Aib Group Plc · EURONEXT:A5G
Aib — Allied Irish Banks, p.l.c. — H1 2012 Earnings Presentation
32 slides from Aib's earnings presentation, Jul 27, 2012
Slide 1: Preliminary Interim Results
Allied Irish Banks, p.l.c. Preliminary Interim Results For the 6 Months Ended June 30 2012 27 July 2012
Slide 2: Important Notice
Important Notice A number of statements we will be making 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 Section 27A of the US Securities Act of 1933 and Section 21E of the US Securities Exchange
Slide 3: David Duffy, Chief Executive Officer
David Duffy Chief Executive Officer ‐3‐
Slide 4: Group Summary
Group Summary Strong capital base; Core Tier 1 ratio of 17.3% and Total Capital ratio of 19.9% Deposit increase of €2.9bn since Dec 2011; increases across all business segments • Loan to deposit ratio reduced to 125% from 138% at Dec 2011 • €6bn reduction in reliance on ECB funding to €25bn Ov
Slide 5: Significant Progress in Execution of Key Initiatives
Significant Progress in Execution of Key Initiatives Restructuring & Governance Cost Cutting Relationship Framework in place with State 3 Severance Scheme Announced & Phase 1 initiated 3 Phase 2 scheduled for late Q3 Revised Strategy & Org Structure announced 3 Pay & Benefits restructured 3
Slide 6: Revised Strategy – Simplify and Adapt to Current Changing Market Dynamics
Revised Strategy – Simplify and Adapt to Current Changing Market Dynamics Key Elements of Delivery Restructuring Governance z Customer focused operating structure z Continued development of key stakeholder • Revised operating structure designed to relationships simplify and unencumber AIB z Focus on
Slide 7: New Operating Structure – Customer Centric for Both New and Existing Business
New Operating Structure – Customer Centric for Both New and Existing Business Customers Financial Key Benefits and Products Solutions UK Distribution (Fergus Murphy) Group (Ronan O’ Neill) Simplification of overall structure (Bernard Byrne) (Peter Spratt) Targeted cost savings as duplication rem
Slide 8: AIB is fulfilling its lending commitments to SMEs and wants to do more
AIB is fulfilling its lending commitments to SMEs and wants to do more Business Activity AIB Fund Participation Sanctions Funds to promote credit Lending target of €3.0bn for 2011 surpassed Agri Investment Fund AIB lending target for 2012 is €3.5bn Fund size: €250m Sanction activity is 17
Slide 9: Delivering on lending commitments to Mortgage customers
Delivering on lending commitments to Mortgage customers Mortgage activity AIB / EBS Mortgage Sanctions Clear Momentum in our mortgage business with Sanctions significant gains year on year Number of total sanctions YTD June 2012 increased by 70% year on year Value of total sanctions YTD June i
Slide 10: Supporting customers in difficulty – Open & Early Engagement Critical
Supporting customers in difficulty – Open & Early Engagement Critical SMEs Mortgages – MARS update Financial Solutions Group established in July 2012 The MARS programme is now operational with advanced forbearance Focusing on challenged assets and returning customers to strategies approved by
Slide 11: Aggressive Focus on Cost Saving Initiatives
Aggressive Focus on Cost Saving Initiatives Target Cost Model Severance Scheme Pay & Benefits Severance scheme launched in May Changes to the pay and benefits structure in Significant cost reductions by 2014 the bank announced in June as follows: The minimum target headcount An aggregate 15%
Slide 12: A Redefined Distribution Network
A Redefined Distribution Network Branch Closures An Post AIB is continuing to develop its Integrated Distribution Network Memorandum of Understanding agreed with An Post in • Wider integration of branch and direct channels relation to extension of banking services in selected • Delivery of seaml
Slide 13: Product Repricing – Actions to Return to Sustainable Operating Levels
Product Repricing – Actions to Return to Sustainable Operating Levels Mortgages - Standard Variable Rate Deposits – Pricing levels stabilising PDH SVR BTL SVR Gross interest rates 4.00% AIB (Current rate) 3.00% 3.95% Customer loans 3.50% 3.38% AIB (+0.50%) 3.50% 4.45% 3.34% 3.00% Overall cost of fun
Slide 14: Paul Stanley, Acting Chief Financial Officer
Paul Stanley Acting Chief Financial Officer ‐14‐
Slide 15: Key Summary Financials – Operating Performance Stabilising
Key Summary Financials – Operating Performance Stabilising Income Statement Loss before exceptionals of €1.1bn in H1 2012, (€3.0bn in H1 2011) Jun Jun Reduction in credit provisions charge to €m 2012 2011 €0.9bn from €3bn in H1 2011, a 70% reduction Net Interest Income (before ELG) 783 860 Net
Slide 16: Capital & Funding
Capital & Funding Capital Funding 150 Core Tier 1 ratio of 17.3%, comfortably above target €bn minimum level of 10.5% 129 122 Risk Weighted Assets (RWA) down €3.5bn to €80.8bn 120 • Non – core deleveraging accounted for a decrease of Customer a/cs c. €3.1bn 61 90 64 Wholesale funding • Other mov
Slide 17: Operating Income – Continued Challenges with Funding Costs
Operating Income – Continued Challenges with Funding Costs 900 Total income down €m 851 €80m, 10% on H1 2011 800 771 700 247 600 203 500 Deposit market 400 remained heated in H1 604 300 568 but now stabilising 200 100 0 Fee & commission H1 2012 H1 2011 subdued due to Interest Non Interest economic c
Slide 18: Costs – Aggressive Focus Ongoing to Reduce Costs in Future Periods
Costs ‐‐ Aggressive Focus Ongoing to Reduce Costs in Future Periods 1000 Total H1 costs up 1% €m 887 832 900 on H1 2011 (excl. EBS) 800 700 368 (incl 356 600 EBS) 500 €43m additional costs 400 due to EBS 300 519 (incl 476 consolidation EBS) 200 100 0 H1 2012 H1 2011 Driving down Staff Operating oper
Slide 19: Deleveraging Plan – Expect LDR to be at or below target of 122.5% by year end
Deleveraging Plan – Expect LDR to be at or below target of 122.5% by year end Net Loan balances down €14.5bn €bn 27.7 7.9 25 3.6 20 3.6 12.6 0.6 13.2 15 6.0 10 7.2 5 0 Dec-10 Disposals Scheduled Provisions Sub Total FX/Other Jun-12 To get to Dec-13 payments 2013 plan Residual • €28bn of non‐core loa
Slide 20: Peter Rossiter, Chief Risk Officer
Peter Rossiter Chief Risk Officer ‐20‐
Slide 21: Loan Book Composition and Credit Profile
Loan Book Composition and Credit Profile Components Credit Profile €m Total Gross Loans €95.4bn 45,000 41,823 39,974 €22.2bn Residential Mortgages 40,000 8,245 Other Personal 35,000 8,851 29,072* Watch 30,000 6,771 Property & Construction 6,290 €23.6bn 25,000 6,864 Vulnerable €5.0bn €44.6bn SME/Corp
Slide 22: Credit Provisions
Credit Provisions Provision charges peaked in 2011; significant reduction expected for full year 2012 Bad debt provision charge of €890m to June 2012 (€2,907m* to June 2011) • Specific provision of €1,355m; IBNR writeback of €465m • Reduced provision charge reflects extent of impairment / provis
Slide 23: Loan Book Profile – Asset Quality
Loan Book Profile – Asset Quality June 2012 RoI UK Land & Inv. SME Personal Corporate €bn Mortgages Mortgages Development Property Advances 41.1 (1) 3.2 6.6 (2) 16.0(3) 15.8 5.0 6.4 Impaired 7.2 0.2 5.5 6.7 4.9 1.4 0.6 Impairment 0.3 0.01 0.2 0.1 0.1 0.1 0.03 charge Balance sheet provisions Specific
Slide 24: Mortgages – largest sector exposure at €45bn
Mortgages – largest sector exposure at €45bn Republic of Ireland Mortgages Republic of Ireland - €41bn Total residential mortgages of €41bn 43% Owner Occupier 77% ‐ €32bn 43% Buy‐to‐let 23% ‐ €9bn c. 34k mortgage accounts or €6.4bn RoI mortgages 14% subject to forbearance as at June 2012 Tra
Slide 25: Republic of Ireland mortgages – Gross Loans of €41bn
Republic of Ireland mortgages – Gross Loans of €41bn 90+ days arrears and / or impaired Impairment Charges and Provisions Dec Jun Mar Dec Jun 2010 % 2011 2012 2012 €bn 2011 2012 Industry ‐ Owner Occupier Impaired Loans 6.0 7.2 Source : Central Bank of Ireland – data as at March 2012 Loan Value 12.3
Slide 26: SME / Commercial
SME / Commercial Dec 2011 €16.3bn June 2012 €15.8bn 28% 31% €4.5bn €4.9bn €8.4bn €7.7bn €1.6bn €1.6bn €1.6bn €1.8bn 10% 51% 10% 49% 11% 10% Satisfactory Watch Satisfactory Watch Vulnerable Impaired Vulnerable Impaired Full Year 2011 Impairment charge €1.6bn Impairment charge to June 2012 €0.1bn Tota
Slide 27: Property & Construction
Property & Construction Dec 2011 €24.5bn June 2012 €23.6bn 48% 35% 29% €8.5bn 53% €6.9bn €12.4bn €11.9bn €2.4bn €1.7bn €2.4bn €1. 9bn 10% 10% 7% 8% Satisfactory Watch Satisfactory Watch Vulnerable Impaired Vulnerable Impaired Full Year 2011 Impairment charge €3.6bn Impairment charge to June 2012 €0.
Slide 28: Property & Construction
Property & Construction • Land & development €6.6bn • €6.1bn is criticised, 92% of portfolio, with 83% impaired • Impairment charge of €0.2bn to June 1.9 RoI 2012 (€1.7bn year to Dec 2012) 4.7 UK • Specific provision / Impaired loans cover now 71% (69% at Dec 2011) • €6.7bn or 42% of investment prop
Slide 29: Personal Loans
Personal Loans Dec 2011 €5.3bn June 2012 €5.0bn 28% 24% €1.3bn €1.4bn €0. 5bn €3.1bn €0.5bn €2.7bn €0.4bn €0.4bn 10% 58% 10% 8% 8% 54% Satisfactory Watch Satisfactory Watch Vulnerable Impaired Vulnerable Impaired Full Year 2011 Impairment charge €0.5bn Impairment charge to June 2012 €0.1bn Total bal
Slide 30: Corporate Loans
Corporate Loans Dec 2011 €7.4bn June 2012 €6.4bn €0.06bn 9% 10% €0.7bn €0.1bn €0.1bn 2% €0.6bn €0.1bn 1% 1% 2% €5.6bn €6.5bn 88% 87% Satisfactory Watch Satisfactory Watch Vulnerable Impaired Vulnerable Impaired Full Year 2011 Impairment charge €0.5bn Impairment charge to June 2012 €0.03bn Total bala
Slide 31: Available for Sale Portfolio
Available for Sale Portfolio Large exposures Gov Securities Jun 2012 €bn 8% 4% Senior Bank / Fin Inst Debt 9% Ireland 6.3 ABS ‐RMBS Core Europe 3.9 Gov Guaranteed Snr Bank Debt 7% 60% UK 1.1 7% Supranationals 5% Spain 1.0 Covered Bonds Italy 0.2 Other Portugal 0.1 • Total debt securities portfolio*
Slide 32: Group Outlook
Group Outlook Challenging economic environment remains evident however profitability is on track for 2014 2014 target dependent on economic recovery in both Ireland and the wider Eurozone Impairment charges peaked in 2011 and material decrease seen in H1 2012 AIB continues to expect impairme
Allied Irish Banks, p.l.c. — H1 2012 Earnings Presentation on 6ix