Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — FY2020 Earnings Presentation
60 slides from Bank Of Ireland's earnings presentation, Feb 26, 2021
Slide 1: 2020 Results Announcement
20 20 2020 Results Announcement 31 December 2020
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Slide 3: Group CEO Francesca McDonagh
3 Bank of Ireland 2020 Results Announcement Group CEO Francesca McDonagh
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Slide 5: Summary
5 Summary Bank of Ireland 2020 Results Announcement • Return to profitability in H2 2020 2020 €374m • 6th straight reporting period of reductions; costs reduced by further Performance Underlying loss 4% vs. 2019 before tax • Irish mortgage market share increased 2% to 25.5% in 2020 • Impairment char
Slide 6: Customers at the core of our response to COVID-19
6 Customers at the core of our response to COVID-19 Bank of Ireland 2020 Results Announcement Payment Breaks – Customers better than expected outcomes Relationship NPS1 improved by +5 points in 2020 vs. 2019 Active payment breaks – 94% now concluded2 with Overall RNPS Score Top 3 Drivers of RNPS sco
Slide 7: Enabling our Colleagues and Communities to thrive
7 Enabling our Colleagues and Communities to thrive Bank of Ireland 2020 Results Announcement Colleagues Communities Strong improvement in Engagement & Culture Supporting our Communities during the Pandemic 80% Irish mortgage €2.0bn new 75% market share lending to increased by 2% 25.5% Irish SMEs 70
Slide 8: Continued economic strengthening in 2021 expected
8 Continued economic strengthening in 2021 expected Bank of Ireland 2020 Results Announcement Ireland • Ireland is a very open economy; imports and exports sum to c.240% of GDP, and leveraged to international 18.7% developments 16.0% • Ireland’s 2020 performance benefited from strong exports; more t
Slide 9: As 2021 progresses, Irish recovery expected to become more broad-based
9 As 2021 progresses, Irish recovery expected to Bank of Ireland 2020 Results Announcement become more broad-based Bank of Ireland Pulse shows sentiment • As of 22 February, total COVID-19 vaccine doses holding up, particularly for housing equivalent to c.7% of the population had been 120 administer
Slide 10: Digital engagement accelerated in 2020
10 Digital engagement accelerated in 2020 following Bank of Ireland 2020 Results Announcement new channel launches and COVID-19 behaviour change COVID-19 accelerated decline in Digital adoption has reached a tipping New mobile app driving increase in traditional branch transactions point on key prod
Slide 11: Material progress on Transformation in 2020, accelerating delivery in 2021
11 Material progress on Transformation in 2020, Bank of Ireland 2020 Results Announcement accelerating delivery in 2021 Key Milestones Delivered in 2020 Committed Milestones on 2021 Roadmap Transformation investment to continue within Growth previous €1.4bn envelope • Digital insurance wallet (now g
Slide 12: Proven track record of cost reduction; new €1.5bn target for 2023
12 Proven track record of cost reduction; new €1.5bn Bank of Ireland 2020 Results Announcement target for 2023 Consistent Broad-based Efficient • Costs reduced by c.10% vs. 2017, • Cost reduction broad-based across • €306m in gross cost savings since FY 2017 despite underlying wage inflation and sta
Slide 13: Further strategic progress in the UK in 2020
13 Further strategic progress in the UK in 2020 Bank of Ireland 2020 Results Announcement Retail UK 2019 2020 Progress on UK repositioning continued in 2020 Net interest income £494m £497m • Underlying PBT Other income (£13m) (£2m) – Stable net interest income; supported by rising margins on Costs (
Slide 14: Wealth & Insurance business provides Group with unique platform to grow income
14 Wealth & Insurance business provides Group Bank of Ireland 2020 Results Announcement with unique platform to grow income • Unique proposition as Ireland’s only universal bancassurer 38% 35% – Market leading positions in life and pensions and savings of Group Bank channel – In-house product manufa
Slide 15: Making good progress on Responsible and Sustainable Business
15 Making good progress on Responsible and Bank of Ireland 2020 Results Announcement Sustainable Business1 New RSB strategy “Investing in Tomorrow” launched Pillar 1 Pillar 2 Pillar 3 Enabling all Enhancing Supporting the colleagues to thrive Financial Wellbeing Green Transition Developing digital a
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Slide 17: Group CFO Myles O'Grady
17 Bank of Ireland 2020 Results Announcement Group CFO Myles O’Grady
Slide 18: 2020 Financial Summary
18 2020 Financial Summary Bank of Ireland 2020 Results Announcement • Underlying loss before tax €374m; return to profitability in H2 • Total income 8% lower; stronger performance in H2 • Costs reduced by 4% • IFRS 9 impairment charge €1.1bn; at lower end of guidance range • Stable net lending • NPE
Slide 19: 2020 Financials recovering in H2
19 2020 Financials recovering in H2 Bank of Ireland 2020 Results Announcement FY 20191 FY 2020 • Net interest income 2% lower vs. 2019 (€m) (€m) • Business income3 21% lower; improved H2 performance Net interest income 2,167 2,115 Business income 666 561 • 4% reduction in operating expenses with fur
Slide 20: Net interest income declines on surplus liquidity and low rate environment
20 Net interest income declines on surplus liquidity Bank of Ireland 2020 Results Announcement and low rate environment Net interest income / NIM Net interest income and NIM lower from surplus liquidity and low rates €2,180m €2,167m €2,115m • Pricing discipline maintained across all portfolios 286bp
Slide 21: Growth in new lending in H2
21 Growth in new lending in H2 Bank of Ireland 2020 Results Announcement Group loan book movement Lending trends in 2020 €0.7bn (€14.0bn) • Overall loan book declined by €2.9bn due to FX and €13.3bn credit impairment (€1.1bn) (€1.8bn) • Gross new lending1 of €13.3bn; down 19% vs. 20192 Stable net le
Slide 22: Lower business income reflects lower economic activity
22 Lower business income reflects lower Bank of Ireland 2020 Results Announcement economic activity FY 2019 FY 2020 Lower business income reflects COVID-19 impact on (€m) (€m) economic activity Wealth and Insurance 277 214 • 23% decrease in Wealth and Insurance from lower sales Retail Ireland 254 20
Slide 23: c.€1.7bn cost target achieved one year early; new €1.5bn target for 2023
23 c.€1.7bn cost target achieved one year early; Bank of Ireland 2020 Results Announcement new €1.5bn target for 2023 Cost Movement €65m / 4% net reduction reflects • Wage inflation of 2.6% (€90m) €25m • COVID-19 costs €25m; €90m / 5% reduction excluding COVID-19 costs • Lower pension costs of €33m
Slide 24: FY 2020 impairment charge €1.1bn
24 FY 2020 impairment charge €1.1bn; H1 €0.9bn Bank of Ireland 2020 Results Announcement Group management IFRS 9 models adjustment (including Actual loan loss experience macro-economic update payment breaks) €515m €181m €437m • Updated IFRS 9 models • Lower than expected • Actual loan loss experienc
Slide 25: Impairment coverage increased to 2.9%
25 Impairment coverage increased to 2.9% Bank of Ireland 2020 Results Announcement Net impairment charge Impairment coverage increased from 1.6% to 2.9% €512m • Net impairment charge €1.1bn1 / 134bps (FY 2019: €388m 27bps) – Ireland mortgage impairment charge reflects macro-economic outlook offset b
Slide 26: Macro-economic conditions, outlook and loss experience driving stage migration
26 Macro-economic conditions, outlook and loss Bank of Ireland 2020 Results Announcement experience driving stage migration Gross loans by stage Stage migration and stock of ILA €80.5bn • €10.2bn increase in Stage 2 loans since 2019 reflecting 1 €78.5bn1 €3.1bn €4.5bn €5.6bn deteriorated macro-econo
Slide 27: NPE ratio increases to 5.7%
27 NPE ratio increases to 5.7% Bank of Ireland 2020 Results Announcement NPE movements Non-performing exposures • NPEs increased by €1.0bn and NPE ratio increased from 6.3% 4.4% 5.7% 4.4% in 2019 to 5.7% in 2020 • Broadly stable NPEs in H2; government fiscal measures €0.4bn €0.6bn supportive • Imple
Slide 28: Robust capital ratio performance despite COVID-19
28 Robust capital ratio performance despite COVID-19 Bank of Ireland 2020 Results Announcement Fully loaded CET1 ratio 40bps (110bps) 125bps (20bps) 75bps (75bps) RWAs (65bps) €49.9bn RWAs Impairment (230bps) (10bps) €48.0bn EL offset 80bps RWA reduction 40bps +10bps 13.8% Net impact (110bps) Regula
Slide 29: 2021 outlook continues to be impacted by COVID-19
29 2021 outlook continues to be impacted by COVID-19 Bank of Ireland 2020 Results Announcement Profitability Asset Quality Capital • 2021 total income expected • Subject to no further • 2021 CET1 ratios expected to to be broadly in line with 2020 deterioration in the economic remain broadly in line
Slide 30: Summary and conclusion
30 Summary and conclusion Bank of Ireland 2020 Results Announcement COVID-19 continues to impact, but Irish and UK economies expected to see reopening Economic and a recovery in GDP in 2021, supported by the rollout of vaccine immunisation backdrop programmes Strong capital ratios and significant bu
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Slide 32: Appendix
32 Bank of Ireland 2020 Results Announcement Appendix
Slide 33: Appendix
33 Appendix Bank of Ireland 2020 Results Announcement Slide No. • BOI overview – customer loans / new lending volumes 34 • Ireland mortgage loan book 35 • Income Statement – Net interest income analysis 36 – Structural hedge, liquid assets and negative rate deposits 37 – Interest rate sensitivity 38
Slide 34: BOI Overview
34 BOI Overview Bank of Ireland 2020 Results Announcement Profile of customer loans1 at Dec 20 (Gross) Ireland UK RoW Total Total Composition (Dec 20) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 22.9 21.8 0.0 44.7 57% Non-property SME and corporate 10.6 5.0 4.3 19.9 25% SME 7.1 1.7 0.0 8.8 11% Corporate 3
Slide 35: Ireland Mortgages: €22.9bn
35 Ireland Mortgages: €22.9bn Bank of Ireland 2020 Results Announcement New Lending volumes and Market Share ROI Mortgages (gross) €23.7bn €23.0bn €22.9bn 27% 25.5% 24% €9.5bn €11.2bn €12.2bn €4.4bn €3.2bn €2.9bn €2.3bn €2.3bn €2.1bn €9.8bn €8.7bn €7.9bn 2018 2019 2020 Dec 18 Dec 19 Dec 20 n New Len
Slide 36: Income Statement
36 Income Statement Bank of Ireland 2020 Results Announcement Net interest income analysis H1 2019 H2 2019 H1 2020 H2 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 37: Structural hedge, liquid assets and negative rate deposits
37 Structural hedge, liquid assets and negative Bank of Ireland 2020 Results Announcement rate deposits Structural Hedge1 Liquid Assets Structural hedge & liquid assets Average • Interest income from structural hedge and liquid assets €33.3bn €35.6bn €23.4bn €27.6bn volume reducing from low interest
Slide 38: Interest Rate Sensitivity
38 Interest Rate Sensitivity Bank of Ireland 2020 Results Announcement 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 Dec 20 Estimated sensitivity on Group income (1 year horizon) (€m)
Slide 39: Payment Breaks
39 Payment Breaks Bank of Ireland 2020 Results Announcement Overview of total payment breaks granted and remaining outstanding as at 12 February 2021 % returned % with approved Total payment Total payment Payment breaks Payment breaks % of payment Ireland to pre-COVID-19 additional breaks granted br
Slide 40: Non-performing exposures by portfolio
40 Non-performing exposures by portfolio Bank of Ireland 2020 Results Announcement Non-performing Non-performing Impairment Impairment loss Advances Composition (Dec 20) (€bn) exposures exposures as % loss allowance allowance as % of (€bn) of advances (€bn) non-performing exposures Residential Mortg
Slide 41: Portfolio by stage
41 Portfolio by stage Bank of Ireland 2020 Results Announcement Gross carrying amount Composition (Dec 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
Slide 42: Non-property SME and corporate by stage
42 Non-property SME and corporate by stage1,2 Bank of Ireland 2020 Results Announcement Gross carrying amount Composition (Dec 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 st
Slide 43: Residential Mortgages & Consumer Loans
43 Residential Mortgages & Consumer Loans Bank of Ireland 2020 Results Announcement Gross loans by stage Residential mortgages Residential Mortgages Consumer • Mortgage portfolios 57% of Group loan book €46.3bn €44.7bn – Average LTV of 60% on stock €1.7bn €2.2bn €1.7bn €2.5bn €5.7bn €5.3bn – 83% of
Slide 44: Non-property SME and Corporate & Property and Construction
44 Non-property SME and Corporate & Property Bank of Ireland 2020 Results Announcement and Construction Gross loans by stage Non-property SME and corporate Non-property SME and Property and construction • 25% of Group loan book, well diversified by geography corporate and sector €20.4bn €19.9bn • €6
Slide 45: Forward Looking Information – macro-economic scenarios
45 Forward Looking Information – macro-economic Bank of Ireland 2020 Results Announcement scenarios Republic of Ireland United Kingdom 31 Dec 2020 2021 2022 2023-2025 2021 2022 2023-2025 Central scenario 1 – 45% probability weighting GDP growth1 5.1% 3.6% 3.0% 6.3% 4.0% 1.9% GNP growth1 5.1% 3.4% 2.
Slide 46: Ireland Mortgages
46 Ireland Mortgages Bank of Ireland 2020 Results Announcement Continued proactive arrears management >90 days arrears1 >90 days arrears • Bank of Ireland is significantly below the industry Industry Average average for both Owner Occupier (30% of industry average) and Buy to Let (26% of industry av
Slide 47: Capital and liquidity
47 Capital and liquidity Bank of Ireland 2020 Results Announcement Liquidity Dec 2019 Dec 2020 (€bn) (€bn) • Funding and liquidity remains strong from stable customer deposits and MREL issuance Customer loans 79 77 Liquid assets 27 31 Customer deposits: €88.6bn Other assets 26 26 • Growth of €4.6bn
Slide 48: Ordinary shareholders' equity and TNAV
48 Ordinary shareholders’ equity and TNAV Bank of Ireland 2020 Results Announcement 2019 2020 Movement in ordinary shareholders’ equity (€m) (€m) Ordinary shareholders’ equity at beginning of period 9,243 9,625 Movements: Profit (Loss) attributable to shareholders 448 (707) Dividend paid to ordinary
Slide 49: Capital – Strong fully loaded and regulatory CET1 ratios
49 Capital – Strong fully loaded and regulatory CET1 ratios Bank of Ireland 2020 Results Announcement Capital ratios – Dec 2020 Regulatory ratio Fully loaded ratio (€bn) (€bn) Total equity 9.6 9.6 Less Additional Tier 1 (1.0) (1.0) Deferred tax (0.7) (1.1) Intangible assets and goodwill (0.5) (0.5)
Slide 50: Regulatory Capital Requirements
50 Regulatory Capital Requirements Bank of Ireland 2020 Results Announcement 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% Ireland Countercyclical buffer
Slide 51: Risk Weighted Assets (RWAs) / Leverage Ratio
51 Risk Weighted Assets (RWAs) / Leverage Ratio Bank of Ireland 2020 Results Announcement Customer lending average credit risk weights – Dec 20201/2 EBA Transparency Exercise 2020 (Based on regulatory exposure class) Country by Country Average IRB risk weights Residential Mortgages – Jun 2020 EAD3 R
Slide 52: Transformation Investment / Operating expenses
52 Transformation Investment / Operating expenses Bank of Ireland 2020 Results Announcement 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 €410m i
Slide 53: Cost income ratio: Dec 2020
53 Cost income ratio: Dec 2020 Bank of Ireland 2020 Results Announcement Headline vs. Adjusted FY 2020 Pro forma FY 2020 Headline adjustments Pro forma (€m) (€m) (€m) Net interest income 2,115 – 2,115 Other income – Business income 561 – 561 – Additional gains 5 (5) – – Other valuation items (61) 61
Slide 54: Defined Benefit Pension Schemes
54 Defined Benefit Pension Schemes Bank of Ireland 2020 Results Announcement 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 €8.9bn 1.30% 0.80% 58% 55% 65% 65% 69% (€0.14bn) (€0.13bn) 17% 21%
Slide 55: Forward – Looking statement
55 Forward – Looking statement Bank of Ireland 2020 Results Announcement 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
Slide 56: Contact Details
56 Contact Details Bank of Ireland 2020 Results Announcement For further information please contact: • Group Chief Financial Officer Myles O’Grady tel: +353 12 50 8900 ext. 43291 myles.ogrady@boi.com • Investor Relations Darach O’Leary tel: +353 12 50 8900 ext. 44711 darach.oleary@boi.com Owen Calla
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