Allied Irish Banks — FY2006 Earnings Presentation
47 slides from Allied Irish Banks's earnings presentation, February 2007
Slide 1: Preliminary Results for the year ended 31 December 2006
Freliminary Ke esultt For the year ended 31 December 2006, Allied Irish Banks, p.l.c.
Slide 2: Forward looking statements
Forward looking statements A number of statements we will be making in our presentation and in the accompanying slides will not be based on historical fact, but will be “forward- looking” statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Actual resu
Slide 3: Eugene Sheehy, Group Chief Executive
Eugene Sheehy Group Chief Executive
Slide 4: AIB – a broad and compelling business footprint
AIB – a broad and compelling business footprint Clear no. 1 Irish banking franchise operating in a high growth economy with rich potential + Premium banking franchises focused on high growth markets / sectors in UK and Poland + Fast, consistently growing international and domestic corporate business
Slide 5: Strongly supportive economic environment
Strongly supportive economic environment GDP % 2006 (e) 2007 (f) Ireland 6.2 5.5 UK 2.7 2.8 USA 3.4 2.5 Poland 5.8 5.4 Eurozone 2.7 2.6 5
Slide 6: Performance highlights
Performance highlights Basic earnings per share 246.8c - basic adjusted * 182.8c 25% ** Positive income / cost gap 4% Cost / income ratio 1.7% Impaired loans 0.9% Dividend 10% Return on equity 29% Tier 1 capital ratio 8.2%*** * Basic earnings per share less profit on disposal/development of pr
Slide 7: Positive trends in growth & returns
Positive trends in growth & returns EPS Growth (basic adjusted) 25 15 13 2004 2005 2006 Total Shareholder Return 29 26 22 2004 2005 2006 7
Slide 8: Well spread growth
Well spread growth Operating profit by division AIB Bank RoI €942m 23% Capital Markets €508m 29% AIB Bank UK €378m 18% Poland €201m 52% M&T* €141m 4% AIB Bank RoI 43% Capital Markets 23% AIB Bank UK 18% Poland 9% M&T 7% * after tax contribution 8
Slide 9: Distinctive and evolving profit profile
Distinctive and evolving profit profile Pre-tax profit by geography December 2003 December 2006* 14% 3% 13% 1% 19% 64% 25% 10% 50% ROI USA UK Poland * Continuing operations less profit on disposal / development of properties & businesses and RoW interest rate hedge volatility 9
Slide 10: AIB Bank Republic of Ireland
AIB Bank Republic of Ireland 23% operating profit Income / cost gap + 4% Income 19% Making competitive gains from a prime position Deposits 20% - gaining market share Business lending 38% - gaining market share Personal lending 27% - gaining market share Mortgage lending 26% - maintaining
Slide 11: Capital Markets
Capital Markets 29% operating profit Income / cost gap + 3% Fee Income 32% Resilient, recurring, low volatility earnings Customer income 83% Interest Income 10 year PBT CAGR 20% Trading 51% Income 17% 2006 profit contribution Treasury 22% Corporate Banking 42% Treasury 2% Investm
Slide 12: AIB Bank United Kingdom
AIB Bank United Kingdom 18% operating profit Income / cost gap + 6% 2006 profit contribution NI 45% GB 55% Great Britain 23% Northern Ireland 11% 26 Franchise quality reflected by 24 19 Loans broad volume growth 16 Deposits GB NI Investing in people, locations and delivery channels D
Slide 13: Poland
Poland 52% operating profit Total income % mix Income / cost gap + 10% 9 7 Strong business volume increases in 10 10 a high growth economy Business lending 25% 33 39 Retail cash lending 54% Mortgages 26% Other FX Business deposits 26% Fees Personal deposits 8% 48 44 NII Exp
Slide 14: Investing to support growth – our single enterprise approach
Investing to support growth – our single enterprise approach Service Quality Reconfiguring, redeploying, simplifying, standardising ………. Operational Managed Risk Cost Excellence Objectives Update on work in progress Rapid speed to market 40+ change programmes impacting Volume growth cost every
Slide 15: M&T
M&T 4% EPS 10%; 13th consecutive year of double digit growth Contribution to AIB reduced by one off reclassification of provisions Tight cost management in a lower income growth environment Q4 cost / income ratio 50.2% Solid asset quality; NPLs 0.52%; allowance for credit losses 1.51% of
Slide 16: 2006 – relentless execution of our clear agenda
2006 – relentless execution of our clear agenda Significant progress made on our 3 key priorities Existing Markets - maximising organic growth opportunities Selected international markets / niches – transferring skills profitably Single enterprise support framework – achieving efficiency and produ
Slide 17: John O'Donnell, Group Finance Director
John O’Donnell Group Finance Director
Slide 18: Performance snapshot
Performance snapshot ccy change 2005 €m 2006 % 3,647 Total operating income 4,326 18 2,011 Total operating expenses 2,314 14 Group operating profit 1,636 before provisions 2,012 22 143 Total provisions 104 -19 1,493 Group operating profit 1,908 26 1,706 Group profit before tax 2,615 52 151.0c EPS –
Slide 19: Adjusted basic EPS
Adjusted basic EPS % vs Dec 2005 Basic earnings per share 246.8c 63 Profit on disposal/development of property (42.8c) Profit on disposal of business (21.7c) IFRS interest rate hedge volatility 0.5c Adjusted basic EPS 182.8c 25 19
Slide 20: M&T - effect of reclassification
M&T - effect of reclassification 4% reduction in contribution reflects technical accounting treatment of provisions 2005 2006 change $m $m % Reported contribution to AIB 185 177 -4 Excluding reclassification of allocated / unallocated provisions (6) 19 “Like for like” contribution 179 196 10 20
Slide 21: Deposit growth
Deposit growth % 25 22 20 19 20 16 15 9 10 5 0 Group AIB Bank Capital AIB Bank Poland RoI Markets UK 21
Slide 22: Loan and risk weighted asset growth
Loan and risk weighted asset growth 36 % 32 26 26 Loan growth 22 23 RWA growth 19 19 17 8 Group AIB Bank Capital AIB Bank Poland RoI Markets UK 22
Slide 23: Loan portfolios by sector
Loan portfolios by sector % of Group loan portfolio 33% 29% 25% 25% Dec-05 Dec-06 13% 13% 12% 12% 8% 8% 6% 5% 4% 3% 2% 2% Agriculture Construction & Residential Manufacturing Personal Services Transport & Other Property Mortgages Distribution 23
Slide 24: Property & construction – high quality portfolios
Property & construction – high quality portfolios Impaired loans 0.4%; total AIB impaired loans 0.9% 1% Loan portfolios diversified by geography 3% 3% Republic of Ireland USA 27% Northern Ireland Poland 57% Great Britain Other 9% ….. and further diversified by a wide range of sub sectors & borro
Slide 25: Home mortgages – Republic of Ireland
Home mortgages – Republic of Ireland Very solid, resilient portfolio Arrears profile continues to decline bps 55 53 50 47 45 40 35 35 34 30 2003 2004 2005 2006 Primary emphasis remains on repayment capacity Conservative LTVs remain a feature Aggressive posture on quality business 25
Slide 26: Net Interest Margin
Net Interest Margin 2006 2005 change 2.26% 2.38% -12 bps Business factors affecting net interest margin; est. -16 bps Lower growth in treasury assets; est. + 4 bps -12 bps Business factors include Loans growing faster than deposits; single biggest though reducing factor Re-investment of cu
Slide 27: N.I.M. business factors attrition – a reducing trend
N.I.M. business factors attrition – a reducing trend -20 -16 -12 bps 2005 2006 2007 (e) 2007 business factor guidance: c. 12 bps (vs 16 bps in 2006, excludes effect of treasury assets) 27
Slide 28: Costs – investing for growth & resilience
Costs – investing for growth & resilience Underlying * 2005 €m 2006 change % 1,298 Staff costs 1,502 15 583 Other costs 672 14 130 Depreciation & amortìsation 140 6 2,011 Operating expenses 2,314 14 Guidance 2006 2007(e) Run rate in current high • includes variable pay elements & growth environment
Slide 29: Positive "jaws" in all franchises
Positive “jaws” in all franchises 10% 4% 4% 3% 6% % 18 19 15 13 22 14 12 10 12 6 Group AIB Bank Capital AIB Bank Poland RoI Markets UK Income Costs 29
Slide 30: Cost / income ratio in all divisions
Cost / income ratio in all divisions 65.7 60.3 55.2 2005 53.5 51.3 2006 49.6 48.7 % 47.5 45.9 45.9 Group AIB Bank Capital AIB Bank Poland RoI Markets UK 30
Slide 31: Constant & material income / cost gap
Constant & material income / cost gap % 20 15 10 5 0 2004 2005 2006 Cost growth Income growth 31
Slide 32: Cost / income ratio – continuing gains across the enterprise
Cost / income ratio – continuing gains across the enterprise AIB Bank Republic of Ireland AIB Capital Markets 54.4 54.4 51.3 47.5 45.9 49.6 2004 2005 2006 2004 2005 2006 Group 57.7 55.2 53.5 2004 2005 2006 AIB Bank UK AIB Poland 51.5 67.4 48.7 65.7 45.9 60.3 2004 2005 2006 2004 2005 2006 32
Slide 33: Asset quality – key indicators remain strong
Asset quality – key indicators remain strong 2005 2006 1.0 Impaired loans (ILs) % 0.9 5.2 Criticised loans / total loans % 4.9 0.4 Gross new ILs % 0.4 78 Total provisions / ILs % 76 15 Bad debt charge bps 12 33
Slide 34: Impaired loans by Division
Impaired loans by Division As at December 31, 2005 As at December 31, 2006 ILs/ Total ILs/ Total Actual Provisions/ Actual Provisions/ ILs Advances ILs ILs Advances ILs €m % % €m % % 308 0.7 84 AIB Bank ROI 366 0.6 81 132 0.7 78 Capital Markets 130 0.6 74 166 0.9 75 AIB Bank UK 205 0.9 71 262 6.8 72
Slide 35: Bad debt provisions by division
Bad debt provisions by division Average Average 2005 Loans % €m 2006 Loans % 45 0.11 AIB Bank ROI 78 0.15 35 0.22 Capital Markets 5 0.02 20 0.13 AIB Bank UK 26 0.13 15 0.40 Poland 9 0.23 115 0.15 Total 118 0.12 2007 full year guidance c. 15 bps 35
Slide 36: Solid capital position
Solid capital position 8% 8.2% Tier 1 ratio 7.2% 30% 27% Preference share % Tier 1 23% Dec 05 Jun 06 Dec 06 Dec Jun-06 Dec-06 Total capital ratio 11.1% Tier 1 8.2% (target minimum c. 7%) Core tier 1 6.0% (preference shares 27%, target range 20 – 30%) 36
Slide 37: Capital outlook
Capital outlook Assumptions 16% capital generation rate ROE 20% 40% Div payout (8%) “Excess” RWA growth will continue to be 12% 25% Leverage 4% supported by management actions 16% Asset sales & leasebacks Further options e.g. securitisations Return on capital must exceed alternative uses
Slide 38: Funding
Funding % 100 10% 10% 4% 7% Capital 10% 80 4% Senior Debt 8% ACS 24% 22% 60 CDs & CPs Deposits by banks Customer a/cs 40 20 52% 49% 0 2005 2006 38
Slide 39: Summary & outlook
Summary & outlook Strong, well spread, high quality growth in 2006 Key dynamics expected to recur in 2007 Operating in outperforming, resilient economies and sectors Buoyant customer demand driving income Investing to sustain growth Improving productivity; income / cost growth ≥ + 3% S
Slide 40: Slide 40
Slide 41: Appendices
Appendices
Slide 42: AIB Bank RoI profit statement
AIB Bank RoI profit statement Change 2005 €m 2006 % 1,314 Net interest income 1,581 20 376 Other income 434 15 1,690 Total operating income 2,015 19 867 Total operating expenses 1,000 15 823 Operating profit before provisions 1,015 23 55 Total Provisions 73 33 768 Operating profit 942 23 12 Profit o
Slide 43: Capital Markets profit statement
Capital Markets profit statement Change 2005 €m 2006 % 435 Net interest income 490 13 407 Other income 464 14 842 Total operating income 954 13 400 Total operating expenses 438 10 442 Operating profit before provisions 516 17 46 Total Provisions 8 -84 396 Operating profit 508 29 2 Associated Underta
Slide 44: AIB Bank UK profit statement
AIB Bank UK profit statement Change 2005 €m 2006 % 516 Net interest income 593 14 148 Other income 154 4 664 Total operating income 747 12 323 Total operating expenses 343 6 341 Operating profit before provisions 404 18 21 Total Provisions 26 26 320 Operating profit 378 18 2 Profit on disposal of pr
Slide 45: Poland profit statement
Poland profit statement Change 2005 €m 2006 % 205 Net interest income 236 11 222 Other income 302 32 427 Total operating income 538 22 280 Total operating expenses 330 12 147 Operating profit before provisions 208 41 15 Total Provisions 7 -53 132 Operating profit 201 52 - Associated undertakings 6 -
Slide 46: Group profit statement
Group profit statement 2005 €m 2006 60 Net interest income 99 (36) Other income (27) 24 Total operating income 72 141 Total operating expenses 203 6 Total Provisions (10) (123) Operating loss (121) 148 Share of results of associates – M&T 141 - Profit on disposal of property 358 45 Construction cont
Slide 47: Contacts
Contacts Our Group Investor Relations Department will be happy to facilitate your requests for any further information Alan Kelly alan.j.kelly@aib.ie +353-1-6412162 Maurice Tracey maurice.m.tracey@aib.ie +353-1-6414191 Pat Clarke patricia.m.clarke@aib.ie +353-1-6412381 Alma Pearson alma.e.pear
Allied Irish Banks, p.l.c. — FY2006 Earnings Presentation on 6ix