Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — FY2017 Earnings Presentation
60 slides from Bank Of Ireland's earnings presentation, February 2018
Slide 1: 2017 Results Announcement
2017 Results Announcement 31 December 2017
Slide 2: Slide 2
Slide 3: Group CEO
Group CEO Francesca McDonagh
Slide 4: Introduction
Introduction 2017 Highlights Early Assessment Ambition, Purpose and Values Strategic Priorities 2
Slide 5: Business Highlights
Business Highlights • Underlying profit before tax of €1,078m; NIM of 2.29% Strong Financial • Further significant improvement in asset quality; NPE ratio now at 8.3% Performance • Strong capital position; dividends re-commencing • Largest lender to Irish economy Ireland’s • Growing market share in
Slide 6: Financial Highlights
Financial Highlights • Underlying profit before tax of €1,078m; increased NIM to 2.29% Profitability €1.1bn • Tracker charge of €170m classified as non-core €14.1bn • New Irish mortgages; growth of 41% and market share increased to 27% New Lending 11% increase vs 2016 • Strong commercial pricing dis
Slide 7: Early Assessment
Early Assessment Bank of Ireland is rich in history and heritage… …with strong foundations for growth • One of the largest financial services groups in Ireland; • Proven customer franchises with diversified income streams 235 years old • Driven and loyal employees • New Ireland business established
Slide 8: Strong businesses in attractive markets
Strong businesses in attractive markets Retail Ireland Retail UK Corporate and International Corporate Banking • Ireland’s leading retail and commercial • Long standing partnerships with Post • Ireland’s #1 Corporate Bank bank; largest lender to the Irish Office and strategic intermediaries; • Suppo
Slide 9: Supportive economic backdrop
Supportive economic backdrop Strong growth in Ireland; Unemployment rate falling in Ireland; steady expansion in the UK at a multi-decade low in the UK 7.0% 8.4% 5.1% 6.8% 4.7% 5.8% 1.9% 1.7% 1.7% 4.9% 4.4% 4.3% 2016 2017e 2018f 2016 2017e 2018f n ROI GDP n UK GDP ROI unemployment rate UK unemployme
Slide 10: My first 100 days
My first 100 days • Introduced new Purpose and Values • Set out our 3 Strategic Priorities • Engaged extensively with our businesses, colleagues, customers and wider stakeholders • Made it a clear priority to resolve the Tracker Mortgage issue • Committed to successful implementation of technology i
Slide 11: Ambition, Purpose and Values
Ambition, Purpose and Values Ambition National Champion Bank in Ireland; UK and selective international diversification Purpose “ Enabling our customers, colleagues and communities to thrive Core Values ” Customer One Group, Agile Accountable Focussed One Team 9
Slide 12: 3 Strategic Priorities
3 Strategic Priorities Transform Serve Customers Grow Sustainable the Bank Brilliantly Profits 10
Slide 13: 1. Transform the Bank
1. Transform the Bank Culture Systems Business Model Embedding our Values Investing in Technology Simplifying our Organisation • Customer focussed; One Group One • Replacing Core Banking Platforms to • Branches transforming into Business Team; Agile; Accountable drive increased efficiency and revenu
Slide 14: 2. Serve Customers Brilliantly
2. Serve Customers Brilliantly Multi-channel distribution Digital Simplification • Putting customer needs at the heart • Delivering digital capability to meet • New ways of working, and rapid of propositions. Customers choose changing customer behaviours and delivery of enhancements and new how, whe
Slide 15: 3. Grow Sustainable Profits
3. Grow Sustainable Profits Responsible growth and development of our franchises to deliver attractive sustainable returns to our shareholders Revenue Growth Commercial Pricing Drive Efficiencies to Strategic Allocation with Diversified and Disciplined Transform our of Capital Income Streams Risk Ap
Slide 16: Group CFO
Group CFO Andrew Keating Bank of Ireland Group C2)
Slide 17: Strong financial performance in 2017
Strong financial performance in 2017 Net interest margin Impairment charge on customer loans €5.4bn 2.29% 32bps 2.19% 2.20% 21bps 2bps 2015 2016 1 2017 2015 2016 2017 Non-performing exposures Fully loaded CET1 ratio €9.4bn 13.8% €8.1bn 11.3% 12.3% €6.5bn Dec 16 Jun 17 Dec 17 Dec 15 Dec 16 Dec 17 Com
Slide 18: Underlying profit before tax of €1,078m
Underlying profit before tax of €1,078m FY 20161 FY 2017 • Net interest income of €2,248m, reduction of €50m vs. (€m) (€m) 2016 primarily due to FX translation impacts Total income 3,126 3,049 • Other income of €801m primarily reflecting: - Net interest income 2,298 2,248 • Sustainable and diversifi
Slide 19: Maintaining strong commercial discipline
Maintaining strong commercial discipline Net interest margin Net interest income1 • Net interest income of €2,248m, reduction of €50m vs. 2016 primarily due to FX translation impacts • Average interest earning assets for 2017 were €98.2bn, down 4% on 2016 primarily due to the impact of a weaker 2.29
Slide 20: Continued growth in new lending
Continued growth in new lending Growth of 11% in new lending • New lending of €14.1bn1 in 2017, increase of 11% on a Retail Ireland Retail UK Corporate & Treasury constant currency basis vs. 2016 • Retail Ireland new lending increased by 9%; • ROI mortgage new lending up 41% • ROI mortgage new lendi
Slide 21: Growing diversified business income
Growing diversified business income FY 20161 FY 2017 • Growth of 8% in business income to €662m in 2017 (2016: (€m) (€m) €615m); Retail Ireland 319 317 • Bank of Ireland Life – strong growth in pension sales Bank of Ireland Life 145 177 contributed to growth in BOI Life business income Retail UK 2 1
Slide 22: Operating expenses
Operating expenses Operating expenses - €1,789m FY 2016 FY 2017 (€m) (€m) • Total staff costs of €900m includes 2017 impact of Career and Reward framework (c.2.5%) and higher pension costs Total staff costs 877 900 • Other costs of €724m reflect investments in our businesses, products, processes and
Slide 23: Business Transformation
Business Transformation Investments in technology are transforming our businesses, our channels and customer experience Implemented in 2017 Delivering the Digital Bank Coming in 2018 • Leading centre of excellence in robotics • 79% of customers are digitally active, up • Creation of single customer
Slide 24: Asset quality - further substantial improvement
Asset quality - further substantial improvement Non-performing exposures Asset Quality continues to improve • Non-performing exposures (NPEs) of €6.5bn, 31% / €2.9bn €2.9bn redu ction reduction during 2017 €9.4bn • Impaired loans of €4.0bn, 35% / €2.2bn reduction during €8.1bn 2017; down 73% from re
Slide 25: Capital and liquidity available to support growth
Capital and liquidity available to support growth Strong liquidity ratios Dec 2016 Dec 2017 (€bn) (€bn) • Net Stable Funding Ratio – 127% • Liquidity Coverage Ratio – 136% Customer loans 78 76 • Loan to Deposit Ratio – 100% Liquid assets 21 24 BOI Life assets 17 17 Customer deposits – €75.9bn Other
Slide 26: Strong capital generation; dividend payments recommencing
Strong capital generation; dividend payments recommencing Fully loaded CET1 ratio movement Capital returns / dividends 1.40% (0.40%) 0.50% 0.25% • Dividend of 11.5c per share proposed and deducted from the (0.25%) 0.20% capital ratios in line with regulatory guidance (€124m) • Expect that dividends
Slide 27: Summary
Summary • Underlying profit before tax of €1,078m Strong 2017 • 11% growth in new lending to €14.1bn Performance • NPEs reduced by 31% to 8.3% of customer loans • CET1 ratio of 13.8%; Dividends re-commencing • Strong economic growth projected in Ireland; UK also expected to expand Looking • Expect n
Slide 28: Appendix
Appendix Bank of Ireland Group C2)
Slide 29: Appendix
Appendix Slide No. • BOI Overview • Business profile 28 • Historic financial results 30 • Profile of customer loans at Dec 17 (gross) 32 • Loans and advances to customers – new business volumes 33 • ROI mortgage loan book 34 • UK mortgage loan book 35 • Income Statement • Divisional performance 36 •
Slide 30: BOI Overview: Business profile
BOI Overview: Business profile Ireland: Leading bank in a growing economy with a well structured market Comprehensive multi-channel distribution c.250 branches c.1,650 79% of consumers are 60% of transactions 685k service calls platform Self-service now digitally active via mobile or tablet monthly
Slide 31: BOI Overview: Business profile
BOI Overview: Business profile Attractive UK and International franchises provide diversification and further opportunities for growth within a disciplined risk appetite Partnership based consumer banking franchise in UK Acquisition Finance Trusted brand and established customer base • ell recognise
Slide 32: BOI Overview: Income Statement
BOI Overview Income Statement1 FY 2013 FY 2014 FY 2015 FY 20162 FY 2017 (€m) (€m) (€m) (€m) (€m) Total income 2,646 2,974 3,272 3,126 3,049 - Net interest income 2,133 2,358 2,454 2,298 2,248 - Other income (net) before additional gains 549 448 591 677 727 - Additional gains 93 205 237 171 74 - ELG
Slide 33: BOI Overview: Summary Balance Sheet
BOI Overview Summary Balance Sheet Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 (€bn) (€bn) (€bn) (€bn) (€bn) Customer loans1 85 82 85 78 76 Liquid assets 27 25 24 21 24 BOI Life assets 14 16 16 17 17 Other assets 6 7 6 7 6 Total assets 132 130 131 123 123 Customer deposits 74 75 80 75 76 Wholesale funding 27
Slide 34: Profile of customer loans at Dec17 (gross)
BOI Overview Profile of customer loans1 at Dec17 (gross) ROI UK RoW Total Total Composition (Dec 17) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 24.1 22.6 0.0 46.7 60% Non-property SME and corporate 11.2 4.02 3.5 18.7 24% SME 8.2 1.7 0.0 9.9 13% Corporate 3.0 2.3 3.5 8.8 11% Property and construction 6.0
Slide 35: Loans and advances to customers
Loans and advances to customers New business volumes Retail Ireland Retail UK Corporate & Treasury (incl. Ireland) €5.3bn €4.8bn £4.6bn €2.0bn £4.1bn €1.4bn €3.6bn €3.2bn £3.2bn £2.8bn €2.5bn €2.2bn €3.0bn €2.9bn £0.2bn £0.2bn £1.0bn £1.1bn €1.0bn €1.1bn €0.4bn €0.4bn 2016 2017 2016 2017 2016 2017 n
Slide 36: ROI Mortgages: €24.1bn
ROI Mortgages: €24.1bn ROI Mortgages (gross) ROI Mortgages (gross) €25.0bn €24.3bn 28% €24.1bn 27% 26% €3.9bn €5.3bn €7.3bn 24% €8.1bn €7.2bn €5.8bn €1.2bn €0.8bn €0.8bn €12.9bn €11.8bn €10.9bn €0.6bn H1 2016 H2 2016 H1 2017 H2 2017 Dec 15 Dec 16 Dec 17 n New Lending Volumes1 Market Share n Tracker
Slide 37: UK Mortgages: £20.0bn/€22.6bn
UK Mortgages: £20.0bn/€22.6bn UK Mortgages (gross) UK Mortgages (gross) £20.5bn £20.4bn £20.0bn £20.5bn £20.4bn £20.0bn £2.6bn £2.2bn £2.0bn £6.9bn £8.5bn £9.6bn £7.6bn £7.4bn £7.5bn £4.9bn £4.0bn £3.3bn £10.4bn £10.8bn £10.6bn £8.7bn £7.9bn £7.2bn Dec 15 Dec 16 Dec 17 Dec 15 Dec 16 Dec 17 n Tracker
Slide 38: Divisional performance
Income Statement Divisional performance Underlying profit / (loss) before Underlying profit / (loss) Additional gains Year ended Dec 17 tax and additional gains before tax (€m) (€m) (€m) Retail Ireland 711 1 712 Bank of Ireland Life 106 - 106 Retail UK - € 94 9 103 Retail UK - £ 83 8 91 Corporate &
Slide 39: Net interest income analysis
Income Statement Net interest income analysis H1 2016 H2 2016 H1 2017 H2 2017 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 40: Interest Rate Sensitivity
Interest Rate Sensitivity 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 16 Dec 17 Estimated sensitivity on Group income (1 year horizon) (€m) (€m) 100bps higher c.140 c.170 100bps lower
Slide 41: Non-core items
Income Statement Non-core items FY 20161 FY 2017 (€m) (€m) Tracker Mortgage Examination charges (21) (170) Cost of restructuring programme (35) (48) Cost of corporate reorganisation and establishment of a new holding company - (7) Loss on disposal / liquidation of business activities (7) (5) Gain /
Slide 42: Non-performing exposures by portfolio
Non-performing exposures by portfolio Non-performing Non-performing Impaired Impaired loans Impairment Specific impairment Specific impairment Advances Composition (Dec 17) (€bn) exposures exposures as % loans as % provisions provisions provisions as % (€bn) of advances (€bn) of advances (€bn) (€bn)
Slide 43: Non-performing exposures
Non-performing exposures 31% reduction in NPEs during 2017 Non-performing exposures (NPEs) Non-performing exposures • NPEs are aligned with the EBA definition and include; 31% €9.4bn red uctio n • Impaired loans - loans with a specific provision €0.7bn attached to them €1.8bn • Exposures >90 days pa
Slide 44: ROI Mortgages
ROI Mortgages Arrears performance 3 to 4 times better than Industry Average >90 days arrears1 >90 days arrears Industry Average • Bank of Ireland is significantly below the industry average for both Owner Occupier (29% of industry average) and Buy to Let (32% of industry average) Industry Average 17
Slide 45: UK Customer Loans £28.0bn (€31.6bn)
UK Customer Loans £28.0bn (€31.6bn) UK Mortgages – £20.0bn UK Mortgages Analysis - £20.0.bn • Total UK mortgages of £20.0bn; (NPEs - 2%; impaired loans - 1%) Scotland, Wales, • Average LTV of 62% on total book (2016: 62%) £1.0bn £0.8bn • Average LTV of 72% on new mortgages (2016: 71%) Greater Northe
Slide 46: Available for Sale Financial Assets
Asset Quality Available for Sale Financial Assets ROI UK France Other Dec 17 Dec 16 (€bn) (€bn) (€bn) (€bn) (€bn) (€bn) Sovereign bonds 4.8 0.5 0.8 1.4 7.5 5.2 Senior debt - - 0.3 1.8 2.1 1.7 Covered bonds 0.2 0.6 0.4 1.9 3.1 3.5 Subordinated debt 0.3 - - 0.1 0.4 0.3 Asset backed securities - 0.1 -
Slide 47: Capital Guidance and Distribution Policy
Capital Guidance and Distribution Policy • The Group expects to maintain a CET1 ratio in excess of 13% on a regulatory basis and on a fully Capital loaded basis by the end of the O-SII phase-in period1. This includes meeting applicable regulatory Guidance capital requirements plus an appropriate man
Slide 48: Regulatory Capital Requirements
Regulatory Capital Requirements Supervisory Review and Evaluation Process (SREP1) requirement 15.8% Capital Conservation Buffer (CCB) of 2.5% fully phased in by 2019 1.5% O-SII1 Buffer phased in over 3 years from July 2019 +P2G +1.5% OSII +0.5% +1.0% 2.5% 2.5% 2.5% 1.875% CCB Regulatory c.0.3% CCyB
Slide 49: CET1 ratios – Dec 2017
Capital CET1 ratios – Dec 2017 Regulatory ratio Fully loaded ratio (€bn) (€bn) Total equity 9.7 9.7 Less Additional Tier 1 (0.8) (0.8) Deferred tax1 (0.3) (1.1) Pension deficit 0.1 - Available for sale reserve (0.1) - National filters (0.1) - Intangible assets and goodwill (0.7) (0.7) Foreseeable di
Slide 50: Risk weighted assets (RWA)
Risk weighted assets (RWA) RWA Density Customer lending Average Credit Risk Weights1/2 (Based on regulatory exposure class) Credit Avg. EAD3 RWA Risk (€bn) (€bn) Weight ROI Mortgages 24.7 7.3 30% UK Mortgages 22.4 4.5 20% SME 16.2 11.6 71% Corporate 9.4 8.4 90% 47% 42% Other Retail 5.1 3.3 65% 41% 3
Slide 51: IFRS 9 – Impairment loss allowance
IFRS 9 – Impairment loss allowance Pro-forma estimated impact on 1 Jan 2018 1 Jan 2018 impact • New IFRS 9 accounting standard effective from 1st January 2018 replacing IAS 39. Impairment provisioning Shareholders’ Equity Reserves (€120m) model now based on expected credit losses (ECL) as CET1 Fully
Slide 52: Defined Benefit Pension Schemes
Defined Benefit Pension Schemes • The Group has developed a framework for pension funding and investment decision making as part of its long-term strategic planning • Management of the Group’s sponsored Defined Benefit pensions schemes involves a multi-year programme, categorised into 3 broad areas.
Slide 53: Defined Benefit Pension Schemes
Defined Benefit Pension Schemes • IAS19 requires that the rate used to discount Defined Benefit pension liabilities be selected by reference to market yields on high quality corporate bonds with a corresponding duration. However, only a small number of long duration AA Euro corporate bonds are in is
Slide 54: Ordinary shareholders’ equity and TNAV
Ordinary shareholders’ equity and TNAV 2016 2017 Movement in ordinary shareholders’ equity (€m) (€m) Ordinary shareholders’ equity at beginning of period 8,317 8,612 Movements: Profit attributable to shareholders 799 664 Distribution on other equity instruments – additional tier 1 coupon (73) (24) D
Slide 55: Contact Details
Contact Details For further information please contact: • Group Chief Financial Officer Andrew Keating tel: +353 76 623 5141 andrew.keating@boi.com • Investor Relations Alan Hartley tel: +353 76 623 4850 alan.hartley@boi.com Niall Murphy tel: +353 76 624 1385 niallj.murphy@boi.com Colin Wallace tel:
Slide 56: 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 57: Bank of Ireland Group
Bank of Ireland Group @) 55
Slide 58: Bank of Ireland Group
Bank of Ireland Group @)
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