Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — FY2023 Earnings Presentation
60 slides from Bank Of Ireland's earnings presentation, Feb 26, 2024
Slide 1: FY 2023 Annual Results Announcement
20 FY 2023 Annual Results Announcement 23 26 February 2024 1
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Slide 3: Group CEO Myles O’Grady
Co ers lle om ag st Purpose ue Cu s FY 2023 Performance Helping you Group CEO rs Thrive de So et ol h ci re Myles O’Grady y a Sh Bank of Ireland – The National Champion Bank Stronger Simpler Sustainable relationships business company 3
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Slide 5: Step change in business performance
Step change in business performance Strategic +23% +8% +18% delivery Irish loans New customers1 AUM Strong financial performance €1.9bn 42% 17.3% PBT CIR2 ROTE3 Step change in 340bps 14.3% €1.15bn distributions Capital generation4 CET1 72% total distribution (2018-22 avg 100bps) 13% of market capita
Slide 6: Highly attractive Irish market
Highly attractive Irish market Irish franchises driving profit growth Strong household finances1 €160 115% 110% 5% €150 105% €140 19% 100% Billions €130 n Ireland 95% % of Group n UK €120 profits 90% n Other €110 85% 76% €100 80% Q120 Q420 Q321 Q222 Q123 Q423 Deposits (LHS) Debt / Disposable Income
Slide 7: Strong Irish retail performance
Strong Irish retail performance Irish residential mortgages Everyday Banking Wealth and Insurance +8% €80.1bn €46bn Net Irish mortgage book growth y/y Irish customer balances AUM (+18% y/y) (excluding KBCI portfolio) 1 (+€2.5bn in 2023) 41% +11% €3.3bn Irish mortgage market share Customer fee income
Slide 8: Supporting Irish businesses and a complementary international footprint
Supporting Irish businesses and a complementary international footprint Corporate and Commercial Retail UK Ireland Property and international corporate €3.4bn -10% +22% Irish SME new lending Net reduction in property and international Growth in new lending y/y (+6% y/y) corporate book y/y €0.9bn 3.4
Slide 9: Strategic pillars supporting growth and improved Customer experience
Strategic pillars supporting growth and improved Customer experience… 1 Stronger relationships 2 Simpler business +75k +8% -5% +18% Increased product New-to-bank customer Customer complaints y/y 3 Active digital users4 y/y holdings1 y/y growth2 in 2023 Growing Customer numbers Better Customer outcom
Slide 10: Delivering benefits to Society and Colleagues… Sustainable company
…delivering benefits to Society and Colleagues… 3 Sustainable company Practical, meaningful ESG interventions #1 €11.1bn 46% 80% for Financial Wellbeing Sustainable finance Female senior appointments in Colleague Cultural Embedding Index1 in Ireland +35% y/y 2023 vs 50:50 target (40% 2022) (+4ppts y
Slide 11: …and rewarding our Shareholders
…and rewarding our Shareholders FY23-25 Financial Targets FY23 performance (all targets apply to each year) Return on Tangible Equity (ROTE) c.15% 17.3% Cost-to-Income Ratio (CIR) < 50% 42% Ordinary dividend Building to c.40% payout 40% payout c.40-60% policy provides flexibility (60c DPS)1 Distribu
Slide 12: Unique opportunity as The National Champion Bank
Unique opportunity as The National Champion Bank Strategic clarity Differentiated and focus business model Strong capital generation Interim distributions to commence in 2024 On track to Highly attractive deliver 2023-2025 markets financial targets 12
Slide 13: FY 2023 Financials
FY 2023 Financials Group CFO Mark Spain 13
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Slide 15: Strong financial performance in 2023
Strong financial performance in 2023 €4.4bn Total income (+42% y/y) €80bn Total customer loans +€8bn y/y 42% Cost-to-Income Ratio1 3.1% NPE ratio (Dec 22 3.6%) 17.3% 14.3% Return on Tangible Equity2 Fully Loaded CET1 post- (FY22 10.1%) €1.15bn distributions For footnotes please refer to slide 30 15
Slide 16: FY23 financial performance; PBT +92%
FY23 financial performance; PBT +92% FY 2022 FY 2023 y/y (€m1) (€m) 2023 PBT up 92% Net interest income 2,482 3,682 48% Total income +42% Business income 624 707 13% • higher interest rates Other income and valuation items 11 39 nmf Total Income 3,117 4,428 42% • strategic actions and acquisitions O
Slide 17: 48% growth in net interest income
48% growth in net interest income Net interest income movement Increase in 2023 • Liquid asset income from higher rates and growing deposit franchise • Lending income driven by higher yields, €600m (€730m) Irish franchise momentum and KBCI transaction, marginally offset by UK €1,330m personal loans
Slide 18: Structural hedge providing NII resilience
Structural hedge providing NII resilience Structural hedge (gross fixed leg income)1 Higher structural hedge volumes in ........€60-65bn ........... Avg volume €36bn €44bn €65bn ............................................................................... 2023 primarily due to growth in current a/
Slide 19: Strong retail deposit franchise
Strong retail deposit franchise Growth in customer deposits Term migration trends 2023 deposit trends • Increase in volumes primarily due to €77.6bn €81.2bn €80.1bn growth in Everyday Banking of €2.5bn €99bn €100bn • Everyday Banking performance in H2 Everyday Banking reflects underlying growth offs
Slide 20: Loan book growth reflects KBCI and Irish net lending
Loan book growth reflects KBCI and Irish net lending Group loan book movement Net lending in Irish non-property loan books of €2.0bn supported by 25% increase in new mortgage lending €2.0bn (€1.6bn) €8.0bn (€0.8bn) €0.1bn €79.7bn Reduction in property and international corporate lending reflects cau
Slide 21: Total business income 10% higher
Total business income1 10% higher FY 2022 FY 2023 (€m2) (€m) Increase in business income Wealth and Insurance 234 332 • Wealth and Insurance +42%; growth in New Ireland and full year Davy Retail Ireland 144 146 contribution3 • Retail Ireland fee income growth, with Retail UK (36) (34) small positive
Slide 22: Operating expenses in line with c.€1.85bn guidance
Operating expenses1 in line with c.€1.85bn guidance Operating expenses movement2 Acquisitions primarily Davy and KBCI €62m €39m (c.2.5%) net growth reflects inflation €39m €81m and BAU investment, partially offset by pension costs and efficiencies €1,857m Other includes accrual for performance- €1,6
Slide 23: Non-core items of €85m
Non-core items of €85m FY 2022 FY 2023 Non-core items Non-core items (€m) (€m) • Acquisition costs related to KBCI and Transformation programme costs (50) (2) Davy transactions • Liability management exercises related Acquisition costs (54) (61) to repurchase of legacy securities • Portfolio divestm
Slide 24: Improved asset quality and strong coverage maintained
Improved asset quality and strong coverage maintained Group loan book segment mix (net) n Consumer Diversified loan book with strong €5.6bn collateralisation n Property and Construction (CRE) 7% €7.0bn 9% • c.60% residential mortgages; weighted average LTV of 55%; FY23 new lending 40% n Ireland mort
Slide 25: Pro-active approach to CRE
Pro-active approach to CRE 12% reduction in CRE lending Book heavily skewed to Ireland 12% y/y reduction in CRE loans; cautious 11% 9% approach and pro-active portfolio €1.1bn management €0.5bn 69% Ireland c.70% of lending; modest US CRE €7.1bn €6.7bn exposure with prudent coverage 21% 10% Average L
Slide 26: Higher impairment charge primarily due to additional management adjustments
Higher impairment charge primarily due to additional management adjustments FY23 impairment loss allowance (ILA) components1 Slightly higher loan loss experience; of risk Cost 33bps 10bps 7bps 50bps portfolio activity charge of €265m • Net losses on portfolio activity €232m (vs €214m FY222) €59m • K
Slide 27: Significantly higher capital generation…
Significantly higher capital generation… Fully Loaded CET1 Net organic capital generation of 340bps RWAs RWAs €46.8bn1 €52.5bn RWA growth of €5.7bn primarily reflects KBCI (€3.5bn of RWA), lending and 340bps (70bps) operational risk RWA (140bps) Total distribution of c.€1.15bn / 240bps • Ordinary di
Slide 28: …results in sustainable step change in distributions
…results in sustainable step change in distributions Net organic capital generation c.2x 260-340bps Outlook 135-185bps • Sustainably higher capital generation, 260-280bps expected in 2024 • Distributions for FY24 expected to comprise both dividends and buybacks 2021-2022 2023-2024 • Interim distribu
Slide 29: 2024 guidance
2024 guidance Income Operating expenses NII 5-6% lower than Q4 2023 annualised Mid-single digit % higher Total business income mid-single Cost-to-income ratio < 50% Strong capital digit % higher generation Interim distributions to commence in 2024 Cost of risk ROTE Low 30s bps > 15% in 2024 On track
Slide 30: Footnote glossary
Footnote glossary Slide 5: Step change in business performance Slide 15: Strong financial performance in 2023 1. New Irish bank channel customer relationships as a proportion of total 1. Basis of calculation set out on slide 52 customers at the start of the year 2. Basis of calculation set out on sl
Slide 31: Footnote glossary (cont)
Footnote glossary (cont) Slide 20: Loan book growth reflects KBCI and Irish net lending 3. Total stock of ILA for affordability assessment of retail portfolios of €33m 1. Included in Group net loan volumes of €79.7bn at 31 Dec 2023 is €1.1bn of 4. See slide 44 for macroeconomic assumptions used in I
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Slide 33: Appendix
= Bank of Ireland Appendix 33
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Slide 35: Appendix
Appendix Slide No. • BOI overview – customer loans / new lending volumes 36 • Ireland mortgages 37 • UK customer loans 38 • Net interest income analysis 39 • Asset quality – Non-performing exposures by portfolio 40 – Portfolio by stage 41 – Residential mortgages / Consumer loans 42 – Non-property SM
Slide 36: Overview of customer loans
Overview of customer loans Profile of customer loans1 at Dec 2023 (Gross) Composition (Dec 23) Ireland (€bn) UK (€bn) RoW (€bn) Total (€bn) Total (%) Mortgages 32.3 15.2 0 47.5 59% Non-property SME & Corporate 10.6 4.8 5.0 20.4 25% SME 7.1 1.6 0 8.7 11% Corporate 3.5 3.2 5.0 11.7 15% Property & Cons
Slide 37: Ireland mortgages
Ireland mortgages New lending volumes and market share Ireland mortgages (gross) 41% €32.0bn 28% €22.4bn €22.5bn 23% €23bn €4.9bn €13.1bn €15.6bn €3.9bn €2.4bn €2.5bn €3.6bn €1.6bn €6.8bn €5.3bn €5.4bn FY 21 FY 22 FY 23 Dec 21 Dec 22 Dec 23 n New lending volumes Market share n Tracker n Variable rat
Slide 38: UK customer loans £21.3bn (€24.5bn)
UK customer loans £21.3bn (€24.5bn) UK mortgages – £13.2bn; NPEs 2.6% • Average LTV of 57% on existing stock at Dec 2023; average LTV of 74% on new UK mortgages in 2023 • 70% of the current mortgage portfolio originated since 2010; of these, £0.3bn 79% are standard owner occupier mortgages • BTL boo
Slide 39: Net interest income analysis
Net interest income analysis H1 2022 H2 2022 H1 2023 H2 2023 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) (%) (€bn) (€m) (%) (€bn) (€m) (%) (€bn) (€m) (%) Ireland loa
Slide 40: Non-performing exposures by portfolio
Non-performing exposures by portfolio Non-performing Impairment loss Advances Non-performing exposures Impairment loss Composition (Dec 23) (€bn) (€bn) exposures as % of allowance (€bn) allowance as % of advances non-performing exposures Residential mortgages 47.5 0.9 1.9% 0.2 27% – Ireland 32.3 0.
Slide 41: Portfolio by stage
Portfolio by stage Gross carrying amount Composition (Dec 23) Impairment loss allowance (before impairment loss allowance) ILA % of Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total gross loans Sectoral analysis by stage €m €m €m €m €m €m €m €m €m €m Residential Mortgages 42,786
Slide 42: Residential mortgages / Consumer loans
Residential mortgages / Consumer loans Gross loans by stage Residential mortgages Residential mortgages Consumer • Mortgage portfolios 59% of Group loan book €38.0bn €47.3bn €5.3bn €5.8bn – Average LTV of 55% on stock €0.1bn €0.9bn €0.1bn – 88% of the portfolio has LTV < 80% €3.6bn €0.8bn €0.5bn €0.
Slide 43: Non-property SME and Corporate / Property and Construction
Non-property SME and Corporate / Property and Construction Gross loans by stage Non-property SME and Corporate Non-property SME and Corporate Property & Construction • 25% of Group loan book, well diversified by geography and sector €21.5bn €20.5bn €8.2bn €7.2bn €0.4bn • €0.1bn decrease in Stage 2 l
Slide 44: Forward Looking Information (FLI) – macroeconomic scenarios
Forward Looking Information (FLI) – macroeconomic scenarios Ireland United Kingdom 31 December 2023 2024 2025 2026-2028 2024 2025 2026-2028 Probability weighted scenario GDP growth1 2.9% 3.6% 3.4% 0.1% 0.6% 1.5% GNP growth1 3.6% 3.4% 3.3% n/a n/a n/a Unemployment rate2 4.6% 5.1% 5.3% 4.9% 5.2% 5.3%
Slide 45: ILA sensitivity to macroeconomic scenarios
ILA sensitivity to macroeconomic scenarios The following table indicates the approximate extent to which impairment loss allowance (ILA), excluding Group management adjustments, would be higher or lower than reported were a 100% weighting applied to the central, upside and downside future macroecono
Slide 46: Capital and liquidity
Capital and liquidity Dec 22 Dec 23 Liquidity (€bn) (€bn) • Funding and liquidity remains strong from stable customer deposits and MREL issuance Customer loans 72 80 Liquid assets 49 44 Customer deposits: €100.2bn Other assets 30 32 • Overall Group customer deposit volumes of €100.2bn at 31 Dec 2023
Slide 47: Ordinary shareholders’ equity and TNAV
Ordinary shareholders’ equity and TNAV Dec 22 Dec 23 Movement in ordinary shareholders’ equity (€m1) (€m) Ordinary shareholders’ equity at beginning of period 9,933 10,489 Movements: Profit / (Loss) for the period 858 1,601 Share buy back - repurchase of shares (50) (125) Dividend paid to ordinary s
Slide 48: Fully Loaded CET1 ratio
Fully Loaded CET1 ratio Fully loaded ratio (€bn) Fully loaded ratio (€bn) Capital ratios – 31 Dec 2023 Dec 23 Dec 224 Total equity 12.6 11.5 Foreseeable distribution (1.2)3 (0.3) Less Additional Tier 1 (1.0) (1.0) Deferred tax 1 (0.8) (1.0) Intangible assets and goodwill (1.0) (1.0) Expected loss de
Slide 49: Regulatory capital requirements
Regulatory capital requirements Pro forma CET1 regulatory capital requirements 2023 2024 2025 Pillar 1 – CET1 4.50% 4.50% 4.50% Pillar 2 Requirement (P2R) 1.27% 1.32% 1.32% Capital Conservation Buffer (CCB) 2.50% 2.50% 2.50% Ireland Countercyclical Buffer (CCyB) 0.63% 0.94% 0.94% UK Countercyclical
Slide 50: Risk Weighted Assets (RWAs) / Leverage ratio
Risk Weighted Assets (RWAs) / Leverage ratio EBA transparency exercise 2023 Customer lending average credit risk weights – Dec 20231, 2 Country by country average IRB risk weights (Based on regulatory exposure class) Residential Mortgages – Jun 2023 EAD 3 RWA Avg. Risk Sweden 4.9% (€bn) (€bn) Weight
Slide 51: Return on Tangible Equity (ROTE)
Return on Tangible Equity (ROTE) FY 2023: Headline vs. Adjusted Adjustments FY 2023 Additional gains Adjusted for FY 2023 Pension Headline & valuation items, CET1 ratio Adjusted Surplus (€m) net of tax at 14.0% (€m) Profit for the period 1,601 Coupon on Additional Tier 1 securities (69) Preference s
Slide 52: Underlying Cost-to-income ratio
Underlying Cost-to-income ratio Headline vs. Adjusted FY 2023 Pro forma FY 2023 Headline adjustments Pro forma (€m) (€m) (€m) Net interest income 3,682 3,682 Other income – Business income 707 707 – Additional gains and other valuation items 39 (39) 0 Total Income 4,428 (39) 4,389 Costs – Operating
Slide 53: Wealth and Insurance – IFRS 17 application
Wealth and Insurance – IFRS 17 application • On 1 Jan 2023, the IFRS 17 accounting standard related to insurance FY 20221 FY 2023 contracts became effective, replacing IFRS 4. This has a material impact (€m) (€m) on the recognition, measurement, presentation and disclosure of the Income 230 325 insu
Slide 54: Defined benefit pension schemes
Defined benefit pension schemes Group IAS19 defined benefit pension (deficit)/surplus Total Group defined benefit pension scheme assets (%) 3.60% 3.40% €7.2bn €7.2bn €8.4bn €8.9bn €9.6bn €6.9bn €7.1bn 2.10% 2.00% 1.30% 1.35% 55% 65% 65% 69% 66% 66% 69% 0.80% €0.60bn €0.70bn €0.68bn 21% 23% 23% 21% 2
Slide 55: Forward-Looking Statement
Forward-Looking Statement 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 and expectations relating to its future
Slide 56: Contact details
Contact details For further information please contact: • Group Chief Financial Officer Mark Spain tel: +353 1 250 8900 ext. 43291 mark.spain@boi.com • Investor Relations Darach O’Leary tel: +353 87 948 0650 darach.oleary@boi.com Eamonn Hughes tel: +353 87 202 6325 eamonn.hughes@boi.com Owen Callan
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