Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — FY2003 Earnings Presentation
53 slides from Bank Of Ireland's earnings presentation, May 2003
Slide 1: Bank of Ireland Group Year End Results to 31 March 2003
Bank of Ireland Group Year End Results to 31 March 2003 1
Slide 2: Forward Looking Statement
Forward Looking Statement This presentation contains certain forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995 with respect to certain of the Group’s plans and its current goals and expectations relating to its future financial condition and performance
Slide 3: Mike Soden, Group Chief Executive
Mike Soden Group Chief Executive 3
Slide 4: Todays Presentation
Todays Presentation Overview & Strategy Mike Soden, CEO Financial Review John O’Donovan, CFO 4
Slide 5: Group Strategy
Group Strategy Organic Strategic Cost M&A Capital Growth Management Management (Acquire & Divest) Organic Growth Strategic Cost Management Mergers and Acquisitions Capital Management 5
Slide 6: Financial Review, John O'Donovan Group Chief Financial Officer
Financial Review John O’Donovan Group Chief Financial Officer 6
Slide 7: Financial Highlights
Financial Highlights Mar 03 Mar 02 % €m €m Change Profit on Ordinary Activities before Exceptional Item(s)* 1,177 1,122 5 Alternative EPS** (Cent) 99.2 93.4 6 Dividend (Cent) 37.0 33.0 12 Shareholder Value Added* 562 551 2 Return on Equity * 22.2% 23.5% Return on Average Assets*** 1.1% 1.1% * Exclud
Slide 8: Strong Capital Base
Strong Capital Base Ongoing Optimisation of Capital Structure Sept 02 Mar 03 Mar 02 % % % 4.4 Equity / Assets 4.3 4.4 10.6 Total Capital 11.1 11.5 7.4 Tier 1 Capital 8.0 7.6 6.8 Tier 1 Excluding Life 7.3 7.0 81 Equity Element of Tier 1 75 81 Sept 02 Mar 03 Mar 02 Growth Constant €bn €bn €bn % Curren
Slide 9: Group Balance Sheet
Group Balance Sheet Sept 02 Mar 03 Mar 02 €bn Assets €bn €bn 7.5 Bank Loans 7.5 8.4 57.4 Customer Loans 57.0 56.6 12.6 Debt Securities 12.3 10.9 6.9 Other 7.4 5.8 84.4 84.2 81.7 5.3 Life Assurance 5.3 5.6 89.7 89.5 87.3 Liabilities 14.2 Bank Deposits 12.6 12.6 49.4 Customer Deposits 48.5 51.1 8.0 De
Slide 10: Group Profit & Loss a/c
Group Profit & Loss a/c 6 months Sept 02 Mar 03 Mar 02 % Constant €m €m €m Change Currency% 849 Net Interest Income 1,729 1,578 10 11 605 Other Income 1,188 1,227 (3) (2) 1,454 Total Income 2,917 2,805 4 5 814 Costs 1,662 1,582 5 6 56 Loan Losses 100 102 (2) (1) 18 Associates/JVs 22 1 - - 602 PBT Pr
Slide 11: Net Interest Income +10%
Net Interest Income +10% Increase of €151m Volume (+€105m) +7% Margin (+€62m) +4% Exchange Rate (-€16m) -1% 11
Slide 12: Group Margin Effect
Group Margin Effect Basis Points Mar 03 Mar 02* Change Group Margin 2.38 2.31 +7 Main Influencers UK Financial Services +9 Residential Mortgages +6 Other +3 Corporate Banking +3 Retail Republic of Ireland -2 Other -3 * Restated - certain Dealing Profits re-defined under amended EU accoun
Slide 13: Other Income –3%
Other Income –3% 41% of Total Income Impact of fall in Equity Markets on Life, Asset Management & Other Equity based products First Rate (UK) – now a Joint Venture Offset by Acquisition of Iridian (7 months) Higher Corporate Banking & Corporate Finance Fees Embedded Value Discount Rate Cha
Slide 14: Group Costs +5%
Group Costs +5% 6 months Sept 02 Mar 03 Mar 02 % €m €m €m Change 476 Staff* 955 923 3 254 Administrative* 525 504 4 75 Depreciation 159 140 14 9 Goodwill 23 15 53 814 1,662 1,582 5 * March 02 has been reclassified 14
Slide 15: Cost / Income Ratios
Cost / Income Ratios Group & Divisional Trends 6 months Sept 02 Mar 03 Mar 02 % % % 54.7 Group 55.8 55.8 60.1 Retail Republic of Ireland 60.6 63.6 54.5 Retail ROI (Including Life) 56.1 56.8 48.2 Asset Mgmt. Services 49.6 44.7 37.2 Wholesale Financial Serv. 37.9 39.1 56.4 UK Financial Services 56.1 5
Slide 16: Loan Loss Charge
Loan Loss Charge 9TH consecutive year ≤ 20 basis points (bps) Sept 02 Mar 03 Mar 02 €m* €m* bps** €m* bps** 56 Group Total 100 18 102 19 47 Specific 114 20 89 16 7 General 16 3 7 1 8 NDSP (25) (4) 25 5 (6) Recoveries (5) (1) (19) (3) * Loan Loss Charge (€m) ** Charge/Average Loans (bps) 16
Slide 17: Asset Quality
Asset Quality Excellent Credit Quality Sept 02 Mar 03 Mar 02 % Change €293m Balances under Provision (BUP) €320m €331m -3 €501m Loan Loss Provision (LLP)* €480m €500m -4 171% Coverage Ratio (LLP/BUP) 150% 151% 0.9% LLP as a % of Loans 0.8% 0.9% * Includes non designated specific provision (NDSP) €13
Slide 18: Group Loan Composition
Group Loan Composition March 2003 - €60bn* Group R.O.I. UK International % % % % Residential Mortgages 51 16 35 - Business & Other Services 12 4 2 6 Personal Lending 10 8 2 - Construction & Property 7 2 3 2 Manufacturing 7 4 1 2 Other Lending 5 3 1 1 Commercial Mortgages 3 - 3 - TMT 3 2 - 1 Agricult
Slide 19: Exceptional Costs
Exceptional Costs Portfolio Review 6 months Sept 02 Mar 03 Mar 02 €m €m €m 9 Joint Venture – Perot 9 - 13 Active Business Services 12 - - Group Transformation Programme - 37 - UKFS Rationalisation 143 - 22 Pre Tax 164 37 22 Post Tax 154 30 19
Slide 20: Pensions
Pensions Fund is in Surplus on an actuarial basis under SSAP 24 SSAP 24 Measures ability of assets to meet liabilities over time Interim assessment valuation by the actuary of the Bank pension scheme in March 2003 Assets represent 105% of liabilities Assumptions in last actuarial valuation con
Slide 21: Business Review
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Slide 22: Profit Before Tax by Division
Profit Before Tax by Division 6 months Sept 02 Mar 03 Mar 02 % Constant €m €m €m Change Currency % 189 Retail Republic of Ireland 375 321 17 17 56 Bank of Ireland Life 87 122 (29) (29) 195 Wholesale Financial Services 389 355 10 10 166 UK Financial Services 352 318 11 13 56 Asset Management Services
Slide 23: Retail Republic of Ireland
Retail Republic of Ireland 32% of Group Profits 6 months Sept 02 Mar 03 Mar 02 % €m €m €m Change 415 Net Interest Income 841 787 7 124 Other Income 240* 228 5 539 Total Income 1,081 1,015 7 324 Operating Costs 655 646 2 26 Loan Loss Provision 51 48 6 189 Profit before Tax 375 321 17 * Includes €2m l
Slide 24: Retail Republic of Ireland
Retail Republic of Ireland Total Income +7% Continued Volume Growth ¾ Resources +9% ¾ Mortgages +29% ¾ Other Lending +8% Margin Attrition Higher Insurance Commissions & Other Fees 24
Slide 25: Retail Republic of Ireland
Retail Republic of Ireland Improved Asset Quality Costs +2% Staff & other offset by Euro implementation costs Asset Quality Loan Loss Charge 28bps (30bps Mar02) Improved Credit Grade Profile 25
Slide 26: Bank of Ireland Life
Bank of Ireland Life 7% of Group Profits 6 months Sept 02 Mar 03 Mar 02 % €m €m €m Change 30 New Business 55 57 (4) 37 Existing Business 65 62 5 28 Expected Return 56 49 14 5 Experience Variances 11 12 (8) 4 Operating Assumption Changes (2) 1 - 5 Shareholder Returns 10 10 - 72 Operating Profit 130 1
Slide 27: Bank of Ireland Life
Bank of Ireland Life New Business Market Share 21% Leading Life Assurance provider to Irish retail market Continuing to grow in exceptionally challenging conditions Annual Premium Equivalent Sales -5% (excluding SSIP’s +9%) Free Asset / Solvency Ratio 343% 27
Slide 28: Wholesale Financial Services
Wholesale Financial Services 33% of Group Profits 6 months Sept 02 Mar 03 Mar 02** % €m €m €m Change 136 Net Interest Income 294 289 2 195 Other Income* 378 334 13 331 Operating Income 672 623 8 123 Operating Costs 255 243 5 13 Loan Loss Charge 28 25 12 195 Profit before Tax 389 355 10 * Includes In
Slide 29: Wholesale Financial Services
Wholesale Financial Services Profit Before Tax Analysis 6 months Mar 03 Mar 02 % Sept 02 €m €m €m Change 66 Corporate Banking 160 113 42 79 Treasury & Intl 153 170 -10 50 Other* 76 72 6 195 389 355 10 * Includes Davy, Private Banking, IBI Corporate Finance and First Rate Enterprises 29
Slide 30: Wholesale Financial Services
Wholesale Financial Services Income (including Associates/JV) +8% Costs +5% Significant fee income, including a number of large transaction based fees in Corporate Banking and Corporate Finance Further substantial growth in First Rate Treasury benefited from falling interest rates €30m excep
Slide 31: Wholesale Financial Services
Wholesale Financial Services 22% of Group Loan & Advances to Customers (€13bn) Risk Management Good Asset Quality - well diversified book with no undue risk concentrations Loan Loss of 21 basis points (20 bps Mar 02) Modest Proprietary Trading 31
Slide 32: UK Financial Services (Sterling)
UK Financial Services (Sterling) 30% of Group Profits 6 months Sept 02 Mar 03 Mar 02 % Stg£m Stg£m Stg£m Change 197 Net Interest Income 398 350 14 80 Other Income 175 179 (2) 277 Total Income 573 529 8 156 Operating Costs 321 300 7 11 Loan Losses 14 19 (26) 110 Operating Profit 238 210 13 5 Goodwill
Slide 33: UK Financial Services
UK Financial Services Good Profit Growth +13% Total Income +8% Good Lending Growth +5% Improved Margins Equity Market Impact Costs +7% 1% positive gap between income and cost growth Asset Quality Loan Loss of 7 basis points (10bps Mar 02, 8bps Mar 01) Arrears experience continues t
Slide 34: UK Financial Services (Sterling)
UK Financial Services (Sterling) Loans & Advances to Customers (€28bn) Sept 02 Mar 03 Mar 02 % Stg£bn Stg£bn Stg£bn Change Residential Mortgages 10.9 - Standard 10.9 11.9 (8) 2.0 - Non Standard Buy to Let 2.3 1.5 53 0.9 Specialised 1.2 0.7 71 13.8 14.4 14.1 2 4.8 Commercial Loans 5.2 4.6 13 18.6 Loa
Slide 35: UK Financial Services
UK Financial Services Residential LTVs Underweight in high LTV business UKFS Market New business > 90% LTV 4% 14%* Non standard lending characteristics BTL Specialised Book average LTV 72% 70% Average loan size in 02/03 £77k £130k Maximum LTV 85% 85% * Source: CACI data 12 months to Dec 2002 35
Slide 36: Asset Management Services
Asset Management Services* 10% of Group Profits 6 months Sept 02 Mar 03 Mar 02 % €m €m €m Change 2 Net Interest Income 5 4 25 108 Fee Income 233 224 4 110 Operating Income 238 228 4 53 Operating Costs 118 102 16 57 Operating Profit 120 126 (5) 1 Goodwill 7 - 56 Profit before Tax 113 126 (10) * Inclu
Slide 37: Asset Management Services
Asset Management Services Strong Profit Performance in weak equity markets BIAM Significant level of new business in our main markets: €6.1bn Assets under Management: €57.1bn to €42.7bn (-25%) Securities Services Assets under Custody & Administration €137bn to €118bn Sale of our share in
Slide 38: Asset Management Services
Asset Management Services BIAM - Assets Under Management 6 months 6 months 12 months Sept 02 Mar 03 Mar 03 €bn €bn €bn Opening AUM 57.1 44.8 57.1 Net Cashflow 3.7 2.4 6.1 Performance (16.0) (4.5) (20.5) Closing AUM 44.8 42.7 42.7* * Excludes Iridian AUM’s US$8.4m 38
Slide 39: Historic Performance
Historic Performance Alternative EPS Dividend EPS: 5 year DPS: 5 year CAGR = 17% CAGR = 20% 99.2 37.0 100 93.4 35 33.0 84.5 30 29.0 80 68.0 25 23.5 60 54.3 20 18.4 40 15 10 45.1 49.9 20 43.5 13.2 35.7 11.6 27.8 5 9.4 5.84 7.36 0 0 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003 39
Slide 40: Shareholder Value Added
Shareholder Value Added Return on Equity Shareholder Value Added* 10th year over 20% SVA: 5 Year CAGR = 14% 600 551 562 30 510 500 23.8 24.5 24.5 25 23.5 423 22.2 400 20 349 300 15 15 15 14.8 14 12.7 200 10 279 271 290 100 237 5 192 9 9.5 9.5 9.5 9.5 0 0 1999 2000 2001 2002 2003 1999 2000 2001 2002
Slide 41: Summary
Summary Good performance in challenging markets Significant improvement in Cost / Income Jaws Asset quality remains strong Significant progress on capital & portfolio management 41
Slide 42: Supplementary Information
Supplementary Information 42
Slide 43: Index - Supplementary
Index - Supplementary Economic Outlook Geographic Analysis Volume Growth Asset Quality UK Financial Services (Euro) 43
Slide 44: Economic Outlook – Ireland
Economic Outlook – Ireland Solid Economic Landscape Relative to the Rest of Europe and US Actual Forecast % Growth 2001 2002 2003 2004 GDP 5.7 6.3 3.9 4.7 GNP 4.6 0.6 2.9 3.5 Consumption 5.1 2.6 2.6 3.5 Exports 6.7 3.8 4.7 4.4 Inflation 4.9 5.0 4.0 3.1 Unemployment 3.8 4.9 4.9 5.2 Source: Consensus
Slide 45: Economic Outlook – UK
Economic Outlook – UK Above European Average Actual Forecast % Growth 2001 2002 2003 2004 GDP 2.0 1.7 2.6 2.5 Consumption 4.1 3.9 2.6 2.1 Inflation 2.1 2.2 2.7 2.4 Unemployment 3.2 3.1 3.2 3.4 Source: Broker consensus 45
Slide 46: Geographic Analysis
Geographic Analysis Profit Shareholder Base March 2003 March 2003 52% Republic of Ireland 18% Republic of Ireland 30% UK 17% UK 18% Rest of the World 18% Europe / Other 22% US 25% Retail 46
Slide 47: Volume Growth: Constant Currency
Volume Growth: Constant Currency Lending Resources P.I.T. Average P.I.T. Average % % % % Increase Increase Increase Increase Group 6 5 0 3 Republic of Ireland 9 7 7 11 UK 5 3 (5) (12) 47
Slide 48: Asset Quality
Asset Quality Residential Other Total Mortgages Lending Mar 03 Mar 02 Mar 03 Mar 02 Mar 03 Mar 02 €m €m €m €m €m €m Balances under Provision Ireland 3 2 199 209 202 211 UK 16 58 36 57 52 115 International - - 66 5 66 5 19 60 301 271 320 331 Loan Loss Provision (LLP) General & Specific Ireland 11 8 1
Slide 49: Asset Quality
Asset Quality Loan to Value – New Business Residential Mortgages: Republic of Ireland Average Loan to Value Mar 03 Mar 02 Owner Occupied 66% 61% Investors 69% 63% Residential Mortgages: UKFS Personal Lending Average Loan to Value Standard 71% 69% Specialised 71% 71% 49
Slide 50: Republic of Ireland Residential Mortgages
Republic of Ireland Residential Mortgages Arrears Balance Profile 1-6 mths 6-12 mths 12+ mths Total 2003 (%) 1.1 0.3 0.2 1.6 2002 (%) 1.2 0.3 0.2 1.7 New Business LTV’s <75% 75-90% 91-95% >95% 2003 (%) 53 35 12 - 2002 (%) 59 32 9 - Book LTV’s <75% 75-90% 91-95% >95% 2003 (%) 67 28 5 - 2002 (%) 69 27
Slide 51: UK Residential Mortgages
UK Residential Mortgages Arrears Balance Profile 1-6 mths 6-12 mths 12+ mths Total 2003 (%) 1.3 0.2 0.1 1.6 2002 (%) 1.5 0.2 0.2 1.9 New Business LTV’s <75% 75-90% 91-95% >95% 2003 (%) 58 38 3 1 2002 (%) 58 34 5 3 Book LTV’s <75% 75-90% 91-95% >95% 2003 (%) 53 32 9 6 2002 (%) 50 30 12 8 51
Slide 52: UK Financial Services (Euro)
UK Financial Services (Euro) 6 months Sept 02 Mar 03 Mar 02 % €m €m €m Change 312 Net Interest Income 615 554 11 126 Other Income 271 284 (5) 438 Total Income 886 838 6 247 Operating Costs 498 475 5 17 Loan Losses 21 30 (30) 174 Operating Profit 367 333 10 8 Goodwill 15 15 - 166 Profit before Tax 35
Slide 53: For Further Information Please Contact
For Further Information Please Contact Fiona Ross Head of Group Investor Relations Mick Stewart Group Investor Relations Tel: +353 1 604 3502 Fax: +353 1 661 5105 Email: investor.relations@boimail.com Website: www.bankofireland.ie/investor 53