Aib Group Plc · EURONEXT:A5G
Aib — Debt Investor Presentation (March 2018)
40 slides from Aib's debt investor presentation, March 2018
Slide 1: Annual Financial Results 2017
Annual Financial Results 2017 AIB Group plc
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 2017, Trading Update December 2017 and all other relevant market disclosures, copies of which can be found at the following link: http://aib.ie/investorrelations Importa
Slide 3: AIB Group plc: 2017 performance and strategic objectives
2017 pert and st objec
Slide 4: 2017 in summary
2017 in summary Momentum in performance Successful IPO and continued market support - €3.4bn raised. Total of €10.5bn return to State (1) Pre-exceptional profit of €1.6bn, loan book growth and significant improvement in asset quality Strong capital ratios, generating and returning capital, 30%
Slide 5: Return to loan book growth; strong capital generation and dividend increase
Return to loan book growth; strong capital generation and 30% increase in proposed dividend payment 2017 Change YoY Net Interest Margin (1) 2.58% +35bps Momentum across business model Cost income ratio (2) 48% -4% Controlled cost discipline +280bps pre- Capital dividend; +220bps Continued capi
Slide 6: Growing economy with attractive market dynamics
Growing economy with attractive market dynamics Well positioned for growth Irish economic growth (1) improving; Brexit risk remains Total employment levels rising as unemployment falls % Unemployment Rate (%) Total Employment (‘000s) 4.9 4.4 2300 16 4.0 3.9 3.6 2200 14 3.2 12 2100 10 2000 8 1900 6 1
Slide 7: Resulting in increased new lending
Resulting in increased new lending Leading market shares in key sectors Increase in New Lending Momentum Across Key Sectors Leading Market Shares Drawdowns (€bn) Mortgage lending (€bn) Stock 41% 43% 36% 33% 9.4 2.4 2.0 21% 20% 8.4 (1) 3.2 (2) (4) 2016 2017 Personal Personal Mortgages Business Leasin
Slide 8: Progress on resolving legacy customer issues
Progress on resolving legacy customer issues 78% reduction in impaired loans since peak Tangible progress in reducing impaired loans Track record of delivery Impaired loans (€bn) • €22.6bn reduction in impaired loans to €6.3bn • Driven by case by case restructuring with new solutions Mortgage to R
Slide 9: Significant capital accretion and payments to the State
Significant capital accretion and payments to the State Further enhanced by dividend payment €10.5bn return to the State Strong organic capital generation CET1 (FL) ratio €6.8bn redemptions, dividends & levies 18.1% -60bps +280bps dividend 17.5% generated €3.4bn IPO proceeds 15.3% €13.6bn €13.1bn c.
Slide 10: AIB Group plc
AIB Group plc
Slide 11: Financial highlights 2017
Financial highlights 2017 A strong performance in line with market expectations Sustainable profitability underpinned by positive net interest income and margin trajectory NIM 2.58%; excluding interest on cured loans(1) 2.50% Continued focus on cost control, FY 2017 in line with expectations Sta
Slide 12: Income statement
Income statement Profit before exceptional items €1.6bn up 7% Summary income statement (€m) FY 2017 FY 2016 Net interest income 2,176 2,013 • Net interest income up 8% Other income 791 617 Total operating income 2,967 2,630 • Other income up 28%, enhanced by other (1) Total operating expenses (1,428
Slide 13: Average balance sheet
Average balance sheet Continued positive NIM expansion FY Dec 17 FY Dec 16 Avg Volume Income Rate Avg Volume Income Rate €bn €m % €bn €m % Assets Loans to customers 60.6 2,166 3.57 62.1 2,248 3.62 Financial investments (AFS / HTM) 16.9 284 1.68 18.4 313 1.70 NAMA senior bonds 0.5 2 0.39 3.6 11 0.30
Slide 14: Net interest margin – NIM 2.58%
Net interest margin – NIM 2.58% Widening spreads from stable asset yields and lower cost of funds Target NIM 2.40%+ Stable asset yields, lower cost of funds Stable loan yields, lower cost of customer accounts 3.63% 3.64% 3.62% 3.57% 2.83% 2.84% 2.87% 2.92% 2.07% 2.95% 1.24% 2.32% 1.59% 1.56% 1.19% 1
Slide 15: Other income
Other income Stable net fee and commission income Net fee & commission income • Stable fee and commission income of €391m €m 395 391 Income from customer accounts represents 56% of 44 49 net fees and commission income and includes 51 47 83 77 current account fees and transaction payment fees 217 2
Slide 16: Costs
Costs Continued focus on cost discipline, CIR 48%(1), excluding other items CIR 53% Target CIR < 50% • Operating expenses €1,428m (+4%) in line with expectations Operating expenses(1) €m • Factors impacting cost: 52% 48% Stable staff costs while absorbing wage inflation (2.75%) 1,377 1,428 Conti
Slide 17: Balance Sheet / Asset Quality
Balance Asset (
Slide 18: Balance sheet
Balance sheet Balance sheet continues to strengthen with strong liquidity and capital ratios Balance sheet (€bn) Dec-17 Dec-16 Assets Gross loans to customers 63.3 65.2 • Net loans €60bn stable Provisions (3.3) (4.6) • Earning loan book €57bn growing (up €1.6bn ex FX) Net loans to customers 60.0 60.
Slide 19: Customer loans
Customer loans Earning loans €57.0bn up 2%, impaired loans €6.3bn down 31% Earning Impaired Credit Customer loans (€bn) Gross loans Net loans loans loans provisions Opening balance (1 Jan ‘17) 56.1 9.1 65.2 (4.6) 60.6 New lending volumes 9.4 - 9.4 - 9.4 (1) New impaired loans (0.7) 0.7 - (0.3) (0.3)
Slide 20: Asset quality & NPE deleveraging strategy
(1) Asset quality & NPE deleveraging strategy Impaired loans €6.3bn (10% of gross loans), NPE €10.2bn (16% of gross loans) Continued progress in NPE reduction in 2017 31% reduction (€2.8bn) in impaired from €9.1bn to €6.3bn 28% reduction (€3.9bn) in NPEs from €14.1bn to €10.2bn Provisions ex
Slide 21: Momentum in NPE reduction continues
Momentum in NPE reduction continues Significant progress in de-risking the balance sheet Significant progress to date in reducing impaired Impaired to NPE reconciliation €bn/% €bn 28.9 2.4 10.2 22.2 0.7 0.8 6.3 13.0 13.1 10.8 9.1 6.9 6.3 5.1 3.6 55% 51% 47% 44% 43% 2013 2014 2015 2016 2017 (3) Impai
Slide 22: Momentum in NPE reduction continues
Momentum in NPE reduction continues Various levers to reach European norms Net impaired loans(1) reducing across all portfolios Targeting further deleveraging to European norms €bn €bn 10.8 1.5 3.4 6.9 0.9 5.1 European 0.3 3.6 1.8 norms(2) 0.7 0.2 c. 5% 1.4 0.4 10.2 5.6 0.2 0.9 4.0 0.1 2.8 2.2 Dec-1
Slide 23: Asset quality by portfolio
Asset quality by portfolio Continued progress as impaired loans reduce across all sectors, coverage stable at 43% Residential Other Property and Non-property Dec-17 PDH BTL Total mortgages personal construction business lending €bn Loans to customers 33.7 29.7 4.0 3.1 8.8 17.7 63.3 Impaired Of which
Slide 24: Capital & MREL
Capital & MREL
Slide 25: Funding structure
Funding structure Stable funding well positioned for growth Total funding Liquidity ratios well in excess of requirements €bn Liquidity metrics % FY 2017 FY 2016 €87.2bn Loan to deposit ratio (LDR) 93% 95% Liquidity coverage ratio (LCR) 132% 128% Net stable funding ratio (NSFR) 123% 119% Customer Ac
Slide 26: HoldCo
HoldCo HoldCo structure in place – positions AIB Group plc for MREL issuance Simplified group structure(1) MREL(2) informative target - issuance plans (€3bn-€5bn) 29.05% Minister for Finance Other shareholders (71.1188% interest) (28.8812% free float) 2.75% Market confidence charge(3) 3.15% Recapita
Slide 27: Capital ratios
Capital ratios Strong capital position, +220bps, CET1 capital increase to 17.5% Target CET1 = 13% Capital ratios (fully loaded) RWAs (fully loaded) % 17.6% 19.0% Risk weighted assets (€m) Dec-17 Dec-16 Movement Credit risk 46,414 49,027 (2,613) 1.0 Market risk 360 288 72 1.4 0.5 0.9 Operational risk
Slide 28: Capital requirements
Capital requirements Steady-state target CET1 ratio of 13% CET1 – Dec 2017 & SREP 2018 Target CET1 Minimum capital requirements / SREP(1)(2) ratio 17.5% • 9.525% CET 1 requirement for 2018 is composed of • 4.50% Pillar 1 CET1 13.0% Min CET1 • 3.15% Pillar 2 requirement (P2R) – down 10bps from (%) 20
Slide 29: Medium term financial targets
Medium term financial targets Focused on delivering sustainable performance Medium Term Metric (3-5 Years) Guidance & Targets FY 2017 Commentary Net interest margin 2.40%+ 2.58% Excluding interest on cured Maintain strong and stable NIM, 2.40%+ loans 2.50% Stable costs, CIR 53% excluding Below 50% b
Slide 30: Appendix
Appendix
Slide 31: Capital detail
Capital detail Transitional and fully loaded capital detail and ratios AIB Group - CRD IV transitional capital ratios AIB Group - Fully loaded capital ratios Risk weighted assets (€m) 31-Dec-17 31-Dec-16 Risk weighted assets (€m) 31-Dec-17 31-Dec-16 Total risk weighted assets 51,728 54,235 Total ris
Slide 32: Minority interest restriction
Minority interest restriction (1) Impact of minority interest Minority Pre interest Post Minority interest restriction impact at AIB Group plc level Dec-17 restriction restriction restriction Fully loaded capital ratios % % • No impact on CET1 CET1 17.5% - 17.5% • Minority interest restriction – und
Slide 33: Financial investments AFS debt securities
Financial investments AFS debt securities €15.6bn portfolio of AFS(1) debt securities Key components Analysis of government securities €bn 9.6 €bn 8.0 7.0 5.1 4.5 4.3 3.4 1.7 1.4 0.9 0.9 1.1 1.1 0.6 0.4 0.3 0.2 Held to maturity Government Supranational Euro bank Ireland Netherlands Italy Spain Rest
Slide 34: Balance sheet provisions
Balance sheet provisions Reduction in provisions €1.3bn in 2017 Residential Property and Non-property Other personal Total mortgages construction business lending €bn Opening balance sheet provisions 1 Jan 2017 Specific 1.7 0.3 1.4 0.7 4.0 IBNR 0.3 - 0.1 0.1 0.5 Balance sheet provisions 2.0 0.3 1.5
Slide 35: ROI residential mortgages
ROI residential mortgages Improving asset quality and lower arrears and impaired loans ROI mortgage portfolio Impairment writeback % Dec 16 Dec 17 €m Fixed, 10% Fixed, 10% Tracker, Tracker, 35% 33% 463 109 92 Variable, Variable, 55% 57% Dec-15 Dec-16 Dec-17 €33.4bn €32.2bn Impaired loans • Continued
Slide 36: Other personal
Other personal Increase in demand for personal loans and lower impaired loans Personal loan portfolio Impairment writeback % Dec 16 Dec 17 €m Impaired Impaired 14% Vulnerable 12% 8% 22 Vulnerable 9% Watch 3% Watch 4% 8 Satisfactory Satisfactory 73% 77% 2 Dec-15 Dec-16 Dec-17 €3.1bn €3.1bn • Portfoli
Slide 37: Property & construction
Property & construction Lower impaired loans due to continued restructuring Property & construction portfolio Impairment writeback % €m Dec 16 Dec 17 Hous ing Contra ctors Hous ing Contra ctors 214 a s sociations 4% a s sociations 6% 3% 3% 145 La nd & La nd & development development 50 Investment 21
Slide 38: Non-property business
Non-property business Improvement in asset quality of new lending and reduction in impaired loans Non-property business portfolio Impairment writeback / (charge) % €m Dec 16 Dec 17 225 Agri cul ture Agri cul ture 10% Other Hotels & 10% Other 28% l i censed Hotels & l icensed 26% premises premises 16
Slide 39: Impact of investment on the target architecture
Impact of investment on the target architecture Harvesting benefits through simplification and efficiencies Modular approach – no Retail Customer Business Customer WIB Customer “big-bang” IT solution 4 1 CUSTOMER ENGAGEMENT CAPABILITY • Continued investment SECURITY CAPABILITY Mobile Tablet Web Cont
Slide 40: Return on tangible equity
Return on tangible equity (PAT – AT1 Coupon + DTA Utilisation) / (FL CET1 @ 13% + DTAs) FY 2017 €m PAT 1,114 Profit (1) (-) AT1 coupon 37 (+) DTA utilisation 137 Profit on Profit (Numerator) 1,214 CET1 @ 13% of Profit (Annualised) 1,214 RWAs + RWAs 51,823 DTAs CET1 at 13% RWAs 6,737 CET1 @ (+) DTAs