Aib Group Plc · EURONEXT:A5G
Aib — FY2007 Earnings Presentation
52 slides from Aib's earnings presentation, 2008
Slide 1: Preliminary Results 2007
Preliminary Results 2007
Slide 2: Forward looking statements
Forward looking statements A number of statements we will be making in our presentation and in the accompanying slides will not be based on historical fact, but will be “forward- looking” statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Actual resu
Slide 3: Eugene Sheehy, Group Chief Executive
Eugene Sheehy Group Chief Executive
Slide 4: Financial highlights
Financial highlights Basic earnings per share 218.0c - basic adjusted * 205.9c 13% ** Positive income / cost gap 3% Cost / income ratio 1.7% Impaired loans 0.8% Dividend 10% Return on equity 21.8% Tier 1 capital ratio 7.5% * Basic earnings per share less profit on disposal / development of p
Slide 5: Diverse sources of growth
Diverse sources of growth Operating profit by division AIB Bank RoI €1,075m 14% Capital Markets €530m 6% AIB Bank UK €452m 20% Poland €268m 29% M&T* €120m 7% AIB Bank RoI 44% Capital Markets 22% AIB Bank UK 18% Poland 11% * after tax contribution M&T 5% 5
Slide 6: Domestic & international – a broad profit base
Domestic & international – a broad profit base Pre-tax profit by geography * 3% 16% ROI USA UK Poland 8% 43% RoW 30% * Management estimate of continuing operations reflecting the geographic markets from which profit was generated. Does not include profit on disposal / development of properties and h
Slide 7: Economic outlook
Economic outlook GDP % 2007 (e) 2008 (f) Ireland 5.5 2.5 UK 3.1 1.8 USA 2.2 1.3 Poland 6.4 5.5 Eurozone 2.7 1.5 7
Slide 8: Irish economy – positive fundamentals
Irish economy – positive fundamentals Growth slowing in 2008 following lengthy period of economic buoyancy Long term growth and stability are firmly underpinned Growing population, labour force & employment Rising real incomes & wealth effect, positive savings ratio House market correction
Slide 9: AIB Bank Republic of Ireland
AIB Bank Republic of Ireland 14% operating profit Very strong and deep competitive position Consistent growth/maintenance of market share again in 2007 Business lending 25% - gaining market share Personal lending 11% - gaining market share Home Mortgages 14% - maintaining market share De
Slide 10: Capital Markets
Capital Markets 6% operating profit Performance underlines customer demand driven nature of our business Strong, sustainable, recurring income streams Income write downs of €131m absorbed in unprecedented market conditions Strong focus on efficiency, cost / income ratio 47.1% (45.9% in 200
Slide 11: AIB Bank United Kingdom
AIB Bank United Kingdom 20% operating profit Well managed, balanced growth Continued efficiency gains, cost / income ratio 44.1% (45.9% in 2006) Solid asset quality, impaired loans 1.1% (0.9% in 2006) Great Britain PBT €249m 20% Driven by success in business banking in chosen mid-market
Slide 12: Poland
Poland 29% operating profit Strong well spread growth across sectors & GDANSK product lines Business lending 32% SZCZECIN Retail cash lending 47% WARSAW Mortgages 43% POZNAN Deposits 26% LODZ Mutual funds 32% WROCLAW Brokerage services income 41% KATOWICE Business & per
Slide 13: Single enterprise update
Single enterprise update Our agenda November 2006 Status Service Quality Datacentre Relocation Completed Practical One Network (VoIP) Completed first steps XP Desktops Completed Infrastructure upgrades Completed Operational Managed Risk Cost Excellence Operating model consolidation On target Transfo
Slide 14: Aligning costs to income
Aligning costs to income “Jaws” Trends AIB Bank RoI Capital Markets 25 25 19 20 20 16 17 15 13 15 13 15 10 10 12 10 13 6 5 9 5 4 0 0 Dec-06 Jun-07 Dec-07 Dec-06 Jun-07 Dec-07 AIB Bank UK Poland 25 25 22 22 20 20 20 13 13 21 15 12 15 15 10 10 12 9 5 8 5 6 0 0 Dec-06 Jun-07 Dec-07 Dec-06 Jun-07 Dec-07
Slide 15: Asset quality – key indicators remain strong
Asset quality – key indicators remain strong Dec 2006 Dec 2007 0.9 Impaired loans (ILs) % 0.8 4.9 Criticised loans / total loans % 5.3 0.44 Gross new ILs % 0.45 76 Total provisions / ILs % 71 12 Bad debt charge bps 9 15
Slide 16: M&T
M&T 7% Good relative performance; significantly affected by highly challenging US environment Maintaining conservative credit philosophy $127m write down of $131m sub-prime exposure Prudent approach to other residential real estate exposure, including Alt-A Allowance for credit losses in
Slide 17: Performance features
Performance features High quality, well spread Growth ……. with further gains in Efficiency ……. on firm foundations underpinning our Resilience ……. in chosen markets and sectors creating earnings Diversity 17
Slide 18: John O'Donnell, Group Finance Director
John O’Donnell Group Finance Director
Slide 19: Performance snapshot
Performance snapshot Dec Dec ccy change 2006 €m 2007 % 4,326 Total operating income 4,868 12 2,314 Total operating expenses 2,521 9 Group operating profit 2,012 before provisions 2,347 17 104 Total provisions 99 -6 1,908 Group operating profit 2,248 18 2,615 Group profit before tax 2,508 15 * 246.8c
Slide 20: Adjusted basic EPS
Adjusted basic EPS % vs Dec 2006 Basic earnings per share 218.0c Profit on disposal/development of property (12.1c) Hedge volatility - Adjusted basic EPS 205.9c 13 20
Slide 21: M&T contribution
M&T contribution 2006 2007 $177m $166m -7% M&T net income $654m, down 22% Difference mainly due to reclassification of allocated / unallocated provisions in M&T in 2006 ($22m effect) M&T contribution down 15% in euro terms due to currency effect 21
Slide 22: Loan and risk weighted asset growth
Loan and risk weighted asset growth Year on Year to Dec 2007 39 30 28 Loan growth 23 RWA growth 20 20 20 17 17 % 11 Group AIB Bank Capital AIB Bank Poland RoI Markets UK Targeting loan growth of c. 10% in 2008 22
Slide 23: Deposit growth
Deposit growth Year on Year to Dec 2007 26 23 17 12 % 3 Group AIB Bank Capital AIB Bank Poland RoI Markets UK Targeting low / mid teens % growth in 2008 23
Slide 24: Net Interest Margin
Net Interest Margin Dec 2006 Dec 2007 change 2.26% 2.14% -12 bps Business factors affecting net interest margin; -12 bps Business factors include Loans growing faster than deposits c. -10 bps Includes c. 1 bp effect of increased cost of funding Business mix & competition; unchanged factor
Slide 25: N.I.M. business factors attrition – a reducing trend
N.I.M. business factors attrition – a reducing trend -20 -16 -12 bps 2005 2006 2007 2008 business factor guidance: around -10 bps 25
Slide 26: Costs – growth rate reducing
Costs 9% – growth rate reducing Dec Underlying 2007 yoy change % Staff costs 1,615 8 Heavy investment phase Other costs 761 13 completed Depreciation & amortìsation 145 3 2008 guidance +6% Operating expenses 2,521 9 Moderating trend to continue 16 13 14 12 % 9 13 8 6 5 4 H1 07 H2 07 0 2005 200
Slide 27: Cost / income ratio
Cost / income ratio 61.1 60.4 53.5 Dec 06 51.8 Dec 07 49.6 48.0 % 47.1 45.9 45.9 44.1 Group AIB Bank Capital AIB Bank Poland RoI Markets UK 27
Slide 28: Asset quality – a granular approach
Asset quality – a granular approach 1. Loan portfolios by sector 2. Property & construction 3. Global dislocation effects 4. Impaired loans and credit provisions 28
Slide 29: Loan portfolios by sector
Loan portfolios by sector % of Group loan portfolio 36% 33% Dec-06 Dec-07 25% 23% 12% 12% 12% 11% 8% 8% 5% 5% 3% 3% 2% 2% Agriculture Construction & Residential Manufacturing Personal Services Transport & Other Property Mortgages Distribution 29
Slide 30: Property & construction – resilience & diversity
Property & construction – resilience & diversity Impaired loans 0.6%, total loan book 0.8% Loan book diversified by geography 3% 3% 3% 27% Republic of Ireland USA 55% Northern Ireland Poland Great Britain Other 9% Comprehensive monitoring and control actions in place 30
Slide 31: Property & construction – sub sector diversity
Property & construction – sub sector diversity % ROI *GB/NI CM *Poland Group Commercial Investment 34 33 78 47 41 Residential Investment 7 15 7 2 9 Commercial Development 22 14 8 21 18 Residential Development 34 32 6 25 29 Contractors 3 6 1 5 3 Total 100 100 100 100 100 Balances €m 27,804 10,054 6,6
Slide 32: RoI property & construction – investment & contracting
RoI property & construction; sub sector characteristics - investment & contracting Commercial investment Spread by sector, tenant & covenant, retail 26%, office 33%, industrial 10%, mixed 33% (34%) c. 90% occupancy levels Typical Debt Service Cover 1.25X Bank risk determined primarily by cas
Slide 33: RoI property & construction – development
RoI property & construction; sub sector characteristics - development Commercial development (22%) Strong emphasis on pre-sales / pre-lets / recourse to independent cash flows Average LTV 68%, on cost price, for proven developers in favourable locations Low exposure to speculative development
Slide 34: International property & construction – robust portfolios
International property & construction – robust portfolios Investment finance c. 60%; well spread by sector, tenant and covenant Early mover on UK property Minimal speculative development Avoidance of more vulnerable sub sectors & locations Average LTV of development book c. 75% of cost pri
Slide 35: RoI – Home mortgages
RoI – Home mortgages bps Very solid, resilient portfolio 55 53 Arrears profile remains low 50 47 45 Primary emphasis on stress tested 40 35 34 repayment capacity 35 36 30 Affordability set to improve 2003 2004 2005 2006 2007 New Business LTVs 2005 2006 2007 LTVs remain very (% no’s of draw
Slide 36: Global dislocation effects on treasury portfolios
Global dislocation effects on treasury portfolios 2 top quality portfolios held for liquidity management purposes, all assets expected to redeem at par, av. life c. 2.9 years Trading portfolio c. €7.25bn c. 99% rated “A” or better; principally comprises bank bonds, prime residential mortgage o
Slide 37: Global dislocation effects on corporate loans – CLOs / CDOs
Global dislocation effects on corporate loans – CLOs / CDOs Type Amount Comment CLO c.€422m Predominantly backed by senior secured corporate loans. No CDOs of ABS 96% investment grade; “AAA” €113m, “A” €32m, “BBB” €260m Highly granular, 28 deals, 75 – 200 loans in each No negative rating act
Slide 38: Global dislocation effects on corporate loans – US sub-prime
Global dislocation effects on corporate loans – US sub-prime Type Vintage Gross Amount* Write down Net* Comment ABS 2004 $70m - $70m Referenced to investment grade tranches, 80% “AAA” ABS 2005 $160m $17m $143m Single name RMBS, original investment in “A/BBB” tranches, $55m downgraded ABS 2006 $57m $
Slide 39: Global dislocation effects on corporate loans – US sub-prime
Global dislocation effects on corporate loans – US sub- prime “Whole loans” $188m * $149m purchased in April 2007 $58m purchased in July 2007 $19m already repaid – loans reduce on a monthly basis c. 1,000 loans, average size $190k purchased from top US originator Extensive due diligence
Slide 40: Impaired loans by division
Impaired loans by division As at 31 December, 2006 As at 31 December, 2007 ILs/ Total ILs/ Total Actual Provisions/ Actual Provisions/ ILs Advances ILs ILs Advances ILs €m % % €m % % 366 0.6 81 AIB Bank ROI 511 0.7 72 130 0.6 74 Capital Markets 77 0.3 96 205 0.9 71 AIB Bank UK 274 1.1 51 232 4.9 73
Slide 41: Bad debt provisions by division
Bad debt provisions by division Dec Average Dec Average 2006 Loans % €m 2007 Loans % 78 0.15 AIB Bank ROI 104 0.16 5 0.02 Capital Markets (18) (0.08) 26 0.13 AIB Bank UK 18 0.08 9 0.23 Poland 2 0.03 1180.12Total 106 0.09 €36m write down to income re sub-prime / other exposures; “underlying” provis
Slide 42: Funding
Funding % 100 10% 9% Capital 7% 8% Senior Debt 80 4% 4% ACS 8% 13% CDs & CPs 14% 60 13% Deposits by banks – unsecured * 8% 5% Deposits by banks – secured 40 49% 48% Customer a/cs 20 0 2006 2007 * Deposits by banks unsecured when netted against “loans to banks” is 5% in 2006 and 8% in 2007 Customer
Slide 43: Strong funding diversity
Strong funding diversity Heightened emphasis on customer deposits €2.6bn increase in Q4 2007 Growing share in Irish retail market, c. 25% Irish corporate banking balances up c. 25% in 2 months to December (Capital Markets) 23% growth in GB business franchise in 2007 26% growth in Poland
Slide 44: Solid capital position
Solid capital position Tier 1 capital ratio 7.5% 25% Equity Preference Shares 75% Total capital ratio 10.1% No requirement for recourse to shareholders Continuing progressive dividend policy Basel II - Group approved for foundation level IRB (proforma tier 1 c. 7.6%) - standardised approac
Slide 45: Our key characteristics: growth, resilience, efficiency & diversity
Our key characteristics growth, resilience, efficiency & diversity Premium positions in chosen markets Recurring and sustainable income from strong customer franchises Consistently exceeds 95% of total profit Flexibility to align cost with income Continuing to invest for growth Prudent l
Slide 46: Slide 46
Slide 47: AIB Bank RoI profit statement
AIB Bank RoI profit statement Change 2006 €m 2007 % 1,581 Net interest income 1,777 12 434 Other income 490 13 2,015 Total operating income 2,267 13 1,000 Total operating expenses 1,088 9 1,015 Operating profit before provisions 1,179 16 73 Total Provisions 104 43 942 Operating profit 1,075 14 6 Pro
Slide 48: Capital Markets profit statement
Capital Markets profit statement Change 2006 €m 2007 % 490 Net interest income 586 21 464 Other income 389 -15 954 Total operating income 975 4 438 Total operating expenses 460 6 516 Operating profit before provisions 515 2 8 Total Provisions (15) - 508 Operating profit 530 6 2 Associated Undertakin
Slide 49: AIB Bank UK profit statement
AIB Bank UK profit statement Change 2006 €m 2007 % 593 Net interest income 685 16 154 Other income 156 2 747 Total operating income 841 13 343 Total operating expenses 371 9 404 Operating profit before provisions 470 17 26 Total Provisions 18 -31 378 Operating profit 452 20 1 Profit on disposal of p
Slide 50: Poland profit statement
Poland profit statement Change 2006 €m 2007 % 236 Net interest income 308 27 302 Other income 371 19 538 Total operating income 679 22 330 Total operating expenses 410 21 208 Operating profit before provisions 269 23 7 Total Provisions 1 -86 201 Operating profit 268 29 6 Associated undertakings 1 -9
Slide 51: Group profit statement
Group profit statement 2006 €m 2007 99 Net interest income 62 (27) Other income 44 72 Total operating income 106 203 Total operating expenses 192 (10) Total provisions (9) (121) Operating loss (77) 141 Share of results of associates – M&T 120 358 Profit on disposal of property 64 - Profit on disposa
Slide 52: Contacts
Contacts Our Group Investor Relations Department will be happy to facilitate your requests for any further information Alan Kelly alan.j.kelly@aib.ie +353-1-6412162 Rose O‟Donovan rose.m.o’donovan@aib.ie +353-1-6414191 Pat Clarke patricia.m.clarke@aib.ie +353-1-6412381 Karla Doyle karla.c.doyl