Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — H1 2023 Earnings Presentation
52 slides from Bank Of Ireland's earnings presentation, Jul 31, 2023
Slide 1: HY23 Interim Results Announcement
HY23 Interim 20 Results Announcement 23 30 June 2023 1
Slide 2: Slide 2
Slide 3: Group CEO Myles O’Grady: H1 2023 Performance
Co ers lle om ag st Purpose ue Cu s H1 2023 Performance Helping you Group CEO rs Thrive de So et ol h ci re Myles O’Grady y a Sh Bank of Ireland – The National Champion Bank Stronger Simpler Sustainable relationships business company 3
Slide 4: Slide 4
Slide 5: Strong strategic delivery
Strong strategic delivery • Net interest income +68% y/y, total business income +23% y/y Financial €1.0bn • Costs +12%, in line with guidance (like-for-like broadly flat) performance PBT • Strong liquidity with LDR of 79% and a 3% increase in customer balances • Asset quality remains resilient +12%
Slide 6: Irish economy growing; UK moderating
Irish economy growing; UK moderating Shifting interest rate and inflation expectations Irish macro backdrop remains supportive; Irish GDP expected to Ireland 1 outperform EU by c.9ppts (cumulative) over 2023-20252 5.0% 2.9% 2.2% 3.90% Ireland UK 3.37% 3.19% 2.83% 2.80% Unemployment 3.8% (June 2023)
Slide 7: Business line performance
Business line performance Irish Residential +6% 1 Commercially disciplined pricing decisions while market Mortgages Irish mortgage loan book growth share grew to 41% (H122 24%) (ex KBCI portfolio) Everyday +5% y/y Increased customer activity combined with €2.6bn growth (vs end Dec 22) in Retail Irel
Slide 8: Digitalisation supporting simpler business and stronger relationships
Digitalisation supporting simpler business and stronger relationships Complaints falling • Active digital customer base increased by c.60% since 2018 • 79% of current account customers digitally active • Customer base is increasing (+7% y/y) while complaints are falling (-7% y/y and -50% since 2017)
Slide 9: ESG fundamental to our Sustainable strategy
ESG fundamental to our Sustainable strategy Commitment to green transition evidenced by tangible outcomes c.€9.7bn Sustainability related finance +€1.5bn in H1 Financial Wellbeing at the heart of customer interactions UNPRB Financial Health & Inclusion targets set in H1 Colleague Engagement and
Slide 10: Creating value as The National Champion Bank
Creating value as The National Champion Bank Differentiated business model H1 2023 outperforming against 2023 - 2025 annual financial targets 2023-2025 Financial Targets Banking Wealth ROTE c.15% CIR <50% Insurance With market-leading brands serving > 4m customers Dividend pay-out building to c.40%
Slide 11: H1 2023 Financials – Group CFO Mark Spain
H1 2023 Financials Group CFO Mark Spain 11
Slide 12: Slide 12
Slide 13: H1 2023 financial summary
H1 2023 financial summary1 • Total income2 of €2.2bn vs €1.4bn in H122 • Loan book growth in Ireland of €8.8bn driven by KBCI portfolio and organic net lending of €0.8bn • Operating expenses performing in-line with guidance; CIR3 at 42% • Net credit impairment charge of €158m including KBCI Day 1 ef
Slide 14: H123 financial performance
H123 financial performance H1 2022 H1 2023 • H123 performance reflects strategic actions, positive business (€m) restated1 (€m) momentum, higher interest rates and continued focus on Net interest income 1,072 1,802 efficiencies Business income 273 350 • Operating profit pre-impairment reflects highe
Slide 15: NII guidance for 2023 upgraded
NII guidance for 2023 upgraded Net interest income movement H123 Performance €419m (€366m) • Net interest income (NII) growth primarily reflects higher rates, €1,802m acquisitions and business momentum: €676m – Liquid asset income supported by growing deposit franchise and €1,072m higher rates – Len
Slide 16: Structural hedge and net interest income sensitivity
Structural hedge and net interest income sensitivity Structural hedge1 • Higher structural hedge volumes in H123 due to growth in customer Period-end €39bn €60bn €66bn current account balances volume • Increased income in H123 reflects higher swap rates and volumes: €374m – Average gross yield on fi
Slide 17: Loan book growth reflects acquisitions and Irish net lending
Loan book growth reflects acquisitions and Irish net lending Group loan book movement €0.8bn (€0.6bn) (€0.2bn) €0.7bn €8.0bn €80.7bn €72.0bn Dec 22 KBCI portfolio Ireland (net lending) International corporate Retail UK Impairment / FX / other Jun 23 and property (net lending) (net lending) Loan book
Slide 18: Total business income 23% higher
Total business income1 23% higher H1 2022 H1 2023 H123 performance (€m) restated (€m) • Retail Ireland reflects higher current account fee income and Retail Ireland 2 71 74 customer activity, partially offset by lower interchange fees Wealth and Insurance 3 80 166 • Wealth and Insurance performance
Slide 19: Operating expenses in line with guidance
Operating expenses in line with guidance Operating expenses movement €25m €93m (€2m) €907m €791m H122 (restated)1 Net reductions / inflation Acquisitions Other H123 (reported)2 H123 performance Non-core • Net efficiencies and lower pension costs have been largely offset • H1 non core costs of €12m b
Slide 20: Impairment charge of €158m in line with expectations
Impairment charge of €158m in line with expectations IFRS 9 models and management adjustments (PMAs) Loan loss experience and portfolio activity (€28m) charge (€130m) charge • Charge of (€53m) related to model updates and updated IFRS 9 • Charge of (€97m) from portfolio activity, reflecting net loss
Slide 21: Diversified loan book and strong asset quality
Diversified loan book and strong asset quality Group loan book segment mix (net) Considered approach to customer lending n Consumer €5.7bn • Disciplined credit underwriting approach based on adherence to prudent risk appetite, credit policies, and portfolio and single-name n Property and 7% concentr
Slide 22: Strong retail franchise and liquidity metrics
Strong retail franchise and liquidity metrics Growing retail deposit base Customer deposits €99bn €102bn • Increase in volumes primarily due to growth in Retail Ireland of €2.6bn, including KBCI deposit portfolio; Q123 Irish household €11bn €11bn savings ratio at 12%2 €9bn €9bn • 53% of Group custom
Slide 23: Net organic capital generation of 180bps
Net organic capital generation of 180bps Fully Loaded CET1 RWAs RWAs €47.5bn €52.0bn 180bps (40bps) (140bps) (60bps) 15.4% 14.8% Dec 221 IFRS 17 / KBCI portfolio Net organic capital2 RWA3 Foreseeable dividend deduction Jun 23 • Net organic capital generation of 180bps H123 (50bps H122) • Foreseeable
Slide 24: 2023 guidance upgraded
2023 guidance upgraded Income Operating expenses NII in H223 expected to be modestly FY23 operating expenses expected higher than H123 to be c.€1.85bn Total business income1 in H223 expected to be broadly in-line with H123 ROTE FY23 expected to be similar to H123 Cost of risk Capital and distributio
Slide 25: Appendix
= Bank of Ireland Appendix 25
Slide 26: Slide 26
Slide 27: Appendix
Appendix Slide No. • BOI overview – customer loans / new lending volumes 28 • Ireland mortgages 29 • UK customer loans 30 • Income statement – Net interest income analysis 31 • Asset quality – Non-performing exposures by portfolio 32 – Portfolio by stage 33 – Non-property SME and Corporate by stage
Slide 28: Overview of customer loans
Overview of customer loans Profile of customer loans1 at Jun 2023 (Gross) Ireland UK RoW Total Total Composition (Jun 23) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 31.2 15.5 0.0 46.7 57% Non-property SME and corporate 10.8 5.1 5.4 21.2 26% Property and Construction 5.0 1.2 1.7 7.9 10% Consumer 2.3 3.6 0
Slide 29: Ireland mortgages: €31bn
Ireland mortgages: €31bn New Lending Volumes and Market Share Ireland Mortgages (gross) 41% €31.0bn €23.0bn €22.9bn €22.4bn €22.5bn 24% €21.9bn 23% 23% 23% €11.1bn €12.2bn €15.6bn €13.1bn €2.4bn €3.2bn €2.9bn €2.5bn €1.3bn €3.1bn €1.0bn €8.7bn €1.6bn €0.9bn €1.0bn €7.9bn €6.8bn €5.3bn €6.0bn H1 2019
Slide 30: UK customer loans £21.8bn (€25.4bn)
UK customer loans £21.8bn (€25.4bn)1 UK Mortgages UK Mortgages Analysis – £13.3bn n Wales • Total UK mortgages of £13.3bn; (NPEs: 2.4%): £0.5bn n Greater London – Average LTV of 56% on existing stock at Jun 2023 n South East £1.3bn £2.7bn – Average LTV of 71% on new UK mortgages in H123 n Scotland •
Slide 31: Income statement: net interest income analysis
Income statement Net interest income analysis H2 2021 H1 2022 H2 2022 H1 2023 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) (%) (€bn) (€m) (%) (€bn) (€m) (%) (€bn) (€m
Slide 32: Non-performing exposures by portfolio
Non-performing exposures by portfolio Non-performing Impairment loss Advances Non-performing exposures Impairment loss Composition (Jun 23) (€bn) (€bn) exposures as % of allowance (€bn) allowance as % of advances non-performing exposures Residential Mortgages 46.7 0.9 1.9% 0.2 23% – Republic of Ire
Slide 33: Portfolio by stage
Portfolio by stage Gross carrying amount Composition (Jun 23) Impairment loss allowance (before impairment loss allowance) ILA % of Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total gross loans Sectoral analysis by stage €m €m €m €m €m €m €m €m €m €m Residential Mortgages 41,181
Slide 34: Non-property SME and Corporate by stage
Non-property SME and Corporate by stage1,2 Composition (Jun 23) Gross carrying amount Impairment loss allowance ILA % of Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total gross loans Sectoral analysis by stage €m €m €m €m €m €m €m €m €m €m Non-property SME and corporate – Manufac
Slide 35: Residential mortgages / Consumer loans
Residential mortgages / Consumer loans Gross loans by stage Residential Mortgages Consumer Residential mortgages €38.0bn €46.7bn €5.3bn €5.9bn • Mortgage portfolios 57% of Group loan book €0.9bn €0.2bn – Average LTV of 54% on stock €4.6bn €0.1bn – 89% of the portfolio has LTV < 80% €0.5bn €0.8bn €0.
Slide 36: Non-property SME and Corporate
Non-property SME and Corporate Gross loans by stage ILA movement 3.6% 3.5% €5m €21.5bn €21.2bn (€36m) €1.5bn €1.4bn €4.7bn €5.0bn €783m €14.8bn €752m €15.3bn Dec 22 Jun 23 Dec 22 Stage 1 / 2 Stage 3 Jun 23 n Stage 1 n Stage 2 n Stage 3 ILA % of gross loans Non-property SME and corporate • 26% of Gro
Slide 37: Property and Construction (P&C)
Property and Construction (P&C) P&C lending (€7.9bn)1 Investment loan portfolio (€7.0bn) Irish focused lending with significant equity protection Development Other Investment (€7.0bn) €1.0bn 10% Investment €7.0bn • Geographical exposure1 primarily focused on Ireland (68%) and Office 38% UK (22%), wi
Slide 38: Forward looking information – macro-economic scenarios
Forward looking information – macro-economic scenarios Ireland United Kingdom 30 June 2023 2023 2024 2025-2027 2023 2024 2025-2027 Central scenario – 40% probability weighting GDP growth1 5.4% 4.6% 3.9% 0.0% 1.0% 1.7% GNP growth1 5.0% 4.3% 3.7% n/a n/a n/a Unemployment rate2 4.3% 4.3% 4.5% 4.1% 4.4%
Slide 39: ILA sensitivity to macro-economic scenarios
ILA sensitivity to macro-economic scenarios 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 central, upside and downside future macroecon
Slide 40: Capital and Liquidity
Capital and Liquidity Liquidity Dec 22 Jun 23 • Funding and liquidity remains strong from stable customer deposits and MREL issuance Customer loans 72 81 Customer loans: €80.7bn Liquid assets 49 44 • Overall Group customer loan volumes of €80.7bn at 30 Jun 2023 are Other assets 30 31 €8.0bn higher (
Slide 41: Ordinary shareholders’ equity and TNAV
Ordinary shareholders’ equity and TNAV Dec 22 Jun 23 Movement in ordinary shareholders’ equity (€m) restated1 (€m) Ordinary shareholders’ equity at beginning of period 9,933 10,489 Movements: Profit / (Loss) for the period 858 853 Share buy back – repurchase of shares (50) (125) Dividend paid to ord
Slide 42: Wealth and Insurance – IFRS 17 application and restatement of H122
Wealth and Insurance1 – IFRS 17 application and restatement of H122 • On 1 Jan 2023, the IFRS 17 accounting standard related to insurance contracts H1 2022 H1 2022 H1 2023 became effective, replacing IFRS 4. This has a material impact on the recognition, (€m IFRS 4) (€m IFRS 17) (€m IFRS 17) measure
Slide 43: Fully Loaded CET1 ratio
Fully Loaded CET1 ratio Capital ratios – 30 June 2023 Fully loaded ratio (€bn) Fully loaded ratio (€bn) Dec 22 Jun 23 Total Equity 11.9 12.1 Less Additional Tier 1 (1.0) (1.0) Deferred Tax (1.0) (0.9) Intangible assets and goodwill (1.0) (1.0) Foreseeable dividend (0.3) (0.3) Expected loss deduction
Slide 44: Regulatory capital requirements
Regulatory capital requirements Pro forma CET1 regulatory capital requirements 2022 2023 2024 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 (CCyB) 0.00% 0.62% 0.93% UK Countercyclical
Slide 45: Risk Weighted Assets (RWAs) / Leverage ratio
Risk Weighted Assets (RWAs) / Leverage ratio EBA Transparency Exercise 2022 Customer lending average credit risk weights – Jun 20231, 2 Country by Country Average IRB risk weights (Based on regulatory exposure class) Residential Mortgages – Jun 2022 EAD 3 RWA Avg. Risk Sweden 3.9% (€bn) (€bn) Weight
Slide 46: Return on Tangible Equity (RoTE)
Return on Tangible Equity (RoTE) HY23: Headline vs. Adjusted Adjustments H1 2023 Additional gains Adjusted for H1 2023 Pension Headline & valuation items, CET1 ratio Adjusted Surplus (€m) net of tax at 14.0% (€m) Profit for the period 853 Coupon on Additional Tier 1 securities (34) Preference share
Slide 47: Cost-to-income ratio: HY 2023
Cost-to-income ratio: HY 2023 Headline vs Adjusted H1 2023 Pro forma H1 2023 Headline adjustments Pro forma (€m) (€m) (€m) Net interest income 1,802 1,802 Other income – Business income 350 350 – Additional gains, valuation and other items 49 (49) - Total Income 2,201 (49) 2,152 Costs – Operating ex
Slide 48: Defined benefit pension schemes
Defined benefit pension schemes Group IAS19 Defined Benefit Pension (deficit)/surplus Total Group defined benefit pension scheme assets (%) 3.80% 3.60% €7.2bn €7.2bn €8.4bn €8.9bn €9.6bn €6.9bn €7.0bn 2.10% 2.00% 1.30% 1.35% 55% 65% 65% 69% 66% 66% 67% 0.80% €0.89bn €0.60bn €0.70bn 21% 23% 23% 21% 2
Slide 49: Forward looking statement
Forward looking statement 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 and expectations relating to its future
Slide 50: Contact details
Contact details For further information please contact: • Group Chief Financial Officer Mark Spain tel: +353 1 250 8900 ext. 43291 mark.spain@boi.com • Investor Relations Darach O’Leary tel: +353 87 948 0650 darach.oleary@boi.com Eamonn Hughes tel: +353 87 202 6325 eamonn.hughes@boi.com Owen Callan
Slide 51: Slide 51
Slide 52: Slide 52
Bank of Ireland Group — H1 2023 Earnings Presentation on 6ix