Aib Group Plc · EURONEXT:A5G
Aib — FY2016 Earnings Presentation
55 slides from Aib's earnings presentation, 2017
Slide 1: Annual Financial Results 2016
Annual Financial Results 2016
Slide 2: Important Information and Forward Looking Statement
Important Information and Forward Looking Statement This presentation should be considered with AIB’s Half-Yearly Financial Report 2016, Trading Update December 2016 and all other relevant market disclosures, copies of which can be found at the following link: http://aib.ie/investorrelations Importa
Slide 3: 2016 Performance & Strategic Objectives
2016 Performance & Strategic Objectives Bernard Byrne Chief Executive Officer
Slide 4: 2016 in Summary
2016 in Summary Momentum in Performance Continued strong financial performance and ongoing sustainable underlying profitability, with further improvement in asset quality Strong capital ratios, organic capital generation and normalised funding (1) Dividend payment to ordinary shareholders of €
Slide 5: Profitable, strong capital generation and delivering shareholder returns
Profitable, strong capital generation and delivering shareholder returns Dividend payment proposed €1.7bn • Strong sustainable profit on a total and underlying basis Profit before tax • Enhanced by one-offs and lower yoy provision writebacks €1.9bn in FY 2015 2.25% • Positive upward NIM trajectory;
Slide 6: Four pillar strategy driving sustainable performance
Four pillar strategy driving sustainable performance Focused on delivering long term shareholder outcomes We will be at the heart of our customers’ financial lives by always being useful, always informing and always providing an exceptional customer experience. Strategic Ambition We will deliver a b
Slide 7: Growing economy with attractive market dynamics
Growing economy with attractive market dynamics Well positioned for growth Economic Growth Expected Despite Brexit Uncertainties Total Employment Levels Rising as Unemployment Falls Real GDP Growth, % Unemployment Rate (%) Total Employment (‘000s) 17.0 2,150 3.4 3.3 3.2 1.6 1.8 11.0 1,925 1.5 5.0 1,
Slide 8: Strong franchise with competitive market position
Strong franchise with competitive market position The leading Irish bank with retail and commercial focus Retail & Commercial Banking (1) Wholesale, Institutional & Corporate Banking (1) AIB UK – AIB GB & Northern Ireland • Largest retail and commercial bank in Ireland • Corporate Banking – relation
Slide 9: Investment in strategic priorities delivering results
Investment in strategic priorities delivering results Customer First approach Customer First Simple & Efficient Risk & Capital Management Talent & Culture Focused Investment of €870m (2015-2017) • Customer need – driven by • Resilient and agile technology • Risk adjusted return on capital • Strategy
Slide 10: Customer First driving commercial success
Customer First driving commercial success Tangible customer and efficiency outcomes Continuously innovate to Serve through our omni- Relentlessly deliver Understand our Customer First provide suitable channel distribution simplification and customers’ needs solutions for customers model digitisation
Slide 11: Proven return on Investment
Proven return on Investment Growing levels of customer interaction and digital engagement 2013 2016 501K 28K 148K Mobile Kiosk / Mobile Interactions Interaction Tablet Logins s 208K Internet 240K 18K Banking Internet Over 1.2 Contact Logins 880k daily Banking Logins million daily Centre Calls intera
Slide 12: Resulting in increased new lending and market share gains
Resulting in increased new lending and market share gains Leading market shares in key sectors Increase in new lending Momentum across key sectors Leading Market Shares Drawdowns (€bn) Mortgage Lending (€bn) Stock 37% 44% 36% 36% 8.7 8.5 1.7 2.0 22% 26% 1.3 1.9 5.7 2.6 2014 2015 2016 (1) (3) Persona
Slide 13: Progress on resolving legacy customer issues
Progress on resolving legacy customer issues 69% reduction in impaired loans since peak Tangible Progress in Reducing Impaired Loans Track record of Delivery Impaired Loans (€bn) • €19.8bn reduction in impaired loans to €9.1bn since Dec 2013 55% 51% • Case by case restructuring including continued r
Slide 14: Significant capital generation enabling substantial payments to the State
Significant capital generation enabling substantial payments to the State Enhanced by dividend payment Strong Organic Capital Generation Significant Capital Repayments CET1 (FL) €3.2bn paid in Ratio (%) €1.6bn of capital €1.7bn paid in fees, coupons, repaid in July Dec 2015 dividends and 15.3% 2016
Slide 15: Focused on delivering sustainable performance
Focused on delivering sustainable performance Based on strong customer franchise, capital accretion and returns and sustainable growth Investment in Customer First agenda driving growth Maintain strong, Strong capital base stable NIM Robust and Attractive returns efficient operating on capital model
Slide 16: Summary
Summary Momentum and delivery Continued strong financial performance and ongoing sustainable underlying profitability, with further improvement in asset quality Strong capital ratios, organic capital generation and normalised funding Dividend payment to ordinary shareholders of €250m proposed
Slide 17: Financial Performance
Financial Performance Mark Bourke Chief Financial Officer
Slide 18: Financial highlights
Financial highlights Key performance metrics in line with expectations Sustainable underlying profitability underpinned by positive NII and margin trajectory NIM 2.25%(1) - exit NIM 2.42%(2) Stable earning loan book (ex-FX) driven by strong momentum in new lending New Lending €8.7bn Continued re
Slide 19: Operating Performance
AIB Operating Performance
Slide 20: Income statement
Income statement Sustainable underlying profitability Summary income statement (€m) 2016 2015 Operating income €2.6bn Net interest income 2,013 1,927 • net interest income up 4% Other income 617 696 Total operating income 2,630 2,623 • net interest margin up 28bps to 2.25%; continued positive NIM
Slide 21: Average balance sheet
Average balance sheet Further NIM expansion driven by stable asset yields and lower funding costs Year ended 31 December 2016 Year ended 31 December 2015 Average Balance(2) Interest Average Rate Average Balance(2) Interest Average Rate €m €m % €m €m % Assets Strong NIM (1) 2.25% (exit NIM 2.42%) L
Slide 22: Other income
Other income Stable net fees and commission income Net fee & commission income €m Stable underlying fee and commission income of €395m 405 395 84 • Current accounts represent c. 50% of net fees and commission 77 48 51 income 85 83 188 184 Other business income fluctuated due to valuations on lon
Slide 23: Costs
Costs Continued focus on cost discipline while progressing on strategic investment programme Operating expenses (1) Disciplined cost management €m 49% 52% 1,742 • Significant reduction in cost base from 2012 - €365m (-21%) 1,465 1,397 1,377 1,292 • 2016 operating expenses €1,377m (+7%) in line wit
Slide 24: P&L - other items
P&L - other items Exceptional benefits and provision writebacks partially offset by regulatory fees and levies Other PL items (€m) 2016 2015 • Bank levies and regulatory fees €112m(1) Operating Profit Before Provisions 1,253 1,331 • Bank Levy €60m Bank Levies and Regulatory Fees (112) (71) • SRF(2)
Slide 25: Balance Sheet & Asset Quality
Balance Sheet & Asset Quality
Slide 26: Balance sheet
Balance sheet Well funded balance sheet management and strong capital ratios; well positioned for growth Balance Sheet €bn Dec-16 Dec-15 Gross loans to customers 65.2 70.2 Provisions (4.6) (6.8) Assets Net loans to customers 60.6 63.3 • Net loans €60.6bn Financial investment (AFS & HTM) 18.8 20.0 NA
Slide 27: Customer loans
Customer loans New lending €8.7bn Customer loans (€bn) Earning loans Impaired loans Gross loans Specific provisions IBNR provisions Net loans Opening balance (1 January 2016) 57.0 13.1 70.1 (6.2) (0.7) 63.2 New lending volumes 8.7 0.0 8.7 0.0 0.0 8.7 New impaired loans (0.8) 0.8 0.0 (0.3) 0.0 (0.3)
Slide 28: Earning loans increasing by segment and sector in Ireland
Earning loans increasing by segment and sector in Ireland Impaired loans are reducing Retail & Commercial Banking RoI Mortgages €bn €bn 38.4 38.7 28.6 28.9 10.8 7.9 5.7 4.4 Earning loans Impaired loans Earning loans Impaired loans Jan-16 Dec-16 Jan-16 Dec-16 Wholesale, Institutional and Corporate Ba
Slide 29: Customer loans
Customer loans Corporate & SME driving new lending growth Dec 2016 – Earning loans €56.1bn Dec 2016 – New lending €8.7bn Property & Corporate & Property & construction SME (ex. construction €6.7bn; 12% Property) €1.5bn; 17% Corporate & €16.1bn; 28% SME (ex. Other Personal Property) €0.7bn; €4.4bn; 5
Slide 30: Asset quality
Asset quality Continued progress as impaired loans reduce across all sectors Dec-16 Residential Property and Non-property Other Personal Total €bn Mortgages Construction business lending Loans and receivables to customers 35.2 3.1 9.4 17.5 65.2 Impaired 4.6 0.4 2.7 1.4 9.1 Impaired loans net 2.0 0.3
Slide 31: Balance sheet provisions
Balance sheet provisions Working well within provision stock while maintaining coverage Residential Property and Non-property Other Personal Total Balance sheet provisions movement (€bn) Mortgages Construction business Opening Balance sheet provisions 1 Jan 2016 Specific 2.0 0.5 2.5 1.2 6.2 IBNR 0.3
Slide 32: Financial investments
Financial investments €18.8bn portfolio of Financial Investments including €3.4bn as HTM Key components of AFS - debt securities (1) AFS - components of government securities €bn €bn 8.7 8.0 5.4 5.1 3.5 3.4 4.6 4.5 2.0 1.7 0.3 0.3 1.2 0.9 1.2 1.1 0.7 0.6 Held to Maturity Government Supranational Eur
Slide 33: Funding & Capital
AIB Funding & Capital
Slide 34: Funding structure
Funding structure Stable deposit base driving strong funding position Total Funding Customer deposits represent 69% of total funding €bn 98.7 92.0 • Low cost stable source of funds, LDR ratio 95% • Wholesale funding Customer Accs 7 year AIB Mortgage Banks ACS issuance €1bn Customer 63.4 Accs • L
Slide 35: Capital ratios
Capital ratios Strong capital base with fully loaded CET 1 of 15.3% - normalised capital stack Capital ratios AIB Group - RWA (€m) (Transitional ) % 18.9 21.7 Risk Weighted Assets (€m) 31-Dec-16 31-Dec-15 Movement 15.5 17.6 Credit risk 48,843 53,596 (4,753) Market risk 288 457 (169) 19.0 Operational
Slide 36: Summary
Summary Continued momentum and well-positioned Robust capital position supporting growth and capital return - €250m dividend proposed Sustainable underlying profitability with positive NII and margin trajectory Stable earning loan book approaching inflection point Continued focus on reducing i
Slide 37: Concluding remarks
Concluding remarks Bernard Byrne Chief Executive Officer
Slide 38: Focused on delivering sustainable performance
Focused on delivering sustainable performance Based on strong customer franchise, capital accretion and returns and sustainable growth Investment in Customer First agenda driving growth Maintain strong, Strong capital base stable NIM Robust and Attractive returns efficient operating on capital model
Slide 39: Slide 39
Slide 40: Appendix
AIB Appendix
Slide 41: AIB revised segments in line with Business
AIB revised segments in line with Business Group & AIB Ireland AIB UK International (1) Retail & Commercial Banking Wholesale, Institutional & Group Treasury & support AIB UK (‘UK’) (‘RCB’) Corporate Banking (‘WIB’) (1) functions • Largest retail and commercial • Corporate Banking – • >360k retail a
Slide 42: AIB segment performance – Dec 2016
AIB segment performance – Dec 2016 Segmental Financials RCB WIB UK Group AIB Group Contribution statement (€m) 2016 2015 2016 2015 2016 2015 2016 2015 2016 Net interest income 1,273 1,220 269 226 224 252 247 229 2,013 Other income 398 382 51 43 65 50 103 221 617 Total operating income 1,671 1,602 32
Slide 43: Improving asset quality by segment
Improving asset quality by segment Dec-16 Dec-15 €m RCB WIB UK Group Total RCB WIB UK Group Total Residential mortgages 33,408 36 1,795 35,239 34,372 48 2,362 36 36,818 of which: owner-occupier 28,624 7 1,564 30,195 28,834 10 2,048 36 30,928 of which: buy-to-let 4,784 29 231 5,044 5,538 38 314 5,890
Slide 44: Improving asset quality by segment
Improving asset quality by segment Balance sheet provisions movement (€m) RCB WIB UK Group Total Opening Balance sheet provisions 1 Jan 2016 Specific 4,896 218 1,027 17 6,158 IBNR 556 47 71 0 674 Balance sheet provisions 5,452 265 1,098 17 6,832 Income statement - credit provision charge/writebacks
Slide 45: Criticised loans and definitions
Criticised loans and definitions Credit profile – criticised loans Credit profile – criticised loans €bn €bn 18.7 42.7 41.8 7.0 1.7 3.0 6.8 34.0 6.3 6.1 5.2 2.8 24.8 6.6 18.7 1.2 4.3 7.4 3.0 0.9 NPE 29.4 28.9 6.6 22.2 9.1 13.1 9.1 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-16 Impaired Vulnerable Watch I
Slide 46: Non-Performing Exposures and Impaired Loans
Non-Performing Exposures and Impaired Loans NPEs: Impaired to NPE Reconciliation • Regulatory definition (FINREP) • Relevant for Regulatory €bn Reporting, EBA stress testing & capital planning Group-wide adoption 14.1 • 2.9 Reconciliation 1.2 • NPEs include • All 90 DPD which are not 0.9 impaired (w
Slide 47: ROI residential mortgages – arrears significantly lower
ROI residential mortgages – arrears significantly lower ROI Mortgage Portfolio – Dec 2016 Impairment writeback €bn €m Buy-to-let Fixed 14% 10% 463 Owner-occupier 86% Tracker 35% 109 Variable 55% €33.4bn Dec-15 Dec-16 Impaired Loans • 86% of the RoI mortgage portfolio is owner occupier and 14% is buy
Slide 48: Other personal
Other personal Personal Loan Portfolio – Dec 2016 Impairment writeback €bn €m Impaired 14% Vulnerable 9% 22 Watch 8 4% Satisfactory 73% €3.1bn Dec-15 Dec-16 Impaired Loans • Portfolio comprises €2.2bn loans and overdrafts and €0.9bn in credit €bn card facilities 69% 70% 58% • Increase in demand for
Slide 49: Property & construction
Property & construction Property & Construction Portfolio – Dec 2016 Impairment writeback €bn €m Contractors Housing 4% Associations Land & 3% 214 Development 16% 145 Investment 77% Dec-15 Dec-16 €9.4bn Impaired Loans • Overall portfolio has reduced by €2.1bn (19%) since Dec’ 15 primarily due to • r
Slide 50: Non-property business
Non-property business Non-property business portfolio – Dec 2016 Impairment writeback €bn €m Other Agriculture 26% 10% 225 Hotels & Licensed Premises 16% Retail/Wholesale/ 16 Other Services 33% Other Distribution 15% Dec-15 Dec-16 €17.5bn Impaired Loans • Portfolio comprises Corporate and SME lendin
Slide 51: ROI Mortgages – stock of forbearance
ROI Mortgages – stock of forbearance of which: loans > 90 days of which: loans > 90 days Dec 2016 - Total in arrears and/or impaired Dec 2015 - Total in arrears and/or impaired Forbearance type by mortgage Number Balance (€m) Number Balance (€m) Number Balance (€m) Number Balance (€m) Interest only
Slide 52: Non-mortgage – stock of forbearance
Non-mortgage – stock of forbearance Dec-16 Dec-15 Non-property Non-property Property business Property business Other and lending Other and lending Personal construction Balance Personal construction Balance Forbearance Type by Non-Mortgage Balance (€m) Balance (€m) Balance (€m) Total (€m) Balance (
Slide 53: Funding market access
Funding market access 2013 2014 2015 2016 ACS Issuance Senior Senior Tier 2 AT1 ACS Issuance Senior ACS Issuance ACS Issuance ACS Issuance ACS Issuance September Unsecured Unsecured November December January 2013 Unsecured March 2014 January 2015 July 2015 January 2016 2013 April 2014 March 2015 201
Slide 54: Shareholders’ equity
Shareholders’ equity Year ended 31 Year ended 31 Shareholders’ equity €m December 2016 December 2015 €m €m Opening Shareholders’ equity 12,148 11,572 PAT 2016 1,356 1,380 Net actuarial gains in retirement benefit schemes 103 743 Net change in fair value of AFS securities (359) 103 Net change in cash
Slide 55: Regulatory capital and ratios
Regulatory capital and ratios Page 55