Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — FY2010 Earnings Presentation
53 slides from Bank Of Ireland's earnings presentation, February 2011
Slide 1: Annual Results Announcement
Annual Results Announcement For the twelve month period ended 31 December 2010
Slide 2: Forward-looking statement
Forward-looking statement This document contains certain forward looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934 and Section 27A of the US Securities Act of 1933 with respect to certain of the Bank of Ireland Group’s (the Group) plans and its current go
Slide 3: Richie Boucher, Group Chief Executive
Richie Boucher Group Chief Executive
Slide 4: Presentation of 2010 annual results
Presentation of 2010 annual results Section 1: Slides 5 to 19 Building a Sustainable Future Section 2: Slides 21 to 27 Asset Quality Section 3: Slides 28 to 31 Funding and Capital Section 4: Slides 32 to 38 Group Income Statement Supplementary Information Slides 39 to 51 4
Slide 5: Overview
Overview Our trading environment has and continues to remain difficult. However: – We believe the Irish economy has begun to stabilise – Key fundamental strengths of Ireland’s open economy will enable it to benefit from the continuing global economic recovery We improved our capital position by
Slide 6: Macro-economic outlook
Macro-economic outlook Economic outlook for Ireland Economic outlook for the UK GDP growth is expected to gradually recover UK economy returned to growth in 2010 during 2011 Exports continue to lead the way out of the Continued growth expected for 2011 but recession likely to be modest and u
Slide 7: Irish economy – Underlying Fundamentals
Irish economy – Underlying Fundamentals Underlying Fundamentals Improving Competitiveness Modern export base benefitting from global Fiscal adjustment re-aligning Government Finances recovery Labour productivity improving Export base is diverse with modern high tech - EU forecast that from 2
Slide 8: 2011 Prudential Capital Assessment Review (PCAR)
2011 Prudential Capital Assessment Review (PCAR) Key Features €4.2bn of new equity including a regulatory buffer of €0.5bn €1.0bn contingent capital comprising a convertible debt instrument Proforma Core tier 1 ratio of 15.0% at 31 Dec 10 The equity and contingent capital requirements have b
Slide 9: 2011 Prudential Capital Assessment Review (PCAR)
2011 Prudential Capital Assessment Review (PCAR) Loan BlackRock Bank of Variance Portfolio methodology Ireland BlackRock BlackRock Methodology includes: Volumes including including Vs BoI Loan 31/12/20101 stock of stock of Loss provisions provisions Estimates Future loan loss estimate over the 201
Slide 10: Bank of Ireland - Core Bank 31 Dec 10
Bank of Ireland - Core Bank 31 Dec 10 #1 retail bank Future value drivers Retail Leading market positions – #1 or 2 across Ireland & principal product segments Core customer Extensive distribution capability SME relationship franchises Continued improvements in customer service maintaine
Slide 11: Bank of Ireland - Non-Core Assets 31 Dec 10
Bank of Ireland - Non-Core Assets 31 Dec 10 Key Characteristics Non-Core Augments 2010 approved EU Restructuring and €39bn assets (net of impairment provisions) Viability Plan €22bn Risk Weighted Assets Non-Strategic assets with limited cross-sell opportunities ¾ Portfolios of UK Intermediar
Slide 12: Building a Sustainable Future
Building a Sustainable Future Objective Deliver a sustainable future for BoI capable of contributing to economic recovery and for the benefit of all of our stakeholders Key Strategic Goals To be the clear leading Irish bank in a consolidating sector, well positioned in our core markets with strong
Slide 13: Continuing progress on our key priorities
Continuing progress on our key priorities Progress on key priorities through pro-active engagement Asset Quality – Losses Peaked and Reducing 9 Strategic Shape of the Group Confirmed – EU Restructuring & Viability Plan 9 Deleveraging & De-risking the Balance Sheet 9 2010 PCAR 9 Strengthening Capital
Slide 14: Continuing progress on our key priorities
Continuing progress on our key priorities The Group re-engaged Oliver Wyman to independently review and challenge the Group’s non-NAMA impairment estimates. This review confirmed BoI’s impairment estimates to be reasonable Asset Quality We maintain our expectation that impairment charges peake
Slide 15: Deleveraging and de-risking the Balance Sheet
Continuing progress on… Deleveraging and de-risking the Balance Sheet Loans & Advances to Customers1 Progress €144bn -20% Loans and advances to customers have reduced by 20% and risk weighted assets have reduced by 32% €115bn since Sept 08 Reductions in loans and risk weighted assets driven by –
Slide 16: Strengthening Capital Ratios
Continuing progress on… Strengthening Capital Ratios Core Tier 1 Capital Ratios Progress Capital ratios significantly strengthened since Sept 08 The Group’s capital raise of €3.6bn gross capital 15.0% (€2.9bn net, after fees and buying back the warrants held by the Irish Government) completed in
Slide 17: Reducing Operating Costs
Continuing progress on… Reducing Operating Costs Operating Costs Progress Cost base reduced by 17% since 2008 €2,140bn Staff reduction of c.2,400 (14%) since 2008. Further redundancy programmes underway -17% €1,785bn Structural pension deficit dealt with – ongoing cost benefits Continued rig
Slide 18: Key Challenges
Key Challenges • Irish economy appears to have stabilised • GDP expected to gradually recover during 2011 Economic Environment • Key drivers of economic recovery are exports, improved competitiveness following substantial cost reductions in the economy, and an improved fiscal position • The Group’s
Slide 19: Key Challenges
Key Challenges • Restructuring of the Group has been underway to reflect reduced size and scope of operations Significant • However capital requirement incorporates conservative loss on disposal Asset Disposals & assumptions. The geographical asset class diversification of assets for Restructuring d
Slide 20: John O’Donovan, Group Chief Financial Officer
John O’Donovan Group Chief Financial Officer
Slide 21: Asset Quality
Bank of Ireland Group G) Section 2 Asset Quality
Slide 22: Profile of total loans
Profile of total loans1 Excluding loans held for sale to NAMA % of Group Loan Book €119bn Group loan book €119bn at 31 Dec 10 3% / €4bn Geographic Profile of loans and advances to customers RoI UK RoW Total 31 Dec 10 €bn €bn €bn €bn 20% Mortgages 28 32 - 60 / €24bn Non-property corporate 14 9 8 31
Slide 23: Impaired loans, Impairment Provisions & Impairment charges
Impaired loans, Impairment Provisions & Impairment charges Excluding loans held for sale to NAMA Impaired loans & Impairment Provisions Impairment charges by portfolio €2,851m Impaired Loans €296m €11bn Impairment €10.4bn Provision €891m €1,887m Residential mortgages €8.0bn €5.0bn €407m Non-property
Slide 24: Group Residential Mortgages €60bn
Group Residential Mortgages €60bn1 Analysis of Residential mortgages UK mortgages – 27% of Group loans and advances to customers RoI: €28bn UK: £28bn • 3% reduction in portfolio in 2010 Standard • Intermediary sourced mortgages down 7%; 14% decline since placed in run-off in Q1 2009. BTL €8.2bn RoI
Slide 25: Non-Property Corporate & SME and Consumer Loans
Non-Property Corporate & SME and Consumer Loans Excluding loans held for sale to NAMA Non-property corporate and SME - €31bn1 Consumer Loans - €3.7bn2 26% of Group loans and advances to customers 3% of Group loans and advances to customers – 9% reduction in portfolio – 15% reduction in portfolio
Slide 26: Property & Construction
Property & Construction Excluding loans held for sale to NAMA Investment Property - €19.8bn1 Land & Development - €4.6bn2 17% of Group loans and advances to customers 4% of Group loans and advances to customers – 5% reduction in portfolio in 2010 Geographic profile Portfolio weighted to UK –
Slide 27: Loans held for sale to NAMA – €0.9bn
Loans held for sale to NAMA – €0.9bn1 31 Dec 10 Movement in assets held for sale to NAMA Total Assets Impairment Carrying Value Provisions €m €m €m Balance at 31 Dec 09 (excl derivatives of €0.1bn) 12,235 (2,778) 9,457 Sale of assets to NAMA in the 12 months to 31 Dec 10 (excl derivatives of (9,340)
Slide 28: Funding and Capital
Section 3 Funding and Capital
Slide 29: Balance Sheet funding
Balance Sheet funding Strategy to revert to traditional banking model Total liabilities €192bn1 – Fund core lending portfolios substantially through deposits – Asset growth dependent on the ability to attract deposits Total liabilities – PLAR mandated loan to deposit ratio of 122.5% by Dec 13 €169
Slide 30: Group deposits & Wholesale funding
Group deposits & Wholesale funding Divisional profile of deposits Wholesale funding profile -1% €70bn €85bn €84bn €61bn 10% -23% Senior unsecured – unguaranteed 14% €29bn €26bn Senior unsecured €65bn – guaranteed 11% 53% Bi-lateral short 10% €9.5bn term secured 7% borrowings £9.8bn £6.6bn ACS – Cove
Slide 31: Capital position and capital raising
Capital position and capital raising Risk Weighted Assets – Basel II Capital Ratios – Basel II €98bn €2bn -20% €6bn New Core Tier 1 15.0% €1.9bn / €79bn 2.3% minimum target of €11.9bn €2bn €6bn 10.5% / €3.5bn 2.6% 5.3% Market Risk €4.2bn Operational Risk €90bn 2.4% Proforma 3.6% €1.9bn additional Cr
Slide 32: Group Income Statement
Section 4 Group Income Statement
Slide 33: Group Income Statement
Group Income Statement Group Income Statement Net Interest Income (excluding non-core items) ELG cost of €275m in 2010 (2009 – nil) 12 months to Dec 09 Dec 10 % Decrease of 8% in average interest earning assets €m €m Change Decrease in Net Interest Margin from 1.64% in 2009 to Net Interest Inc
Slide 34: Net interest margin
Net interest margin 12 months to Dec 10 Net Interest Margin 12 Months to Dec 09 Dec 10 Net interest income €2,909m €2,236m Addback cost of ELG - €275m IFRS Income Classifications (€79m) (€175m) 173 169 166 174 164 141 146 bps bps bps bps bps bps bps Net Interest Income (excl ELG and €2,830m €2,336m
Slide 35: Net Other income
Net Other income 12 months to Dec 10 Net Other Income – movement Dec 09 to Dec 10 (€m) €33m €71m (€97m) €6m € 17m €218m Net Other Income Net Other €741m Income €493m Investment CIFS Core Banking Bank of 12 months Investment Other 12 months Valuation Guarantee Fees & Ireland to Dec 09 Property to Dec
Slide 36: Operating Expenses
Operating Expenses 12 Months to 31 Dec 10 Operating Expenses – movement Dec 09 to Dec 10 (€m) €1,891m €1,785m (€106m) €824m €775m Other Costs €195m Pension €174m Costs €872m €836m Staff Costs Reduction in 12 months to 12 months to 2010 Dec 09 Dec 10 2010 Since Peak: Operating Expenses down 6% Op
Slide 37: Conclusion
Conclusion Trading conditions in the first months of 2011 remain challenging Challenges remain in building a sustainable future for the Group Bank of Ireland continues to progress our key priorities in a structured, focussed and disciplined manner We believe that the Irish economy has the po
Slide 38: Questions & Answers
Bank of Ireland Group G) Questions & Answers
Slide 39: Supplementary Information
Bank of Ireland Group G) Supplementary Information
Slide 40: Supplementary
Supplementary Asset Quality – Impaired loans – Impairment Charge – UK Mortgages – RoI Mortgages AFS Wholesale funding profile Income Statement EPS calculation Stockholders’ equity & Tangible net asset value Abbreviations Contact details 40
Slide 41: Group loan book asset quality profile
Group loan book asset quality profile Excluding loans held for sale to NAMA Asset Quality Proforma Dec 094 Proforma June 104 Dec 10 €bn % €bn % €bn % High quality 68.7 55% 70.6 56% 65.4 55% Satisfactory quality 27.8 23% 23.5 19% 22.7 19% Acceptable quality 11.6 9% 11.2 9% 10.2 8% Lower quality but n
Slide 42: Stock of Balance Sheet provisions and coverage ratios
Stock of Balance Sheet provisions and coverage ratios Excluding loans held for sale to NAMA Total loans and Impaired loans1 Impaired loans as Impairment Impairment advances to % of advances provisions provisions as % customers of impaired loans €bn €bn % €bn % 31 Dec 10 Residential mortgages 60.3 1.
Slide 43: Impairment charge by portfolio
Impairment charge by portfolio Excluding loans held for sale to NAMA €2,851m €2,800m -34% €2,400m €1,887m Group €2,000m Residential mortgages €1,600m Non-property corporate and SME €1,200m Property and construction €800m Property – Land & Development €891m €1,055m €400m €609m Consumer €445m €375m €4
Slide 44: Residential mortgages
Residential mortgages Irish Mortgages1 UK Mortgages2 £28.7bn -4% €28.2bn €28.1bn £27.6bn FTB €2.1bn €2.9bn €7.9bn €8.2bn BTL POFS / €7.9bn €7.3bn NI Branch €26.6bn -7% Intermediary €24.7bn Trading Sourced up/down €6.5bn €6.7bn Equity release & switchers €5.9bn €5.9bn Dec 09 Dec 10 Dec 09 Dec 10 Dec
Slide 45: Available for sale financial assets
Available for sale financial assets NAMA Bonds Portfolio MTM Reserve Average Portfolio MTM Reserve Average 31 Dec 10 Balance Rating 31 Dec 09 Balance Rating €bn €bn €bn €bn - Irish Government Bonds 3.1 (0.3) BBB+ 1.0 - AA - Irish Government Bonds - Other Government Bonds 0.6 - AAA - Other Government
Slide 46: Wholesale funding profile
Wholesale funding profile Dec 10 Quantum of wholesale funding at Dec 10 increased to Dec 10 – €70bn €70bn from €61bn at Dec 09 and €58bn at June 10 Monetary Authority – Increase driven by reduction in deposits offset by a decrease in customer lending and liquid assets Senior secured – RMBS 10% T
Slide 47: Group Income Statement
Group Income Statement Group Income Statement Non-core items (excluding non-core items) 12 months to 12 months to Income Dec 09 Dec 10 €m €m Dec 09 Dec 10 % €m €m Change Gain on liability management exercises 1,037 1,413 Total income1 3,323 2,802 (16%) Impact of changes in pension benefits - 733 Ope
Slide 48: Divisional Performance
Divisional Performance Retail Capital Group Retail Ireland 12 months to 31 Dec 10 Ireland BIL UKFS Markets Centre Total Net interest income impacted by lower deposit €m €m €m €m €m €m margins and higher cost of wholesale funding partially offset by improved lending margins Total Income 1,357 173 6
Slide 49: EPS calculation
EPS calculation 12 months to 12 months to Dec 09 Dec 10 €m €m Loss attributable to ordinary stockholders (1,719) (614) Dividends to other equity interests (4) - Gain on repurchase of $150m FRN - 24 Dividend on 2009 preference stock (210) (231) A Loss attributable to ordinary stockholders (1,933) (82
Slide 50: Stockholders’ equity and Tangible net asset value
Stockholders’ equity and Tangible net asset value 9 mths ended 12 mths ended Stockholders’ equity 31 Dec 09 31 Dec 10 €m €m Stockholders’ equity at beginning of period 6,852 6,387 Movements (loss) attributable to stockholders (1,460) (614) Net new equity raised from public capital markets - 1,006 Fo
Slide 51: Abbreviations
Abbreviations Bank of Ireland BBUK Business Banking UK BIL Bank of Ireland Life POFS Post Office Financial Services PLUK Personal Lending UK NI Northern Ireland UKFS UK Financial Services Regulatory CBI Central Bank of Ireland PCAR Prudential Capital Assessment Review PLAR Prudenti
Slide 52: Contact details
Contact details For further information please contact: Group Chief Financial Officer John O’Donovan tel: +353 76 624 4703 jp.odonovan@boi.com Director of Group Finance Andrew Keating tel: +353 1 637 8141 andrew.keating@boi.com Investor Relations Tony Joyce tel: +353 76 623 4729 tony.joyce@boi.com D
Slide 53: Annual Results Announcement
Annual Results Announcement For the twelve month period ended 31 December 2010