) Operating Loss (27) - (3) Share of Joint Venture (3) (3) (9) Loss pre-goodwill (30) (3) (4) Goodwill (8) - (13) Loss Before Tax (38) (3) * POFS full
Slide 42: UK Post Office Financial Services
UK Post Office Financial Services Product Launch Schedule Products Launched in Year 1 Products Scheduled for Year 2 (04/05) (05/06) Personal Loans Mar 04 Extended Growth Bond Range Car Insurance July 04 Credit Cards Growth Bonds Oct 04 Instant Access Account GEBs Oct 04 Mortgages (Pilot) Home Insura
Slide 43: UK Post Office Financial Services
UK Post Office Financial Services Building a sales climate whilst offering a competitive product suite Sales Transformation Programme Very Competitive Products •Segmentation • Personal Loan – Top 5 in the market Branches divided into three divisions: – Top 3000: Diamond • Car Insurance – one-third l
Slide 44: Summary
Summary • Excellent financial performance for the year – Alternative EPS (excluding POFS) up 9% – Return on Equity 22.4% – Asset Quality remains very strong • Positive outlook for Group underpinned by: – Strong business pipeline – Excellent asset quality – Prudent capital and funding – Strength of I
Slide 45: Supplementary Information
Supplementary Information Bank of Ireland Group
Slide 46: Index - Supplementary Information
Index- Supplementary Information • UK Post Office FS Impact on Group Alternative EPS • Economic Outlook – Ireland and UK • Geographic Analysis of Profit and Shareholder Base • Volume Growth: Constant Currency • UKFS Lending & Resources • UKFS Residential Mortgage Book • Geographic & Sectoral Analysi
Slide 47: UK Post Office FS impact on Group Alternative EPS
UK Post Office FS impact on Group Alternative EPS March 05 €m Loss before Tax (55) Goodwill 12 Tax & Minority Interest 24 Cost of Funding (after tax) (7) Bank of Ireland Impact pre-goodwill (26) Alternative EPS Impact - dilutive (2.7c)
Slide 48: Economic Outlook - Ireland
Economic Outlook - Ireland Actual Forecast % Growth 2004 2005 2006 GDP 4.9 6.0 6.2 GNP 5.5 6.0 6.2 Consumer Spending 3.2 5.5 7.0 Exports 4.4 5.5 5.0 Inflation 2.2 2.2 2.4 Unemployment 4.5 4.2 4.1 Source: Bank of Ireland Global Markets
Slide 49: Economic Outlook - UK
Economic Outlook - UK Actual Forecast % Growth 2004 2005 2006 GDP 3.1 2.8 2.4 Consumer Spending 3.3 2.5 2.5 Exports 3.0 4.5 3.5 Inflation 1.4 1.9 2.1 Unemployment 2.8 2.6 2.8 Source: Bank of Ireland Global Markets
Slide 50: Geographic Analysis
Geographic Analysis Profit before Tax Shareholder Base March 2005 March 2005 16% 20% 18% 56% 21% 27% 28% 14% Republic of Ireland Republic of Ireland Retail UK UK US Rest of World Europe/Other
Slide 51: Volume Growth: Constant Currency
Volume Growth: Constant Currency Lending Resources PIT % Average % PIT % Average % Increase Increase Increase Increase Group 18 18 12 9 Republic of Ireland 23 21 18 12 UK 13 14 0 5
Slide 52: UK Financial Services Lending & Resources
UK Financial Services Lending & Resources 6 months Sept 04 March 05 March 04 % Stg £bn Stg £bn Stg £bn Change Residential Mortgages 11.3 Standard 10.7 10.9 (2) Non-Standard 3.7 • Buy to Let 4.2 3.4 24 2.2 • Specialised 2.7 1.8 50 17.2 17.6 16.1 9 6.6 Commercial Loans 7.4 6.2 19 23.8 Loan Book 25
Slide 53: UKFS Residential Mortgage Book
UKFS Residential Mortgage Book Total 36% 20% 15% 14% 9% SVR £14.4bn £16.1bn £17.2bn £17.6bn 12% 11% 8% 1% 17% 3% 27% 3% 12% 11% 3% 17% 9% 50% 51% 47% 48% 40% 39% 34% 41% 32% 32% 34% 24% 24% Mar-03 Mar-04 Sep-04 Mar-05 Mar 06 (est) Non Standard Other Standard SVR Tied SVR Free to go
Slide 54: Group Loan Book
Group Loan Book €83.1bn* Well diversified book with no undue risk concentrations Group % ROI % UK % International % Residential Mortgages 49 18 31 - Business & Other Services 14 6 2 6 Personal Lending 10 8 2 - Construction & Property 10 4 5 1 Manufacturing 6 3 1 2 Other Lending 4 2 1 1 Commercial Mo
Slide 55: Asset Quality
Asset Quality Residential Mortgages Other Lending Total Mar 05 Mar 04 Mar 05 Mar 04 Mar 05 Mar 04 €m €m €m €m €m €m Balances Under Provision (BUP) Ireland 3 3 182 217 185 220 UK 17 16 39 34 56 50 International - - 94 105 94 105 20 19 315 356 335 375 Loan Loss Provision General & Specific Ireland 15
Slide 56: Asset Quality: Loan to Value
Asset Quality Loan to Value – New Business Residential Mortgages: ROI Average Loan to Value Mar 05 Mar 04 Owner Occupied 73% 71% Investors 64% 66% Residential Mortgages: UKFS Personal Lending Average Loan to Value Mar 05 Mar 04 Standard 58% 58% Specialised 73% 76% Buy to Let 67% 73%
Slide 57: Republic of Ireland Residential Mortgages
Republic of Ireland Residential Mortgages New Business LTVs <75% 75-90% 91-92% 93-100% Mar 05 (%) 42 35 17 6 Mar 04 (%) 44 37 16 3 Book LTVs <75% 75-90% 91-92% 93-100% Mar 05 (%) 59 32 6 3 Mar 04 (%) 62 31 5 2 Arrears Profile 1-6mths 6-12mths 12+ mths Total Mar 05 (%) 0.7 0.2 0.2 1.1 Mar 04 (%) 0.8
Slide 58: UK Residential Mortgages
UK Residential Mortgages New Business LTVs <75% 75-90% 91-92% 93-100% Mar 05 (%) 55 37 6 2 Mar 04 (%) 51 42 5 2 Book LTVs <75% 75-90% 91-92% 93-100% Mar 05 (%) 55 37 6 2 Mar 04 (%) 54 35 7 4 Arrears Profile 1-6mths 6-12mths 12+ mths Total Mar 05 (%) 0.7 0.1 0.1 0.9 Mar 04 (%) 1.1 0.1 0.1 1.3
Slide 59: UK Financial Services (Euro)
UK Financial Services (Euro) 6 mths Mar 05 Mar 04 % Sept 04 €m €m Change €bn 304 Net Interest Income 606 601 1 121 Other Income 240 246 (2) 425 Total Income 846 847 - 239 Operating Costs 472 466 1 (14) Loan Losses (14) 2 200 Operating Profit 388 379 2 - Goodwill - 6 200 Profit Before Tax 388 373 4
Slide 60: Group Balance Sheet
Group Balance Sheet Mar 05 Mar 04 Assets €bn €bn Bank Loans 7.8 7.8 Loans and Advances to Customers 79.9 67.6 Debt Securities 21.3 15.7 Other 8.9 8.3 117.9 99.4 Life Assurance 8.5 7.0 126.4 106.4 Liabilities Bank Deposits 20.3 17.1 Customer Deposits 60.3 54.4 Debt Securities in Issue 20.5 12.9 Other
Slide 61: IFRS
IFRS The Group gave a market update on the indicative impact of International Financial Reporting Standards (IFRS) on 10 March 2005. The key conclusions looking forward were as follows: •The impact of IFRS on EPS is estimated to be a reduction of approximately 10 cent per share •The impact of IFRS o
Slide 62: IFRS Timeline
IFRS Timeline Annual Accounts Half-year Accounts Annual Accounts 31 March 2005 30 September 2005 31 March 2006 Prepared under Irish GAAP Prepared under IFRS with 30 September 2004 comparatives First full IFRS Accounts restated, where with 31 March 2005 appropriate comparatives restated, where approp
Slide 63: For Further Information
For Further Information Please Contact: Geraldine Deighan Niamh O’Reilly Group Investor Relations Tel: +353 1 604 3501 Fax: + 353 1 661 5105 Email: investor.relations@boimail.com