Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — H1 2020 Earnings Presentation
60 slides from Bank Of Ireland's earnings presentation, Jun 30, 2020
Slide 1: 2020 Interim Results Announcement
20 20 2020 Interim Results Announcement 30 June 2020
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Slide 3: Group CEO Francesca McDonagh
3 Bank of Ireland 2020 Interim Results Group CEO Francesca McDonagh
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Slide 5: H1 2020 Summary
5 H1 2020 Summary Bank of Ireland 2020 Interim Results • Total income reduced 13%; lower business income and valuation item movements €669m • Stable net interest income; NIM of 2.02% H1 Performance Underlying loss • Strong cost discipline continues; costs reduced by further 3% vs. before tax H1 2019
Slide 6: Supporting our customers during COVID-19
6 Supporting our customers during COVID-19 Bank of Ireland 2020 Interim Results Customers Payment Breaks • Relationship Net Promoter Score (NPS) improved by 10 Ireland1 Mortgages Consumer SME2 Total points from end 2019; reflecting actions taken to support No. of accounts 21k 8k 13k 42k customers Ex
Slide 7: Enabling our colleagues and communities to thrive
7 Enabling our colleagues and communities to thrive Bank of Ireland 2020 Interim Results Colleagues Communities • Colleague engagement up 8 points since Q4 2019 to a • Proactive and regular engagement with Irish Government high of 70%, surpassing the Global Financial Services and state bodies to sup
Slide 8: Economic activity has increased but uncertainties remain
8 Economic activity has increased but uncertainties remain Bank of Ireland 2020 Interim Results Ireland • Significant contraction in our core markets March – May 13.5% 2020, but high frequency data points to an improving environment in Q2 2020 8.2% • Reopening of the Irish economy accelerated during
Slide 9: High frequency Irish data show improving trends
9 High frequency Irish data show improving trends Bank of Ireland 2020 Interim Results Number of Pandemic Unemployment BOI Economic Pulse reflects the gradual Payment recipients; 52% below peak reopening of Ireland's economy 650,000 110 100 550,000 90 80 450,000 70 60 350,000 50 40 250,000 30 07-Apr
Slide 10: Increasing trend to digital engagement accelerating
10 Increasing trend to digital engagement accelerating Bank of Ireland 2020 Interim Results Longer term trend of decline Mobile app now accounts for over >65% of high volume product in over-the-counter branch 60% of digital traffic applications fulfilled digitally transactions and services (61%) +7%
Slide 11: Transformation delivering customer and cost benefits
11 Transformation delivering customer and cost benefits Bank of Ireland 2020 Interim Results Key milestones delivered Delivering market leading digital platforms in Wealth and Insurance • New mobile app deployment; Favourable Irish demographics, growing pension demand, increased deposit +19 point im
Slide 12: Capturing all tactical and strategic opportunities to further reduce cost base
12 Capturing all tactical and strategic opportunities Bank of Ireland 2020 Interim Results to further reduce our cost base Consistent Broad-based Efficient • Costs reduced by 10% vs. H2 2017 • Cost reduction broad based across • €262m in gross cost savings since • Costs have reduced during each of s
Slide 13: Strategic progress in Retail UK business with further restructuring required
13 Strategic progress in Retail UK business with further Bank of Ireland 2020 Interim Results restructuring required Retail UK H1 20181 H1 2019 H1 2020 • Net interest income: back book deleveraging, lower base rates and mortgage competition impacting NII; partial offset from Net interest income £258
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Slide 15: Group CFO Myles O'Grady
15 Bank of Ireland 2020 Interim Results Group CFO Myles O’Grady
Slide 16: H1 2020 Financial Summary
16 H1 2020 Financial Summary Bank of Ireland 2020 Interim Results • Underlying loss before tax €669m • Total income 13% lower; net interest income stable • Strong cost discipline; costs reduced by 3% • IFRS 9 impairment charge €937m • Net lending growth €0.2bn including €1.3bn of revolving credit fa
Slide 17: H1 2020 Financials
17 H1 2020 Financials Bank of Ireland 2020 Interim Results H1 2019 H1 2020 • Underlying loss before tax €669m (€m) (€m) • Total income 13% lower; net interest income stable Net interest income 1,069 1,079 Business income 311 266 • Business income 14% lower from reduced economic activity Additional g
Slide 18: Stable net interest income
18 Stable net interest income Bank of Ireland 2020 Interim Results Net interest income1 / NIM Stable net interest income / NIM 2.02% €1,069m €1,081m €1,079m • Net interest income benefitting from loan book growth 285bps 280bps since 2017 and reduced liability costs offsetting lower 278bps structural
Slide 19: Net lending growth of €0.2bn
19 Net lending growth of €0.2bn Bank of Ireland 2020 Interim Results Group loan book movement Net lending growth of €0.2bn in H1 2020 • New lending €5.8bn decreased by 19% vs. H1 20191: €1.3bn (€6.9bn) €5.8bn – Retail Ireland new lending €2.3bn, (14%) vs. H1 2019 – Retail UK new lending €2.4bn, (18%
Slide 20: Lower business income from reduced economic activity
20 Lower business income from reduced economic activity Bank of Ireland 2020 Interim Results H1 2019 H1 2020 14% decrease in business income (€m) (€m) • 16% decrease in Wealth and Insurance: Wealth and Insurance 119 100 – New business sales (APE) decreased by 21% vs. H1 2019 Retail Ireland 129 103 –
Slide 21: Strong cost discipline – €31m / 3% reduction
21 Strong cost discipline – €31m / 3% reduction Bank of Ireland 2020 Interim Results Cost Movement Strong cost discipline – €31m / 3% reduction • €31m / 3% net reduction after absorbing wage inflation (€47m) of 2.6% €12m €4m • Gross cost savings €47m: – Process efficiencies, organisational design an
Slide 22: H1 2020 impairment charge €937m – prudent and comprehensive approach
22 H1 2020 impairment charge €937m – prudent and Bank of Ireland 2020 Interim Results comprehensive approach IFRS 9 models Payment breaks Actual loan loss experience macro-economic update €432m €184m €321m • Updated IFRS 9 models • Management adjustment to • Actual loan loss experience incorporating
Slide 23: Impairment coverage increased to 2.7%
23 Impairment coverage increased to 2.7% Bank of Ireland 2020 Interim Results Net impairment charge Impairment coverage increased to 2.7% €365m • Net impairment charge €888m1 / 222bps (H1 2019: 21bps) on loans and advances to customers €246m • Increased impairment charge driven by: €124m €77m €76m –
Slide 24: Macro-economic outlook increasing Stage 2 balances
24 Macro-economic outlook increasing Stage 2 balances Bank of Ireland 2020 Interim Results Gross loans by stage Macro-economic outlook increasing Stage 2 loans €80.5bn • €5.7bn increase in Stage 2 loans since Dec 2019 €78.5bn €0.1bn €0.1bn reflecting deteriorated macro-economic outlook: €3.1bn €5.6b
Slide 25: Residential mortgages
25 Residential mortgages Bank of Ireland 2020 Interim Results Gross loans by stage Residential mortgages €46.3bn €1.7bn €44.3bn • Mortgage portfolios 57% of Group loan book €1.7bn €2.2bn €1.7bn • ROI mortgage portfolio €22.9bn at June 2020: – Average LTV of 60% on stock €42.9bn €40.4bn – 81% of the
Slide 26: Non-property SME and corporate
26 Non-property SME and corporate Bank of Ireland 2020 Interim Results Gross loans by stage Non-property SME and corporate €20.4bn €20.7bn • Non-property SME and corporate portfolio well €0.8bn €1.1bn €2.2bn diversified by geography and sector €5.9bn • Predominantly secured portfolios; government me
Slide 27: Property and construction
27 Property and construction Bank of Ireland 2020 Interim Results Gross loans by stage Property and construction €8.1bn €8.2bn €0.6bn €1.1bn • 10% of Group loan book; €7.4bn Investment Property; €1.5bn €0.8bn Development lending €3.4bn • >40% Investment property exposures in Dublin; 30% UK exposures
Slide 28: Consumer
28 Consumer Bank of Ireland 2020 Interim Results Gross loans by stage Consumer €5.7bn • 7% of Group loan book; exit of UK Credit Cards in 2019 €0.1bn €5.3bn €0.2bn €0.1bn €0.3bn • €2.0bn Ireland consumer exposure; €0.8bn motor, €0.8bn consumer loans. €0.4bn credit cards €5.4bn €4.9bn • €3.3bn UK con
Slide 29: NPE ratio increase to 5.8%
29 NPE ratio increase to 5.8% Bank of Ireland 2020 Interim Results NPE movements Non-performing exposures 6.3% 4.4% 5.8% • NPE ratio increased by 140bps to 5.8% • €0.6bn inflows primarily from credit migration in €0.5bn Non-property SME and corporate, and Property and €0.6bn construction portfolios
Slide 30: Strong capital position
30 Strong capital position Bank of Ireland 2020 Interim Results Fully loaded CET1 ratio 40bps (65bps) RWAs 45bps €49.9bn (15bps) (15bps) RWAs (60bps) 10bps €47.6bn 40bps Impairment (190bps) EL offset 90bps RWA reduction 35bps Net impact (65bps) 13.8% (20bps) 13.6% Regulatory capital demand Dec 19 Pr
Slide 31: Outlook
31 Outlook Bank of Ireland 2020 Interim Results Profitability Asset Quality Capital • 2020 gross new lending • While we expect economic • 2020 regulatory CET1 ratio to volumes expected to be c.70% recovery commencing in H2 remain above 13.5% of 2019 volumes 2020, COVID-19 and Brexit are • No dividen
Slide 32: Summary and conclusion
32 Summary and conclusion Bank of Ireland 2020 Interim Results While uncertainties remain, accelerated economic activity is supporting improved Trading outlook outlook for 2020 lending and income vs. Q1 outlook Capital Strong capital position with fully loaded CET1 ratio of 13.6%, regulatory CET1 ra
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Slide 34: Appendix
34 Bank of Ireland 2020 Interim Results Appendix
Slide 35: Appendix
35 Appendix Bank of Ireland 2020 Interim Results Slide No. • BOI overview – customer loans / new lending volumes 36 • ROI mortgage loan book 37 • Income Statement – Net interest income analysis 38 – Structural hedge 39 – Interest rate sensitivity 40 • Asset Quality – Non-performing exposures by port
Slide 36: BOI Overview
36 BOI Overview Bank of Ireland 2020 Interim Results Profile of customer loans1 at Jun 20 (Gross) ROI UK RoW Total Total Composition (Jun 20) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 22.9 21.4 0.0 44.4 57% Non-property SME and corporate 10.8 5.1 4.7 20.6 26% SME 7.1 1.6 0.0 8.7 11% Corporate 3.7 3.5 4.
Slide 37: ROI Mortgages: €22.9bn
37 ROI Mortgages: €22.9bn Bank of Ireland 2020 Interim Results New Lending volumes and Market Share ROI Mortgages (gross) €23.7bn €23.0bn €22.9bn 25% 24% 23% €9.5bn €11.1bn €11.6bn €4.4bn €3.2bn €3.0bn €1.3bn €1.0bn €0.9bn €9.8bn €8.7bn €8.3bn H1 2019 H2 2019 H1 2020 Dec 18 Dec 19 Jun 20 n New Lendi
Slide 38: Income Statement: Net interest income analysis
38 Income Statement Bank of Ireland 2020 Interim Results Net interest income analysis H2 2018 H1 2019 H2 2019 H1 2020 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) (%)
Slide 39: Structural Hedge
39 Structural Hedge Bank of Ireland 2020 Interim Results Interest income on structural hedge1 Overview Average structural €32.7bn €35.8bn • Structural hedging is used to help mitigate volatility in hedge volume earnings from interest rate movements €85m • Income from structural hedging has supported
Slide 40: Interest Rate Sensitivity
40 Interest Rate Sensitivity Bank of Ireland 2020 Interim Results The table below shows the estimated sensitivity of the Group’s income (before tax) to an instantaneous and sustained 1% parallel movement in interest rates Dec 19 Jun 20 Estimated sensitivity on Group income (1 year horizon) (€m) (€m)
Slide 41: Non-performing exposures by portfolio
41 Non-performing exposures by portfolio Bank of Ireland 2020 Interim Results Non-performing Non-performing Impairment Impairment loss Advances Composition (Jun 20) (€bn) exposures exposures as % loss allowance allowance as % of (€bn) of advances (€bn) non-performing exposures Residential Mortgages
Slide 42: Portfolio by stage
42 Portfolio by stage Bank of Ireland 2020 Interim Results Gross carrying amount Composition (Jun 20) Impairment loss allowance ILA % (before impairment loss allowance) of gross Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Sectoral analysis by stage loans €m €m €m €m €m €m €
Slide 43: Non-property SME and corporate by stage
43 Non-property SME and corporate by stage1,2 Bank of Ireland 2020 Interim Results Gross carrying amount Composition (Jun 20) Impairment loss allowance ILA % (before impairment loss allowance) of gross Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Sectoral analysis by stage l
Slide 44: Forward Looking Information – macro-economic scenarios
44 Forward Looking Information – macro-economic Bank of Ireland 2020 Interim Results scenarios Republic of Ireland United Kingdom 30 June 2020 2020 2021 2022-2024 2020 2021 2022-2024 Downside – 30% scenario probability weighting GDP growth1 (12.0%) 5.7% 2.5% (13.0%) 7.9% 1.6% GNP growth1 (14.0%) 6.9
Slide 45: ROI Mortgages
45 ROI Mortgages Bank of Ireland 2020 Interim Results Continued proactive arrears management >90 days arrears1 >90 days arrears • Bank of Ireland is significantly below the industry Industry average for both Owner Occupier (29% of industry Average average) and Buy to Let (24% of industry average) In
Slide 46: UK Customer Loans £29.1bn (€31.7bn)
46 UK Customer Loans £29.1bn (€31.7bn) Bank of Ireland 2020 Interim Results UK Mortgages – £19.6bn UK Mortgages Analysis – £19.6bn • Total UK mortgages of £19.6bn; (NPEs: 3.1%): n South East n Wales £2.0bn £0.8bn – Average LTV of 62% on existing stock at Jun 2020 (Dec 19: 63%) n Greater – Average LT
Slide 47: Ordinary shareholders' equity and TNAV
47 Ordinary shareholders’ equity and TNAV Bank of Ireland 2020 Interim Results 2019 H1 2020 Movement in ordinary shareholders’ equity (€m) (€m) Ordinary shareholders’ equity at beginning of period 9,243 9,625 Movements: Profit attributable to shareholders 448 (726) Dividend paid to ordinary sharehol
Slide 48: Capital and liquidity
48 Capital and liquidity Bank of Ireland 2020 Interim Results Liquidity Dec 2019 Jun 2020 • Funding and liquidity remains strong from stable (€bn) (€bn) customer deposits and MREL issuance Customer loans 79 77 Liquid assets 27 29 Customer deposits: €86.5bn • Growth of €2.5bn principally due to highe
Slide 49: Capital – strong fully loaded and regulatory CET1 ratios
49 Capital – strong fully loaded and regulatory CET1 ratios Bank of Ireland 2020 Interim Results Capital ratios – Jun 2020 Regulatory ratio Fully loaded ratio (€bn) (€bn) Total equity 9.9 10.0 Less Additional Tier 1 (0.7) (0.7) Deferred tax (0.7) (1.2) Intangible assets and goodwill (0.6) (0.6) Fore
Slide 50: Regulatory Capital Requirements
50 Regulatory Capital Requirements Bank of Ireland 2020 Interim Results Pro forma CET1 Regulatory Capital Requirements 2019 2020 2021 Pillar 1 – CET1 4.50% 4.50% 4.50% Pillar 2 Requirement (P2R) 2.25% 1.27% 1.27% Capital Conservation Buffer (CCB) 2.50% 2.50% 2.50% ROI Countercyclical buffer (CCyB) 0
Slide 51: Risk Weighted Assets (RWAs) / Leverage Ratio
51 Risk Weighted Assets (RWAs) / Leverage Ratio Bank of Ireland 2020 Interim Results Customer lending average credit risk weights – Jun 20201, 2 EBA Transparency Exercise 2019 (Based on regulatory exposure class) Country by Country Average IRB risk weights Residential Mortgages – Jun 2019 EAD3 RWA A
Slide 52: Transformation Investment / Operating expenses
52 Transformation Investment / Operating expenses Bank of Ireland 2020 Interim Results Transformation Investment: €1.4bn (2016-2021) Transformation Investment Average of €275m p.a. • Average annual investment of €275m from 2018-2021; equates to CET1 capital of c.50-60bps • Investment of €109m in H1
Slide 53: Cost income ratio: Jun 2020
53 Cost income ratio: Jun 2020 Bank of Ireland 2020 Interim Results Headline vs. Adjusted H1 2020 Pro forma H1 2020 Headline adjustments Pro forma (€m) (€m) (€m) Net interest income 1,079 – 1,079 Other income – Business income 266 – 266 – Additional gains 2 (2) – – Other valuation items1 (125) 109 (
Slide 54: Defined Benefit Pension Schemes
54 Defined Benefit Pension Schemes Bank of Ireland 2020 Interim Results Group IAS19 Defined Benefit Pension (Deficit) / Surplus Total Group Defined Benefit Pension Scheme Assets (%) 2.10% 2.00% 1.60% €7.1bn €7.2bn €7.2bn €8.4bn €8.5bn 1.45% 1.30% €0.53bn 58% 55% 65% 65% 68% (€0.23bn) (€0.14bn) 17% 2
Slide 55: Forward-Looking statement
55 Forward – Looking statement Bank of Ireland 2020 Interim Results 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 goal
Slide 56: Contact Details
56 Contact Details Bank of Ireland 2020 Interim Results For further information please contact: • Group Chief Financial Officer Myles O’Grady tel: +353 76 624 3291 myles.ogrady@boi.com • Investor Relations Darach O’Leary tel: +353 76 624 4711 darach.oleary@boi.com Eoin Veale tel: +353 76 624 1873 eo
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