Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — Debt Investor Presentation (March 2019)
56 slides from Bank Of Ireland's debt investor presentation, March 2019
Slide 1: Credit Presentation 31 December 2018
Credit Presentation 31 December 2018
Slide 2: Slide 2
Slide 3: Bank of Ireland Overview
2 2018 Credit Presentation Bank of Ireland Overview
Slide 4: 2018 Highlights
3 2018 Highlights 2018 Credit Presentation €935m • NIM of 2.20% Profitability Underlying profit • Net impairment gains of €42m before tax • NPEs reduced by 24% to €5.0bn; NPE ratio now at 6.3% • New lending €15.9bn, increase of 13% vs. 2017 Growth €1.3bn • New Irish mortgages; Growth of 17%, stable
Slide 5: Economic backdrop
4 Economic backdrop 2018 Credit Presentation Irish credit growth emerging Annual % Change 4 0 -4 -8 2012 2013 2014 2015 2016 2017 2018 Stock of lending to households1 Stock of lending to businesses (non-financial corporations)1 Solid growth in Ireland; UK growth also House price growth continuing in
Slide 6: Focused on execution of our strategy to 2021
5 Focused on execution of our strategy to 2021 2018 Credit Presentation Our ambition 2018 has been While there are …we are committed to is clear transformational challenges ahead… delivering our strategy • Investor Day – June • Cultural change • Brexit and the global • Growing and 2018 • Technology
Slide 7: Strategic Priorities: Transform the Bank
6 Strategic Priorities: Transform the Bank 2018 Credit Presentation Culture Systems Business model 2018 Progress Target Outcomes • Defined the culture we want – ambition, purpose and values being embedded across organisation • Technology transformation continues to progress • Strengthened culture ou
Slide 8: Strategic Priorities: Serve Customers Brilliantly
7 Strategic Priorities: Serve Customers Brilliantly 2018 Credit Presentation Embedding voice of customer Investing in digital and New brand strategy in our businesses physical channels 2018 Progress Target Outcomes • Listening to our customers and taking action • Significant improvement in – 200+ fr
Slide 9: Strategic Priorities: Grow Sustainable Profits
8 Strategic Priorities: Grow Sustainable Profits 2018 Credit Presentation 2018 Progress 2021 Target Headline RoTE of 8.5% Improved profitability RoTE in excess of 10% Adjusted RoTE of 7.2%1 Cost base of c.€1.7bn Cost reduction of 3% / €48m Efficient business Costs reduce every year: 2018-2021 vs. 20
Slide 10: Operating Performance
9 2018 Credit Presentation Operating Performance
Slide 11: Underlying profit before tax of €935m
10 Underlying profit before tax of €935m 2018 Credit Presentation FY 2017 FY 2018 (€m) (€m) Income Statement Total income 3,049 2,805 • Net interest income of €2,146m Operating expenses (before levies and • Other income of €659m includes sustainable and diversified (1,900) (1,852) business income of
Slide 12: Net lending growth of €1.3bn
11 Net lending growth of €1.3bn 2018 Credit Presentation Group loan book movement Net lending growth of €1.3bn • New lending of €15.9bn; an increase of 13% vs. 2017 • Redemptions of €14.6bn; 3% reduction vs. 2017 €15.9bn (€14.6bn) • Expect further net lending growth in 2019, while maintaining (€0.4b
Slide 13: NIM – Strong commercial discipline on pricing
12 NIM – Strong commercial discipline on pricing 2018 Credit Presentation 2018 – Q4 NIM Movement NIM – 2.20% in 2018 • Maintaining strong commercial discipline on pricing e.g. (3bps) (10bps) recent price adjustments on Irish mortgages • Competitive pressures in UK mortgage market driving lower front
Slide 14: Costs have reduced by 3% / €48m
13 Costs have reduced by 3% / €48m 2018 Credit Presentation Operating expenses to reduce further Transformation of cost base • Operating expenses (before levies and regulatory charges) of €1,852m reduced by €48m (3%) vs. 2017 • Expect operating expenses, including transformation investment charge, t
Slide 15: 24% improvement in NPE levels
14 24% improvement in NPE levels 2018 Credit Presentation Non-performing exposures Asset quality continues to improve • Non-performing exposures (NPEs) of €5.0bn, a reduction of 11.4% 8.3% 6.3% €1.5bn (24%) during 2018 €4.4bn re • NPE ratio reduced by 200bps to 6.3% duction • Reductions reflect succ
Slide 16: ROI Mortgages
15 ROI Mortgages 2018 Credit Presentation Continued proactive arrears management >90 days arrears1 >90 days arrears Industry • Bank of Ireland is significantly below the industry average Average for both Owner Occupier (28% of industry average) and Buy to Let (28% of industry average) Industry Avera
Slide 17: Capital and liquidity available to support growth
16 Capital and liquidity available to support growth 2018 Credit Presentation Strong liquidity ratios Dec 2017 Dec 2018 (€bn) (€bn) • Liquidity Coverage Ratio: 136% • Net Stable Funding Ratio: 130% Customer loans 76 77 • Loan to Deposit Ratio: 97% Liquid assets 24 25 Wealth and Insurance assets 17 1
Slide 18: Outlook
17 Outlook 2018 Credit Presentation Growth Efficiency Returns • Net lending growth while • Costs to reduce further in • Continue to generate strong maintaining commercial 2019 organic capital discipline on risk and pricing • Expect further reduction in • Dividend to increase • Continued growth in We
Slide 19: Capital & MREL
18 2018 Credit Presentation Capital & MREL
Slide 20: Unchanged Corporate Structure
19 Corporate Structure 2018 Credit Presentation BOIG established in 2017 Capital / MREL Bank of Ireland Group plc (BOIG) New HoldCo AT1 Tier 2 Senior unsecured 100% Unchanged Corporate Structure The Governor and Company of the Bank of Ireland (GovCo) 1 Senior unsecured 100% 100% Funding 100% New Ire
Slide 21: BOI Credit Ratings
20 BOI Credit Ratings 2018 Credit Presentation Investment grade ratings for BOIG and GovCo BOIG Issuer Ratings BBB- (Positive) Baa3 (Positive) BBB (Stable) GovCo Issuer Ratings BBB+ (Positive) A3 (Positive) BBB (Positive) Oct 2018: GovCo rating upgraded one Jul 2017: Assigned Baa3 (Positive) Nov 201
Slide 22: Strong capital generation and position
21 Strong capital generation and position 2018 Credit Presentation Fully loaded CET1 ratio 1.8% (0.4%) (0.6%) (0.7%) (0.4%) 0.1% 13.6% 13.4% 1 Jan 18 Organic Loan growth / Transformation Regulatory Capital 2018 Other Dec 18 CET1 capital RWA investment Demand2 Dividend CET1 (post IFRS 9 generation1 i
Slide 23: Strategic investment and rigorous allocation of capital
22 Strategic investment and rigorous allocation 2018 Credit Presentation of capital Investment / allocation of capital in 2018 Growth in • CET1 of c.200-250bps to accommodate c.20% loan book growth over 4 years 1 loan book (2018 – 2021) 200-250bps • Net lending growth of €1.3bn in 2018 (c.40bps) Org
Slide 24: Robust capital ratios
23 2018 Credit Presentation Robust capital ratios Dec 2017 Dec 2018 Tier 1 & Total Capital CET1 ratios: • Tier 1 and Total Capital ratios reflect growth in the CET1 ratio in the period and movement in the haircuts associated with Fully Loaded 13.8% 13.4% subordinated debt issued by BOIG subsidiaries
Slide 25: MREL Requirement
24 MREL Requirement1 2018 Credit Presentation Loss absorption Recapitalisation Market amount + amount + Confidence Charge 1.5% O-SII2 -1.25% 2.75% 2.5% CCB2 -0.86% 4 2.25% P2R2 Own Funds 8% Pillar 1 9.39% Requirement 26.39% MREL 1.5% O-SII2 Target 2.5% CCB2 2.25% P2R2 14.25% Own Funds 8% Pillar 1 Re
Slide 26: Regulatory Capital Requirements
25 Regulatory Capital Requirements 2018 Credit Presentation Pro forma CET1 Regulatory Capital Requirements Set by Range 2017 2018 2019 2020 2021 Pillar 1 – CET1 CRR 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% Pillar 2 Requirement (P2R) SSM 1% – 2.25%2 2.25% 2.25% 2.25% 2.25% 2.25% Capital Conservation Buffe
Slide 27: Risk Weighted Assets (RWAs)
26 Risk Weighted Assets (RWAs) 2018 Credit Presentation Customer lending average credit risk weights – Dec 20181/2 EBA Transparency Exercise 2018 (Based on regulatory exposure class) Country by Country Average IRB risk weights EAD3 RWA Avg. Risk Residential Mortgages – June 2018 (€bn) (€bn) Weight S
Slide 28: Capital / MREL
27 Capital / MREL 2018 Credit Presentation Summary Highlights • BOIG (HoldCo) investment grade ratings with positive outlook from Moody’s and S&P Ratings • Upgrades to the Bank’s senior ratings by Moody’s and S&P reflect the issuance of bail-in-able debt by BOIG leading to greater protection for the
Slide 29: Appendix
28 2018 Credit Presentation Appendix
Slide 30: Slide 30
Slide 31: Appendix
30 Appendix 2018 Credit Presentation Slide No. • BOI Overview – Business profile 31 – Historic financial results 33 – Profile of customer loans 35 – Gross new lending volumes 36 • ROI mortgage loan book 37 • UK mortgage loan book 38 • Income Statement – Divisional performance 39 – Interest Rate Sens
Slide 32: BOI Overview: Ireland
31 BOI Overview: Ireland 2018 Credit Presentation Ireland’s leading retail and commercial bank Retail Ireland Corporate Ireland Consumer Business Wealth Corporate Property Banking Finance Ireland • #1 Corporate • Disciplined Unique customer Bank in Ireland approach to risk franchise • 1.7m active co
Slide 33: BOI Overview: UK / International
32 BOI Overview: UK / International 2018 Credit Presentation Attractive UK and International businesses provide diversification and further opportunities for growth Retail UK Corporate UK / International Partnerships Northern Ireland Niche Businesses Corporate Acquisition Banking UK Finance • Over 4
Slide 34: BOI Overview: Income Statement
33 BOI Overview 2018 Credit Presentation Income Statement FY 2014 FY 2015 FY 20163 FY 20174 FY 2018 (€m) (€m) (€m) (€m) (€m) Total income 2,974 3,272 3,126 3,049 2,805 – Net interest income 2,358 2,454 2,298 2,248 2,146 – Other income (net) before additional gains 448 591 677 727 650 – Additional ga
Slide 35: BOI Overview: Summary Balance Sheet
34 BOI Overview 2018 Credit Presentation Summary Balance Sheet Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 (€bn) (€bn) (€bn) (€bn) (€bn) Customer loans1 82 85 78 76 77 Liquid assets 25 24 21 24 25 Wealth and Insurance assets 16 16 17 17 17 Other assets 7 6 7 6 5 Total assets 130 131 123 123 124 Customer depo
Slide 36: Profile of customer loans
35 BOI Overview 2018 Credit Presentation Profile of customer loans1 at Dec 18 (Gross) ROI UK RoW Total Total Composition (Dec 2018) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 23.7 21.7 0.0 45.4 58% Non-property SME and corporate 10.8 4.62 4.1 19.5 24% SME 7.6 1.6 0.0 9.2 11% Corporate 3.2 3.0 4.1 10.3 13
Slide 37: Gross new lending volumes
36 Gross new lending volumes 2018 Credit Presentation Retail Ireland Retail UK Corporate Banking €5.7bn €5.3bn £5.2bn £4.6bn €4.4bn €2.3bn €2.0bn €1.1bn €3.6bn £3.3bn €0.4bn €0.5bn £3.2bn €1.1bn €1.1bn €0.7bn €1.2bn €2.9bn €2.9bn €1.1bn £1.6bn £1.1bn €0.9bn €0.6bn £0.2bn £0.2bn 2017 2018 2017 2018 2
Slide 38: ROI Mortgages: €23.7bn
37 ROI Mortgages: €23.7bn 2018 Credit Presentation New Lending volumes and Market Share ROI Mortgages (gross) €24.3bn €24.1bn €23.7bn 27% 27% 25% €5.3bn €7.3bn €9.5bn €7.2bn €5.8bn €4.4bn €2.0bn €2.3bn €1.4bn €11.8bn €10.9bn €9.8bn 2016 2017 2018 Dec 16 Dec 17 Dec 18 n New Lending Volumes1 Market Sh
Slide 39: UK Mortgages: £19.4bn/€21.7bn
38 UK Mortgages: £19.4bn/€21.7bn 2018 Credit Presentation UK Mortgages (gross) UK Mortgages (gross) £20.4bn £20.0bn £20.4bn £20.0bn £19.4bn £19.4bn £2.2bn £2.0bn £1.7bn £8.5bn £9.6bn £10.4bn £7.4bn £7.5bn £7.5bn £4.0bn £3.3bn £2.7bn £10.8bn £10.6bn £10.2bn £7.9bn £7.1bn £6.3bn Dec 16 Dec 17 Dec 18 D
Slide 40: Income Statement: Divisional performance
39 Income Statement 2018 Credit Presentation Divisional performance Underlying profit / (loss) before Additional gains / Underlying profit / (loss) Year ended Dec 18 tax and additional gains / (losses) (losses) before tax (€m) (€m) (€m) Retail Ireland 665 (16) 649 Wealth and Insurance (formerly Bank
Slide 41: Interest Rate Sensitivity
40 Interest Rate Sensitivity 2018 Credit Presentation The table below shows the estimated sensitivity of the Group’s income (before tax) to an instantaneous and sustained 1% parallel movement in interest rates Dec 17 Dec 18 Estimated sensitivity on Group income (1 year horizon) (€m) (€m) 100bps high
Slide 42: Net interest income analysis
41 Income Statement 2018 Credit Presentation Net interest income analysis H1 2017 H2 2017 H1 2018 H2 2018 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)
Slide 43: Non-core items
42 Non-core items 2018 Credit Presentation FY 2017 FY 2018 (€m) (€m) Cost of restructuring programme (48) (111) – Transformation investment costs1 (48) (93) – Other restructuring charges2 - (18) Gain on disposal of Property - 7 Gross-up for policyholder tax in the Wealth and Insurance business 10 (7
Slide 44: Transformation Investment
43 Transformation Investment 2018 Credit Presentation 2016-21 investment: €1.4bn Increasing our investment to support growth and drive efficiencies Average of €275m p.a. • Scope: Culture, Systems, Business Model • Average annual investment of €275m from 2018-2021; equates to CET1 capital of c.50-60b
Slide 45: Non-performing exposures by portfolio
44 Non-performing exposures by portfolio 2018 Credit Presentation Non-performing Non-performing Impairment Impairment loss Advances Composition (Dec 18) (€bn) exposures exposures as % loss allowance allowance as % of (€bn) of advances (€bn) non-performing exposures Residential Mortgages 45.4 2.8 6.0
Slide 46: Debt Securities at fair value through OCI (FVOCI)
45 Debt Securities at fair value through other 2018 Credit Presentation comprehensive income (FVOCI) ROI UK France Other Dec 18 Dec 171 (€bn) (€bn) (€bn) (€bn) (€bn) (€bn) Sovereign bonds 2.6 - 0.8 2.6 6.0 7.5 Senior debt - - 0.3 1.9 2.2 2.1 Covered bonds 0.2 0.4 0.9 2.2 3.7 3.1 Subordinated debt -
Slide 47: UK Customer Loans £27.9bn (€31.2bn)
46 UK Customer Loans £27.9bn (€31.2bn) 2018 Credit Presentation UK Mortgages – £19.4bn UK Mortgages Analysis – £19.4bn • Total UK mortgages of £19.4bn; (NPEs: 2%) Scotland, Wales, £1.1bn £0.7bn – Average LTV of 62% on total book (2017: 62%) Greater – Average LTV of 72% on new mortgages (2017: 72%) N
Slide 48: Capital: CET1 ratios – Dec 2018
47 Capital 2018 Credit Presentation CET1 ratios – Dec 2018 Regulatory ratio Fully loaded ratio (€bn) (€bn) Total equity 10.1 10.1 Less Additional Tier 1 (0.8) (0.8) Deferred tax1 (0.4) (1.1) Intangible assets and goodwill (0.7) (0.7) Foreseeable dividend2 (0.2) (0.2) Expected loss deduction (0.6) (0
Slide 49: Capital Guidance and Distribution Policy
48 Capital Guidance and Distribution Policy 2018 Credit Presentation • The Group expects to maintain a CET1 ratio in excess of 13% on a regulatory basis and on a fully loaded Capital basis by the end of the O-SII phase-in period1 Guidance • This includes meeting applicable regulatory capital require
Slide 50: Defined Benefit Pension Schemes
49 Defined Benefit Pension Schemes 2018 Credit Presentation Group IAS19 Defined Benefit Pension Deficit Mix of BSPF* Defined Benefit Pension Scheme Assets (%)1 2.20% 2.10% 2.00% 1.60% €4.0bn €5.5bn €5.6bn €1.19bn 45% 61% 72% 11% €0.45bn €0.48bn €0.23bn 21% 44% 23% 18% 5% Jun 16 Dec 16 Dec 17 Dec 18
Slide 51: Ordinary shareholders’ equity and TNAV
50 Ordinary shareholders’ equity and TNAV 2018 Credit Presentation 2017 2018 Movement in ordinary shareholders’ equity (€m) (€m) Ordinary shareholders’ equity at beginning of period 8,612 8,859 Movements: Profit attributable to shareholders 664 620 Impact of adopting IFRS 9 - (31) Dividend paid to o
Slide 52: Cost income ratio: Dec 2018
51 Cost income ratio: Dec 2018 2018 Credit Presentation Headline vs. Adjusted FY 2018 Pro forma FY 2018 Headline adjustments Pro forma (€m) (€m) (€m) Net interest income 2,146 - 2,146 Other income – Business income 672 - 672 – Additional gains 9 (9) - – Other valuation items1 (22) 56 34 Total Income
Slide 53: Return on tangible equity (RoTE)
52 Return on tangible equity (RoTE) 2018 Credit Presentation 2018: Headline vs. Adjusted Adjustments Additional gains, 2018 “Normalised” 2018 & valuations impairment impairment Adjustment for 2018 Headline items1, gains, net of adjustment, net CET1 Ratio Adjusted (€m) net of tax tax of tax at 13% (€
Slide 54: Forward-Looking statement
53 Forward-Looking statement 2018 Credit Presentation 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 expectat
Slide 55: Contact Details
54 Contact Details 2018 Credit Presentation For further information please contact: • Group Chief Financial Officer Andrew Keating tel: +353 76 623 5141 andrew.keating@boi.com • Investor Relations Darach O’Leary tel: +353 76 624 4711 darach.oleary@boi.com Colin Wallace tel: +353 76 623 5135 colin.wa
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Bank of Ireland Group — Debt Investor Presentation (March 2019) on 6ix