Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — FY2022 Earnings Presentation
78 slides from Bank Of Ireland's earnings presentation, February 2023
Slide 1: FY22 Results Announcement and Strategy Update
FY22 20 Results Announcement 22 and Strategy Update 31 December 2022 1
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Slide 3: Format for the day
Format for the day Topic Speaker FY22 Performance Myles O’Grady, Group CEO FY22 Financials Mark Spain, Group CFO Strategy Update Myles O’Grady, Group CEO Medium Term Financial Outlook Mark Spain, Group CFO 3
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Slide 5: FY22 Performance
FY22 Performance Group CEO Myles O’Grady 5
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Slide 7: Strong strategic progress and financial performance in 2022
Strong strategic progress and financial performance in 2022 • Underlying PBT of €1.2bn FY22 financial 10.6% • Total income2 +11% y/y, reflecting higher net interest income and growth in fee income ROTE1 in • Strong cost discipline maintained; like-for-like costs lower, cost to income ratio5 performa
Slide 8: Key business line highlights
Key business line highlights +64% • €3.9bn in new mortgage drawdowns; net book growth of 2% (ex NPE disposals) y/y increase in • Market share increased to 28% (FY21 23%); 31% H2 2022 Irish Mortgages new mortgage • Performance supported by enhanced digital and green offerings, while maintaining drawd
Slide 9: Delivering improvements for our customers
Delivering improvements for our customers Product and service model improvements Investments supporting further digital adoption +34pts c.95% Wealth and Insurance products now available on Improvement in Mobile App CES1 since launch digital channel (vs 31% in 2021) -9% +21% Customer complaints2 in 2
Slide 10: Significant progress on our ESG Strategy
Commitment to green transition evidenced by 1st c.€8bn tangible outcomes First Irish bank to have Science Sustainability-related finance Based Targets validated by SBTi on balance sheet Financial Wellbeing Significant at the heart progress on our of customer > 4 million UN co-lead ESG Strategy inter
Slide 11: Strong track record of delivery through 2018-22 cycle
Strong track record of delivery through 2018-22 cycle 2018 CMD target outcomes achieved… Target Delivery Target Delivery Cost to ROTE >10% 10.6% income ratio <50% 54% Costs Cost level <€1.7bn c.€1.65bn CET1 >13% 15.4% Distributions Cost Reduced Reduced Prudent & resumed trajectory annually a
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Slide 13: FY22 Financials
FY22 Financials Group CFO Mark Spain 13
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Slide 15: FY 2022 financial summary
FY 2022 financial summary • Total income 11%1 higher vs FY21 • Net lending of €1.6bn in Retail Ireland and Corporate; UK deleveraging in line with strategy • Operating expenses 6% higher reflecting strategic investments; expenses lower on like-for-like basis • Net credit impairment charge of c.25bps
Slide 16: Strong financial performance in 2022
Strong financial performance in 2022 FY 2021 FY 2022 • FY 22 performance reflects positive business momentum, continued y/y % (€m) (€m) focus on efficiencies and more normalised impairment charge Net interest income 2,219 2,482 12% • Operating profit pre-impairment +15% y/y reflecting Business incom
Slide 17: Net interest income 12% higher
Net interest income 12% higher Net interest income movement 2022 Performance €425m €25m (€160m) • Net interest income (NII) +12% y/y primarily driven by €2,447m €35m €2,482m – Higher liquid asset income reflecting higher interest rates and €2,157m growth in our Irish deposit franchise of €11bn (incl
Slide 18: Net interest income resilience from structural hedge
Net interest income resilience from structural hedge Structural hedge • Increased structural hedge volumes of €60bn at end 2022 reflect Period-end €37.6bn €60.5bn – Increase in current account balances volume – Hedging of current account balances previously subject to negative interest rates €129m –
Slide 19: Net lending of €1.6bn in Retail Ireland and Corporate
Net lending of €1.6bn in Retail Ireland and Corporate New lending1 by division Strong growth in Irish mortgage lending €15.6bn €14.2bn • Total new lending of €15.6bn in 2022 (+10% y/y) – Retail Ireland +36% y/y supported by 64% growth in mortgages – Corporate & Markets +2% y/y supported by 7% growth
Slide 20: Business income +27% (+15% ex Davy)
Business income1 +27% (+15% ex Davy2) FY 2021 FY 2022 • Wealth and Insurance +44% y/y following acquisition of Davy2 (+15% (€m) (€m) y/y % ex Davy) and improved performance on the existing book Wealth and Insurance (incl. Davy) 266 382 44% • Retail Ireland +27% y/y due to higher customer activity an
Slide 21: Like-for-like expenses below FY21
Like-for-like expenses1 below FY21 Cost Movement €78m €25m (€32m) €28m €1,746m €1,647m €1,640m FY21 Inflation and other2 Efficiencies FY22 like-for-like1 One-off investment in growth Davy FY22 reported opportunities FY22 operating expenses 2023 outlook • Operating expenses reduction of 0.4% y/y refl
Slide 22: Non-core items
Non-core items 2022 non-core items FY 2021 FY 2022 Non-core items (€m) (€m) • Net non-core charge of €142m primarily comprising Transformation programme costs (122) (50) – transformation programme charge (€50m) primarily related to Retail UK restructuring Acquisition costs (2) (54) – acquisition cos
Slide 23: FY22 net impairment charge of €187m or 25bps
FY22 net impairment charge of €187m or 25bps IFRS 9 models and management adjustments (PMAs) Loan loss experience and portfolio activity (€20m) charge (€167m) charge • IFRS 9 model updates (€137m) reflecting downgrade of macroeconomic outlook and • €214m charge split evenly over H1 and H2; primarily
Slide 24: Significant reduction in NPEs
Significant reduction in NPEs NPE movements – NPE ratio declines to 3.6% Non-performing exposures c.40% lower y/y • NPE ratio significantly reduced following NPE disposals in H2 2022, 5.5% (€1.3bn) now at 3.6%; 3.4% pro forma post KBC acquisition 4.4% • Proven track record of 3.6% (€0.4bn) – Sustain
Slide 25: Strong capital generation supports material step up in distributions
Strong capital generation supports material step up in distributions Fully Loaded CET1 ratio 135bps (50bps) RWAs 10bps (80bps) €46.2bn RWAs (75bps) €47.5bn 16.0% 15.4% Dec-21 Net organic capital 1 RWA2 Pension / Other Davy Proposed distribution Dec-22 post distribution Strong capital generation Dist
Slide 26: 2023 guidance
2023 guidance1 Net interest income Business income (incl. JVs) > 12% higher than Q4 2022 High single digit % lower annualised rate of c.€3bn than 2022 due to impact of IFRS 17 Capital Organic generation to materially increase in 2023 Costs Total cost of risk Like-for-like costs broadly in line; Mid-
Slide 27: Strategy Update
Col ers le a om gu Strategy Update st Purpose es Cu Group CEO Helping you Myles O’Grady rs Thrive de So et ol h ci y a re Sh Bank of Ireland – The National Champion Bank 27
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Slide 29: Unique opportunity – Highly attractive markets, differentiated model
Unique opportunity – Highly attractive markets, differentiated model Highly Growing, Attractive Consolidating Acknowledging attractive resilient Irish customer banking macro markets economy demographics sector uncertainty Unique opportunity as The National Champion Bank Leading, Unique wealth Comple
Slide 30: Highly attractive market and demographics
Highly attractive market and demographics Ireland is the +6ppts1 4.4% fastest growing Irish economic growth vs Ireland unemployment economy in the EU EU average 2023-25 (fastest in EU) rate January 2023 Ireland has a younger population and higher 33% 19% savings ratio than most of population less th
Slide 31: Differentiated business model is increasing value creation
Differentiated business model is increasing value creation Leading, full-service bank with c.440k new customers1 (+11%) Unique wealth offering; Ireland’s only bancassurer Leading ROI Leading Business Bolstered Retail and Corporate by recent market franchise franchises moves Banking Wealth >2.0m c.30
Slide 32: Purposeful and sustainable growth for our stakeholders
Purposeful and sustainable growth for our stakeholders Bank of Ireland – The National Champion Bank 32
Slide 33: Strategic pillars to deliver 2025 outcomes
Strategic pillars to deliver 2025 outcomes Stronger Simpler Sustainable Relationships Business Company Activate <50% c.15% Further embedding a digital first customer Annual cost-income ratio 2023-2025 Annual ROTE target 2023-2025 acquisition model Connect +10pts #1 Improved customer experiences Impr
Slide 34: Irish Residential Mortgages | Capture value in a growing market
Irish Residential Mortgages | Capture value in a growing market Starting point 2025 target outcomes 2022 new lending growth Increased Market expected to grow by c.5% p.a. 93% since 2017 market share BOI market share to continue to grow Market New home construction in 30k 2022; annual underlying Posi
Slide 35: Everyday Banking | Protect and grow relationship value
Everyday Banking | Protect and grow relationship value Starting point 2025 target outcomes Market Ireland deposit market Efficient funding, Growth in customers and balances targeting 49% growth since 20171 growing >GDP stable funding and increased income Deposits & current account Deeper relationshi
Slide 36: Wealth and Insurance | Market leadership via clear brand propositions
Wealth and Insurance | Market leadership via clear brand propositions Starting point 2025 target outcomes AUM growth across our key #1 partner of choice for Wealth & Insurance in Ireland c.30% markets since 2017 5-10% p.a. AUM growth, driver of business income Market growth Substantial markets Stron
Slide 37: Business & Corporate | Serving simple and complex customer needs
Business & Corporate | Serving simple and complex customer needs Starting point 2025 target outcomes Market consolidation in 2022 Best-in-class Irish franchise delivering net following bank exits lending growth Market Leading positions in A sustain and maintain approach to Growth in business and int
Slide 38: Retail UK | Continuing to deliver returns through niche strategy
Retail UK | Continuing to deliver returns through niche strategy Starting point 2025 target outcomes New UK mortgage lending in £311bn Improve intermediary integration 12 months to Sept 2022 Selective growth Market in Bespoke Further digitise the customer experience mortgages1 Develop green mortgage
Slide 39: Sustainable Company: ESG ambitions
Managing environmental risks; leveraging c.€15bn Advisory opportunities Sustainable financing by 2025 Providing leading advice on ESG (and €30bn by 2030) (e.g. Davy Horizons for SMEs) Practical, Delivering impact meaningful across society ESG interventions through our #1 50:50 activities Position fo
Slide 40: Key outcomes for our stakeholders by 2025
Improved Customer 5% >10 experience and Increase in financial needs Relationship NPS score offering met per customer (2022 baseline of +4) Enhanced +6pts Alignment Colleague Engagement score Performance related variable engagement Key outcomes for (2022 baseline of 68%) remuneration our stakeholders
Slide 41: Medium Term Financial Targets
Col ers le a Medium Term om gu st Purpose es Cu Financial Targets Group CFO Helping you rs Thrive Mark Spain de So et ol h ci y a re Sh 41
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Slide 43: Financial Targets – Step change in returns and distributions
Financial Targets – Step change in returns and distributions FY23-25 Financial Targets FY22 Performance (all targets apply to each year) Return on Tangible Equity1 (ROTE) 10.6% c.15% Cost to Income Ratio2 (CIR) 54% < 50% 25% Building to c.40% pay-out Ordinary dividend Of statutory profits c.40-60% p
Slide 44: Financial targets based on prudent economic assumptions
Financial targets based on prudent economic assumptions Ireland 2023 2024 2025 UK 2023 2024 2025 GDP growth 4.1% 3.8% 3.4% GDP growth -0.6% 0.7% 1.7% CPI inflation 6.4% 2.7% 1.9% CPI inflation 7.6% 2.7% 1.2% Unemployment 4.9% 4.9% 4.8% Unemployment 4.4% 4.8% 4.7% House prices (HPI) 0.0% 0.0% 1.0% Ho
Slide 45: Sustainable reduction in cost to income ratio (CIR)
Sustainable reduction in cost to income ratio (CIR)1,2 Cost to income ratio 2022-25 (illustrative) Net interest income Higher rates TLTRO Irish mortgages and Funding costs deposits KBC acquisition Business income Wealth income (incl. Davy) IFRS 17 54% Retail Ireland income Costs < 50% Efficiencies I
Slide 46: Value drivers delivering ROTE target of c.15%
Value drivers delivering ROTE1,2 target of c.15% ROTE 2022-25 (illustrative) Pre-impairment profit Interest rates Cost inflation Irish mortgages and deposits Investment in growth and efficiencies KBC and Davy acquisitions Funding costs Wealth income Efficiencies Normalised impairment NPE de-risking
Slide 47: Highly capital generative business supports attractive distributions
Highly capital generative business supports attractive distributions Fully Loaded CET1 bridge (illustrative) To be considered annually 15.4% > 14% FY22 CET1 Capital generation KBC portfolio IFRS 17 impact Ordinary dividends RWA investment Surplus capital CET1 guidance • Material step up in capital g
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Slide 49: Concluding remarks
Col ers le a om gu Concluding remarks st Purpose es Cu Group CEO Helping you Myles O’Grady rs Thrive de So et ol h ci y a re Sh 49
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Slide 51: Unique opportunity as The National Champion Bank
Unique opportunity as The National Champion Bank 2023-2025 Financial Targets Highly attractive markets ROTE c.15% CIR <50% Stronger Simpler Sustainable Relationships Business Company Driving Growth Improving Efficiency Enhancing Returns Dividend pay-out building to c.40%1 Distribution of surplus cap
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Slide 53: Appendix
Appendix 53
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Slide 55: Appendix
Appendix Slide No. • BOI overview – customer loans / new lending volumes 56 • Ireland mortgage loan book 57 • Income statement – Net interest income analysis 58 • Asset quality – Non-performing exposures by portfolio 59 – Portfolio by stage 60 – Non-property SME and corporate by stage 61 – Residenti
Slide 56: Overview of customer loans
Overview of customer loans Profile of customer loans1 at Dec 2022 (Gross) Ireland UK RoW Total Total Composition (Dec 22) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 22.5 15.6 0.0 38.0 52% Non-property SME and corporate 10.9 5.2 5.4 21.5 29% Property & construction 5.1 1.5 1.8 8.2 11% Consumer 2.2 3.2 0.0
Slide 57: Ireland Mortgages: €22.5bn
Ireland Mortgages: €22.5bn New Lending volumes and Market Share Ireland Mortgages (gross) €22.9bn €22.4bn €22.5bn 28% 25.5% 23% €12.2bn €13.1bn €15.6bn €3.9bn €2.9bn €2.4bn €2.5bn €2.1bn €1.6bn €7.9bn €6.8bn €5.3bn 2020 2021 2022 Dec-20 Dec-21 Dec-22 n New Lending Volumes Market Share n Tracker n Va
Slide 58: Income statement: Net interest income analysis
Income statement Net interest income analysis H1 2021 H2 2021 H1 2022 H2 2022 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
Slide 59: Non-performing exposures by portfolio
Non-performing exposures by portfolio Non-performing Impairment loss Advances Non-performing exposures Impairment loss Composition (Dec-22) (€bn) (€bn) exposures as % of allowance (€bn) allowance as % of advances non-performing exposures Residential Mortgages 38.0 0.5 1.3% 0.1 30% – Republic of Ire
Slide 60: Portfolio by stage
Portfolio by stage Gross carrying amount Composition (Dec-22) 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 34,020
Slide 61: Non-property SME and corporate by stage
Non-property SME and corporate by stage1,2 Composition (Dec-22) Gross carrying amount 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 Non-property SME and corporate – Manufac
Slide 62: Residential mortgages / Consumer loans
Residential mortgages / Consumer loans Gross loans by stage Residential mortgages Residential mortgages Consumer • Mortgage portfolios 53% of Group loan book €43.3bn €5.3bn – Average LTV of 53% on stock €5.2bn €1.8bn €38.0bn €0.1bn – 92% of the portfolio has LTV < 80% €0.1bn €0.5bn • Stage 2 loans i
Slide 63: Non-property SME and corporate / Property & Construction
Non-property SME and corporate / Property & Construction Gross loans by stage Non-property SME and corporate Non-property SME and corporate Property and Construction • 29% of Group loan book, well diversified by geography and sector €20.8bn €21.5bn • €0.4bn decrease in stage 2 loans since FY 2021 gi
Slide 64: Forward looking information – macroeconomic scenarios
Forward looking information – macroeconomic scenarios Ireland United Kingdom 31 December 2022 2023 2024 2025-2027 2023 2024 2025-2027 Central scenario – 45% probability weighting GDP growth1 4.1% 3.8% 3.1% (0.6%) 0.7% 1.9% GNP growth1 3.7% 2.8% 3.0% n/a n/a n/a Unemployment rate2 4.9% 4.9% 4.8% 4.4%
Slide 65: 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 66: Capital and liquidity
Capital and liquidity Liquidity Dec-21 Dec-22 • Funding and liquidity remains strong from stable customer deposits (€bn) (€bn) and MREL issuance Customer loans 76 72 • Liquidity Ratios LCR 221% and NSFR 163% significantly above regulatory Liquid assets 50 49 requirements of 100% for both ratios Othe
Slide 67: Ordinary shareholders’ equity and TNAV
Ordinary shareholders’ equity and TNAV Dec-21 Dec-22 Movement in ordinary shareholders’ equity (€m) (€m) Ordinary shareholders’ equity at beginning of period 8,587 10,304 Movements: Profit / (Loss) for the period 1,055 897 Impact of adopting IFRS 9 – – Dividend paid to ordinary shareholders – (54) D
Slide 68: Fully Loaded CET1 ratio
Fully Loaded CET1 ratio Capital ratios – 31 December 2022 Fully loaded ratio (€bn) Fully loaded ratio (€bn) Dec-21 Dec-22 Total Equity 11.3 11.9 Foreseeable distribution1 (0.1) (0.3) Less Additional Tier 1 (1.0) (1.0) Deferred Tax Assets (1.1) (1.0) Intangible assets and goodwill (0.5) (1.0) Expecte
Slide 69: Regulatory capital requirements
Regulatory capital requirements Pro forma CET1 regulatory capital requirements 2022 2023 2024 Pillar 1 – CET1 4.50% 4.50% 4.50% Pillar 2 Requirement (P2R) 1.27% 1.27% 1.27% Capital Conservation Buffer (CCB) 2.50% 2.50% 2.50% Ireland Countercyclical buffer (CCyB)1 0.00% 0.61% 0.92% UK Countercyclical
Slide 70: Risk weighted assets (RWAs) / Leverage ratio
Risk weighted assets (RWAs) / Leverage ratio Customer lending average credit risk weights – Dec 20221,2 EBA Transparency Exercise 2022 (Based on regulatory exposure class) Country by Country Average IRB risk weights Residential Mortgages – Jun 2022 EAD 3 RWA Avg. Risk (€bn) (€bn) Weight Sweden 3.9%
Slide 71: Return on tangible equity (RoTE)
Return on tangible equity (RoTE) FY22: Headline vs. Adjusted Adjustments FY 2022 Additional gains Adjusted for FY 2022 Pension Headline & valuation items, CET1 ratio Adjusted Surplus (€m) net of tax at 14.0% (€m) Profit for the period 897 Coupon on Additional Tier 1 securities (69) Preference share
Slide 72: Cost income ratio: FY 2022
Cost income ratio: FY 2022 Headline vs Adjusted FY 2022 Pro forma FY 2022 Headline adjustments Pro forma (€m) (€m) (€m) Net interest income 2,482 2,482 Other income – Business income 774 774 – Additional gains 100 (100) – Other valuation items (122) 122 Total Income 3,234 22 3,256 Costs – Operating
Slide 73: IFRS 17 – key messages
IFRS 17 – key messages • IFRS 17 is an accounting change which impacts the phasing of profit IFRS 4 IFRS 17 Impact on Wealth and Insurance (2022)1 recognition for insurance contracts (€m) (€m) – Under IFRS 4, expected future profit on insurance contracts is recognised Income 295 135-160 as new busin
Slide 74: Defined benefit pension schemes
Defined benefit pension schemes Group IAS19 Defined Benefit Pension (deficit)/surplus Total Group defined benefit pension scheme assets (%) 3.60% €7.2bn €7.2bn €8.4bn €8.9bn €9.6bn €6.9bn 2.10% 2.00% 1.30% 1.35% 55% 0.80% 65% 65% 69% 66% 66% €0.60bn €0.70bn 21% 23% 23% 21% 24% 29% 24% (€0.14bn) (€0.
Slide 75: 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 76: 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 1 250 8900 ext. 44711 darach.oleary@boi.com Eamonn Hughes tel: +353 1 250 8900 ext. 35055 eamonn.hughes@
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