AIB Group plc · EURONEXT:A5G

AIB — H1 2021 Earnings Presentation

45 slides from AIB's earnings presentation, August 2021

  1. Slide 1: Half-Yearly Financial Results – Backing Our Customers

    BACKING OUR CUSTOMERS HALF-YEARLY FINANCIAL RESULTS For the six months ended 30 June 2021 AIB Group plc

  2. Slide 2: Forward looking statement

    Forward looking statement This document contains certain forward looking statements with respect to the financial condition, results of operations and business of AIB Group and certain of the plans and objectives of the Group. These forward looking statements can be identified by the fact that they

  3. Slide 3: H1 2021 Highlights

    H1 2021 Highlights  Economic recovery underway supported by vaccine rollout and sound Irish economy re-opens medium-term fundamentals  Well-positioned as the competitive landscape evolves with leading market Strong financial position supports customer franchise shares and No 1 digital bank  Stron

  4. Slide 4: Favourable Irish economic outlook

    Favourable Irish economic outlook Upward revisions to GDP forecasts Sentiment improves as restrictions are eased % CBI forecasts EC forecasts 70 10 PMIs 8.3 60 8 7.2 50 6 5.4 5.1 4.6 40 3.8 3.4 3.5 4 30 2 20 0 10 2021 2022 2021 2022 Dec 2019 Jun 2020 Dec 2020 Jun 2021 As at Jan 21 As at Jun 21 Servi

  5. Slide 5: Vaccine roll-out remains key to re-opening

    Vaccine roll-out remains key to re-opening Irish vaccination programme continues at pace COVID–19 adjusted unemployment rate declining % EU 57.5% 30 USA 60.6% 20 Ireland 72.0% 10 UK 72.7% 0 0% 15% 30% 45% 60% 75% Feb 2020 Jun 2020 Oct 2020 Feb 2021 Jun 2021 Fully Vaccinated, as % of adult population

  6. Slide 6: We are uniquely positioned in a changing banking landscape

    We are uniquely positioned in a changing banking landscape Strength and depth of AIB Backing our customers with Offering complete and franchise digitally-enabled technology competitive product range to play our role in communities and the to support new banking behaviours to our customers economy 

  7. Slide 7: Delivering on Strategy 2023 to take out €230m cost

    Delivering on Strategy 2023 to take out €230m cost Savings Progress in H1 Status by 2023 Refocused AIB: 6 branches amalgamated. Further 15 amalgamations due in H2 €65m branch network An Post: deepening our 20 year relationship End-to-end Retail SME credit: project on track to centralise, simplify an

  8. Slide 8: Significant progress made on inorganic opportunities

    Significant progress made on inorganic opportunities* AIB Group plc  Positions AIB as #1 bank for corporate banking  Underpins AIB growth plans and positions us to support the business community Consideration of €4.1bn  Enhances AIB’s capital markets and private clients offering Consideration of

  9. Slide 9: Integrated sustainability practices across the Group

    Integrated sustainability practices across the Group Environment Social Governance ‘ensuring a greener tomorrow by ‘backing economic & social inclusion’ ‘at the heart of our business’ backing those building it today’  Net zero commitment by 2030(1)  Social Bond Framework  Sustainability-focused B

  10. Slide 10: Our H2 2021 priorities

    Our H2 2021 priorities Customer First Implement Strategy 2023 to deliver €230m cost 1 savings and progress inorganic initiatives Simple & Efficient Advance the sustainability agenda and support Risk & Capital 2 our customers through increased green lending while maintaining focus on asset quality Ta

  11. Slide 11: Revised medium-term targets by 2023

    Revised medium-term targets by 2023 Focused on cost(1) discipline <€1.475bn Appropriate capital target Deliver sustainable CET1(2) >13.5% returns RoTE(3) >9% Our Strategy 2023 is set and we are implementing at pace 1) Costs before bank levies, regulatory fees and exceptional items 2) Fully loaded 3)

  12. Slide 12: Financial performance

    BACKING OUR CUSTOMERS Financial performance AIB Group plc

  13. Slide 13: Financial performance H1 2021

    Financial performance H1 2021 Operating profit(1) of €373m in line with H1 2020  Profit after tax €274m includes €103m ECL writeback Total income €1,183m  Net interest income €881m (-9%) and other income €302m (+37%) Costs €739m(2) (-1%) well managed and in line with expectations  FTEs reduced 3%

  14. Slide 14: Income statement

    BACKING OUR CUSTOMERS Income statement AIB Group plc

  15. Slide 15: Income statement – profit after tax €274m

    Income statement – profit after tax €274m Summary income statement (€m) H1 2021 H1 2020  Net interest income reduced 9% impacted Net interest income 881 967 by lower loan volumes and the lower interest rate environment and reflects: Other income(1) 302 220 Total operating income 1,183 1,187 • €15m

  16. Slide 16: Net interest income -9%, improved from Q1 -13%

    Net interest income -9%, improved from Q1 -13% NII – material movements  NII €881m down €86m / 9% from H1 2020 impacted by: (€86m reduction in NII / 19bps reduction in NIM) • +€65m: lower cost of liabilities including: • +€33m customer accounts Q2 Exit NIM • +€15m net TLTRO benefit 2.10% 11 bps 1.6

  17. Slide 17: Other income +37%; fees & commission +10%

    Other income +37%; fees & commission +10% Net fees and commission income (€m) H1 2021 H1 2020 Customer accounts 99 90  Other income €302m up 37% Credit related fees 26 21 Card 32 30  Fee and commission income €212m, up €20m (+10%) reflecting higher transaction volumes as economic activity Other fe

  18. Slide 18: Costs -1% and in line with expectations

    Costs -1% and in line with expectations Operating expenses (1) (€m)  Costs €739m, down 1% as guided 747 739  Factors impacting costs 136 140 • lower FTEs partially offset by wage inflation • increased depreciation €4m 243 239  FTEs reduced on average by -3% v H1 2020  Exceptional items €191m pri

  19. Slide 19: ECL writeback €103m with coverage of 3.6%

    ECL writeback €103m with coverage of 3.6% ECL material stock movements (€bn) ECL writeback (€m) H1 2021 Macro economic assumptions 15 Total ECL mortgage portfolio sales €0.3bn Credit quality / stage transfers / other 91 2.5 4.2% 0.2 Post model adjustments (36) 0.1 2.1 0.7 0.1 3.6% ECL writeback on c

  20. Slide 20: Balance sheet

    BACKING OUR CUSTOMERS Balance sheet AIB Group plc

  21. Slide 21: Balance sheet – strong funding & liquidity to support economic recovery

    Balance sheet – strong funding & liquidity to support economic recovery Balance sheet (€bn) Jun 2021 Dec 2020 Performing loans 54.9 55.2 Assets Non-performing loans 3.8 4.3  Performing loans decreased marginally by €0.3bn Gross loans to customers 58.7 59.5  New lending €4.5bn exceeded by redemptio

  22. Slide 22: Net loans of €56.6bn broadly stable YTD

    Net loans of €56.6bn broadly stable YTD Net loans movement (€bn) Performing gross loans (€bn)(2) +4.5 (4.9) 55.2 -0.4% 54.9 (0.3) 0.4 0.5 (0.6) 8.1 8.3 57.0 56.6 14.5 14.7 (1) Dec-20 New lending Redemptions Redemptions ECL FX / Other Portfolio sales Jun-21 Performing NPEs 32.5 31.9 Performing gross

  23. Slide 23: New lending of €4.5bn up +3%; term lending +12%

    New lending of €4.5bn up +3%; term lending +12% Total new lending (€bn) Mortgages (€bn) Personal (€bn) 4.9 5.0 +3% +10% -4% 4.5 4.4 0.9 0.9 1.2 1.1 0.4 0.4 1.6 H1 2020 H1 2021 H1 2020 H1 2021 1.5 Property (€bn) Corporate & SME (€bn) +16% -3% 2.0 2.0 0.8 2.2 0.7 2.1 H1 2020 H1 2021 H1 2020 H1 2021 H1

  24. Slide 24: NPEs at 6.5% declined 12.5%; target c. 3% by 2023

    NPEs at 6.5% declined 12.5%; target c. 3% by 2023 NPEs NPE – €3.8bn (€bn) 7.3% Arrears profile 4.3 0.4 0.3 6.5% 0.6 3.8 29% 1.0 1.2 5% 62% 1.0 4% 0.2 0.9 Not Past Due < 90DPD 0.2 >90 < 180DPD > 180DPD 2.1 1.5 Weighted average LTV ROI mortgages: NPEs Net flow to NPEs / Redemptions Portfolio Sales NPE

  25. Slide 25: Funding and capital

    BACKING OUR CUSTOMERS Funding and capital AIB Group plc

  26. Slide 26: Strong funding driven by increased customer deposits

    Strong funding driven by increased customer deposits Total funding (€bn) €119.7bn Liquidity metrics (%) Jun 2021 Dec 2020 +12% €107.1bn 4.5 Loan to deposit ratio (LDR) 64 69 4.2 Liquidity coverage ratio (LCR) 201 193 NBFI (1) 34.3 Corporate / SME Customer accounts Net stable funding ratio (NSFR) 149

  27. Slide 27: CET1 (FL) 16.4% up 80bps

    CET1 (FL) 16.4% up 80bps Capital ratios fully loaded (FL) (%) €52.6bn RWAs €50.7bn RWAs  CET1 (FL) ratio 16.4% up 80bps from Dec 20 21.8% • +110bps capital generation 20.8% • -30bps dividend foreseeable charge 3.2 3.1 2.2  RWA reduction +60bps includes: 2.1 • SME 501 +10bps 15.6 16.4 • Portfolio s

  28. Slide 28: Capital – revised medium-term target: CET1 of >13.5%

    Capital – revised medium-term target: CET1 of >13.5% Capital requirements Dec 2021 Appropriate CET1 target • Optimised capital stack with AT1 and Tier 2 buckets filled Pillar 1 4.50% • SREP P2R reduced from 3.00% to 1.69% Pillar 2 requirement (P2R) 1.69% • >3% buffer from SREP to medium-term target

  29. Slide 29: Revised medium-term targets

    Revised medium-term targets Previous medium-term targets by Revised medium-term targets by 2023 2023 Improved economic outlook, further loan book growth and Focused cost(1) Focused cost fee income opportunities discipline Focused cost<€1.475bn (1) discipline <€1.35bn discipline <€1.475bn Appropriate

  30. Slide 30: Appendices

    BACKING OUR CUSTOMERS Appendices AIB Group plc

  31. Slide 31: AIB Sustainability Journey

    AIB Sustainability Journey Sponsored Chair in Sustainable Business University College Cork (3 years) Published Human Rights Commitment & joined UN Global Compact Named Large Green Organisation of the Year Mandatory Sustainability Training for all Employees Dublin Chamber of Commerce Sustainability 3

  32. Slide 32: Average balance sheet

    Average balance sheet H1 2021 H1 2020 Average Volume Interest Yield Average Volume Interest Yield €m €m % €m €m % Assets Customer loans 57,823 922 3.22 60,417 1,004 3.33 Investment securities 18,762 31 0.33 17,417 72 0.82 Loans to banks / other 30,573 (42) (0.27) 14,571 (4) (0.05) Interest earning a

  33. Slide 33: Customer loans

    Customer loans €bn Performing Loans Non-Performing Loans Customer Loans Gross loans (1 Jan 2021) 55.2 4.3 59.5 New lending 4.5 - 4.5 Redemptions of existing loans (4.9) (0.3) (5.2) Portfolio sales - (0.6) (0.6) Net flow to NPE (0.4) 0.4 - Foreign exchange / other movements 0.5 - 0.5 Gross loans (30

  34. Slide 34: Loan book by staging and coverage

    Loan book by staging and coverage Jun 2021 Total Loan book by staging – €58.4bn loan exposures Stage 1 Stage 2 Stage 3* Gross loan exposures (€bn) exposure Mortgages 26.6 1.5 1.5 29.6 Personal 2.1 0.3 0.2 2.6  Stage 1 loan exposures increased by €1.4bn to Property & Construction 4.9 1.6 0.7 7.2 €47

  35. Slide 35: Stage movements

    Stage movements Jun 2021 Stage movements (excluding Mortgages & Personal) Gross loan exposures (€bn) Stage 1 Stage 2 Stage 3* Total exposure (excluding Mortgages & Personal)  Stage 1 loan exposures increased €1.4bn primarily due to Property & Construction 4.9 1.6 0.7 7.2 new lending and some upward

  36. Slide 36: Asset quality by portfolio

    Asset quality by portfolio €bn Mortgages Personal Property Corporate & SME Total Jun 2021 Customer loans* 29.6 2.6 7.5 19.0 58.7 Total ECL cover (%) 2% 9% 5% 5% 3.6% of which NPEs 1.5 0.2 0.9 1.2 3.8 ECL on NPE 0.4 0.1 0.2 0.3 1.0 ECL / NPE coverage % 28% 61% 20% 26% 27% Dec 2020 Customer loans 30.6

  37. Slide 37: Asset quality – Total portfolio and personal portfolio

    Asset quality – Total portfolio and personal portfolio Total Portfolio (€bn) Personal (€bn) 59.5 58.7 32% 27% 2.8 4.3 7.3% 3.8 6.5% 61% 2.6 0.2 9% 4.7 7.8% 4.7 8.1% 0.2 7% 61% 0.2 9% 0.2 6% 50.5 84.9% 50.2 85.4% 2.4 84% 85% 2.2 0.0 Dec 20 Jun 21 Dec 20 Jun 21 Strong / Satisfactory Criticised NPE Str

  38. Slide 38: Asset quality - mortgages

    Asset quality - mortgages Credit quality (€bn) RoI mortgages Dec-20 Jun-21 30.6 29.6 34% 2.1 7% 28% 5% 1.5 25% 23% 1.5 5% 1.4 5% 30% 35% 45% 42% 88% €29.5bn €29.5bn 27.0 26.7 90% Tracker Variable Fixed Dec 20 Jun 21 Strong / Satisfactory Criticised NPE ECL/NPE coverage 38

  39. Slide 39: Asset quality – Property & construction and Corporate & SME

    Asset quality – Property & construction and Corporate & SME Property & construction (€bn) Corporate & SME (€bn) 7.4 7.5 22% 20% 12% 18.7 19.0 1.0 13% 0.9 5% 26% 32% 1.2 6% 0.5 6% 1.0 0.5 6% 13% 2.7 14% 2.5 5.9 81% 6.1 82% 15.2 81% 15.1 80% Dec 20 Jun 21 Dec 20 Jun 21 Strong / Satisfactory Criticised

  40. Slide 40: Asset quality – internal credit grade by ECL staging

    Asset quality – internal credit grade by ECL staging* Jun 2021 Dec 2020 €m Stage 1 Stage 2 Stage 3 POCI** Total Stage 1 Stage 2 Stage 3 POCI Total Strong 34,101 835 - 4 34,940 35,341 1,257 - 5 36,603 Satisfactory 12,098 3,037 - 3 15,138 9,411 4,384 - 1 13,796 Total strong / 46,199 3,872 - 7 50,078 4

  41. Slide 41: Investment securities – debt securities €16.3bn

    Investment securities – debt securities €16.3bn Key components €bn 9.2 7.4 5.3 4.0 1.4 1.3 1.6 1.5 Government Supernational banks Euro bank securities Non Euro bank securities and gov agencies securities Dec-20 Jun-21  €16.3bn down from €19.2bn mainly due to €1.8bn decrease in Irish Government secu

  42. Slide 42: Reported capital ratios

    Reported capital ratios Transitional capital ratios Fully loaded capital ratios Jun 21 Dec 20 Jun 21 Dec 20 Total risk weighted assets (€m) 51,139 53,036 Total risk weighted assets (€m) 50,723 52,579 Capital (€m) Capital (€m) Shareholders equity excl AT1 and dividend 12,364 12,307 Shareholders equit

  43. Slide 43: Loan book analysis, interest rate sensitivity and ECL sensitivities

    Loan book analysis, interest rate sensitivity and ECL sensitivities Concentration by sector (%) H1 2021 Concentration by location (%) H1 2021 Agriculture 3 Republic of Ireland 76 United Kingdom 16 FYEnergy 2020 macroeconomic scenarios and 4 Manufacturing 4 North America 4 weightings: • Base Property

  44. Slide 44: Credit ratings

    Credit ratings As at 3 Aug 2021 AIB Group plc (HoldCo) Baa1 BBB BBB- Long term issuer rating Outlook Stable Negative Negative Investment grade    AIB p.l.c. (OpCo) A2 BBB+ BBB+ Long term issuer rating Outlook Stable Negative Negative Investment grade    44

  45. Slide 45: Contact details

    Contact details Our Investor Relations Department are happy to facilitate your requests for any further information Name Email Telephone Niamh Hore niamh.a.hore@aib.ie +353 1 6411817 Head of IR Janet McConkey janet.e.mcconkey@aib.ie +353 1 6418974 Siobhain Walsh siobhain.m.walsh@aib.ie +353 1 641190

AIB Group — H1 2021 Earnings Presentation on 6ix