Slide 1: Backing Our Customers – Annual Financial Results 2020
BACKING OUR CUSTOMERS ANNUAL FINANCIAL RESULTS for the financial year ended 31 December 2020 AIB Group plc
Slide 2: Forward looking statement
Forward looking statement This document contains certain forward looking statements with respect to the financial condition, results of operations and business of AIB Group and certain of the plans and objectives of the Group. These forward looking statements can be identified by the fact that they
Slide 3: Highlights
Highlights 1 • Progress made on both cost and growth initiatives; Goodbody acquisition agreed Strategy 2023 • Potential acquisition of Ulster Bank’s c. €4bn corporate & commercial loan book 2 • Strong capital CET1 15.6% Strong balance sheet • Conservative approach to ECL, 240bps cost of risk 3 • Sev
Slide 4: Irish economy to recover in 2021-22
Irish economy to recover in 2021-22 Strong GDP growth expected in 2021 and 2022 Businesses adapting to tighter restrictions and aided by % GDP Government measures; fiscal support 18% of GNI* 5 4.6 60 PMIs 3.8 3.5 4 3.4 50 3.0 3 2.5 40 2 30 1 20 0 10 2020 2021 2022 Aug 2019 Feb 2020 Aug 2020 Feb 2021
Slide 5: COVID-19 response – action when and where most needed
COVID-19 response – action when and where most needed Supporting our Supporting our Supporting our customers colleagues communities >66,000 payment Donated €2.4m to Trinity breaks granted in >80% of employees College Dublin to set up Retail Banking; 88% working from home the AIB COVID-19 returned to
Slide 6: 2021 activity in line with 2020 despite Q1 lockdown
2021 activity in line with 2020 despite Q1 lockdown 800 AIB weekly card spend (€m) Increase in customer activity and digital adoption 700 Shift from cash 600 500 39%* reduction 71%* increase 400 in volume of in volume of 2019 ATM Digital Wallet 300 withdrawals payments 2020 200 2021 100 0 * versus F
Slide 7: Market leading financial services provider
Market leading financial services provider 1.72m 15.6% CET1 active digital customers Strong capital base #1 > 8% RoTE Irish banking app Progressing strategy to deliver by 2023 AIB is Ireland’s - leading financial services #1 €9.2bn provider Personal bank and New lending in 2020 - No 1 digital bank m
Slide 8: Strategic review complete – progress towards medium-term targets underway
Strategic review complete – progress towards medium-term targets underway Strategic Customer Simple & Risk & Talent & Sustainable Sustainable Pillars First Efficient Capital Culture Communities Communities Progress in Support through > 1 million Conservative 41% female as Range of green 2020 COVID-1
Slide 9: Strategy 2023 – priorities and initiatives
Strategy 2023 – priorities and initiatives By 2023 cost reduction €230m Digitalisation: Progress update Refocused branch H1 21: Maintaining community presence as branch evolves to c. €65m network sales and advisory model; branch amalgamation underway End-to-end credit H1 21: Programme in place, curr
Slide 10: Complete customer product suite, diversifying income
Complete customer product suite, diversifying income Acquisition of Goodbody agreed* JV with Great-West LifeCo Consideration of €138m Move AIB beyond distributor model, • €82m enterprise value providing scale in Retail Wealth segment • €56m excess cash on with enhanced growth and earnings balanc
Slide 11: Sustainability leader
Sustainability leader Environment Social Governance ‘ensuring a greener tomorrow by ‘backing economic & social ‘at the heart of our business’ backing those building it today’ inclusion’ • 70% green lending ambition by 2030 • €300m social housing fund launched • Embedded into Strategy 2023 • Net Zero
Slide 12: 2021 priorities
2021 priorities 1 • Deliver on cost reduction Strategy 2023 implementation • Integrate and maximise inorganic initiatives 2 • Maintain quality of new lending Asset quality • Continue to reduce legacy NPEs and work toward c. 3% target 3 • Rebooting Irish economy Navigating uncertainty • Enhance engag
Slide 13: Financial performance
rey AIB Financial performance CUSTOMERS
Slide 14: Financial performance FY 2020
Financial performance FY 2020 Operating profit(1) €0.7bn; loss after tax €0.7bn €1.46bn ECL charge (CoR 240bps); in line with c.235-250bps guidance ECL consistent with our conservative, comprehensive and forward looking approach Total income €2.4bn decreased 12% Net interest income €1,872m (-1
Slide 15: Income statement
AIB Income statement cus OMERS
Slide 16: Income statement – pre-provision operating profit €0.7bn
Income statement – pre-provision operating profit €0.7bn Summary income statement (€m) FY 2020 FY 2019 Net interest income 1,872 2,076 Net interest income reduced 10% impacted by the lower interest rate environment Other income(1) 499 619 Total operating income 2,371 2,695 Other income €499m – d
Slide 17: Net interest income down 10% vs FY 2019
Net interest income down 10% vs FY 2019 NII – material movements NII €1,872m down €204m / 10% from FY 2019 impacted by: • +€81m: lower cost of liabilities (€204m reduction in NII / 25bps reduction in NIM) • -€152m: lower customer loan income from reduced volumes and lower interest rate environment
Slide 18: Other income – COVID-19 impact lowers fees & commission 16%
Other income – COVID-19 impact lowers fees & commission 16% Net fees and commission income (€m) FY 2020 FY 2019 Other income €499m down 19% Customer accounts 179 214 Fee and commission income €395m, down €77m (16%) Credit related fees 40 50 predominantly due to reduced economic activity: Card 69
Slide 19: Costs – in line with expectations
Costs – in line with expectations Operating expenses (1) (€m) Costs €1,527m, up 2% as guided 1,504 1,527 Factors impacting costs <€1.35bn 229 279 • increased depreciation €50m • COVID-19 related expenditure offset by lower 501 514 travel & business expenses and other operational costs • lower FT
Slide 20: ECL and asset quality
rey AIB ECL and asset quality CUSTOMERS
Slide 21: ECL charge €1.46bn – conservative, forward looking and comprehensive
ECL charge €1.46bn – conservative, forward looking and comprehensive ECL €1.46bn / CoR 240bps (H1 €1.2bn); ECL cover doubled to 4% in 2020 Three drivers of ECL charge ECL charge (€m) H1 2020 H2 2020 FY 2020 1 Macro economic scenarios - €0.4bn In H2 the economic environment improved Macro economic as
Slide 22: Outlook for macroeconomic environment improved in H2 2020
Outlook for macroeconomic environment improved in H2 2020 1 Updated macroeconomic scenarios reflected an improved economic environment in H2 reducing ECL by €0.3bn; FY 20 impact €0.4bn Base scenario (50%) 2021(1) 2022 2023 Macroeconomic scenarios improved in H2 as Irish Irish GDP 5.0 4.5 3.5 econo
Slide 23: Downward stage migration in COVID-19 impacted sectors
Downward stage migration in COVID-19 impacted sectors 2 Impact of credit deterioration and stage transfers in H2 increased ECL €0.3bn; FY 2020 €0.7bn Loan book* by Staging & Coverage (€bn) Staging impact on ECL (€m) H1 2020 H2 2020 FY 2020 Net transfer Stage 1 to Stage 2 154 7 161 62.0 2% 4% 59.4 Ne
Slide 24: Post model adjustments (PMAs)
Post model adjustments (PMAs) 3 PMAs increased ECL in H2 by €0.3bn due to increasing cover for legacy NPE mortgages and COVID-19 overlays FY 2020 €0.4bn €0.2bn Legacy NPE mortgages €0.2bn COVID-19 overlays increasing cover for legacy to cover latent risk of further credit deterioration in NPE mortga
Slide 25: Balance sheet
AIB Balance sheet cus OMERS
Slide 26: Balance sheet – strong funding & liquidity to support economic recovery
Balance sheet – strong funding & liquidity to support economic recovery Balance sheet (€bn) Dec 2020 Dec 2019 Assets Performing loans decreased €3.6bn (-6%) Performing loans 55.2 58.8 New lending €9.2bn exceeded by redemptions €11.1bn Non-performing loans 4.3 3.3 • New lending €3.1bn lower than
Slide 27: Net loans – 6% decline as redemptions exceeded new lending
Net loans – 6% decline as redemptions exceeded new lending Net loans movement (€bn) Performing gross loans (€bn)(2) 58.8 +9.2 (9.9) -6% 55.2 9.0 8.1 (0.7) (1.3) (0.7) (0.5) 16.2 60.9 14.5 57.0 (1) Dec-19 New lending Redemptions Redemptions ECL FX / Other SIF loan Dec-20 Performing NPEs disposals 33.
Slide 28: New lending of €9.2bn; up 9% in the second half
New lending of €9.2bn; up 9% in the second half New lending -25% to €9.2bn; recovery in H2 New lending grew across all asset classes (1) in H2 New lending (€bn) Mortgages (€bn) Personal (€bn) 4.9 5.0 4.8 +20% +18% +9% 4.4 0.9 1.3 0.5 0.9 1.1 0.4 1.5 H1 2020 H2 2020 H1 2020 H2 2020 1.5 Property (€bn)
Slide 29: NPE normalisation remains a priority; target c. 3% by 2023
NPE normalisation remains a priority; target c. 3% by 2023 NPEs NPE – €4.3bn 7.3% (€bn) Arrears profile c. 6% 0.7 4.3 5.4% 1.5 0.7 38% 1.0 3.6 3.3 54% 0.2 0.4 1.0 0.4 1.0 3% 5% 0.2 0.2 1.0 3.7 Not Past Due < 90DPD 0.2 >90 < 180DPD > 180DPD 2.3 2.1 1.4 NPE pro-forma* – €3.6bn Arrears profile NPEs Def
Slide 30: Funding and Capital
AIB Funding and Capital cus OMERS
Slide 31: Strong funding driven by increased customer deposits
Strong funding driven by increased customer deposits Total funding (€bn) Liquidity metrics (%) Dec 2020 Dec 2019 €107.1bn +14% Loan to deposit ratio (LDR) 69 85 €94.9bn 4.2 (1) NBFI Liquidity coverage ratio (LCR) 193 157 4.1 31.7 Customer accounts €82bn Net stable funding ratio (NSFR) 148 129 27.1 7
Slide 32: Reported CET1 (FL) 15.6% in excess of >14% target
Reported CET1 (FL) 15.6% in excess of >14% target Reported - Capital ratios fully loaded (FL) (%) €52bn RWAs Reported CET1 (FL) ratio 15.6% including €52.6bn RWAs impact of regulatory adjustments -120bps: 20.5% 20.8% TRIM review -130bps 1.9 3.1 • Mortgages -50bps 1.3 2.1 • Leverage -60bps • Corpor
Slide 33: Capital – medium-term target: CET1 >14%
Capital – medium-term target: CET1 >14% Capital requirements Dec 2020 Dec 2021 Strong buffer to MDA / SREP of 9.69% Pillar 1 4.50% 4.50% CET 1 (FL) 15.6%; 5.9% buffer Pillar 2 requirement (P2R) 1.69% 1.69% CET 1 Transitional 18.9%; 9.2% buffer Capital Conservation Buffer (CCB) 2.50% 2.50% O-SII
Slide 34: Medium-term targets (2023)
Medium-term targets (2023) Medium-term targets by 2023(1) Focused Appropriate Deliver cost(2) capital sustainable discipline target returns <€1.35bn CET1(3) > 14% RoTE(4) > 8% Our Strategy 2023 is set and we are implementing at pace (1) Excludes potential inorganic opportunities (2) Costs before ban
Slide 35: Our Strategy 2023
Our Strategy 2023 For reference: A number of slides from Investor and Analyst Update 2 Dec 2020
Slide 36: Strategic review complete
Strategic review complete Proven strategy compounded by accelerating trends Strategic Pillars Accelerating trends Customer First Sustainability Digitalisation Simple & Efficient Accelerating Risk & Capital trends Talent & Culture Ways of working Sustainable Communities 36
Slide 37: Digitalisation – refocused customer engagement
Digitalisation – refocused customer engagement Reconfigured sales and advisory model due to accelerated digital adoption, increased mobile enablement, declining cash usage and reduced branch footfall Branch footfall (weekly) 2019 2020 -30% -50% March November Community Presence Outcomes A refocuse
Slide 38: Digitalisation – End to End credit
Digitalisation – End to End credit Data-driven, digitally-enabled, agile & frictionless credit End to End Credit Management Decisioning Fulfilment Origination Origination via digital Outcomes 77% Enhanced customer experience with faster response and turnaround times 27% Automation of back office
Slide 39: Ways of working – Property
Ways of working – Property Responding to workforce trends to provide greater flexibility while saving costs Dublin office estate - represents c. 50% of our property costs Dublin office estate costs 50% reduction c. €50m in location 40% reduction in capacity Exited in 2020 2020 2023 Outcomes 2020 Wor
Slide 40: Ways of working – Change Delivery
Ways of working – Change Delivery Creating roles whilst delivering sustainable annual cost savings & reducing risk Creation of 400 new AIB roles Change Technology Data Shift the change management agenda in-house External expertise AIB employees Current workforce model, paying a premium 75% : 25% Out
Slide 41: Business model – UK
Business model – UK Refocusing on GB Corporate banking market and exiting the SME market in GB Reshaping the business towards higher return assets AIB UK – Loans AIB UK – Loans 29% 25% £7.7bn 49% 8% 67% 22% AIB GB - Corporate 2020 estimate 2023 estimate AIB GB - SME AIB NI Outcomes Withdraw from t
Slide 42: Business model – product gaps
Business model – product gaps Exploring opportunities to enhance and diversify our revenue to become a full service provider of financial services for our customers Expanding the product range Non interest income 2020 as % of Total Income Mortgages Credit cards Transaction Loans services 40% Payment
Slide 43: Appendices
AIB Appendices cus OMERS
Slide 44: Our Sustainability Journey
OUR SUSTAINABILITY Sustainable Communities becomes Pledged to become Carbon Neutral in our Operations by 2030 AIB’s 5th strategic pillar JOURNEY Main sponsor of Climate Finance Week Achieved CDP Climate A Leadership Rating Awarded Chambers Ireland Outstanding in Sustainability 2020 Pledge to Do More
Slide 45: Retail Banking Payment Breaks: 88% return to full capital & interest
Retail Banking Payment Breaks: 88% return to full capital & interest (C&I) (volume basis) Payment Total Total Breaks amount amount granted granted Retail Banking - Payment Breaks (PB) outstanding (#) (€m) (€bn) / (#) 88% 11% 1% Total 66,334 €4,302m €32m / 647 Mortgages 22,644 €3,081m 89% 11% <1% €12
Slide 46: Net interest margin (NIM)
Net interest margin (NIM) NIM – material movements (19 bps) impact NII & NIM (12 bps) impact NIM 2 bps (10 bps) 2.41% 5 bps (10bps) (6 bps) 2.25% (12 bps) 2.20% 1.94% Q4 19 Cust. Other Customer Investment Loans to Higher AIEA / Dec-20 Deposits loans securities banks yields Exc. Liq NIM excl. excess
Slide 47: Average balance sheet
Average balance sheet FY 2020 FY 2019 Average Volume Interest Yield Average Volume Interest Yield €m €m % €m €m % Assets Customer loans 59,586 1,965 3.29 61,405 2,117 3.45 Investment securities 18,389 112 0.61 16,755 195 1.17 Loans to banks 18,062 (28) (0.15) 9,319 22 0.24 Interest earning assets 96
Slide 48: Loans to customers
Loans to customers €bn Performing Loans Non-Performing Loans Loans to Customers Gross loans (1 Jan 2020) 58.8 3.3 62.1 New lending 9.2 - 9.2 Redemptions of existing loans (10.4) (0.7) (11.1) Write-offs / restructures - (0.1) (0.1) Net flow to NPE (1.8) 1.8 - Foreign exchange / other movements (0.6)
Slide 49: Overview – stage 2 increases, coverage increases
Overview – stage 2 increases, coverage increases Loan book* by Staging & Coverage (€bn) ECL stock movements (€bn) 62.0 2% 4% 0.2 2.5 4% 59.4 0.4 3.3 27% 4.0 4.3 32% 5% 32% 9.4 9% 0.7 0.3% 1.4 0.6% 1.2 2% 0.4 54.7 45.7 27% 9% 0.9 €1.5bn ECL charge in P&L 0.8 0.2 5% €1.3bn increase ECL Stock 0.1 0.3%
Slide 50: Loan book by Staging and Coverage
Loan book by Staging and Coverage Dec 2020 Total Loan book by Staging – €59.4bn loan exposures Stage 1 Stage 2 Stage 3* Gross loan exposures (€bn) exposure Mortgages 26.5 2.0 2.1 30.7 Stage 2 loan exposures increased by €5.4bn to Personal 2.2 0.3 0.2 2.8 €9.4bn (16% of the loan book) in those sect
Slide 51: Stage 2 movements
Stage 2 movements Dec 2020 Gross loan exposures (€bn) Stage 1 Stage 2 Stage 3* Total exposure The majority of the Stage 2 loan exposures increase (€5.6bn) (excluding Mortgages & Personal) is primarily due to movements in Property and Corporate & Property & Construction 4.3 2.1 0.9 7.3 SME sectors
Slide 52: Asset quality by portfolio
Asset quality by portfolio €bn Mortgages PDH BTL Personal Property Corporate & SME Total Dec 2020 Customer loans 30.6 28.5 2.1 2.8 7.4 18.7 59.5 Total ECL cover (%) 3% 8% 5% 6% 4% of which NPEs 2.1 1.8 0.3 0.2 1.0 1.0 4.3 ECL on NPE 0.7 0.6 0.1 0.2 0.2 0.3 1.4 ECL / NPE coverage % 34% 61% 22% 32% 32
Slide 53: Asset quality – Total Portfolio and Personal Portfolio
Asset quality – Total Portfolio and Personal Portfolio Total Portfolio (€bn) Personal (€bn) 62.1 59.5 3.0 27% 60% 2.8 3.3 5.4% 32% 0.2 6% 61% 4.3 7.3% 0.2 9% 3.5 5.5% 4.7 0.3 9% 7.8% 0.2 7% 55.3 50.5 2.5 85% 84% 89.1% 84.9% 2.4 0.0 Dec 19 Dec 20 Dec 19 Dec 20 Strong / Satisfactory Criticised NPE Str
Slide 54: Asset quality - Mortgages
Asset quality - Mortgages Credit quality (€bn) RoI mortgages 31.5 Dec-19 Dec-20 30.6 22% 2.3 7% 34% 7% 2.1 21% 1.8 6% 1.5 5% 27% 25% 30% 52% 45% 87% €30.2bn €29.5bn 27.4 27.0 88% Tracker Variable Fixed Dec 19 Dec 20 Strong / Satisfactory Criticised NPE ECL/NPE coverage 54
Slide 55: Asset quality – Property & construction and Corporate & SME
Asset quality – Property & construction and Corporate & SME Property & construction (€bn) Corporate & SME (€bn) 7.4 20.3 35% 7.4 32% 2% 0.4 5% 22% 13% 0.4 18.7 0.4 1.0 5% 32% 5% 5% 1.0 1.0 0.5 6% 13% 2.5 6.6 90% 81% 18.9 93% 5.9 15.2 81% Dec 19 Dec 20 Dec 19 Dec 20 Strong / Satisfactory Criticised N
Slide 56: Asset quality – internal credit grade by ECL staging
Asset quality – internal credit grade by ECL staging* Dec 2020 Dec 2019 €m Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Strong 35,341 1,257 - 5 36,603 42,123 329 - 2 42,454 Satisfactory 9,411 4,384 - 1 13,796 11,346 1,452 - - 12,798 Total strong / 44,752 5,641 - 6 50,399 53,
Slide 57: Investment securities – debt securities €19.3bn
Investment securities – debt securities €19.3bn Key components €bn 9.2 7.0 5.3 5.3 1.4 1.7 1.6 1.0 Government Supernational banks Euro bank securities Non Euro bank securities and gov agencies securities Dec-19 Dec-20 €19.3bn up from €16.5bn mainly due to €2.8bn increase in Irish Government securi
Slide 58: Reported capital ratios
Reported capital ratios Transitional capital ratios Fully loaded capital ratios Dec 20 Dec 19 Dec 20 Dec 19 Total risk weighted assets (€m) 53,036 52,121 Total risk weighted assets (€m) 52,579 51,999 Capital (€m) Capital (€m) Shareholders equity excl AT1 and dividend 12,307 13,023 Shareholders equit
Slide 59: Loan book analysis, interest rate sensitivity and ECL sensitivities
Loan book analysis, interest rate sensitivity and ECL sensitivities Concentration by sector (%) FY 2020 Concentration by location (%) FY 2020 Agriculture 3 Republic of Ireland 77 United Kingdom 15 FYEnergy 2020 macroeconomic scenarios and 3 Manufacturing 4 North America 4 weightings: Propertyscenari
Slide 60: Credit ratings
Credit ratings AIB Group plc (HoldCo) Baa2 BBB BBB- Long term issuer rating Outlook Stable Negative Negative Investment grade AIB p.l.c. (OpCo) A2 BBB+ BBB+ Long term issuer rating Outlook Stable Negative Negative Investment grade 60
Slide 61: Contact details
Contact details Our Investor Relations Department are happy to facilitate your requests for any further information Name Email Telephone Niamh Hore niamh.a.hore@aib.ie +353 1 6411817 Head of IR Janet McConkey janet.e.mcconkey@aib.ie +353 1 6418974 Siobhain Walsh siobhain.m.walsh@aib.ie +353 1 641190