Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — H1 2019 Earnings Presentation
60 slides from Bank Of Ireland's earnings presentation, Jun 30, 2019
Slide 1: 2019 Interim Results Announcement
2019 Interim Results Announcement 30 June 2019
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Slide 3: H1 2019 Highlights
2 Bank of Ireland 2019 Interim Results H1 2019 Highlights Francesca McDonagh, Group CEO
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Slide 5: H1 2019 Highlights
4 H1 2019 Highlights Bank of Ireland 2019 Interim Results €376m • NIM of 2.16% Profitability Underlying profit • Cost reduction continues, 3% lower (€30m) vs. H1 2018 before tax • NPE ratio improved by 100bps to 5.3% • New lending of €7.7bn; largest lender to the Irish economy Growth €1.2bn • Irish
Slide 6: Economic and Interest Rate Outlook
5 Economic and Interest Rate Outlook Bank of Ireland 2019 Interim Results Solid growth in Ireland; Unemployment rate in Ireland Lower for longer interest rates UK expanding more moderately and UK at low levels now expected 0.96% 8.1% 8.2% 6.7% 0.68% 5.7% 0.40% 100bps 4.8% decline 3.8% 4.6% 4.2% 1.8%
Slide 7: Transform the Bank
6 Transform the Bank Bank of Ireland 2019 Interim Results Culture Systems Business model H1 2019 Progress Target Outcomes • Colleague engagement continuing to improve, up +7% since 2017 • Continue to create a leaner, simplified and agile organisation with 70% of end • Strengthened culture state span
Slide 8: Serve Customers Brilliantly
7 Serve Customers Brilliantly Bank of Ireland 2019 Interim Results Embedding voice of customer Investing in digital and New brand strategy in our businesses physical channels H1 2019 Progress Target Outcomes • Leading supporter of home building and buying in Ireland; – Approved €750m in development
Slide 9: Grow Sustainable Profits
8 Grow Sustainable Profits Bank of Ireland 2019 Interim Results H1 2019 Progress 2021 Target Headline RoTE of 6.8% Improved profitability RoTE in excess of 10% Adjusted RoTE of 6.5%1 Cost base of c.€1.7bn Cost reduction of €30m (3%) Efficient business Costs reduce every year: 2018-2021 vs. H1 2018 C
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Slide 11: Group CFO Andrew Keating
10 Bank of Ireland 2019 Interim Results Group CFO Andrew Keating
Slide 12: Key areas of focus
11 Key areas of focus Bank of Ireland 2019 Interim Results Income Transformation Capital generation, growth of cost base investment and return Target is to increase RoTE to in excess of 10% by 2021
Slide 13: Underlying profit before tax of €376m
12 Underlying profit before tax of €376m Bank of Ireland 2019 Interim Results H1 2018 H1 2019 Operating profit pre-impairment – increase of 9% reflecting (€m) (€m) positive jaws • Total income of €1,411m increased 1% vs. H1 2018 Total income 1,398 1,411 – Net interest income of €1,069m in line with
Slide 14: Net lending growth of €1.2bn
13 Net lending growth of €1.2bn Bank of Ireland 2019 Interim Results Group loan book movement Net lending growth of €1.2bn in H1 2019 • Expect further net lending growth in H2 2019, while €7.7bn (€6.5bn) maintaining our risk and commercial discipline €0.2bn (€0.3bn) (€0.1bn) Ireland: €0.2bn net lend
Slide 15: NIM – Strong commercial discipline on pricing
14 NIM – Strong commercial discipline on pricing Bank of Ireland 2019 Interim Results Net interest margin drivers NIM of 2.16% in H1 2019 • H1 2019 NIM of 2.16% 2.23% 2.17% 2.16% • Maintaining strong commercial pricing discipline – loan asset 282bps 283bps 284bps spreads stable at 284bps in H1 2019
Slide 16: Sustainable business income
15 Sustainable business income Bank of Ireland 2019 Interim Results H1 2018 H1 2019 • Adjusting for the impact of the sale and repositioning of UK (€m) (€m) Cards and ATMs (€21m income in 2018), Business Income Retail Ireland 131 129 was €9m / 3% higher in H1 2019 due to market share growth and high
Slide 17: Costs continue to reduce – net reduction €30m (3%)
16 Costs continue to reduce – net reduction €30m (3%) Bank of Ireland 2019 Interim Results Operating expenses continue to reduce Transformation of cost base continues €1.9bn • Expect operating expenses (including transformation investment charge) in 2019 to be lower than 2018 and to reduce every yea
Slide 18: NPE ratio now at 5.3%; a reduction of 100bps in six months
17 NPE ratio now at 5.3%; a reduction of Bank of Ireland 2019 Interim Results 100bps in six months Non-performing exposures (NPEs) Asset quality continues to improve • NPE ratio improved by 100bps to 5.3% in H1 2019 €5.9bn €5.0bn €4.2bn • NPEs of €4.2bn, a reduction of €0.8bn (16%) during H1 220bps
Slide 19: Capital and liquidity available to support growth
18 Capital and liquidity available to support growth Bank of Ireland 2019 Interim Results Strong liquidity ratios Dec 2018 Jun 2019 (€bn) (€bn) • Liquidity Coverage Ratio: 134% • Net Stable Funding Ratio: 128% Customer loans 77 78 • Loan to Deposit Ratio: 97% Liquid assets 25 23 Wealth and Insurance
Slide 20: Strong capital generation and robust capital position
19 Strong capital generation and robust Bank of Ireland 2019 Interim Results capital position Fully loaded CET1 ratio Increased by 40bps 90bps (30bps) (25bps) (20bps) 30bps (5bps) 0.2% 13.2% 13.6% 1 Jan 19 Organic Loan Growth / Transformation Dividend Accrual NPE Disposal Other Jun 19 CET1 capital R
Slide 21: Strategic investment and rigorous allocation of capital
20 Strategic investment and rigorous allocation Bank of Ireland 2019 Interim Results of capital Investment / allocation of capital Growth in • CET1 of c.200-250bps to accommodate loan book growth of c.20% over 4 years 1 loan book (2018 – 2021) 200-250bps • Net lending growth of €1.2bn (c.30bps) in H
Slide 22: H2 2019 – Outlook
21 H2 2019 – Outlook Bank of Ireland 2019 Interim Results Growth Efficiency Returns • Net lending growth while • Costs in 2019 to be lower • Continue to generate strong maintaining commercial than 2018 organic capital discipline on risk and pricing • Expect further reduction in • Dividend to increas
Slide 23: Strategic Outlook
22 Bank of Ireland 2019 Interim Results Strategic Outlook Francesca McDonagh, Group CEO
Slide 24: Leading Irish retail and commercial bank; unlocking growth in our home market
23 Leading Irish retail and commercial bank; Bank of Ireland 2019 Interim Results unlocking growth in our home market New lending of €3.8bn in H1 2019 Irish credit growth emerging Annual % Change Property Corporate €0.6bn 5 €0.5bn Consumer €0.3bn 0 Mortgages €1.0bn Business -5 Banking 2017 2018 2019
Slide 25: Execution of strategy improving UK returns
24 Execution of strategy improving UK returns Bank of Ireland 2019 Interim Results H1 2019 Progress Future focus • Increased market share and new lending in higher • Continue to progress higher margin lending initiatives margin personal loans and Northridge businesses while maintaining disciplined r
Slide 26: Continued delivery on transformation
25 Continued delivery on transformation Bank of Ireland 2019 Interim Results H1 2019 milestones achieved Future milestones planned • First Data migration completed, the largest in • Bank’s mobile app to launch in Q4 2019; the Bank’s history, to enable further capability customer migration to begin i
Slide 27: Delivery of 2021 targets to be our constant focus
26 Delivery of 2021 targets to be our constant focus Bank of Ireland 2019 Interim Results Levers to mitigate changing environment Relentless Business Continued delivery Efficient Selective growth Prudent price focus on cost model on transformation capital in key areas management opportunities simpli
Slide 28: Appendix
27 Bank of Ireland 2019 Interim Results Appendix
Slide 29: Appendix
28 Appendix Bank of Ireland 2019 Interim Results Slide No. • BOI Overview – Business profile 29 – Historic financial results 31 – Profile of customer loans 33 – Debt Securities at fair value through other comprehensive income (FVOCI) 34 – Gross new lending volumes in H1 2019 35 • ROI mortgage loan b
Slide 30: BOI Overview: Ireland
29 BOI Overview: Ireland Bank of Ireland 2019 Interim Results Ireland’s leading retail and commercial bank Retail Ireland Corporate Ireland Consumer Business Wealth Corporate Property Banking Finance Ireland Unique customer • #1 Corporate • Disciplined • 1.7m active consumer customers Bank in Irelan
Slide 31: BOI Overview: UK / International
30 BOI Overview: UK / International Bank of Ireland 2019 Interim Results Attractive 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 Fina
Slide 32: BOI Overview: Income Statement
31 BOI Overview Bank of Ireland 2019 Interim Results Income Statement FY 2015 FY 20162 FY 20173 FY 2018 H1 2019 (€m) (€m) (€m) (€m) (€m) Total income 3,272 3,126 3,049 2,805 1,411 – Net interest income 2,454 2,298 2,248 2,146 1,069 – Other income (net) before additional gains and valuation items 626
Slide 33: BOI Overview: Summary Balance Sheet
32 BOI Overview Bank of Ireland 2019 Interim Results Summary Balance Sheet Dec 15 Dec 16 Dec 17 Dec 18 Jun 19 (€bn) (€bn) (€bn) (€bn) (€bn) Customer loans1 85 78 76 77 78 Liquid assets 24 21 24 25 23 Wealth and Insurance assets 16 17 17 17 18 Other assets 6 7 6 5 7 Total assets 131 123 123 124 126 C
Slide 34: Profile of customer loans
33 BOI Overview Bank of Ireland 2019 Interim Results Profile of customer loans1 at Jun 19 (Gross) ROI UK RoW Total Total Composition (Jun 19) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 23.2 21.6 0.0 44.8 57% Non-property SME and corporate 11.0 4.82 4.5 20.3 25% SME 7.5 1.6 0.0 9.1 11% Corporate 3.5 3.2 4
Slide 35: Debt Securities at fair value through other comprehensive income (FVOCI)
34 Debt Securities at fair value through other Bank of Ireland 2019 Interim Results comprehensive income (FVOCI) ROI UK France Other Jun 19 Dec 18 (€bn) (€bn) (€bn) (€bn) (€bn) (€bn) Sovereign bonds 2.5 - 0.8 2.5 5.8 6.0 Senior debt - - 0.3 1.9 2.2 2.2 Covered bonds 0.2 0.2 0.9 2.3 3.6 3.7 Subordina
Slide 36: Gross new lending volumes in H1 2019
35 Gross new lending volumes in H1 2019 Bank of Ireland 2019 Interim Results Retail Ireland Retail UK Corporate Banking €2.7bn €2.7bn £2.6bn £2.5bn €2.1bn €2.1bn €1.0bn €1.0bn £1.3bn €0.6bn €0.6bn £1.6bn €0.2bn €0.3bn €0.5bn €0.5bn £0.4bn £0.3bn €0.5bn €1.4bn €1.5bn €0.7bn £0.7bn £0.5bn €0.5bn €0.4b
Slide 37: ROI Mortgages: €23.2bn
36 ROI Mortgages: €23.2bn Bank of Ireland 2019 Interim Results New Lending volumes and Market Share ROI Mortgages (gross) 28% 28% €24.1bn €23.7bn €23.2bn 26% 26% €7.3bn 23% €9.5bn €10.4bn €5.8bn €4.4bn €3.5bn €1.2bn €1.3bn €1.0bn €1.0bn €10.9bn €0.8bn €9.8bn €9.3bn H1 2017 H2 2017 H1 2018 H2 2018 H1
Slide 38: UK Mortgages: £19.4bn / €21.6bn
37 UK Mortgages: £19.4bn / €21.6bn Bank of Ireland 2019 Interim Results UK Mortgages (gross) UK Mortgages (gross) £20.0bn £20.0bn £19.4bn £19.4bn £19.4bn £19.4bn £2.0bn £1.7bn £1.6bn £9.6bn £10.4bn £11.0bn £7.5bn £7.5bn £7.4bn £3.3bn £2.7bn £2.4bn £10.6bn £10.2bn £10.4bn £7.1bn £6.3bn £6.0bn Dec 17
Slide 39: Income Statement: Divisional performance
38 Income Statement Bank of Ireland 2019 Interim Results Divisional performance – all trading divisions have increased their operating profit pre-impairment Underlying profit / (loss) before tax Additional gains, Operating Profit valuation and Underlying profit / (loss) and additional gains, valuati
Slide 40: Interest Rate Sensitivity
39 Interest Rate Sensitivity Bank of Ireland 2019 Interim Results 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 Jun 19 Estimated sensitivity on Group income (1 year horizon) (€m) (€m)
Slide 41: Net interest income analysis
40 Income Statement Bank of Ireland 2019 Interim Results Net interest income analysis H2 2017 H1 2018 H2 2018 H1 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 42: Non-core items
41 Non-core items Bank of Ireland 2019 Interim Results H1 2018 H1 2019 (€m) (€m) Customer redress programme - (62) – Tracker Mortgage Examination - (55) – Other programme - (7) Cost of restructuring programme1 (51) (21) (Loss) / gain on disposal / liquidation of business activities - (3) Gain on dis
Slide 43: Transformation Investment of €1.4bn supporting growth / driving efficiencies
42 Transformation Investment of €1.4bn supporting growth Bank of Ireland 2019 Interim Results / driving efficiencies Costs will decrease every year in absolute terms Investment: €1.4bn (2016-2021) c.65% c.65% c.50% Average of €275m p.a. c.€1.9bn c.€1.7bn €1,796m €1,739m €306m €104m €113m 2017 2018 2
Slide 44: Non-performing exposures by portfolio
43 Non-performing exposures by portfolio Bank of Ireland 2019 Interim Results Non-performing Non-performing Impairment Impairment loss Advances Composition (Jun 19) (€bn) exposures exposures as % loss allowance allowance as % of (€bn) of advances (€bn) non-performing exposures Residential Mortgages
Slide 45: ROI Mortgages: arrears management
44 ROI Mortgages Bank of Ireland 2019 Interim Results Continued proactive arrears management >90 days arrears1 >90 days arrears Industry • Bank of Ireland is significantly below the industry average Average for both Owner Occupier (30% of industry average) and Buy to Let (28% of industry average) In
Slide 46: UK Customer Loans £28.6bn (€31.9bn)
45 UK Customer Loans £28.6bn (€31.9bn) Bank of Ireland 2019 Interim Results UK Mortgages – £19.4bn UK Mortgages Analysis – £19.4bn • Total UK mortgages of £19.4bn; (NPEs: 2%) Scotland, Wales, £1.1bn £0.7bn – Average LTV of 62% on total book (2018: 62%) Greater – Average LTV of 74% on new mortgages (
Slide 47: Ordinary shareholders’ equity and TNAV
46 Ordinary shareholders’ equity and TNAV Bank of Ireland 2019 Interim Results 2018 H1 2019 Movement in ordinary shareholders’ equity (€m) (€m) Ordinary shareholders’ equity at beginning of period 8,859 9,243 Movements: Profit attributable to shareholders 620 195 Impact of adopting IFRS 9 (31) - Div
Slide 48: Capital – fully loaded CET1 ratio improved by 40bps
47 Capital – fully loaded CET1 ratio improved by 40bps Bank of Ireland 2019 Interim Results CET1 ratios – Jun 2019 Regulatory ratio Fully loaded ratio (€bn) (€bn) Total equity 10.1 10.1 Less Additional Tier 1 (0.8) (0.8) Deferred tax (0.5) (1.1) Intangible assets and goodwill (0.7) (0.7) Foreseeable
Slide 49: Capital Guidance and Distribution Policy
48 Capital Guidance and Distribution Policy Bank of Ireland 2019 Interim Results • The Group expects to maintain a CET1 ratio in excess of 13% on a regulatory basis and on a fully loaded Capital basis by the end of the O-SII phase-in period1 Guidance • This includes meeting applicable regulatory cap
Slide 50: Regulatory Capital Requirements
49 Regulatory Capital Requirements Bank of Ireland 2019 Interim Results Pro forma CET1 Regulatory Capital Requirements Set by Range 2017 2018 2019 2020 2021 Pillar 1 – CET1 CRR 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% Pillar 2 Requirement (P2R) SSM 1% – 2.25%2 2.25% 2.25% 2.25% 2.25% 2.25% Capital Conser
Slide 51: Risk Weighted Assets (RWAs) / Leverage Ratio
50 Risk Weighted Assets (RWAs) / Leverage Ratio Bank of Ireland 2019 Interim Results Customer lending average credit risk weights – June 20191/2 EBA Transparency Exercise 2018 (Based on regulatory exposure class) Country by Country Average IRB risk weights Residential Mortgages – June 2018 EAD3 RWA
Slide 52: Cost income ratio: Jun 2019
51 Cost income ratio: Jun 2019 Bank of Ireland 2019 Interim Results Headline vs. Adjusted H1 2019 Pro forma H1 2019 Headline adjustments Pro forma (€m) (€m) (€m) Net interest income 1,069 - 1,069 Other income – Business income 311 - 311 – Additional gains 3 (3) - – Other valuation items1 28 (18) 10
Slide 53: Return on tangible equity (RoTE)
52 Return on tangible equity (RoTE) Bank of Ireland 2019 Interim Results H1 2019: Headline vs. Adjusted Adjustments H1 2019 Additional gains, & ‘Normalised’ H1 2019 Headline valuations items1 impairment Adjusted for CET1 Adjusted (€m) net of tax adjustment, net of tax Ratio at 13% (€m) Profit for th
Slide 54: Defined Benefit Pension Schemes
53 Defined Benefit Pension Schemes Bank of Ireland 2019 Interim Results Group IAS19 Defined Benefit Pension Deficit Mix of BSPF* Defined Benefit Pension Scheme Assets (%)1 2.20% 2.10% 2.00% 1.60% €4.0bn €5.6bn €6.1bn 1.30% €1.19bn 45% 72% 72% 11% €0.45bn €0.48bn €0.23bn €0.29bn 44% 23% 23% 5% 5% Jun
Slide 55: Forward-Looking statement
54 Forward-Looking statement Bank of Ireland 2019 Interim Results 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 goals
Slide 56: Contact Details
55 Contact Details Bank of Ireland 2019 Interim Results For further information please contact: • Group Chief Financial Officer Andrew Keating tel: +353 76 623 5141 andrew.keating@boi.com • Investor Relations Darach O’Leary tel: +353 76 624 4711 darach.oleary@boi.com Eoin Veale tel: +353 76 624 1873
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Bank of Ireland Group — H1 2019 Earnings Presentation on 6ix