Eurobank S.A. · ATHEX:EUROB
Eurobank — Investor Presentation (October 2005)
32 slides from Eurobank's investor presentation, Oct 4, 2005
Slide 1: A Private Sector Perspective on the Celtic Tiger Experience
A Private Sector Perspective on the Celtic Tiger Experience Pat Mc Ardle, Chief Economist 4 Oct 2005
Slide 2: Summary
Summary Period GNP growth rates Events of the period 1961-1972 4.2% Open trade, developing manufacturing sector, booming growth 1973-1978 3.6% EEC membership, oil crises, rising unemployment 1979-1986 0.7% Recession, growing national debt, increasing taxes, EMS membership. 1987-1993 4.0% Fiscal rect
Slide 3: GDP & GNP at Constant 1995 Prices
GDP & GNP at Constant 1995 Prices 100,000 90,000 80,000 70,000 GDP 60,000 GNP € million 50,000 40,000 30,000 20,000 10,000 1961 1966 1971 1976 1981 1986 1991 1996 2001 3
Slide 4: Employment & Unemployment
(000) Employment & Unemployment 2,000 18 1,900 16 1,800 14 1,700 Employment LHS 12 1,600 Unemployment Rate RHS 10 1,500 8 1,400 6 1,300 4 1,200 1,100 2 1,000 0 1961 1966 1971 1976 1981 1986 1991 1996 2001 4
Slide 5: GNP Volume Growth
GNP Volume Growth 12% 10% 8% 6% 4% 2% 0% -2% -4% 1961 1966 1971 1976 1981 1986 1991 1996 2001 5
Slide 6: Irish per capita income % EU15
60 70 80 90 100 110 120 130 1960 1962 1964 1966 GDP 1968 1970 1972 GNI 1974 1976 1978 1980 6 1982 1984 1986 1988 1990 1992 1994 1996 1998 Irish per capita income % EU15 2000 2002 2004
Slide 7: Output per worker
Output per worker 7% 6% 5% 4% 3% 2% 1% 0% 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 7
Slide 8: Non-Agricultural employment as share of total population
Non-Agricultural employment as share of total population 45% 40% 35% 30% 25% 20% 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 8
Slide 9: Contribution to per capita GNP growth 1993-00
Contribution to per capita GNP growth 1993-00 Productivity Employment Rate LF Participation ratio 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9
Slide 10: Distribution of population 1961-2001
Distribution of population 1961-2001 4,000 3,000 Non-ag employment Ag employment million 2,000 Unemployed Inactive Over 64 Under 15 1,000 0 1961 1971 1986 2001 10
Slide 11: Population change by economic status
Population change by economic status 70 60 50 Under 15 Over 64 Annual averages (000) 40 non-active non-ag employment 30 unemployed 20 ag. employment 10 0 -10 -20 61-71 71-86 86-91 91-01 11
Slide 12: Employment Changes
Employment Changes (000) 1994 2001 Change % Change Agriculture 148 120 -20 -19% Industry 252 317 65 +26% Construction 92 180 88 +96% Retail & W/Sale Trade 169 248 79 +47% Hotels & Restaurants 68 105 37 +54% Transport & Comms 56 110 54 +96% Finance & Business 114 218 104 +91% Government 248 325 77 +3
Slide 13: Our interpretation
Our interpretation O No productivity miracle z GNP/Pop gap at 1973 already due only to low share of population at work (outside traditional agriculture) O Convergence postponed from 1973 z By policy errors after 1973 z Fiscal crisis withdrew demand; increased taxation, costs; lowered confidence O Co
Slide 14: Productivity in UK and Ireland, 1973
Productivity in UK and Ireland, 1973 £3,000 £2,500 £2,000 UK £1,500 Ireland £1,000 £500 £0 Agriculture Rest of economy 14
Slide 15: Non-agricultural employment as % of population, 1973
Non-agricultural employment as % of population, 1973 50 45 40 35 30 % 25 20 15 10 5 0 UK Ireland 15
Slide 16: Unemployment rate: Ireland and UK
Unemployment rate: Ireland and UK 18 16 14 12 UK 10 Ireland - ILO basis 8 6 4 2 0 55 60 65 70 75 80 85 90 95 00 16
Slide 17: Government Balances
Government Balances 10% 5% 0% % GNP -5% -10% Current Budget Total Borrowing -15% -20% 1970 1975 1980 1985 1990 1995 2000 17
Slide 18: Government Debt
% GNP Government Debt 140 120 100 80 60 40 20 0 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 18
Slide 19: Taxes & Current Expenditure
Taxes & Current Expenditure 55 50 45 40 % GNP 35 30 Current Expenditure Tax Revenue 25 20 1970 1975 1980 1985 1990 1995 2000 19
Slide 20: Interest Rates
Interest Rates 20 Mortgage Rate Real Interest Rate 15 10 % GNP 5 0 -5 -10 1970 1975 1980 1985 1990 1995 2000 20
Slide 21: Interest & Transfers
Interest & Transfers 20% 18% 16% 14% 12% % GNP 10% 8% 6% 4% Debt Interest Transfers 2% 0% 1970 1975 1980 1985 1990 1995 2000 21
Slide 22: Wages & Capital Spending
Wages & Capital Spending 25% 20% 15% % GNP Wages Capital Spending 10% 5% 0% 1970 1975 1980 1985 1990 1995 2000 22
Slide 23: The ingredients: Simmering
The ingredients: Simmering O Education z Relatively late effort O Falling burden of age-dependency z Belated drop in birth rate after 1980 O Promotion of Ireland as an industrial location z Grants / Low corporation tax O Good governance! z e.g. ability to raise 40% of GDP in taxes O Cultural factors
Slide 24: Dependency
Dependency 2.4 2.2 2.0 1.8 1.6 1.4 Ireland EU 1.2 1.0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 24
Slide 25: Catalysts for the turnaround
Catalysts for the turnaround O EU funds (3% of GDP) O Devaluations (1993 and especially 1986) O Improved industrial incentives (IFSC)? O Tourist boom ? But mainly: O Improved wage competitiveness, z lower taxation z realistic wage-setting - corporatism z improved fiscal environment 25
Slide 26: Corp Taxes as % GDP, 2002
Corp Taxes as % GDP, 2002 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 IRL-GNP FIN NZ Neths Spain Italy Korea UK France Dk Switz Hungary Poland US Ger 26
Slide 27: Top Rate of Income Tax & Social Security
Top Rate of Income Tax & Social Security 80% 75% 70% 65% 60% 55% 50% 45% 40% 1975 1980 1985 1990 1995 2000 2005 27
Slide 28: Union Density (non-ag)
Union Density (non-ag) 50 48 46 44 42 40 38 60 65 70 75 80 85 90 95 28
Slide 29: Number of days lost through industrial disputes, Ireland and UK
Number of days lost through industrial disputes, Ireland and UK (rates per 1000 employees) 1,750 IRL 1,250 UK 750 250 -250 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 29
Slide 30: Replacement rates
Replacement rates 150 IRL UK US relative to OECD average 125 100 75 50 25 0 1961 1971 1981 1991 1997 30
Slide 31: Private Sector Credit Growth
% Private Sector Credit Growth 40 35 unadj 30 adj PSC 25 20 15 10 5 0 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 31
Slide 32: A Private Sector Perspective on the Celtic Tiger Experience
A Private Sector Perspective on the Celtic Tiger Experience Pat Mc Ardle, Chief Economist 4 Oct 2005