Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — Debt Investor Presentation (February 2020)
58 slides from Bank Of Ireland's debt investor presentation, February 2020
Slide 1: 2019 Credit Presentation
20 19 2019 Credit Presentation 31 December 2019
Slide 2: Slide 2
Slide 3: Bank of Ireland Overview
3 Bank of Ireland 2019 Credit Presentation Bank of Ireland Overview
Slide 4: 2019 Highlights
4 2019 Highlights Bank of Ireland 2019 Credit Presentation €758m • Stable net interest income; NIM of 2.14% Profitability Underlying profit • Costs reduced by €67m (4%) before tax • NPE ratio reduced by 190bps to 4.4% • New lending up 3% to €16.5bn Growth €2.0bn • Irish mortgage market share of 24%;
Slide 5: Economic and interest rate outlook
5 Economic and interest rate outlook Bank of Ireland 2019 Credit Presentation Strong growth in Ireland UK remains resilient Lower for longer interest rates 5.0% 1.50% 4.6% 4.6% 3.8% 3.8% 3.9% 1.00% 0.50% BoE 0.00% 5.8% 4.8% 3.6% -0.50% 1.4% 1.3% 1.4% -1.00% ECB 2019e 2020f 2021f 2019 2020f 2021f 201
Slide 6: Continued to deliver on our strategic priorities throughout 2019
6 Continued to deliver on our strategic priorities Bank of Ireland 2019 Credit Presentation throughout 2019 Transform the Bank Serve customers brilliantly Grow Sustainable Profits Culture Systems Business Embedding Investing in New brand Improved Efficient Robust Sustainable model voice of digital a
Slide 7: Responsible and Sustainable Business
7 Responsible and Sustainable Business Bank of Ireland 2019 Credit Presentation • Signatory to the UN Principles for Responsible Banking • Enhanced board and management governance to drive our RSB agenda; supported by a framework of robust policies across key areas • Good progress on environmental a
Slide 8: Financial Targets 2021
8 Financial Targets 2021 Bank of Ireland 2019 Credit Presentation Investor Day Updated Improved RoTE of c.8.0% RoTE in excess of 10% profitability RoTE >10% over longer term Cost base of c.€1.7bn in 2021 Cost base of €1.65bn in 2021 Efficient Costs reduce every year 2018-2021 Costs reduce every year
Slide 9: Operational Performance
9 Bank of Ireland 2019 Credit Presentation Operational Performance
Slide 10: Underlying profit before tax of €758m
10 Underlying profit before tax of €758m Bank of Ireland 2019 Credit Presentation FY 2018 FY 2019 (€m) (€m) Income statement Total income 2,805 2,836 • Operating profit pre-impairment increased 10% from higher Operating expenses (before levies and income and lower costs (1,852) (1,785) • Stable net
Slide 11: Net interest income and NIM
11 Net interest income and NIM Bank of Ireland 2019 Credit Presentation Net interest income1 / NIM movement Net Interest Income • Stable net interest income benefitting from loan book growth €2,146m €2,150m and pricing discipline (4bps) (3bps) NIM of 2.14% 1bps • Strong commercial pricing discipline
Slide 12: Net lending growth of €2.0bn
12 Net lending growth of €2.0bn Bank of Ireland 2019 Credit Presentation Group loan book movement Net lending growth of €2.0bn in 2019 • Diversified mix of Group’s loan portfolios continuing to benefit €16.5bn (€14.5bn) net lending growth €0.2bn (€1.0bn) €1.3bn • Net lending growth in 2019 driven by
Slide 13: Strong cost discipline – net reduction €67m (4%)
13 Strong cost discipline – net reduction €67m (4%) Bank of Ireland 2019 Credit Presentation Cost Movement 2017-2019 Operating expenses1 • Gross cost savings of €108m (6%): €1,900m €1,852m €1,785m – Process efficiencies, organisational design and sourcing strategically €104m €113m (€108m) €41m – Por
Slide 14: NPE ratio 4.4%; reduction of 190bps
14 NPE ratio 4.4%; reduction of 190bps Bank of Ireland 2019 Credit Presentation Non-performing exposures (NPEs) movements Non-performing exposures • €1.5bn reduction during 2019 8.3% 6.3% 4.4% • Group working closely with customers to agree sustainable solutions; organic NPE resolution reduced NPEs
Slide 15: Asset Quality
15 Asset Quality Bank of Ireland 2019 Credit Presentation Net impairment (charges) / gains Asset Quality • Net impairment charges in 2019 of €210m / 26bps (H1 2019: (2bps) 5bps (26bps) 21bps, H2 2019: 32bps) • Increase in 2019 vs. 2018 reflects: – A more normalised level of impairments in line with
Slide 16: Capital and liquidity available to support growth
16 Capital and liquidity available to support growth Bank of Ireland 2019 Credit Presentation Liquidity Dec 2018 Dec 2019 • Strong funding and liquidity from increased customer (€bn) (€bn) deposits and MREL issuance Customer loans 77 79 Liquid assets 25 27 Customer deposits: €84.0bn • Growth of €5.1
Slide 17: Strategic Outlook
17 Bank of Ireland 2019 Credit Presentation Strategic Outlook
Slide 18: Significant progress in systems and business model transformation
18 Significant progress in systems and business Bank of Ireland 2019 Credit Presentation model transformation Transformation Investment of €1.4bn from 2016 to 2021 …Beyond 2021 Regulatory change and Core systems transformation of €1.1bn ongoing improvements in the resilience and security of Back Mid
Slide 19: Strategic imperative to improve UK returns
19 Strategic imperative to improve UK returns Bank of Ireland 2019 Credit Presentation Invest Improve Reposition • Pivot to niche mortgages: higher • UK Post Office: partnership • UK credit cards: sale added margins and lower LTV; £225m new extended with enhanced alignment 10bps to Group CET1 ratio
Slide 20: €250m cost reduction 2017–2021; target lowered to €1.65bn
20 €250m cost reduction 2017–2021; Bank of Ireland 2019 Credit Presentation target lowered to €1.65bn • Strong momentum with net cost reduction of €115m since €1.9bn 2017: €1.65bn – €215m (11%) gross cost saves driven by simplifying our organisation, sourcing strategically and ways of working – Crea
Slide 21: 2020 outlook
21 2020 outlook Bank of Ireland 2019 Credit Presentation Growth Efficiency Returns • Net lending growth of c.€2bn • Costs in 2020 to be lower than • Capital benefitting from organic while maintaining commercial 2019 generation and capital discipline on risk and pricing initiatives • Further progress
Slide 22: Capital & MREL
22 Bank of Ireland 2019 Credit Presentation Capital & MREL
Slide 23: Corporate Structure
23 Corporate Structure Bank of Ireland 2019 Credit Presentation Holding company Capital / MREL Bank of Ireland Group plc (BOIG) AT1 Tier 2 Senior unsecured 100% The Governor and Company of the Bank of Ireland (GovCo) Senior unsecured Operating subsidiaries 1 Funding 100% 100% 100% New Ireland Assura
Slide 24: Credit Ratings
24 Credit Ratings Bank of Ireland 2019 Credit Presentation Instrument Ratings BOIG GovCo (Stand alone BOIMB ratings) BOIG GovCo BOIG GovCo BOIG GovCo (ACS)3 Aaa Aaa Aaa C AAA AAA AAA AAA Investment Grade baa2 A2 Aa1 Aa1 Aa1 AA+ AA+ AA+ AA+ Stable Stable Aa2 Aa2 Aa2 AA AA AA AA Aa3 Aa3 Aa3 AA- AA- AA
Slide 25: Strong capital generation and robust capital position
25 Strong capital generation and robust capital position Bank of Ireland 2019 Credit Presentation Fully loaded CET1 ratio Increased by 60bps Capital Management 40bps (50bps) • Organic capital generation of 170bps in 2019 170bps (50bps) RWAs • Capital initiatives of 40bps in 2019: (40bps) €49.9bn RWA
Slide 26: Capital guidance increasing to >13.5%
26 Capital guidance increasing to >13.5% Bank of Ireland 2019 Credit Presentation Regulatory Capital Requirements • Capital guidance increasing from >13% to >13.5% on regulatory basis and on fully loaded basis by end of O-SII phase-in (July 2021) • Increase reflects recent announcement by the Bank o
Slide 27: Robust capital ratios
27 Bank of Ireland 2019 Credit Presentation Robust capital ratios CET1 Dec 18 Dec 19 • The Group’s fully loaded CET1 ratio increased by c.40bps1 to CET1 Ratios: 13.8% and the regulatory CET1 ratio is unchanged at 15% in 2019 Fully Loaded 13.4% 13.8% Tier 1 & Total Capital Regulatory 15.0% 15.0% • Ti
Slide 28: MREL requirement
28 MREL requirement Bank of Ireland 2019 Credit Presentation Loss absorption Recapitalisation Market Amount + Amount + Confidence Charge 14.58% 9.62% 2.89% 27.09% 0.33% CCyB1 -1.25% 1.5% O-SII1 -0.19%2 2.5% CCB1 -0.63%2 2.25% P2R1 Own Funds 8% Pillar 1 Requirement MREL 0.33% CCyB1 Target 1.5% O-SII1
Slide 29: Risk Weighted Assets (RWAs) / Leverage Ratio
29 Risk Weighted Assets (RWAs) / Leverage Ratio Bank of Ireland 2019 Credit Presentation Customer lending average credit risk weights – Dec 20191, 2 EBA Transparency Exercise 2019 (Based on regulatory exposure class) Country by Country Average IRB risk weights Residential Mortgages – Jun 2019 EAD3 R
Slide 30: Capital / MREL – Summary highlights
30 Capital / MREL – Summary highlights Bank of Ireland 2019 Credit Presentation • Fully loaded organic capital generation of 170bps in 2019, providing capacity for investment in loan growth, transformation and dividend; unlocked additional 40bps through capital initiatives Capital • Group expects to
Slide 31: Appendix
31 Bank of Ireland 2019 Credit Presentation Appendix
Slide 32: Appendix
32 Appendix Bank of Ireland 2019 Credit Presentation Slide No. • BOI Overview – Ireland 33 – UK / International 34 – Profile of customer loans 35 – Gross new lending volumes 36 • Debt Securities at fair value through other comprehensive income (FVOCI) 37 • ROI mortgage loan book 38 • UK mortgage loa
Slide 33: BOI Overview: Ireland
33 BOI Overview: Ireland Bank of Ireland 2019 Credit Presentation Ireland’s leading retail and commercial bank Retail Ireland Corporate Ireland Consumer Business Wealth Corporate Property Banking Ireland Finance Unique customer • #1 Corporate • Actively supporting • 1.7m active consumer customers Ba
Slide 34: BOI Overview: UK / International
34 BOI Overview: UK / International Bank of Ireland 2019 Credit Presentation UK and International businesses provide diversification and further opportunities for growth Retail UK Corporate UK / International Partnerships Northern Ireland Niche Businesses Corporate Acquisition Banking UK Finance • O
Slide 35: BOI Overview: Profile of customer loans
35 BOI Overview Bank of Ireland 2019 Credit Presentation Profile of customer loans1 at Dec 19 (Gross) ROI UK RoW Total Total Composition (Dec 19) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 23.1 23.2 0.0 46.3 58% Non-property SME and corporate 10.8 5.22 4.4 20.4 25% SME 7.2 1.8 0.0 9.0 11% Corporate 3.6 3
Slide 36: BOI Overview: Gross new lending volumes
36 BOI Overview: Gross new lending volumes Bank of Ireland 2019 Credit Presentation Retail Ireland Retail UK Corporate Banking £5.9bn €5.7bn €5.8bn £5.2bn €2.3bn €4.4bn €2.3bn €4.0bn £3.6bn €1.1bn £3.3bn €0.6bn €1.3bn €0.5bn €1.1bn €0.7bn €2.9bn €2.9bn €1.2bn €1.3bn £2.1bn £1.6bn €0.9bn €0.7bn £0.2b
Slide 37: Debt Securities at fair value through other comprehensive income (FVOCI)
37 Debt Securities at fair value through other Bank of Ireland 2019 Credit Presentation comprehensive income (FVOCI) ROI UK France Other Dec 19 Dec 18 (€bn) (€bn) (€bn) (€bn) (€bn) (€bn) Sovereign bonds 2.3 - 0.7 2.8 5.8 6.0 Senior debt - - 0.3 1.2 1.5 2.2 Covered bonds 0.2 0.2 0.8 2.2 3.4 3.7 Subor
Slide 38: ROI Mortgages: €23.0bn
38 ROI Mortgages: €23.0bn Bank of Ireland 2019 Credit Presentation New Lending volumes and Market Share ROI Mortgages (gross) €24.1bn €23.7bn €23.0bn 27% 27% 24% €7.3bn €9.5bn €11.1bn €5.8bn €4.4bn €3.2bn €2.0bn €2.3bn €2.3bn €10.9bn €9.8bn €8.7bn 2017 2018 2019 Dec 17 Dec 18 Dec 19 n New Lending Vo
Slide 39: UK Mortgages: £19.8bn / €23.2bn
39 UK Mortgages: £19.8bn / €23.2bn Bank of Ireland 2019 Credit Presentation UK Mortgages (gross) UK Mortgages (gross) £20.0bn £19.8bn £20.0bn £19.4bn £19.4bn £19.8bn £2.0bn £1.6bn £1.7bn £9.6bn £10.4bn £11.9bn £7.5bn £7.5bn £7.4bn £3.3bn £2.7bn £2.3bn £10.6bn £10.2bn £10.8bn £7.1bn £6.3bn £5.6bn Dec
Slide 40: Sustainable business income
40 Sustainable business income Bank of Ireland 2019 Credit Presentation FY 2018 FY 2019 6% growth in business income (€m) (€m) • 11% increase in Wealth and Insurance: Wealth and Insurance 250 277 – New business sales (APE) increased by 11% Retail Ireland 267 254 – 2% growth in Life market share to 2
Slide 41: Income Statement: Divisional performance
41 Income Statement Bank of Ireland 2019 Credit Presentation Divisional performance Underlying profit / (loss) before Additional gains, Operating Profit valuation and Underlying profit / (loss) tax and additional gains, valuation 12 months ended Dec 19 pre-impairment before tax and other items other
Slide 42: Interest Rate Sensitivity
42 Interest Rate Sensitivity Bank of Ireland 2019 Credit Presentation 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 18 Dec 19 Estimated sensitivity on Group income (1 year horizon) (€m)
Slide 43: Net interest income analysis
43 Income Statement Bank of Ireland 2019 Credit Presentation Net interest income analysis1 H1 2018 H2 2018 H1 2019 H2 2019 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
Slide 44: Operating expenses
44 Operating expenses Bank of Ireland 2019 Credit Presentation FY 2018 FY 2019 (€m) (€m) Total staff costs 868 844 – Staff costs 721 710 – Pension costs 147 134 Other costs1 659 544 Depreciation1 212 289 Operating Expenses 1,739 1,677 Transformation Investment charge 113 108 Operating Expenses (befo
Slide 45: Non-core items
45 Non-core items Bank of Ireland 2019 Credit Presentation FY 2018 FY 2019 (€m) (€m) Customer redress programme - (74) – Tracker Mortgage Examination - (67) – Other programme - (7) Cost of restructuring programme1 (111) (59) (Loss) / gain on disposal / liquidation of business activities 5 (25) Gain
Slide 46: Non-performing exposures by portfolio
46 Non-performing exposures by portfolio Bank of Ireland 2019 Credit Presentation Non-performing Non-performing Impairment Impairment loss Advances Composition (Dec 19) (€bn) exposures exposures as % loss allowance allowance as % of (€bn) of advances (€bn) non-performing exposures Residential Mortga
Slide 47: ROI Mortgages
47 ROI Mortgages Bank of Ireland 2019 Credit Presentation Continued proactive arrears management >90 days arrears1 >90 days arrears • Bank of Ireland is significantly below the industry average Industry Average for both Owner Occupier (28% of industry average) and Buy to Let (22% of industry average
Slide 48: UK Customer Loans £28.9bn (€33.9bn)
48 UK Customer Loans £28.9bn (€33.9bn) Bank of Ireland 2019 Credit Presentation UK Mortgages – £19.8bn UK Mortgages Analysis – £19.8bn • Total UK mortgages of £19.8bn; (NPEs: 2.1%): n South East n Wales £2.0bn £0.8bn – Average LTV of 63% on existing stock at Dec 2019 (Dec 18: 62%) n Greater – Averag
Slide 49: Ordinary shareholders’ equity and TNAV
49 Ordinary shareholders’ equity and TNAV Bank of Ireland 2019 Credit Presentation 2018 2019 Movement in ordinary shareholders’ equity (€m) (€m) Ordinary shareholders’ equity at beginning of period 8,859 9,243 Movements: Profit attributable to shareholders 620 448 Impact of adopting IFRS 9 (31) - Di
Slide 50: Capital – fully loaded CET1 ratio improved by 60bps
50 Capital – fully loaded CET1 ratio improved by 60bps Bank of Ireland 2019 Credit Presentation Capital ratios – Dec 2019 Regulatory ratio Fully loaded ratio (€bn) (€bn) Total equity 10.5 10.5 Less Additional Tier 1 (0.8) (0.8) Deferred tax (0.5) (1.0) Intangible assets and goodwill (0.8) (0.8) Fore
Slide 51: Capital Guidance and Distribution Policy
51 Capital Guidance and Distribution Policy Bank of Ireland 2019 Credit Presentation • The Group expects to maintain a CET1 ratio in excess of 13.5% on a regulatory basis and on a fully Capital loaded basis by the end of the O-SII phase-in period1 Guidance • This includes meeting applicable regulato
Slide 52: Cost income ratio: Dec 2019
52 Cost income ratio: Dec 2019 Bank of Ireland 2019 Credit Presentation Headline vs. Adjusted FY 2019 Pro forma FY 2019 Headline adjustments Pro forma (€m) (€m) (€m) Net interest income 2,150 - 2,150 Other income – Business income 666 - 666 – Additional gains 5 (5) - – Other valuation items1 15 2 17
Slide 53: Return on tangible equity (RoTE)
53 Return on tangible equity (RoTE) Bank of Ireland 2019 Credit Presentation 2019: Headline vs. Adjusted Adjustments 2019 Additional gains ‘Normalised’ 2019 Headline and valuation impairment Adjusted for CET1 Adjusted (€m) items1 net of tax adjustment, net of tax ratio at 13% (€m) Profit for the per
Slide 54: Underlying earnings per share: Dec 2019
54 Underlying earnings per share: Dec 2019 Bank of Ireland 2019 Credit Presentation FY 2018 FY 2019 (€m) (€m) Profit attributable to shareholders 620 386 Non-core items including tax 78 177 Underlying profit attributable to ordinary shareholders 698 563 Weighted average number of ordinary shares in
Slide 55: Defined Benefit Pension Schemes
55 Defined Benefit Pension Schemes Bank of Ireland 2019 Credit Presentation Group IAS19 Defined Benefit Pension Deficit Total Group Defined Benefit Pension Scheme Assets (%) 2.10% 2.00% 1.60% €7.1bn €7.2bn €7.2bn €8.4bn 1.30% €1.19bn 58% 55% 65% 65% €0.48bn 17% 21% €0.23bn 21% 23% €0.14bn 25% 24% 12
Slide 56: Forward-Looking statement
56 Forward-Looking statement Bank of Ireland 2019 Credit Presentation 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 go
Slide 57: Contact Details
57 Contact Details Bank of Ireland 2019 Credit Presentation For further information please contact: • Group Chief Financial Officer Myles O’Grady tel: +353 76 624 3291 myles.ogrady@boi.com • Investor Relations Darach O’Leary tel: +353 76 624 4711 darach.oleary@boi.com Eoin Veale tel: +353 76 624 187
Slide 58: Slide 58
Bank of Ireland Group — Debt Investor Presentation (February 2020) on 6ix