Slide 1: AIB Group Interim Results 2002
AIB Group Interim Results 2002
Slide 2: Forward looking statement
Forward looking statement 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 the Private Securities Litigation Reform Act of 1995. Actual results may differ m
Slide 3: Michael Buckley, Group Chief Executive
Michael Buckley Group Chief Executive
Slide 4: Financial highlights
Financial highlights Dividend Profit before per Share taxation EUR 17.25c €703m 12% 5% Underlying Earnings per Share 7%* Profit Return on attributable equity €519m 22.2% 8% * before goodwill amortisation and tax benefit on release of provision Consistent top quartile total shareholder return
Slide 5: Performance features
Performance features Operating profit before provisions 13%; Tangible cost / income ratio 1.1% to 57.3%; Provisions €67m; Tier 1 Capital strengthened to 6.8%
Slide 6: Results agenda
Results agenda Productivity gains; Maintaining asset quality; Our community banking agenda / divisional review; Update on response to Allfirst fraud; Financial review.
Slide 7: Productivity gains
Productivity gains Tangible cost / income ratio from 58.4% to 57.3%; Income growth outpacing cost growth: Year 2001* H1 2002* - Income +8% +8% - Costs +12% +5% 94% of profit from core and dependable relationship business. * excludes the impact of currency movements and acquisitions
Slide 8: Maintaining asset quality
Maintaining asset quality Non-performing loans 2% (2% in 2001); Prudent specific and general provision cover; Annual provision charge expected to be in line with forecast of c.35 bps.
Slide 9: Asset quality - robust & resilient portfolios
Asset quality - robust & resilient portfolios “Strong credit culture exists throughout each of the Divisions and at the Group level” Deloitte & Touche (Credit & Operational Risk Review), July 2002 No stress on retail & commercial portfolios: NPLs as % of loans stable / down in all franchises;
Slide 10: Our community banking agenda
Our community banking agenda Progressing to consistent delivery of a distinctive customer proposition, wherever we operate...
Slide 11: AIB Bank Republic of Ireland
AIB Bank Republic of Ireland 8% Strong loan growth; High productivity - cost / income ratio at 50%; Market share gains in key strategic products; Increasing number of customer portfolio managers within existing resources: Implemented in 10 of 26 regions; Increasing customer loyalty...2
Slide 12: AIB Bank Great Britain & Northern Ireland
AIB Bank Great Britain & Northern Ireland 14% Strong business growth, record volumes; Improved efficiency - cost / income ratio to 51%; Redeployment increasing customer relationship capacity: Development teams in new business centres; Sectoral experts and wealth advisors supporting loc
Slide 13: U.S.A. - Allfirst
U.S.A. 25% Allfirst... Underlying operating profit performance up 5%: Core business retained & stabilised; Average core deposits up 1%, average loans up 6%* (H1 02 v. H1 01) Profits reduced due to provisions / one off items; Recovery Plan being developed in Q3: Restructuring for effici
Slide 14: Allfirst strategic revalidation
Allfirst strategic revalidation Business retention underlines depth and value of franchise; Ongoing consideration of optimum position recognises: Unrealised potential validates continuing commitment to US regional banking; Systematically exploring options to strengthen position; Shape our
Slide 15: U.S.A. continued - Allied Irish America
U.S.A. continued Allied Irish America... Strong profit growth, realising investment benefits; Underlying fee income 37%; Increase in risk weighted assets 11%; Business driven by distinctive customer proposition.
Slide 16: Capital Markets
Capital Markets 14% Increasing customer base and maximising relationship potential; Continuing strong growth in Corporate Banking: Risk adjusted model, independently endorsed, driving behaviour and pricing; Product development aligned to customer need; Almost 150% cover for non-performin
Slide 17: Poland
Poland 18% Significant increase in operating profit, 78%; Underlying provisions as % of average loans from 1.7% to 1.2%; Identifying and selecting segment opportunities; Implementation of new branch banking model on schedule: 30% of business converted; 100% complete Q1 2003; Transf
Slide 18: Finance & Enterprise Technology
Finance & Enterprise Technology Identifying innovative joint venture opportunities: AIB / BOI technology services joint venture; Streamlining support and administration activities; Driving Group-wide best practice and value management.
Slide 19: Update on response to Allfirst fraud
Update on response to Allfirst fraud Completing intensive examination of governance and risk control framework, supported by independent assessments: Board and Audit Committee linkages; Treasury, Credit, Operational and Asset & Liability; Progressing actions agreed with regulators; Central
Slide 20: Summary
Summary Strong performance in a difficult period; Consistent Group-wide focus on translating a distinctive customer proposition into superior profit growth: Republic of Ireland - organising and growing capability (complete Q1 03) to deliver best in class products and services; Northern Irela
Slide 21: Summary
Summary Consistent Group-wide focus on translating a distinctive customer proposition into superior profit growth: USA - revitalising and reshaping our involvement in regional banking to restore sustainable growth; Continuing to invest in fast growing not-for-profit niche; Capital Markets -
Slide 22: Gary Kennedy, Group Director, Finance & Enterprise Technology
Gary Kennedy Group Director, Finance & Enterprise Technology
Slide 23: 2001 figures restated for FRS 17, UITF 33
2001 figures have been restated to reflect FRS 17, UITF 33, and 2001 divisional structure
Slide 24: Profit and Loss account
Profit and Loss account H1 H1 Change 2001 €m 2002 % 1,805 Total operating income 1,971 9 1,075 Total operating expenses 1,145 7 Group operating profit 730 before provisions 826 13 65 Total provisions 132 Group operating profit on 665 continuing activities 694 4 670 Group profit before tax 703 5
Slide 25: Performance by division
Performance by division H1 H1 Change 2001 €m 2002 % 284 AIB Bank Rep Ire 307 8 102 AIB Bank GB & NI 116 14 170 USA 128 -25 103 Capital Markets 117 14 26 Poland 31 18 (15) Group 4 - 670 Group profit before tax 703 5
Slide 26: USA underlying performance
USA underlying performance H1 H1 Change €m 2001 2002 % Profit before taxation 170 128 -25 Specific corporate case 28 Deferred compensation - mutual funds 15 Auto residual values 10 Underlying profit before tax 170 181 +6
Slide 27: Operating income
Operating income H1 H1 Underlying 2001 €m 2002 Change %* 1,052 Net interest income 1,197 15 33 Other finance income 29 -14 720 Other income 745 -1 1,805 Total operating income 1,971 8 41.7% Other income ratio 39.2% Better margin outcome than anticipated Embedded value -€13m, discount rate adjust
Slide 28: Risk weighted asset & loan growth
Risk weighted asset & loan growth * RWA Loan 4 Group 2 5 Rep of Ireland 3 8 Northern Ireland 10 7 Britain 4 0 USA -1 3 Poland 2 0 2 4 6 8 10 * excludes the impact of currency movements
Slide 29: Deposit growth
Deposit growth * Group -1 Rep of Ireland 1 10 Northern Ireland Britain 6 USA -8 Poland -6 -10 -5 0 5 10 Ireland - growth traditionally higher in H2; USA - benefit at 31/12/01 from high level of short term corporate (seasonal) deposits; Allfirst average core deposits up 1% for half year; Poland
Slide 30: Net interest margin
Net interest margin H1 H2 H1 Change on 2001 2001 % 2002 H1 2001 bps 2.89 3.08 Group 3.06 17 2.57 2.62 Domestic 2.78 21 3.16 3.50 Foreign 3.33 17 Margin down 4 bps excluding benefit of interest rate management activities in treasury.
Slide 31: Operating expenses
Operating expenses H1 H1 Underlying * 2001 €m 2002 Change % 643 Staff costs 694 6 333 Other costs 351 5 Depreciation & 91 amortisation 100 8 1,067 1,145 8 Integration costs - 1,075 Operating expenses 1,145 5 58.4% Tangible cost / income ratio 57.3% * excludes the impact of currency movements and acq
Slide 32: Tangible cost / income ratios
Tangible cost / income ratios 80.0% 75%* 75.0% 72% 70.0% 65.0% 63% 62% 58.4% 60.0% 57.3% 56% 55.0% 54% 50% 50% 51% 51% 50.0% 45.0% Group ROI GB&NI USA Cap Mkts Poland H1 2001 H1 2002 * excludes integration costs
Slide 33: Provisions
Provisions H1 2001 H1 2002 Bad and doubtful debts 67 96 Contingent liabilities & commitments (3) - Investment provisions 1 36 Total Provisions 65 132
Slide 34: Provisions for bad debts
Provisions for bad debts H1 Average H1 Average 2001 Loans % €m 2002 Loans % 22 0.26 AIB Bank Rep Ire 25 0.28 10 0.28 AIB Bank GB & NI 11 0.27 20 0.30 USA 50 0.75 10 0.26 Capital Markets 17 0.38 5 0.31* Poland 21 1.24 Group (28) -0.11 67 0.28 Total 96 0.37 * includes the use of general provisions in
Slide 35: Bad debt provision - underlying analysis
Bad debt provision - underlying analysis H1 2001 H1 2002 bps bps Bad and doubtful debts 28 37 Fair value adjustment 9 - US specific case - 11 Gross provision rate 37 48 Release from unallocated - (11) Underlying rate 37 37
Slide 36: Asset quality
Asset quality H1 H1 % 2001 2002 NPLs / loans 2.0 2.0 Bad debts charge / average loans 0.28 0.37 Provisions / NPLs 99 91 • NPLs / loans ratio at 1.0% (excl. Poland) • Provisions / NPLs at 138% (excl. Poland)
Slide 37: Balance sheet
Balance sheet 31 Dec €m 30 June Underlying * 2001 Assets: 2002 change % 51,216 Loans to customers 50,458 4 54,557 Customer accounts 50,897 -1 88,837 Total assets 85,733 3 * excludes the impact of currency movements
Slide 38: Capital ratios
Capital ratios Dec 2001 June 2002 Tier 1 6.5% 6.8% Total 10.1% 10.3% Strong capital generation, €330m profits retained following 12% increase in dividend.
Slide 39: Underlying Return on Equity
Underlying Return on Equity 30.0% 22.2% 19.4% 20.0% 20.9% 18.7% 10.0% 0.0% 1999 2000 2001 H12002
Slide 40: Conclusion
Conclusion Strong business momentum and resilient balance sheet; Income / cost gap to be maintained; Income growth to be sustained by an increasingly distinctive customer proposition; Active cost control; Prudently managing and maintaining asset quality; Well positioned to continue growt
Slide 41: AIB Bank Republic of Ireland profit statement
AIB Bank Republic of Ireland profit statement H1 H1 Change 2001 €m 2002 % 406 Net interest income 449 11 21 Other finance income 18 -16 181 Other income 193 6 608 Total income 660 8 304 Operating costs 330 8 304 Operating profit before prov. 330 9 22 Provisions 28 29 282 Operating profit 302 7 2 Pro
Slide 42: AIB Bank GB & NI profit statement
AIB Bank GB & NI profit statement H1 H1 Change 2001 €m 2002 % 163 Net interest income 178 9 2 Other finance income -1 - 78 Other income 83 6 243 Total income 260 7 131 Operating costs 133 2 112 Operating profit before prov. 127 13 10 Provisions 11 5 102 Profit before tax 116 14
Slide 43: USA profit statement
USA profit statement H1 H1 Change 2001* €m 2002 % 287 Net interest income 294 3 1 Other finance income - - 209 Other income 236 13 497 Total income 530 7 307 Operating costs 336 9 190 Operating profit before prov. 194 2 20 Provisions 66 230 170 Profit before tax 128 -25 * excludes Allfirst fraud
Slide 44: Capital Markets profit statement
Capital Markets profit statement H1 H1 Change 2001 €m 2002 % 55 Net interest income 154 185 4 Other finance income 3 -11 186 Other income 136 -27 245 Total income 293 20 136 Operating costs 149 9 109 Operating profit before prov. 144 34 8 Provisions 32 335 101 Operating profit 112 12 2 Income from a
Slide 45: Poland profit statement
Poland profit statement H1 H1 Change 2001 €m 2002 % 134 Net interest income 137 2 73 Other income 95 31 207 Total income 232 13 169 Operating costs 179 6 8 Integration costs - - 177 Total operating expenses 179 2 30 Operating profit before prov. 53 78 5 Provisions 21 342 25 Operating profit 32 27 1
Slide 46: Poland Division relative to BZWBK
Poland Division relative to BZWBK H1 2002 PLN €m BZWBK consolidated 183 50 BZ Goodwill amortisation (12) Other adjustments * (7) Poland division 31 * includes capital adjustment and alignment with Group accounting policies
Slide 47: Risk weighted assets
Risk weighted assets 31 Dec H2 Underlying 2001 €m 2002 Change %* 15,987 AIB Bank Rep Ire 17,374 9 7,542 AIB Bank GB & NI 7,782 10 22,403 USA 19,639 -1 18,821 Capital Markets 17,395 -8 4,105 Poland 3,602 2 - Group 18 68,858 65,810 2 * excludes the impact of currency movements
Slide 48: Return on risk weighted assets
Return on risk weighted assets Return % Average RWA (bn) €bn 3.0 70 60 50 2.0 40 30 1.0 20 10 1.63 1.61 1.74 1.96 1.78 1.65 1.66 1.59 0.0 0 1995 1996 1997 1998 1999 2000 2001 H1 2002
Slide 49: Non-performing loans by division
Non-performing loans by division As at December 31, 2001 As at June 30, 2002 NPLs/ Total NPLs/ Total Actual Provisions/ Actual Provisions/ NPLs Advances NPLs NPLs Advances NPLs €m % % €m % % 162 0.9 123 AIB Bank Rep Ire 179 0.9 111 107 1.3 119 AIB Bank GB & NI 91 1.1 131 87 0.6 222 USA - €m 127 1.0
Slide 50: Forecast GDP growth
Forecast GDP growth Growth % 2002 (f) 2003 (f) Republic of Ireland 4.0 6.0 Northern Ireland 2.0 3.5 Great Britain 1.8 3.0 U.S.A. 2.7 3.5 Poland 1.5 3.0 Source: AIB Group Chief Economist
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Slide 52: Contacts
Contacts Our Investor Relations Department will be happy to facilitate your requests for any further information Alan Kelly alan.j.kelly@aib.ie +353-1-6412162 David O’Callaghan david.a.o’callaghan@aib.ie +353-1-6414191 Pat Clarke patricia.m.clarke@aib.ie +353-1-6412381 Mary Gethings mary.gethi