Permanent TSB Group Holdings PLC · EURONEXT:PTSB
Permanent TSB — Irish Life & Permanent Group Holdings — FY2009 Earnings Presentation
58 slides from Permanent TSB's earnings presentation, 2010
Slide 1: 2009 Preliminary Results
2009 Preliminary Results 1 2009 Preliminary Results
Slide 2: Index
Index Section Page Business review 3 Review of life business 4 Review of banking business 12 Outlook & Strategic agenda 20 Financial Review: Group earnings 23 Funding 27 Loan impairments 29 Capital 35 Outlook 37 Additional information 38 A number of statements we make in our presentation will not be
Slide 3: Business Review
Business Review 2009 outcome - bottom of cycle Progress made across range of issues z Costs z Life persistency z Retail deposits z Loan re-pricing z Strategic agenda 2010 outlook - start of recovery Kevin Murphy Group Chief Executive 3 2009 Preliminary Results
Slide 4: Life & Investment: Key Priorities 2009
Life & Investment: Key Priorities 2009 ● Sales - protect market leading franchise ● Market share 30% ● Value of inforce - manage retention agenda ● Marked improvement in Retail retention in H2 2009 ● Costs - ‘right-size’ for new market reality ● Substantially complete 4 2009 Preliminary Results
Slide 5: Life Sales 2009 - Competing Strongly
Life Sales 2009 - Competing Strongly Retail €159m APE* (-36%) ● Strong recovery in H2 (-14%) ● Out-perform in IFA market (-16%) ● ‘Down-sizing’ in Bancassurance and Direct Sales a distraction Corporate €164m APE* (-30%) ● Overall premium income down just 3% ● Unemployment and salary reductions impac
Slide 6: Life Sales 2010 - Investing for Growth
Life Sales 2010 - Investing for Growth Retail ● Drive Bancassurance and Direct Sales post cost cutting ● Significant investment in IFA channel - IT, products & investment solutions ● Re-position product range to adjust to changing customer needs Corporate ● New life-styling investment strategy for D
Slide 7: Life Sales - Outlook is Positive
Life Sales - Outlook is Positive 2009 2010 2011 2012 Retail Decline Recovery Growth Growth Corporate Decline Decline Recovery Growth ILIM Growth Growth Growth Growth = Bottom of cycle Each business has different drivers: ● Retail - consumer confidence, equity / property performance ● Corporate - emp
Slide 8: Life In-force - Retail Retention Improving
Life In-force - Retail Retention Improving ● Investment & Savings persistency now back at long term assumptions ● Sustained investment in Protection - nearly there ● Pensions remain a concern ● New persistency infrastructure working well Retail Lapse Experience against Long Term Assumptions 225% 200
Slide 9: Life In-force - Corporate Book Growth Slows
Life In-force - Corporate Book Growth Slows Slowdown in expected book growth ● Premium reductions due to lower salaries, redundancies and scheme closures ● Public sector levy and pay reductions ● Pension policies paid up but not encashed - funds retained Improvement will come with renewed employment
Slide 10: Life In-force - Risk & Expenses Positive
Life In-force - Risk & Expenses Positive Risk ● Positive mortality experience in Retail, offset by some larger claims in Corporate ● Morbidity (permanent health insurance) positive across book. Positive counter-cyclical effects in Corporate claims Expenses ● Retail, Corporate and ILIM all reduced un
Slide 11: Life Costs - Strong Management Action
Life Costs - Strong Management Action 2010 costs projected to be circa 18% lower than 2007 Underlying costs down 11% in 2009 ● Further headcount reductions (-7%) ● Continued pay restraint ● Overhead spend curtailed Core business now at ‘right-size’ for expected business flows 11 2009 Preliminary Res
Slide 12: Banking - Key Priorities 2009
Banking - Key Priorities 2009 Deposits - strong retail deposit growth ● Reduction in LDR to 246% (2008: 271%) Impairments - arrears coming close to peak ● Bulk of downturn provisioning in 2009 - 2010 Costs - initial round of cost cutting successfully completed ● Further re-engineering process to fol
Slide 13: Bank - Funding Strategy
Bank - Funding Strategy ● Focus on maximising “stable funding” - retail deposits and long-term funding ● Aim to have 70% of funding comprising retail deposits and long-term debt by 2012 2010 2011 2012 % % % Retail Deposits 27 29 33 Long Term Debt 33 36 37 Short Term Debt 40 35 30 100 100 100 ● 2009
Slide 14: Bank Funding 2009 - Strong Retail Growth
Bank Funding 2009 - Strong Retail Growth Retail Deposits +€1.8bn (+23%) ● Branch network refocused on deposit market ● Continuing to attract new current accounts Corporate Deposits -€0.8bn (-12%) ● Outflow of overseas corporate deposits in Q1 ● Strong growth in RoI deposits over remainder of 2009 Te
Slide 15: Bank Funding 2010 - Remains Challenging
Bank Funding 2010 - Remains Challenging Overview - target outcome FY 2010 ● Stable funding ratio - 60% ● Loan to Deposit - 230% Deposits ● Continued strong flows in Retail, some growth in Irish Corporate deposits Term Debt ● Now issuing under revised Government Guarantee - already issued $1.75bn in
Slide 16: Bank Margins - Continued Pressure
Bank Margins - Continued Pressure Net interest margin reduced to 83bps in 2009 (2008 - 105 bps) ● Higher funding costs - deposits, wholesale and capital markets ● Reduced reliance on ECB funding Action being taken to improve margins in 2010 ● SVR* increases in Sept. ’09 and Feb. ’10 - 100bps ● Gradu
Slide 17: Bank Loan Book - New lending down
Bank Loan Book - New lending down Loan Balances Gross new lending €1.2bn Closed for new business in UK Continued slowdown in redemptions No corporate / SME / development lending exposure Total Loan Book €38.9bn (Dec 2008: €39.9bn) Mix Growth % S% ROI residential mortgages 70 (2) UK residential mortg
Slide 18: Loan Impairments - Arrears to peak in 2010
Loan Impairments - Arrears to peak In 2010 Unemployment ROI Residential Rate Mortgages NPLs * % €m 14 1,400 12 1,200 10 1,000 8 UE rate (lhs) 800 6 600 4 * (rhs) NPLs 400 2 200 0 0 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Arrears to level off as unemployment peaks * non-performing loan balances 18
Slide 19: Bank Costs - Continued Progress
Bank Costs - Continued Progress 2010 core costs 12-13% off peak Underlying costs down 10% in 2009 ● Significant headcount reduction (-8%) ● Continued payroll / overhead restraint 2010 Cost Initiatives ● 11 branches to close ● Further reductions of 140 staff in Q1 ● Re-engineering review 19 2009 Prel
Slide 20: Group Earnings Outlook - Gradual Recovery
Group Earnings Outlook - Gradual Recovery 2009 2010 2011 2012 Bank Decline Decline Recovery Growth Life Decline Recovery Growth Growth Total Earnings Decline Recovery Growth Growth = Bottom of cycle Each business has different drivers: ● Bank - impairment cycle and normalising of credit markets ● Li
Slide 21: Strategic Agenda
Strategic Agenda ● New group holding company in place from January ● Current focus on NAMA and AIB and Bank of Ireland ● Next part of agenda - other banks in sector ● Discussions to commence post start of NAMA process 21 2009 Preliminary Results
Slide 22: Financial Review
Financial Review Earnings Funding Loan impairments Capital David McCarthy Group Finance Director 22 2009 Preliminary Results
Slide 23: Group Earnings
Group Earnings 2009 2008 Operating loss due to: €m €m Lower sales and negative Operating (loss) / profit (196) 341 persistency in life business Life Embedded Value: Losses in bank from increased impairment provisions and higher • Investment fluctuations (68) (640) funding costs • Economic assumption
Slide 24: Operating Earnings
Operating Earnings Group Income 2009 2008 Pre-tax operating result from core life & banking operations was a loss of Statement* €m €m €168m Operating (loss) / profit Lower life new business profits • Life 102 284 and high negative persistency • Banking (270) 30 variance • Associate (2) 23 Increased
Slide 25: Operating Profit - Life
Operating Profit - Life Life Income 2009 2008 New business earnings lower on reduced life sales (excl. ILIM) volumes Statement €m €m (-32%) New business 51 100 Life (excl. ILIM) new business In-force business 51 184 margins: APE: 11.4% (2008: 15.1%) • Total expected return 122 165 PVNBP: 1.6% (2008:
Slide 26: Operating Profit - Bank
Operating Profit - Bank Bank Income 2009 2008 Revenue Statement €m €m ● NII impacted by higher funding costs Net interest income 375 473 and reduced spreads Other income* 41 47 ● Margin of 83bps (2008: 105bps) Government guarantee (29) (8) ● Exceptional gain of €29m on disposal of gilt portfolio in
Slide 27: Bank Funding / Asset Mix & NI Margin
Bank Funding / Asset Mix & NI Margin Cost of Funds Book Cost % % Margin movement in 2009: Customer accounts 33 2.1 bps Long-term 27 1.6 2008 105 ECB 20 1.0 Funding costs (18) Short term 20 0.9 Liability margins (17) 100 1.5 Asset margins 21 Treasury / Other (8) Asset Yields Book Yield 2009 83 % % RO
Slide 28: Bank Funding Mix
Bank Funding Mix December 2009 - Total €48bn Funding conditions improved through H2 following difficult H1 Cost of funds remains elevated Short-Term Debt ROI Deposits 20% Term Debt Strong growth throughout 2009 27% Very competitive market ECB funding €9.75bn at December 2009 ECB Includes €3.5bn 1 ye
Slide 29: Arrears & Impairments
Arrears & Impairments Arrears trends Provisioning Impairment outlook 29 2009 Preliminary Results
Slide 30: Impairments - UK Mortgage Arrears
Impairments - UK Mortgage Arrears CHL Mortgage Arrears Cases BTL accounts for 94% of Capital 1800 Accounts >1 and < 3 months Home Loans (CHL) portfolio 1,608 Accounts >3 months (incl. LPA Receivers & Repo’s) 1600 1,532 1,537 1,460 Closed for new business since early 1400 1,338 1,362 1,322 1,280 1,27
Slide 31: Impairments - ROI Residential Mortgage Arrears
Impairments - ROI Res. Mortgage Arrears Irish Residential Mortgage Arrears Cases 80% increase in total arrears cases in 10000 2009 Accounts >90 days Accounts >30<90 days > 90 days monthly arrears increase of 8000 6,717 6,958 6,862 7,228 8% in H1 moderated to 3% in H2 6,549 6,249 6000 5,663 5,928 Iri
Slide 32: Impairments - Commercial Mortgage Arrears
Impairments - Commercial Mortgage Arrears Commercial Mortgage Arrears Cases 800 Closed to new business in 2008 Accounts >90 days Accounts >30<90 days Continued increase in arrears cases 600 Growth in total arrears moderated in 458 H2 2009 410 420 424 400 355 371 399 398 No market in commercial prope
Slide 33: Impaired Loans
Impaired Loans December 2009 June 2009 December 2008 Balances Total Loans Balances Total Loans Balances Total Loans €m % €m % €m % Residential mortgages • ROI 415 1.5 227 0.8 51 0.2 • UK 75 1.0 75 0.9 74 1.0 Commercial mortgages* 171 7.2 67 2.8 16 0.7 Consumer finance 167 9.5 73 3.5 61 2.6 828 2.1 4
Slide 34: Impairment Charge
Impairment Charge 2009 2008* Specific Collective Total Total Specific provisions for ROI mortgages on accounts 6 €m €m €m €m months in arrears ROI mortgages 107 47 154 27 Assumes peak to trough fall UK mortgages 27 6 33 15 of 40% in house prices Expect 2009 to be peak of ROI commercial 69 30 99 9 ba
Slide 35: Capital - Bank
Capital - Bank Basel II Dec 09 Dec 08 Basel II implementation €m €m Pillar 1 in operation Tier 1 capital 2,059 Pillar 2 / ICAAP outstanding 1,858 Interim capital requirement (ICR) Total RWAs* pre-ICR 16,411 18,173 add-on of 23% in lieu Total RWAs after ICR 20,185 22,353 Basel II minimum total capita
Slide 36: Capital - Life
Capital - Life Regulatory Capital Movement Short Term Investment Fluctuations €m €m January 2009 694 Unit-linked management fees 46 Capital from existing business 194 Property (85) New business strain (74) Options / guarantees / other (14) Net capital release 120 Movement (53) Short-term investment
Slide 37: Outlook
Outlook Delivering on business as usual 2009 outcome - bottom of cycle 2010 outlook - start of recovery 37 2009 Preliminary Results
Slide 38: Additional Information
Additional Information Page 39. Group total (loss) / profit after tax - EV basis 40. Group operating (loss) / profit after tax - EV basis 41. Group operating EPS - EV basis 42. Group IFRS (Statutory) (loss) / profit after tax 43. Group IFRS and EV basis results reconciliation 44. Group IFRS (loss) /
Slide 39: Total (Loss) / Profit After Tax - EV Basis
Total (Loss) / Profit After Tax - EV Basis 2009 2008 Pre-tax Tax Post-tax Post-tax €m €m €m €m Operating (loss) / profit (196) 14 (182) 306 Investment fluctuations (68) 15 (53) (660) Economic assumptions (38) 11 (27) 81 Impairment of goodwill - - - (170) Other changes (17) - (17) 14 (319) 40 (279) (
Slide 40: Operating (Loss) / Profit After Tax - EV Basis
Operating (Loss) / Profit After Tax - EV Basis 2009 2008 Pre-tax Tax Post-tax Post-tax €m €m €m €m Life assurance 102 (12) 90 260 Banking (270) 24 (246) 20 Associate (2) - (2) 23 Other (26) 2 (24) 3 Operating (loss) / profit (196) 14 (182) 306 40 2009 Preliminary Results
Slide 41: Operating EPS - EV Basis
Operating EPS - EV Basis 2009 2008 €m €m Operating (loss) / profit (196) 341 Taxation 14 (35) (Loss) / profit after tax (182) 306 Average no. of shares 276m 276m EPS (66)c 111c Note: “own shares” included for EPS calculation 41 2009 Preliminary Results
Slide 42: IFRS (Statutory) (Loss) / Profit After Tax
IFRS (Statutory) (Loss) / Profit After Tax 2009 2008 €m €m Life assurance & investment 93 288 IFRS Life Earnings Movement 2009 Banking (270) 30 €m General Insurance (2) 23 New business effect (2) Other (26) 4 Interest on insurance VIF 58 Expected surplus on Inv. contracts 52 93 (205) 345 Exp var. &
Slide 43: IFRS / EV Reconciliation
IFRS / EV Reconciliation 2009 S’Holders Total (Loss) / Profit* Equity after Tax €m €m Embedded Value basis 2,485 (279) Investment business • Value of in-force (663) (63) • Deferred costs & fees 143 4 • Restatement of liabilities 72 (2) Own shares adjustment - (18) Other (31) 45 IFRS (Statutory) basi
Slide 44: IFRS Profit After Tax - Segmental Information
IFRS Profit After Tax - Segmental Information Banking Banking Life Fund General Brokerage / Consol Total 2009 Ireland UK Assurance Mgmt Insurance 3rd Party Adj. €m €m €m €m €m €m €m €m Net interest income 336 39 (36) - - - 24 363 Other non-interest income 11 1 (136) - - 40 - (84) Premiums on insuran
Slide 45: Bank New Lending
Bank New Lending Total new lending €1.2bn (2008: €7.1bn) Irish Residential New Lending LTVs €bn 2007 2009 2008 4.5 4.2 Home Loans % % % 4 First Time Buyers 75 78 84 Second Time Buyers 51 56 57 3.5 Average 62 64 69 3 BTL Average 67 61 66 2.5 Equity Release Average 50 53 54 2 1.5 Total New Lending* 57
Slide 46: Bank Non-Interest Income
Bank Non-Interest Income 2009 2008 €m €m Fees & Comms (rec’d) 54 52 Fees & Comms (payable) (10) (10) 44 42 Government guarantee (29) (8) Trading income (3) 5 Gilt portfolio / investment return 6 29 18 68 Note: Bancassurance Embedded Value operating profit €14m [2008: €37m] included in life assurance
Slide 47: Bank Asset Portfolio
Bank Asset Portfolio Asset Portfolio December 2009 Category €bn % Total bank asset portfolio of €7.4bn Sovereign Bonds The portfolio is made up of €3.6bn AAA 1.8 50 Sovereign Bonds (48%), €3.2bn Bank AA 1.6 47 FRNs (44%) and €0.6bn Prime RMBS A 0.1 3 (8%) Bank FRNs / Corporate Bonds 93% of the Prime
Slide 48: Non Performing Loans
Non Performing Loans December 2009 June 2009 December 2008 Balances Total Loans Balances Total Loans Balances Total Loans €m % €m % €m % Residential mortgages • ROI 1,342 4.9 1,165 4.2 605 2.2 • UK 258 3.4 297 3.8 255 3.6 Commercial mortgages* 307 12.9 216 8.9 147 6.1 Consumer finance 206 11.8 124 6
Slide 49: Bank Capital - Basel II
Bank Capital - Basel II Basel II Capital Dec 09 Dec 08 €bn €bn Available capital Basel II implementation Tier 1 3.9 4.2 Pillar 1 in operation Tier 2 1.2 1.3 Pillar 2 outstanding Total capital 5.1 5.5 Interim capital requirement (ICR) add-on of 23% Deductions* (3.2) (3.4) Basel II minimum total capit
Slide 50: Life Embedded Value Movement
Life Embedded Value Movement Required Net Worth VIF Total Capital €m €m €m €m Opening 1 Jan 2009 569 1,080 1,649 626 Operating profit 120 (30) 90 Investment fluctuations (109) 56 (53) Economic assumptions 3 (30) (27) Capital & other movements (17) - (17) Closing 30 Dec 2009 566 1,076 1,642 634 * All
Slide 51: Life Asset Quality
Life Asset Quality Non-linked Debt Securities Non-linked liabilities matched with Rating €m % debt securities of appropriate duration AAA 1,325 77 Majority high quality sovereign bonds AA 386 22 A 24 1 No exposure to “toxic” assets 1,735 Shareholders’ Net Worth Insurance & investment assets €m % Pro
Slide 52: Life New Business Margin
Life New Business Margin 2009 2008 APE Sales New Business Contribution €m €m 2009 2008 Life 40 77 €m €m Life 348 511 ILIM 11 23 ILIM 191 203 Margin - APE % % Life 11.4 15.1 ILIM 5.9 11.4 PVNBP* Sales Margin – PVNBP* 2009 2008 % % €m €m Life 1.6 2.4 Life 2,398 3,152 ILIM 0.6 1.1 ILIM 1,908 2,028 * Pr
Slide 53: Life Variances & Assumptions
Life Variances & Assumptions Experience Variances Assumption Changes 2009 2008 2009 2008 €m €m €m €m Persistency (66) (29) (42) (31) Risk 23 25 9 22 Expenses / Other (27) 4 32 28 (70) 0 (1) 19 53 2009 Preliminary Results
Slide 54: Life Operating Costs
Life Operating Costs 2009 2008 €m €m Retail & Corporate 169 187 ILIM 14 16 Other 7 12 190 215 Pension IAS 19 adjust. 1 (4) 191 211 54 2009 Preliminary Results
Slide 55: Life & Investment Sales
Life & Investment Sales Recurring Premium Single Premium 2009 2008 2009 2008 €m €m €m €m Retail 85 170 736 772 Corporate 117 185 471 485 ILIM - - 1,908 2,028 ILI - - 252 304 Total 202 355 3,367 3,589 APE Basis 202 355 337 359 PVNBP Basis 939 1,591 3,367 3,589 55 2009 Preliminary Results 2006 Interim
Slide 56: Retail & Corporate Life Sales
Retail & Corporate Life Sales Retail APE Sales Corporate APE Sales 2009 2008 Change 2009 2008 Change €m €m % €m €m % Products Products Pension 82 129 (36) DC pension 98 160 (39) Protection / Risk 43 56 (23) Protection / Risk 25 38 (34) Investments 25 36 (31) Annuities 18 15 20 Savings 9 26 (65) PRB
Slide 57: Other Activities Operating (Loss) / Profit
Other Activities Operating (Loss) / Profit 2009 2008 €m €m Cornmarket / IPSI 5 23 Corporate costs (31) (19) (26) 4 57 2009 Preliminary Results
Slide 58: Contact Information
Contact Information Please contact our Investor Relations Department for any further information or visit our group website at www.irishlifepermanent.ie Contact details: Barry Walsh barry.walsh@irishlife.ie +353 1 704 2678 Orla Brannigan orla.brannigan@irishlife.ie +353 1 704 1345 58 2009 Preliminar
Irish Life & Permanent Group Holdings — FY2009 Earnings Presentation on 6ix