Aib Group Plc · EURONEXT:A5G
Aib — FY2013 Earnings Presentation
38 slides from Aib's earnings presentation, February 2014
Slide 1: For the year ended 31 December 2013
For the year ended 31 December 2013
Slide 2: Important Information and Forward Looking Statement
Important Information and Forward Looking Statement AIB has c.521 billion ordinary shares, 99.8% of which are held by the National Pensions Reserve Fund Commission (NPRFC), mainly following the issue of 500 billion ordinary shares to the NPRFC at €0.01 per share in July 2011. The contents of this pr
Slide 3: Agenda
Agenda Group Progress & Performance 2013 Financial Results Asset Quality and Funding Capital Position Outlook and Medium Term Objectives
Slide 4: Group Progress and Performance
Group Progress and Performance David Duffy Chief Executive Officer
Slide 5: 2013 – Delivering our strategic objectives
2013 – Delivering our strategic objectives Continued improvement in operating performance • Total operating income increased by 34% • Operating costs 16% lower with continued investment in underlying franchise • €0.8 billion increase in pre provision operating profit • Total provisions 25% lower i
Slide 6: Summary results – underlying model returned to profit
Summary results – underlying model returned to profit Operating Metrics Meeting key strategic objectives FY 2012 FY 2013 YoY • Operating profit improvement of €769m vs. 2012 Change • Recovery in net interest margin (NIM) continued Operating profit / (loss) before provisions (3) (€324m) €445m €769m –
Slide 7: Key drivers of long term profitability improving
Key drivers of long term profitability improving… Return to positive operating profit Margins expanding Operating Profit (1) (Pre-Provisions) NIM % (€m) 25bps increase from H2 ’12 trough 600 1.75 1.67 +€769m 445 400 1.54 1.5 1.45 1.42 1.37 200 1.27 1.28 1.27 1.20 1.22 0 1.25 (200) 1 H2 2012 H1 2013
Slide 8: …with continued stabilisation in balance sheet metrics
…with continued stabilisation in balance sheet metrics Improving funding profile (1) Capital ratios remain robust (2) Dec 2013 Basel III LDR (%) Capital Ratio (%) Includes transitional CET1 consideration ratio of 15.0% of BSA 140 €64bn €64bn €66bn 15.2 14.3 125% 15 120 Minimum Regulatory 10.5 115% 1
Slide 9: Domestic Core Bank – Omni channel strategy
Domestic Core Bank – Omni channel strategy Investment in our physical and digital offerings central to overall customer strategy Leading Customer Franchise Strategy • c.2.0m Personal Customers • c.180k Business Customers • Customers at the centre • c.1.3k Corporate Customers of an integrated Omni- c
Slide 10: Leading Irish market shares – positioned for future growth
Leading Irish market shares – positioned for future growth Leading Irish Market Shares¹ Translation of Omni-channel customer strategy • Personal Market: – No. 1 provider by number of customer accounts across: o Main Current A/C; Deposits; Credit Cards & Mortgages • Business Market • c.1.5m customers
Slide 11: 2013 Financial Results
2013 Financial Results Myles O‟Grady Director of Finance
Slide 12: €2bn improvement in underlying performance
€2bn improvement in underlying performance Income statement FY FY Operating metrics €m 2012 2013 • Operating profit improvement of €769m to €445m Net interest income (Before ELG) 1,494 1,518 • Net interest income increased €239m ELG fees (388) (173) Other Income 318 570 – ELG reduction of €215m Tota
Slide 13: Positive momentum in underlying performance metrics
Positive momentum in underlying performance metrics Return to positive operating profit Net interest income Operating profit (1) (Pre-Provisions) (€m) • Widening positive gap between yield on interest earning assets (-23bp) €0.5bn increase in H2 2013 and cost of funds (-45bp) 400 vs. H2 2012 283 • A
Slide 14: Net Interest Margin expansion continues
Net Interest Margin expansion continues Margin trend Net interest margin drivers NIM % (excl. ELG) % Yield % H2 12 H213 Change 1.50% 25bps increase vs. H2 2012 Customer Loans 3.28% 3.39% 0.11% 1.45% Customer Accounts 2.58% 1.68%(2) -0.90% 1.40% 1.28% 3.01 1.30% 2.87 2.83 1.20% 1.20% 0.77% 1.09% 1.10
Slide 15: On-going focus on cost reduction and efficiencies
On-going focus on cost reduction and efficiencies Staff Numbers (1) Downward costs momentum continues 15% reduction year on year • Total operating expenses reduced by €278m across all 24% reduction since June 2012 areas • Lower staff costs with c. 2,000 FTE reduction in 2013 • Reductions across most
Slide 16: Asset Quality and Funding
Asset Quality and Funding Fergus Murphy Director of Products & Capital Markets
Slide 17: Balance Sheet provisions & impairment charges
Balance Sheet provisions & impairment charges Credit impairment charge €bn 2013 Credit provision process 3.0 Includes • Stabilisation of fundamentals of Irish and UK economies, consideration 2.43 21% Lower of BSA particularly in H2 2013 2.5 0.16 1.91 2.0 0.52 0.03 • The bank's 2013 credit provisioni
Slide 18: Loan book composition and credit profile
Loan book composition and credit profile Total loan portfolio profile by value Summary €82.9bn at Dec 2013 • Gross loans decreased by €7.0bn (8%) in the year to €82.9bn – Sales of non-core assets – Amortisation exceeding demand for credit • Non core deleverage programme of €20.5bn completed in 2013
Slide 19: Customer loan book – Sector Profile
Customer loan book – Sector Profile December 2013 ROI Land & Investment SME / Other UK Personal Corporate Total €m mortgages development property commercial mortgages Advances 38,151 6,301 13,409 13,779 4,291 4,307 2,613 82,851 Impaired 8,788 5,523 7,631 4,775 1,423 476 295 28,911 Impairment charge
Slide 20: ROI owner occupied mortgages: €30.7bn
ROI owner occupied mortgages: €30.7bn Asset profile components by value (€m) Arrears profile and provisions (€m) Dec 2012 Dec 2013 1-90 days past due 1,863 1,758 of which impaired 496 471 90+ days past due 3,424 4,238 of which impaired 3,245 3,973 Impaired loans not past due 782 686 Total impaired l
Slide 21: ROI buy to let mortgages: €7.4bn
ROI buy to let mortgages: €7.4bn Asset profile components by value (€m) Arrears profile and provisions (€m) Dec 2012 Dec 2013 1-90 Days Past Due 681 597 of which Impaired 425 416 90+ Days Past Due 2,013 2,509 of which Impaired 1,883 2,369 Impaired Loans not Past Due 1,025 873 Total Impaired Loans 3,
Slide 22: Property and construction
Property and construction Asset profile (€19.7bn) Impairment charge and provisions (€m) Dec 2012 Dec 2013 Impaired loans 13,804 13,154 Impairment charge 781 724 Impairment charge (bps) 330bps 347bps Total specific provisions 7,681 8,114 Specific provisions / Impaired loans 56% 62% Summary • Indicati
Slide 23: SME / other commercial lending
SME / other commercial lending Impairment charge and provisions (€m) Asset profile (€13.8bn) Dec 2012 Dec 2013 Impaired loans 5,248 4,775 Impairment charge 517 221 Impairment charge (bps) 326bps 155bps Total specific provisions 3,256 3,131 Specific provisions / Impaired loans 62% 66% Summary • Overa
Slide 24: Corporate lending Personal lending
Corporate lending Personal lending Asset quality profile (€4.3bn) Asset quality profile (€4.3bn) Impairment charge and provisions (€m) Impairment charge and provisions (€m) Dec 2012 Dec 2013 Dec 2012 Dec 2013 Impaired loans 803 476 Impaired loans 1,431 1,423 Impairment charge 167 30 Impairment charg
Slide 25: Funding position stable and improving
Funding position stable and improving Funding sources €bn Customer accounts 120 • Customer accounts (1) increased by €2bn to €65.7bn 22 13 100 18 • Customer accounts now 60% of the total funding 19 requirement 17 16 Monetary authority 80 funding – Increase of 5% from year end 2012 13 12 12 – Loan to
Slide 26: Measured return to the funding markets
Measured return to the funding markets Funding transactions ACS Issuance – Nov. 2012 ACS Issuance – Jan 2013 ACS Issuance – Sept 2013 Cr. Card Securitisation– Oct 2013 Senior Unsecured – Nov 2013 Issuer AIB Mortgage Bank Issuer AIB Mortgage Bank Issuer AIB Mortgage Bank Issuer AIB Issuer AIB Ratings
Slide 27: Balance sheet management
Balance sheet management Treasury Basel III Liquidity Profitability Assets Liabilities Basel 3 Interest rate risk Sources of Funding Funding costs Liquidity Balance sheet strategies management • Customer Accounts • Lower overall costProfitability of • Stabilised capital and • Re-positioning strategy
Slide 28: Capital Position
Capital Position Myles O‟Grady Director of Finance
Slide 29: Capital – Comfortable Buffers to Minimum Requirements
Capital – Comfortable Buffers to Minimum Requirements Core tier one ratio Includes Capital (1) consideration % of BSA Minimum Reg. • Capital ratios continue to be comfortably above minimum regulatory Requirement (PCAR) requirements • Core Tier 1 ratio of 14.3% vs. 10.5% 2011 PCAR minimum – Reduced r
Slide 30: RWA & Capital Ratios – Basel II vs. Basel III Fully Loaded
RWA & Capital Ratios – Basel II vs. Basel III Fully Loaded (1) RWA Basel 2 to Basel 3 €bn 64 Basel III CET1 Ratio • CRD IV (Basel III) (2) will be phased in over 10 61 1.0 0.3 62.4 0.7 years from 1 January 2014 58 3.8 • €3.5bn Preference Shares will not constitute 60.7 CET 1 capital from 1 January 2
Slide 31: Outlook & Medium Term Objectives
Outlook & Medium Term Objectives David Duffy Chief Executive Officer
Slide 32: Capital structure considerations & medium term targets
Capital structure considerations & medium term targets Capital structure (1) Medium term targets • Intend to provide further guidance during 2014 on capital targets Dec 2012 Dec 2013 Target • The Department of Finance has indicated that it Fully Loaded Basel III CET 1 10.2%(2) 10.5%(2) >10% will ent
Slide 33: Meeting our strategic objectives
Meeting our strategic objectives Momentum in our operating model Funding stable and improving Full year pre provision operating profit achieved €20.5bn non-core deleveraging completed Margins increasing and trending positive Debt capital markets access demonstrated Operating costs down significantly
Slide 34: Appendix
Appendix
Slide 35: Components of capital structure
Components of capital structure AIB Group State 2009 Preference Shares Capital Adequacy information (€m) Dec-12 Dec-13 • €3.5bn perpetual, non-cumulative Preference Shares Tier 1 • 8% fixed non-cumulative annual coupon, no coupon step up, payable Paid up share capital and related share premium 8,096
Slide 36: Overview of segmental reporting
Overview of segmental reporting DCB FSG UK DEC DEC DEC Income statement (€m) 2012 2013 2012 2013 2012 2013 Net interest income incl. ELG 747 973 230 190 102 177 Other income 346 460 (45) 25 67 68 Total operating income 1,093 1,433 185 215 169 245 Personnel expenses (517) (452) (168) (128) (110) (109
Slide 37: Available for sale portfolio
Available for sale portfolio Year on Year Movements (Dec 2013 vs. Dec 2012) Components of Government Securities (Dec 2013) 6.3% 3.9% Irish Govt 4.0% Securities 5.8% France United Kingdom Netherlands 80.0% Rest of World Summary • Total debt securities portfolio* increased to €20.3bn (Dec 2012 €16.2bn
Slide 38: Criticised loan definitions
Criticised loan definitions Watch The credit is exhibiting weakness but with the expectation that existing debt can be fully repaid from normal cash flows Vulnerable Credit where repayment is in jeopardy from normal cash flows and may be dependent on other sources Impaired A loan is impaired if ther