Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — FY2019 Earnings Presentation
60 slides from Bank Of Ireland's earnings presentation, February 2020
Slide 1: 2019 Results Announcement
20 19 2019 Results Announcement 31 December 2019
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Slide 3: Group CEO Francesca McDonagh
3 Bank of Ireland 2019 Results Announcement Group CEO Francesca McDonagh
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Slide 5: 2019 Highlights
5 2019 Highlights Bank of Ireland 2019 Results Announcement €758m • Stable net interest income; NIM of 2.14% Profitability Underlying profit • Costs reduced by €67m (4%) before tax • NPE ratio reduced by 190bps to 4.4% • New lending up 3% to €16.5bn Growth €2.0bn • Irish mortgage market share of 24%
Slide 6: Economic and interest rate outlook
6 Economic and interest rate outlook Bank of Ireland 2019 Results Announcement Strong growth in Ireland UK remains resilient Lower for longer interest rates 5.0% 1.50% 4.6% 4.6% 3.8% 3.8% 3.9% 1.00% 0.50% BoE 0.00% 5.8% 4.8% 3.6% -0.50% 1.4% 1.3% 1.4% -1.00% ECB 2019e 2020f 2021f 2019 2020f 2021f 20
Slide 7: Continued to deliver on our strategic priorities throughout 2019
7 Continued to deliver on our strategic priorities Bank of Ireland 2019 Results Announcement throughout 2019 Transform the Bank Serve customers brilliantly Grow Sustainable Profits Culture Systems Business Embedding Investing in New brand Improved Efficient Robust Sustainable model voice of digital
Slide 8: Significant progress in systems and business model transformation
8 Significant progress in systems and business Bank of Ireland 2019 Results Announcement model transformation Transformation Investment of €1.4bn from 2016 to 2021 …Beyond 2021 Regulatory change and Core systems transformation of €1.1bn ongoing improvements in the resilience and security of Back Mid
Slide 9: Customer benefits are being delivered
9 Customer benefits are being delivered Bank of Ireland 2019 Results Announcement Mobile App Wealth and Insurance End to End • Customer launch commencing in • Digital Investment platform and • 15 customer journeys in scope Q1 2020 Insurance Wallet launched • Digital personal customer • 50% increase
Slide 10: Strategic imperative to improve UK returns
10 Strategic imperative to improve UK returns Bank of Ireland 2019 Results Announcement Invest Improve Reposition • Pivot to niche mortgages: higher • UK Post Office: partnership • UK credit cards: sale added margins and lower LTV; £225m new extended with enhanced alignment 10bps to Group CET1 ratio
Slide 11: €250m cost reduction 2017–2021; target lowered to €1.65bn
11 €250m cost reduction 2017–2021; Bank of Ireland 2019 Results Announcement target lowered to €1.65bn • Strong momentum with net cost reduction of €115m since €1.9bn 2017: €1.65bn – €215m (11%) gross cost saves driven by simplifying our organisation, sourcing strategically and ways of working – Cre
Slide 12: Responsible and Sustainable Business
12 Responsible and Sustainable Business Bank of Ireland 2019 Results Announcement • Signatory to the UN Principles for Responsible Banking • Enhanced board and management governance to drive our RSB agenda; supported by a framework of robust policies across key areas • Good progress on environmental
Slide 13: Financial Targets 2021
13 Financial Targets 2021 Bank of Ireland 2019 Results Announcement Investor Day Updated Improved RoTE of c.8.0% RoTE in excess of 10% profitability RoTE >10% over longer term Cost base of c.€1.7bn in 2021 Cost base of €1.65bn in 2021 Efficient Costs reduce every year 2018-2021 Costs reduce every ye
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Slide 15: Group CFO Myles O’Grady
15 Bank of Ireland 2019 Results Announcement Group CFO Myles O’Grady
Slide 16: 2019 Financial Highlights
16 2019 Financial Highlights Bank of Ireland 2019 Results Announcement Underlying profit before tax of €758m Net lending growth of €2.0bn Wealth and Insurance income up 11% Costs reduced by 4% NPE ratio 4.4%; NPE reduction of €1.5bn Organic capital generation of 170bps CET1 capital rat
Slide 17: Underlying profit before tax of €758m
17 Underlying profit before tax of €758m Bank of Ireland 2019 Results Announcement FY 2018 FY 2019 • Operating profit pre-impairment increased 10% from higher (€m) (€m) income and lower costs Net interest income 2,146 2,150 • Stable net interest income Other income 659 686 Total income 2,805 2,836 •
Slide 18: Net interest income and NIM
18 Net interest income and NIM Bank of Ireland 2019 Results Announcement Net interest income1 / NIM movement Net Interest Income • Stable net interest income benefitting from loan book growth €2,146m €2,150m and pricing discipline (4bps) (3bps) NIM of 2.14% 1bps • Strong commercial pricing disciplin
Slide 19: Structural hedge primary factor driving NIM guidance
19 Structural hedge primary factor driving Bank of Ireland 2019 Results Announcement NIM guidance Interest income on structural hedge1 Overview Average structural €23.3bn €26.4bn €33.3bn • Structural hedging is used to help mitigate volatility in earnings hedge volume from interest rate movements €2
Slide 20: Net lending growth of €2.0bn
20 Net lending growth of €2.0bn Bank of Ireland 2019 Results Announcement Group loan book movement Net lending growth of €2.0bn in 2019 • Diversified mix of Group’s loan portfolios continuing to benefit €16.5bn (€14.5bn) net lending growth €0.2bn (€1.0bn) €1.3bn • Net lending growth in 2019 driven b
Slide 21: Sustainable business income
21 Sustainable business income Bank of Ireland 2019 Results Announcement FY 2018 FY 2019 6% growth in business income (€m) (€m) • 11% increase in Wealth and Insurance: Wealth and Insurance 250 277 – New business sales (APE) increased by 11% Retail Ireland 267 254 – 2% growth in Life market share to
Slide 22: Strong cost discipline – net reduction €67m (4%)
22 Strong cost discipline – net reduction €67m (4%) Bank of Ireland 2019 Results Announcement Cost Movement 2017-2019 Operating expenses1 • Gross cost savings of €108m (6%): €1,900m €1,852m €1,785m – Process efficiencies, organisational design and sourcing strategically €104m €113m (€108m) €41m – Po
Slide 23: NPE ratio 4.4%; reduction of 190bps
23 NPE ratio 4.4%; reduction of 190bps Bank of Ireland 2019 Results Announcement Non-performing exposures (NPEs) movements Non-performing exposures • €1.5bn reduction during 2019 8.3% 6.3% 4.4% • Group working closely with customers to agree sustainable solutions; organic NPE resolution reduced NPEs
Slide 24: Asset Quality
24 Asset Quality Bank of Ireland 2019 Results Announcement Net impairment (charges) / gains Asset Quality • Net impairment charges in 2019 of €210m / 26bps (H1 2019: (2bps) 5bps (26bps) 21bps, H2 2019: 32bps) • Increase in 2019 vs. 2018 reflects: – A more normalised level of impairments in line with
Slide 25: Capital and liquidity available to support growth
25 Capital and liquidity available to support growth Bank of Ireland 2019 Results Announcement Liquidity Dec 2018 Dec 2019 • Strong funding and liquidity from increased customer (€bn) (€bn) deposits and MREL issuance Customer loans 77 79 Liquid assets 25 27 Customer deposits: €84.0bn • Growth of €5.
Slide 26: Strong capital generation and robust capital position
26 Strong capital generation and robust capital position Bank of Ireland 2019 Results Announcement Fully loaded CET1 ratio Increased by 60bps Capital Management 40bps (50bps) • Organic capital generation of 170bps in 2019 170bps (50bps) RWAs • Capital initiatives of 40bps in 2019: (40bps) €49.9bn RW
Slide 27: Capital guidance increasing to >13.5%
27 Capital guidance increasing to >13.5% Bank of Ireland 2019 Results Announcement Regulatory Capital Requirements • Capital guidance increasing from >13% to >13.5% on regulatory basis and on fully loaded basis by end of O-SII phase-in (July 2021) • Increase reflects recent announcement by the Bank
Slide 28: 2020 outlook
28 2020 outlook Bank of Ireland 2019 Results Announcement Growth Efficiency Returns • Net lending growth of c.€2bn • Costs in 2020 to be lower than • Capital benefitting from organic while maintaining commercial 2019 generation and capital discipline on risk and pricing initiatives • Further progres
Slide 29: Incremental progress on sustainable returns
29 Incremental progress on sustainable returns Bank of Ireland 2019 Results Announcement Return on Tangible Equity (RoTE) 2019-2021 • Lower costs • Low interest rate environment • Growth in Wealth and Insurance • MREL issuance • Loan growth • Rebase to 13.5% CET1 target (c.1.2%) c.2.5% c.8.0% 6.8%1
Slide 30: Financial Targets
30 Financial Targets Bank of Ireland 2019 Results Announcement 2019 Progress Updated 2021 Targets Improved RoTE c.8.0% in 2021 RoTE of 6.8%1 profitability RoTE >10% over longer term Cost base of €1.65bn in 2021 Efficient €67m / 4% reduction in costs Costs reduce every year 2018 – 2021 business vs. 2
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Slide 32: Appendix
32 Bank of Ireland 2019 Results Announcement Appendix
Slide 33: Appendix
33 Appendix Bank of Ireland 2019 Results Announcement Slide No. • BOI Overview – Ireland 34 – UK / International 35 – Profile of customer loans 36 – Gross new lending volumes 37 • Debt Securities at fair value through other comprehensive income (FVOCI) 38 • ROI mortgage loan book 39 • UK mortgage lo
Slide 34: BOI Overview: Ireland
34 BOI Overview: Ireland Bank of Ireland 2019 Results Announcement Ireland’s leading retail and commercial bank Retail Ireland Corporate Ireland Consumer Business Wealth Corporate Property Banking Ireland Finance Unique customer • #1 Corporate • Actively supporting • 1.7m active consumer customers B
Slide 35: BOI Overview: UK / International
35 BOI Overview: UK / International Bank of Ireland 2019 Results Announcement 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 •
Slide 36: BOI Overview: Profile of customer loans
36 BOI Overview Bank of Ireland 2019 Results Announcement Profile of customer loans1 at Dec 19 (Gross) ROI UK RoW Total Total Composition (Dec 19) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 23.1 23.2 0.0 46.3 58% Non-property SME and corporate 10.8 5.22 4.4 20.4 25% SME 7.2 1.8 0.0 9.0 11% Corporate 3.6
Slide 37: BOI Overview: Gross new lending volumes
37 BOI Overview: Gross new lending volumes Bank of Ireland 2019 Results Announcement Retail Ireland Retail UK Corporate Banking £5.9bn €5.7bn €5.8bn £5.2bn €2.3bn €4.4bn €2.3bn €4.0bn £3.6bn €1.1bn £3.3bn €0.6bn €1.3bn €0.5bn €1.1bn €0.7bn €2.9bn €2.9bn €1.2bn €1.3bn £2.1bn £1.6bn €0.9bn €0.7bn £0.2
Slide 38: Debt Securities at fair value through other comprehensive income (FVOCI)
38 Debt Securities at fair value through other Bank of Ireland 2019 Results Announcement comprehensive income (FVOCI) ROI UK France Other Dec 19 Dec 18 (€bn) (€bn) (€bn) (€bn) (€bn) (€bn) Sovereign bonds 2.3 - 0.7 2.8 5.8 6.0 Senior debt - - 0.3 1.2 1.5 2.2 Covered bonds 0.2 0.2 0.8 2.2 3.4 3.7 Subo
Slide 39: ROI Mortgages: €23.0bn
39 ROI Mortgages: €23.0bn Bank of Ireland 2019 Results Announcement New Lending volumes and Market Share ROI Mortgages (gross) €24.1bn €23.7bn €23.0bn 27% 27% 24% €7.3bn €9.5bn €11.1bn €5.8bn €4.4bn €3.2bn €2.0bn €2.3bn €2.3bn €10.9bn €9.8bn €8.7bn 2017 2018 2019 Dec 17 Dec 18 Dec 19 n New Lending V
Slide 40: UK Mortgages: £19.8bn / €23.2bn
40 UK Mortgages: £19.8bn / €23.2bn Bank of Ireland 2019 Results Announcement UK Mortgages (gross) UK Mortgages (gross) £20.0bn £19.8bn £20.0bn £19.4bn £19.4bn £19.8bn £2.0bn £1.6bn £1.7bn £9.6bn £10.4bn £11.9bn £7.5bn £7.5bn £7.4bn £3.3bn £2.7bn £2.3bn £10.6bn £10.2bn £10.8bn £7.1bn £6.3bn £5.6bn De
Slide 41: Income Statement: Divisional performance
41 Income Statement Bank of Ireland 2019 Results Announcement Divisional performance Underlying profit / (loss) before Additional gains, Operating Profit valuation and Underlying profit / (loss) tax and additional gains, valuation 12 months ended Dec 19 pre-impairment before tax and other items othe
Slide 42: Interest Rate Sensitivity
42 Interest Rate Sensitivity Bank of Ireland 2019 Results Announcement 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 18 Dec 19 Estimated sensitivity on Group income (1 year horizon) (€m)
Slide 43: Income Statement: Net interest income analysis
43 Income Statement Bank of Ireland 2019 Results Announcement Net interest income analysis1 H1 2018 H2 2018 H1 2019 H2 2019 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) (€
Slide 44: Operating expenses
44 Operating expenses Bank of Ireland 2019 Results Announcement FY 2018 FY 2019 (€m) (€m) Total staff costs 868 844 – Staff costs 721 710 – Pension costs 147 134 Other costs1 659 544 Depreciation1 212 289 Operating Expenses 1,739 1,677 Transformation Investment charge 113 108 Operating Expenses (bef
Slide 45: Non-core items
45 Non-core items Bank of Ireland 2019 Results Announcement FY 2018 FY 2019 (€m) (€m) Customer redress programme - (74) – Tracker Mortgage Examination - (67) – Other programme - (7) Cost of restructuring programme1 (111) (59) (Loss) / gain on disposal / liquidation of business activities 5 (25) Gain
Slide 46: Non-performing exposures by portfolio
46 Non-performing exposures by portfolio Bank of Ireland 2019 Results Announcement Non-performing Non-performing Impairment Impairment loss Advances Composition (Dec 19) (€bn) exposures exposures as % loss allowance allowance as % of (€bn) of advances (€bn) non-performing exposures Residential Mortg
Slide 47: ROI Mortgages
47 ROI Mortgages Bank of Ireland 2019 Results Announcement Continued proactive arrears management >90 days arrears1 >90 days arrears • Bank of Ireland is significantly below the industry average Industry Average for both Owner Occupier (28% of industry average) and Buy to Let (22% of industry averag
Slide 48: UK Customer Loans £28.9bn (€33.9bn)
48 UK Customer Loans £28.9bn (€33.9bn) Bank of Ireland 2019 Results Announcement UK Mortgages – £19.8bn UK Mortgages Analysis – £19.8bn • Total UK mortgages of £19.8bn; (NPEs: 2.1%): n South East n Wales £2.0bn £0.8bn – Average LTV of 63% on existing stock at Dec 2019 (Dec 18: 62%) n Greater – Avera
Slide 49: Ordinary shareholders’ equity and TNAV
49 Ordinary shareholders’ equity and TNAV Bank of Ireland 2019 Results Announcement 2018 2019 Movement in ordinary shareholders’ equity (€m) (€m) Ordinary shareholders’ equity at beginning of period 8,859 9,243 Movements: Profit attributable to shareholders 620 448 Impact of adopting IFRS 9 (31) - D
Slide 50: Capital – fully loaded CET1 ratio improved by 60bps
50 Capital – fully loaded CET1 ratio improved by 60bps Bank of Ireland 2019 Results Announcement Capital ratios – Dec 2019 Regulatory ratio Fully loaded ratio (€bn) (€bn) Total equity 10.5 10.5 Less Additional Tier 1 (0.8) (0.8) Deferred tax (0.5) (1.0) Intangible assets and goodwill (0.8) (0.8) For
Slide 51: Capital Guidance and Distribution Policy
51 Capital Guidance and Distribution Policy Bank of Ireland 2019 Results Announcement • The Group expects to maintain a CET1 ratio in excess of 13.5% on a regulatory basis and on a fully Capital loaded basis by the end of the O-SII phase-in period1 Guidance • This includes meeting applicable regulat
Slide 52: Risk Weighted Assets (RWAs) / Leverage Ratio
52 Risk Weighted Assets (RWAs) / Leverage Ratio Bank of Ireland 2019 Results Announcement Customer lending average credit risk weights – Dec 20191, 2 EBA Transparency Exercise 2019 (Based on regulatory exposure class) Country by Country Average IRB risk weights Residential Mortgages – Jun 2019 EAD3
Slide 53: Cost income ratio: Dec 2019
53 Cost income ratio: Dec 2019 Bank of Ireland 2019 Results Announcement Headline vs. Adjusted FY 2019 Pro forma FY 2019 Headline adjustments Pro forma (€m) (€m) (€m) Net interest income 2,150 - 2,150 Other income – Business income 666 - 666 – Additional gains 5 (5) - – Other valuation items1 15 2 1
Slide 54: Return on tangible equity (RoTE)
54 Return on tangible equity (RoTE) Bank of Ireland 2019 Results Announcement 2019: Headline vs. Adjusted Adjustments 2019 Additional gains ‘Normalised’ 2019 Headline and valuation impairment Adjusted for CET1 Adjusted (€m) items1 net of tax adjustment, net of tax ratio at 13% (€m) Profit for the pe
Slide 55: Underlying earnings per share: Dec 2019
55 Underlying earnings per share: Dec 2019 Bank of Ireland 2019 Results Announcement FY 2018 FY 2019 (€m) (€m) Profit attributable to shareholders 620 386 Non-core items including tax 78 177 Underlying profit attributable to ordinary shareholders 698 563 Weighted average number of ordinary shares in
Slide 56: Defined Benefit Pension Schemes
56 Defined Benefit Pension Schemes Bank of Ireland 2019 Results Announcement Group IAS19 Defined Benefit Pension Deficit Total Group Defined Benefit Pension Scheme Assets (%) 2.10% 2.00% 1.60% €7.1bn €7.2bn €7.2bn €8.4bn 1.30% €1.19bn 58% 55% 65% 65% €0.48bn 17% 21% €0.23bn 21% 23% €0.14bn 25% 24% 1
Slide 57: Forward-Looking statement
57 Forward-Looking statement Bank of Ireland 2019 Results Announcement 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 g
Slide 58: Contact Details
58 Contact Details Bank of Ireland 2019 Results Announcement For further information please contact: • Group Chief Financial Officer Myles O’Grady tel: +353 76 624 3291 myles.ogrady@boi.com • Investor Relations Darach O’Leary tel: +353 76 624 4711 darach.oleary@boi.com Eoin Veale tel: +353 76 624 18
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