Aib Group Plc · EURONEXT:A5G
Aib — Investor Day (March 2017)
136 slides from Aib's investor day presentation, Mar 9, 2017
Slide 1: Capital Markets Day
Capital Markets Day AIB 9 March 2017
Slide 2: Important Information and Forward Looking Statement
Important Information and Forward Looking Statement This presentation should be considered with AIB’s Annual Financial Report 2016, Half-Yearly Financial Report 2016, Trading Update December 2016 and all other relevant market disclosures, copies of which can be found at the following link: http://ai
Slide 3: Today’s Agenda
Today’s Agenda Topic Page number Presenter Arrival Section 1: AIB Overview – The Journey 4 – 10 Bernard Byrne Section 2: AIB – The Market Leader with Highly Attractive Prospects in a Growing Economy 11 – 29 Bernard Byrne Section 3: Business Overview 3a) Brand and Customer Propositions 30 – 38 Tom Ki
Slide 4: AIB Overview – The Journey
AIB Overview – The Journey Bernard Byrne CEO
Slide 5: Four Phases of Recovery
Four Phases of Recovery State Recapitalisation, NAMA Transfer & Deepening Crisis Implementation of New Strategy Sustainable Profitability Disposals 2008 - 2009 2012 - 2014 2015 - 2016 2010 - 2011 2008 - 2009 2010 2012 2015 Introduction of Bank Guarantee ELG Scheme introduced by the Irish Volun
Slide 6: Experienced Management Team
Experienced Management Team Bernard Byrne (FCA) Mark Bourke (B.E., ACA, AITI Chief Executive Officer 6 CBD) 16 2001-2014 CEO IFG Group p.l.c., May 2010 (CEO from May 2015) ESB, PwC, IWP International plc Chief Financial Officer 2000-2001 Finance Director IFG Group AIB: Director of Retail and Busines
Slide 7: Strong Momentum and Improved Financial Performance
Strong Momentum and Improved Financial Performance 2013 2016 Net Interest Margin (excl. ELG) 1.37% 2.25% Profitable & Cost / Income Ratio (excl. exceptionals) 77% 52% Efficient Profit / (loss) before tax (1) (€1.7bn) €1.7bn Franchise New Lending Drawdowns €3.9bn €8.7bn Growth Fully Loaded CET 1 Capi
Slide 8: Strong Franchise with Competitive Market Position
Strong Franchise with Competitive Market Position Retail & Commercial Banking (1) Wholesale, Institutional & Corporate Banking (1) AIB UK – AIB GB & Northern Ireland • Largest retail and commercial bank in Ireland • Corporate Banking – relationship-driven model • >360k retail and SME customers with
Slide 9: Four Pillar Strategy Driving Sustainable Performance
Four Pillar Strategy Driving Sustainable Performance Focused on Delivering Long Term Shareholder Outcomes We will be at the heart of our customers’ financial lives by always being useful, always informing and always providing an exceptional customer experience. Strategic Ambition We will deliver a b
Slide 10: Established Capabilities to Deliver Growth
Established Capabilities to Deliver Growth New Management Team Investment in the network, Leading banking franchise in who has re-defined and the brand, the people, the Ireland with a young dynamic re-developed the systems and proven customer base and leading franchise operational capabilities Net P
Slide 11: Market Leader with Highly Attractive Prospects in a Growing Economy
Market Leader with Highly Attractive Prospects in a Growing Economy Bernard Byrne CEO
Slide 12: Market Leader with Highly Attractive Prospects
Market Leader with Highly Attractive Prospects 1 Leading Franchise in a Growing Economy with Attractive Banking Dynamics Business Model Re-Engineered, Simplified, and Digitally-Enabled with a Customer First Strategy Driving 2 Commercial Success 3 Strong Risk Management Framework Resulting in Improve
Slide 13: Ireland is a Growing Economy with Strong Dynamics
1 Ireland is a Growing Economy with Strong Dynamics Economic Growth Expected Despite Total Employment Levels Rising as Deleveraging Reaching an Inflection Brexit Uncertainties Unemployment Falls Point Real GDPGrowth (%) Unemployment Rate (%) TotalEmployment (K) Household Debt as % of Disposable Inco
Slide 14: Competitive Advantage in an Irish Market with Attractive Demographics
1 Competitive Advantage in an Irish Market with Attractive Demographics European Population Under Age 25 (1) Population (%) 33.3 Irish Population Youngest in EU 30.4 30.3 28.9 25.1 23.9 23.6 Ireland France UK Netherlands Spain Germany Italy Demographic with Most Attractive Characteristics AIB Ma
Slide 15: Structural Drivers Underpinning Strong Growth Prospects in Key Banking Markets
1 Structural Drivers Underpinning Strong Growth Prospects in Key Banking Markets Household Formation Outstripping Supply… …Driving Increased Prices… Units (K) # of Completions(K) Price (Index from 100) 25.0 27.0 22.0 100 140 Strong Economic Growth with Falling 14.9 Forecast 11.0 12.7 Unemployment an
Slide 16: Positive Macroeconomic and Demographic Outlook for the Irish Banking Market
1 Positive Macroeconomic and Demographic Outlook for the Irish Banking Market Mortgage Lending Business Lending Personal Lending Market Size (€bn) Market Size (€bn) Market Size (€bn) Total New Lending Total New Lending Total New Lending ~8+ ~4+ ~10+ 3.2 5.3 5.7 2016 Normalised Long Run 2016 Normalis
Slide 17: Leading Franchise in All Key Personal & Business Banking Segments
1 Leading Franchise in All Key Personal & Business Banking Segments Market Position #1 Personal Market Shares - Stock % 36 37 35 #1 Mortgages 18 #1 Personal Main Current Accounts Personal #1 Personal Loans (1) (3) Mortgages Personal Main Current Personal Loans Personal Credit Cards #1 Personal Credi
Slide 18: Significant change in the Irish Banking Market Since 2007
1 Significant change in the Irish Banking Market Since 2007 Pre-Financial Crisis Today Market Leaders Market Leaders Consolidation in the Irish Challengers and Other New Entrants Challengers and Other New Entrants domestic banking system has accelerated as a result of the crisis Mutuals Mutuals AIB
Slide 19: Investment Aligned to Strategic Agenda and Delivering Growth
2 Investment Aligned to Strategic Agenda and Delivering Growth, Efficiencies and Customer Satisfaction Customer First Simple & Efficient Risk & Capital Management Talent & Culture Focused Investment of €870m (2015-2017) • Customer need – driven by • Resilient and agile technology • Risk adjusted ret
Slide 20: Customer First Driving Commercial Success
2 Customer First Driving Commercial Success Tangible Customer and Efficiency Outcomes Continuously innovate to Relentlessly deliver Understand our customers’ Serve through our omni- Customer First provide suitable solutions simplification and needs channel distribution model for customers digitalisa
Slide 21: Proven Return on Investment: Growing Levels of Customer Interaction
2 Proven Return on Investment: Growing Levels of Customer Interaction and Digital Engagement 2013 2016 501K 28K 148K Mobile Kiosk / Tablet Mobile Interactions Logins Interactions 208K Internet 240K Banking 18K Internet Logins Over 1.2m Contact Banking 880K daily daily Centre Calls Logins interaction
Slide 22: Resulting in Increased New Lending and Market Share Gains
2 Resulting in Increased New Lending and Market Share Gains Increase in New Lending Momentum Across Key Sectors Leading Market Shares Drawdowns (€bn) Mortgage Lending (€bn) Stock 8.7 37% 36% 44% 36% 8.5 2.0 1.3 1.7 26% 22% 1.9 2.6 2014 2015 2016 5.7 (2) 2.9 Personal Lending (€bn) Personal Personal M
Slide 23: Continued Investment in Talent & Culture
2 Continued Investment in Talent & Culture Manpower Movements (FTEs) iConnect (Engagement) (1) 2013 c.7,400 staff exits Actively Disengaged, 39% Leadership Team Engaged, 9% c.4,400 new hires Refreshed 2016 13,459 - c.3,000 Actively Disengaged, 7% Engaged, 50% 10,376 iConnect Scores 2013 2014 2015 20
Slide 24: New Lending Within Risk Appetite and Book Performing Well
3 New Lending Within Risk Appetite and Book Performing Well High Quality New Lending Average Mortgage LTVs Declining New Lending in Ireland (Dec 2016) Stock and Flow (%) 87% 97% at High Grades (1) 74% 78% 74% 73% 70% 50% 47% 2014 2015 2016 Stock New Lending New to Impaired Loans Normalised New to Im
Slide 25: Strong Risk Management Driving Reduction in Impaired Loans
3 Strong Risk Management Driving Reduction in Impaired Loans Tangible Progress in Reducing Impaired Loans …Leading to Provision Writebacks Continued Reduction in Impaired Loans a Key €m Priority Impaired Loans (€bn) 923 55% 51% Appropriate Provisioning 28.9 Process, Externally 47% Validated 22.2 44%
Slide 26: Stable, Low Cost Funding Model & Robust Liquidity Profile
4 Stable, Low Cost Funding Model & Robust Liquidity Profile Funding Model Supported by Resilient & Stable Loan to Deposit Ratio ~100% Low Cost Customer Deposit Base Average Cost of Funding Declining Strong and Stable Loan to Deposit Ratio (LDR, %) Customer Deposits as % of Total Funding Cost of Fund
Slide 27: Significant Capital Accretion Enabling Substantial Payments to the State
Significant Capital Accretion Enabling Substantial Payments to 4 the State Enhanced by Dividend Payment Strong Organic Capital Generation Significant Capital Repayments Fully Loaded (FL) CET1 Ratio (%) €3.2bn paid in €1.6bn of capital €1.7bn paid in fees, coupons, repaid in July 15.3% Dec 2015 divid
Slide 28: Sustainable Profitability, Strong Capital Generation and Delivering Shareholder Returns
5 Sustainable Profitability, Strong Capital Generation and Delivering Shareholder Returns €1.7bn • Strong sustainable profit on a total and underlying basis Profit Before Tax • Enhanced by one-offs and lower YoY provision writebacks €1.9bn in FY 2015 • Positive upward NIM trajectory; exit NIM of 2.4
Slide 29: Focused on Delivering Sustainable Performance
5 Focused on Delivering Sustainable Performance Based on Strong Customer Franchise, Capital Accretion and Returns, and Sustainable Growth Investment Investmentinin Customer CustomerFirst First agenda agendadriving driving growth growth Target Targetreturns returnsonon Maintainstrong Maintain stronga
Slide 30: Brand and Customer Propositions
Brand and Customer Propositions Tom Kinsella Chief Marketing Officer
Slide 31: Market Demographics & Conditions Driving Opportunity for Growth
Market Demographics & Conditions Driving Opportunity for Growth Market Context AIB Strategy & Proposition Deep understanding of customer value and value potential – targeted acquisition strategy for high value Young and Dynamic Population customers today as well as future prospects No.1 bank for
Slide 32: A Clear & Differentiated Brand Supporting Customers Across Their Financial Lifetime
A Clear & Differentiated Brand Supporting Customers Across Their Financial Lifetime Legacy Challenges Resulting in a Brand Strategy Built on “Customer First” Foundations Rehabilitated AIB Brand Brand Promise A tarnished brand Re-Invigorated EBS Brand Brand The Bank Disempowered & disenfranch
Slide 33: A Unified Brand Strategy to Grow Customer Engagement
A Unified Brand Strategy to Grow Customer Engagement… AIB Brand Idea Delivered through the “Backing” Creative Concept All-Ireland Club 48-Hour Approval Dedicated Mortgage Adviser All-Ireland Senior Football Extended Call Hours Approval valid for 12 months £50 for your GAA club with home insurance Bu
Slide 34: Underpinned by Focus on Improving Customer Experience
…Underpinned by Focus on Improving Customer Experience • Voice of the Customer 2013 2015 2016 Programme measuring VOICE OF Launch of VoC 2014 Re-launch of VoC Programme Programme 2017 customer experience CUSTOMER Programme • 17 Transactional Journeys Expansion Prioritised Programme Review using NPS
Slide 35: AIB is the #1 Banking Brand in Ireland
…with Tangible Results – AIB is the #1 Banking Brand in Ireland Strong Market Share in Key Segments …Improving Customer Experience… …the #1 Banking Brand in Ireland Main current account Market Share (1) 15-24 Transactional NPS Personal +44 45 (Q4 2016) 1 YoY% 45% Brand AIB Rank 35% Q3 2013 Q4 2016 C
Slide 36: Case Studies: Compelling Propositions Leveraging Clear Brand Strategies
Case Studies: Compelling Propositions Leveraging Clear Brand Strategies Delivering Growth and Customer Loyalty Mortgage: Multi Brand Strategy for Whole of Market Personal Loans: A Digitally Enabled Model • Customers consider 2-3 providers (including current transactional bank) • Interview vs. Hug St
Slide 37: Deep Insights Into Customer Value Life Cycle
Deep Insights Into Customer Value Life Cycle Driving More Focused Customer Strategy Based on Mutual Value Customer Lifetime Value (1) 1 • Retain loyalty 1 Current Income PV of Income and Income Potential 2 • Grow share of wallet Future Income • AIB developing customer life cycle value model to desig
Slide 38: Customer Led Propositions Leveraging Deep Insights, Multi-Brand Strategy
Customer Led Propositions Leveraging Deep Insights, Delivered Through a Leading Multi-Brand Strategy • Brand rehabilitation driven by customer insight Customer First • Implementation via Multi-Brand approach Simple & • Consistent focus on improving Customer Experience in the way customers interact w
Slide 39: Retail & Commercial Banking
Retail & Commercial Banking Robert Mulhall Managing Director, Retail and Commercial Banking
Slide 40: Strong Franchise with Competitive Market Position
Strong Franchise with Competitive Market Position The Leading Irish Bank with Retail and Commercial Focus Retail & Commercial Banking (1) Wholesale, Institutional & Corporate Banking (1) AIB UK – AIB GB & Northern Ireland • Largest retail and commercial bank in Ireland • Corporate Banking – relation
Slide 41: Largest Retail & Commercial Bank in Ireland
Largest Retail & Commercial Bank in Ireland A Diversified and Growing Personal and SME Franchise Commentary Group Net Loans RCB Earning Loans RCB New Lending UK SME 16% Mortgage portfolio is the largest portfolio and 2016 15% contributor to net interest income Personal WIB Lending €1.2bn 15% 7% Stra
Slide 42: Optimising Distribution to Drive Higher Efficiencies and Competitive Advantage
Optimising Distribution to Drive Higher Efficiencies and Competitive Advantage Distribution Network Redesigned…. …Organised Around the Customer • “Best Bank in Every Community” Ambition 206 Branches 71 Franchises 20 Business • Empowered Local Leaders & Teams Centres equipped with local market insigh
Slide 43: Leading Digital Capability in the Irish Market Place
Leading Digital Capability in the Irish Market Place # 1 Digital Offering in Ireland Customer Journey Driving Higher Digital Adoption No. 1 Digital Channel Distribution Network in Ireland Digital Penetration & Use (1) Digital Journey Successful engagement across multiple digital channels Descriptor
Slide 44: Mortgages: Growing Share Driven By Multi-brand Approach
Mortgages: Growing Share Driven By Multi-brand Approach, New Lending Up 22% YoY vs. 16% for Total Market Differentiated Brand and Pricing Strategy Outperforming the Industry Resulting in Market Share Gains Mortgage Market Share (Flow) (1) % 37.1 38.6 33.9 34.5 34.1 33.1 “Maximising Customer “Challen
Slide 45: Mortgages: Multi-Brand Strategy Driving Pricing & Mix
Mortgages: Multi-Brand Strategy Driving Pricing & Mix and Well Positioned for Further Opportunities Strong Growth in New Lending in First Time Buyers Consistently Strong Customer Rates Drawdowns by Segment, % (as at 2016) Home Mover % AIB Mortgage Rates FTB new lending : 34% 4.15 3.65 3.40 • 46% of
Slide 46: SME: Established Business with National Reach and Scale
SME: Established Business with National Reach and Scale Customer Definition Product Offering Overdrafts & Working Asset Finance & Turnover <€20m / Term Lending Capital Leasing Business Entities & Exposure (1) <€10m Owner Managed Businesses Distribution Channels Commercial Finance Business Credit Car
Slide 47: SME: Leading Position in Business Banking in a Recovering Market
SME: Leading Position in Business Banking in a Recovering Market Strong Market Share (1) in Key Attractive Products and Start-Ups New Lending Up 10% YoY Market Share (%) Market Share for “Start Ups” (%) (2) AIB New Lending Flow €bn #1 #1 #1 51 1.2 44 45 1.1 39 26 11 Main Account Leasing Overdraft AI
Slide 48: Personal Lending: Digital Enablement Facilitates Growing Market Share
Personal Lending: Digital Enablement Facilitates Growing Market Share Digital Strategy Implemented across Portfolio AIB Personal Loans Flow (€bn) Personal Personal – 67% Stock 0.7 • End-to-end digital journey drives strong growth (+58% YoY unit sales growth) 0.5 #1 • 61% of applications through digi
Slide 49: Growing Customer Deposit Base with a Low and Declining Cost of Funds
Growing Customer Deposit Base with a Low and Declining Cost of Funds Cost of Deposits Reduced and Changing Mix Maintaining Market Share in a Growing Market Split of Deposits by Type (€bn) Household Market (€bn) Market Share 0.84% 0.44% 120 28% 43 117 40 115 114 27% 17 19 111 25.9% 110 25.6% 26% 25.5
Slide 50: Strong Current Account Relationship Provides Platform for Other Income
Strong Current Account Relationship Provides Platform for Other Income Generation and Growth Growth Opportunities Across Other Total Other Income (1) Other Income Composition (2) Income Lines €m Card Issuing and Growing Adoption of Digital Transactions Resulting in: Acquiring 5% Steady income stre
Slide 51: RCB Financial Snapshot (Earning Book) – 2016
RCB Financial Snapshot (Earning Book) – 2016 Earning Loan New Lending Total Book Total Book Total RCB Income – 71% of Operating Contribution of AIB Group Change Y-o-Y Portfolio (€bn) 2016 2016 2015 Mortgages 2.0 23.4 23.3 0% Average yield 3.47% 2.67% Interest Income up €85m (+8%) as yields impro
Slide 52: Market Leading Performance Driven by Strategic Priorities
Market Leading Performance Driven by Strategic Priorities • No. 1 franchise in Ireland commanding strong market share in key product lines and customer segments and well positioned to benefit from strong Customer First macro drivers Simple & • Differentiated, highly efficient operating model, optimi
Slide 53: Wholesale, Institutional & Corporate Banking (WIB)
Wholesale, Institutional & Corporate Banking (WIB) Colin Hunt Managing Director, Wholesale, Institutional & Corporate Banking
Slide 54: Strong Franchise with Competitive Market Position
Strong Franchise with Competitive Market Position Retail & Commercial Banking (1) Wholesale, Institutional & Corporate Banking (1) AIB UK – AIB GB & Northern Ireland • Largest retail and commercial bank in Ireland • Corporate Banking – relationship-driven model • >360k retail and SME customers with
Slide 55: Well-Established Business with Growth Opportunities
Well-Established Business with Growth Opportunities • Established business area serving the bank’s larger customers and customers requiring specific sector or product expertise Evolution of Loan Stock €bn • Delivering customer-focused solutions in private and public markets and 0.2 9.1 providing att
Slide 56: Sector and Product Focus to Meet Customer Needs
Sector and Product Focus to Meet Customer Needs 2016 Team Headcount: Location 258 Primary focus on senior debt origination through specialist sector coverage teams Corporate Banking − Profitable business supporting core domestic corporates Sector specialists Wholesale Institutional & Corporate Ban
Slide 57: Our Lending Model: Experienced Centres of Excellence
Our Lending Model: Experienced Centres of Excellence Selective Approach Based on Tight Standards and Controls • “Centres of Excellence” ensuring learnings from past cycles are consistently applied Multidisciplinary Teams • Risk-aware approach to new business origination • Multi-disciplinary teams fo
Slide 58: Leading Domestic Corporate Banking Franchise
Leading Domestic Corporate Banking Franchise with Corporate Diversified Portfolio and End-to-End Relationship Model • Ireland’s leading Corporate Bank Financial Overview – 40 years track record with deep customer relationships Loan Stock and Flow (€bn) – Predominantly focused on domestic corporate c
Slide 59: Sample Corporate Banking Customers
Sample Corporate Banking Customers (1) Source: Company Information (1) As published in national print media February 2016 Page 59
Slide 60: Centralised Approach to Real Estate Finance
Centralised Approach to Real Estate Finance with Multi- Real Estate Disciplinary Team and Tightened Underwriting Centre of Excellence for real estate finance applying lessons learned from past cycles – previously fragmented approach now largely centralised with enhanced controls Financial Overview
Slide 61: Real Estate Finance – Development Lending Aligns to Housing Strategy
Real Estate Finance – Development Lending Aligns to Housing Strategy Addressing Fundamental Market Requirement Projections on Residential House Completions AIB Case Study 100,000 Forecast 80,000 60,000 40,000 20,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: CSO,
Slide 62: Diversified Syndicated and International Finance Portfolio
Diversified Syndicated and International Finance Portfolio with Highly Selective Approach and Proven Flexibility Syndicated & International Financial Overview • Conservatively-sized diversified portfolio of acquisition finance loans delivering Loan Stock and Flow (€bn) strong risk-adjusted returns a
Slide 63: Energy, Climate Change & Infrastructure Centre of Expertise
Energy, Climate Change & Infrastructure Centre of Expertise to Help Ireland Become Low Carbon Economy • Established lending business with experienced project finance lenders Ireland 2020 Sustainability Targets % of energy supplied from renewables • Increasing focus on renewable energy: Significant p
Slide 64: WIB Financial Snapshot – 2016
WIB Financial Snapshot – 2016 New Lending Total book Total book WIB Income – 18% of Operating Contribution of AIB Group Loan Portfolios (€bn) Change Y-o-Y 2016 2016 2015 Corporate 0.9 4.4 4.6 -4% Average yield 3.27% 3.24% Income up €51m (+19%) from established Corporate Banking business, activit
Slide 65: Performance Driven by Strategic Priorities
Performance Driven by Strategic Priorities Customer First • Market-leading customer-centric franchise business serving the bank’s larger customers and customers with specialised product requirements Simple & • Simple and Efficient operating model with Centre of Expertise approach to management of ke
Slide 66: AIB UK
AIB UK Brendan O’Connor Managing Director, AIB UK
Slide 67: Strong Franchise with Competitive Market Position
Strong Franchise with Competitive Market Position Retail & Commercial Banking (1) Wholesale, Institutional & Corporate Banking (1) AIB UK – AIB GB & Northern Ireland • Largest retail and commercial bank in Ireland • Corporate Banking – relationship-driven model • >360k retail and SME customers with
Slide 68: Evolution of the UK Business – Near Term Focus on Optimisation of Platform
Evolution of the UK Business – Near Term Focus on Optimisation of Platform AIB UK (2012 – 2016) AIB UK (2016 – 2017) • AIB UK largely in holding pattern as Group restructuring, transformation and full recovery prioritised • Focus on Optimising the distribution and operations platform to support Jour
Slide 69: AIB Full Service Business Banking Offering Well Positioned to Compete in the UK
AIB Full Service Business Banking Offering Well Positioned to Compete in the UK Market UK Banking Market – Macro Considerations UK Scale players dealing with significant Technology and Lower for longer increasing focus on asset Regulation forcing scaled players to focus government policy supporting
Slide 70: AIB GB: Niche Business Bank in the UK
AIB GB: Niche Business Bank in the UK with Expertise in Chosen Sectors Overview of Current Offering & Distribution Platform 2016 AIB GB Lending Volumes (1) Business Banking Corporate Banking Stock Flow Balances (1) £2.4bn £2.8bn 7% 1% 0.4% 0.4% • Typically SMEs • Larger, more complex customers Overv
Slide 71: FTB: Focused Challenger Bank in Northern Ireland
FTB: Focused Challenger Bank in Northern Ireland with Business Banking Focus Overview of Current Offering & Distribution Platform 2016 AIB FTB Lending Volumes (1) Personal Banking Corporate Banking Stock Flow Balances (2) £1.29bn (1) £1.47bn 5% 9% 10% • Transactional banking services to personal • B
Slide 72: Focus on Business Banking Opportunity Supported by Simple Operating Platform
Focus on Business Banking Opportunity Supported by a Simple and Efficient Operating Platform Strategic Opportunities Critical Success Factors Strategic Direction Sector and Regional Business Banking Significant market opportunity for niche Lean & Efficient Omni-Channel players/specialists distribu
Slide 73: UK Financial Snapshot - 2016
UK Financial Snapshot - 2016 New Lending Total Book Total Book UK Income – 11% of Operating Contribution of AIB Group Loan Portfolio (£bn) Change Y-o-Y 2016 2016 2015 AIB GB 1.3 5.1 5.1 0% Income increased 8% from stable interest income and higher levels of lending related fee income. Average yi
Slide 74: UK Strategy Fully Aligned with AIB Group Strategic Priorities
UK Strategy Fully Aligned with AIB Group Strategic Priorities • GB – linking central sectoral expertise with local relationship distribution network to provide compelling full service banking proposition for target customers and sectors Customer First • Northern Ireland – multi-channel access for re
Slide 75: Operating Platform & Investment Strategy
Operating Platform & Investment Strategy Tomás O’Midheach Chief Operating Officer
Slide 76: Investment Approach
Investment Approach 2012-2014 Investment strategy focused on: Digital investment has enhanced our customer experience • Rationalisation of our infrastructure • Digital & Direct Channel investment Complete Consistent Connected Branch Transactions Growth of Lending on Digital Phone Banking Avg. Daily
Slide 77: Investment Plan: 2015-2017
Investment Plan: 2015-2017 Substantially Complete - Focus on Harvesting €870m Investment (2015-2017) on Track Commentary €m Significant uplift of spend for this period, ~313 3 year Investment Plan focused on four key areas 292 265 • Resilience - Ensuring our infrastructure is current & resilient wit
Slide 78: Impact of Investment on the Target Architecture
Impact of Investment on the Target Architecture Fit for Purpose Platform with Clear, Cost Effective Go-Forward Strategy Retail Customer Business Customer WIB Customer 4 1 CUSTOMER ENGAGEMENT CAPABILITY SECURITY Contact Relationship Manager / Modular approach – no “big-bang” IT CAPABILITY Mobile Tabl
Slide 79: Simple & Efficient: Example of Process Efficiency and Automation
Simple & Efficient: Example of Process Efficiency, Automation Customer Data & Displacement A typical manual process – Paper based, physical transport, manual inputs and outputs Banking Operations CUSTOMER CHANNEL AIB CUSTOMER PROCESSING Impact (2014-2016) A-Z Process simplification has resulted in:
Slide 80: IT & Operations – Evolved People Capability
IT & Operations – Evolved People Capability Increased Expertise, Flexibility and Access Focus on Optimisation of Resources 2014 2016 IT 33% Partners 25% Banking Operations & Banking Contact Centre Operations & 58% Contact Centre IT 67% 17% • 6 major contracts with 5 new strategic technology partners
Slide 81: Performance Driven by Strategic Priorities
Performance Driven by Strategic Priorities • We are building Complete, Consistent and Connected Omni-Channel solutions Customer First • Investment strategy is rooted in customer experience. Simple & • By automation we are delivering standardised, repeatable, de-risked straight through processing end
Slide 82: NPL Evolution & Strategy
NPL Evolution & Strategy Mark Bourke Chief Financial Officer
Slide 83: Significant Progress Already Made in De-Risking Balance Sheet
Significant Progress Already Made in De-Risking Balance Sheet Impaired Loans 14% of Gross €65bn Loans; Down From 35% in 2013 Impaired loan evolution: AIB Impaired Loan Evolution • Reduction of c. €20bn since 2013 €bn – Dedicated work out unit set up 55% 51% 47% 44% – Case by case restructuring • Cus
Slide 84: Tangible Success in Curing Customers and Using Provisioning to De-Lever
Tangible Success in Curing Customers and Using Provisioning to De-Lever the Balance Sheet Impaired Loans Reduced Within Existing Balance Sheet Provisioning Levels and Without Significantly Impacting Capital €bn 3.1 (8.0) Cash Collections 28.9 Customer €4bn & Cures restructures – without Loss €4bn in
Slide 85: Full Set of Solutions Designed to Provide Customer Focused Outcomes
Full Set of Solutions Designed to Provide Customer Focused Outcomes and Reduce Risk Work Out Unit (FSG): Financial Solutions Group Support customers in difficulty whilst optimising return on impaired debt through application of solutions tailored • Dedicated work out unit set up in 2012 to differing
Slide 86: Non-Performing Exposures a Key Focus in Regulatory Process
Non-Performing Exposures a Key Focus in Regulatory Process Impaired to NPE Reconciliation Impaired: • IFRS accounting definition €bn 14.1 NPEs: 2.9 • EBA regulatory definition 1.2 • Relevant for Regulatory Reporting (FINREP), EBA stress testing & capital planning 0.9 9.1 Reconciliation • NPEs includ
Slide 87: NPE Strategy: Medium Term Target in Line with European Banking Norms
NPE Strategy: Medium Term Target of Bringing NPE in Line with European Banking Norms Targeting Further Deleveraging to European Norms • 54% reduction in NPEs from 2013 to 2016 through normal restructuring €bn • NPE Plan to reduce Impaired loans through: 30.7 28.9 − Sales & Redemptions 26.2 − Cures 2
Slide 88: Financial Performance
Financial Performance Mark Bourke Chief Financial Officer
Slide 89: 2012-2016: Business Model Delivering Growth
2012-2016: Business Model Delivering Growth New Lending Increased NIM (1) and NII Reduced Operating Costs (2) €bn % €m €1.5bn €2bn 123% 52% 8.5 8.7 2.42% 2.25 1,748 1.97 5.9 1.69 1,470 1,403 1,377 1,296 1.37 3.9 1.22 n.m. 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 20
Slide 90: 2012-2016: Business Model Delivering Growth - Cont’d
2012-2016: Business Model Delivering Growth - Cont’d NPLs Reduced Return to Profit (1) Capital Accretion (2) €bn Profit / (Loss) Before Tax (€m) %, FL CET1 Ratio (257bps) +44bps 1,914 1,682 15.3 1,111 29.4 28.9 13.0 11.8 10.2 10.5 22.2 13.1 (1,687) 9.1 (3,729) 2012 2013 2014 2015 2016 2012 201
Slide 91: Financial Highlights in 2016
Financial Highlights in 2016 Key Performance Metrics in Line with Expectations Sustainable underlying profitability underpinned by positive NII and margin trajectory NIM 2.25% (1) - exit NIM 2.42% (2) Stable earning loan book (ex-FX) driven by strong momentum in new lending New lending €8.7bn Co
Slide 92: Operating Performance
AIB Operating Performance
Slide 93: Income Statement
Income Statement Sustainable Underlying Profitability Summary Income Statement (€m) 2016 2015 Operating income €2.6bn Net interest income 2,013 1,927 − Net interest income up 4% Other income 617 696 − Net interest margin up 28bps to 2.25%; continued positive NIM Total operating income 2,630 2,623
Slide 94: Average Balance Sheet
Average Balance Sheet Further NIM Expansion Driven by Stable Asset Yields and Lower Funding Costs Year ended 31 December 2016 Year ended 31 December 2015 Strong NIM (1) 2.25% (exit NIM 2.42%) Average Balance(2) Interest Average Rate Average Balance(2) Interest Average Rate €m €m % €m €m % Assets L
Slide 95: Other Income
Other Income Stable Net Fees and Commission Income Net Fee & Commission Income €m 405 395 Stable underlying fee and commission income of €395m 84 77 48 51 − Current accounts represent c. 50% of net fees and commission 85 83 income 188 184 Other business income fluctuated due to valuations on lon
Slide 96: Costs
Costs Continued Focus on Cost Discipline While Progressing on Strategic Investment Programme Operating Expenses (1) Disciplined cost management €m 49% 52% − Significant reduction in cost base from 2012 - €365m (-21%) 1,742 1,465 1,397 1,377 − 2016 operating expenses €1,377m (+7%) in line with expe
Slide 97: P&L - Other Items
P&L - Other Items Exceptional Benefits and Provision Writebacks Partially Offset by Regulatory Fees & Levies Other PL items (€m) 2016 2015 Bank levies and regulatory fees €112m (1) Operating Profit Before Provisions 1,253 1,331 − Bank Levy €60m Bank Levies and Regulatory Fees (112) (71) − SRF (2)
Slide 98: Segmental Financial Performance
Segmental Financial Performance
Slide 99: AIB Revised Segments in Line with Business
AIB Revised Segments in Line with Business See Appendix Slide 124 for Reconciliation of Segments to Group Group & AIB Ireland AIB UK International (1) Retail & Commercial Banking Wholesale, Institutional & Group Treasury & support AIB UK (“UK”) (“RCB”) Corporate Banking (“WIB”) (1) functions • Large
Slide 100: RCB (Earning Book) – Dec 2016
RCB (Earning Book) – Dec 2016 P&L Items (€m) 2016 2015 Change Y-o-Y Net Interest Income 1,131 1,046 +8% Total RCB Income – 71% of Operating Contribution of AIB Group Other Income 398 382 +4% Interest Income up €85m (+8%) Total Operating Income 1,529 1,428 +7% − Cost of deposits reduce and changi
Slide 101: RCB (Impaired Book) – Dec 2016
RCB (Impaired Book) – Dec 2016 P&L Items (€m) 2016 2015 Change Y-o-Y Interest Income recognised on Impaired Loans €142m Net Interest Income 142 174 (18%) Other Income − Average Asset Yield on Impaired Book 2.41% 0 0 0% Total Operating Income 142 174 (18%) Costs remain flat as work out continues
Slide 102: Wholesale, Institutional & Corporate Banking – Dec 2016
Wholesale, Institutional & Corporate Banking – Dec 2016 P&L Items (€m) 2016 2015 Change Y-o-Y WIB Income – 18% of Operating Contribution of AIB Group Net Interest Income 269 226 +19% Other Income 51 43 +19% Income up €43m (+19%) due to strong loan growth and attractive risk adjusted returns (NIM
Slide 103: AIB UK – Dec 2016
AIB UK – Dec 2016 P&L Items (£m) 2016 2015 Change Y-o-Y UK Income – 11% of Operating Contribution of AIB Group Net Interest Income 183 183 0% Other Income 54 36 +47% Operating Income broadly stable Total Operating Income 237 219 +8% − Stable net interest income despite BoE rate cut Operating Exp
Slide 104: Balance Sheet & Asset Quality
Balance Sheet & Asset Quality
Slide 105: Balance Sheet
Balance Sheet Well Funded Balance Sheet Management and Strong Capital Ratios; Well Positioned for Growth Balance Sheet €bn Dec-16 Dec-15 Assets Gross loans to customers 65.2 70.2 Provisions (4.6) (6.8) Net loans €60.6bn Net loans to customers 60.6 63.3 Financial investment (AFS & HTM) 18.8 20.0 −
Slide 106: Customer Loans
Customer Loans New Lending €8.7bn Customer Loans (€bn) Earning loans Impaired Loans Gross Loans Specific Provisions IBNR Provisions Net Loans Opening Balance (1 January 2016) 57.0 13.1 70.1 (6.2) (0.7) 63.2 New lending volumes 8.7 0.0 8.7 0.0 0.0 8.7 New impaired loans (0.8) 0.8 0.0 (0.3) 0.0 (0.3)
Slide 107: Earning Loans Increasing by Segment and Sector in Ireland
Earning Loans Increasing by Segment and Sector in Ireland Impaired Loans are Reducing Retail & Commercial Banking RoI Mortgages €bn 38.7 €bn 38.4 28.6 28.9 10.8 7.9 5.7 4.4 Earning loans Impaired loans Earning loans Impaired loans Wholesale, Institutional and Corporate Banking Non-Property Business
Slide 108: Customer Loans
Customer Loans Corporate & SME Driving New Lending Growth Dec 2016 – Earning Loans €56.1bn Dec 2016 – New Lending €8.7bn Corporate & SME (ex. Residential Property) Mortgages €16.1bn; 28% €2.1bn; 24% Corporate & Residential SME (ex. Mortgages Property) Other Personal €30.6bn; 55% €4.4bn; 50% €0.7bn;
Slide 109: Asset Quality
Asset Quality Continued Progress as Impaired Loans Reduce Across All Sectors Dec-16 Residential Property and Non-Property Other Personal Total €bn Mortgages Construction Business Lending Loans and receivables to customers 35.2 3.1 9.4 17.5 65.2 Impaired 4.6 0.4 2.7 1.4 9.1 Impaired loans net Balance
Slide 110: Balance Sheet Provisions
Balance Sheet Provisions Working Well Within Provision Stock While Maintaining Coverage Residential Property and Non-Property Other Personal Total Balance Sheet Provisions Movement (€bn) Mortgages Construction Business Opening Balance Sheet Provisions 1 Jan 2016 Specific 2.0 0.5 2.5 1.2 6.2 IBNR 0.3
Slide 111: Financial Investments
Financial Investments €18.8bn Portfolio of Financial Investments Including €3.4bn as HTM Key Components of AFS - Debt Securities (1) AFS - Components of Government Securities €bn €bn 8.7 8.0 3.5 3.4 4.6 4.5 5.4 5.1 2.0 1.7 0.3 0.3 1.2 0.9 1.2 1.1 0.7 0.6 Held to Maturity Government Supranational Ban
Slide 112: Funding & Capital
AIB Funding & Capital
Slide 113: Funding Structure
Funding Structure Stable Deposit Base Driving Strong Funding Position Total Funding Customer deposits represent 69% of total funding €bn − Low cost stable source of funds, LDR ratio 95% 98.7 92.0 − Wholesale funding Customer 7 year AIB Mortgage Banks ACS issuance €1bn Accs: 63.4 Customer − LCR 1
Slide 114: Stable Deposit Base with Low & Declining Cost of Funds
Stable Deposit Base with Low & Declining Cost of Funds Strong Deposit Contribution Across Mix Shift to Current Account Mix Shift and Pricing Actions Driving Group Segments Decline in Cost of Funds €bn €bn 1.12% 63.4 63.5 58.0 59.6 6.0 6.4 0.83% 26.0 29.7 11.6 10.3 37% 46% 40.4 42.9 37.4 33.8 63% 54%
Slide 115: Capital Ratios
Capital Ratios Strong Capital Base with Fully Loaded CET 1 of 15.3% - Normalised Capital Stack AIB Group - RWA (€m) (Transitional) Capital Ratios Risk Weighted Assets (€m) 31-Dec-16 31-Dec-15 Movement % Credit risk 48,843 53,596 (4,753) 18.9 21.7 15.5 17.6 Market risk 288 457 (169) Operational Risk
Slide 116: Risk Weighted Assets and RWA Density
Risk Weighted Assets and RWA Density RWAs and RWA Density AIB Group – RWA (€m) (FL) Risk Weighted Assets (€m) 2016 2015 Overall RWA reduction of €4.6bn Credit Risk 49,027 54,105 – Improvement in Credit Risk RWAs (€3.7bn) driven by restructuring activity and positive grade migrations, net redemptio
Slide 117: Steady-State Target CET1 Range of 13%
Steady-State Target CET1 Range of 13% In a steady-state, SREP CET1 requirement will take Illustrative SREP CET1 Evolution Target CET1 Range into account of fully phased in capital buffers (CCB and O-SII) 13.0% Min CET1 − 2.50% CCB Requirement (%) 11.75% − 1.50% O-SII 1.50% CET1 / 9.00% MDA (%) 2.5
Slide 118: How We Think About Returns
How We Think About Returns (PAT – AT1 Coupon + DTA Utilisation) / (FL CET1 @ 13% + DTAs) (€m) 2016 PAT 1,356 (-) AT1 coupon 37 Profit (1) (+) DTA utilisation 97 Profit on Profit (Numerator) 1,416 CET1 @ 13% RWAs 54,419 of RWAs + DTAs CET1 at 13% RWAs 7,075 CET1 @ (+) DTAs 3,050 13% of DTAs RWAs Adju
Slide 119: Financial Targets: Focused on Delivering Sustainable Performance
Financial Targets: Focused on Delivering Sustainable Performance Medium Term Metric 2016 (3-5 Years) Guidance & Targets Net Interest Margin (excl. ELG) 2.25% 2.40%+ “Maintain strong and stable NIM, 2.40%+” Cost / Income Ratio 52% <50% “Below 50% by end 2019 reflecting robust and efficient operating
Slide 120: Concluding Remarks
Concluding Remarks Bernard Byrne Chief Executive Officer
Slide 121: Focused on Delivering Sustainable Performance
Focused on Delivering Sustainable Performance Based on Strong Customer Franchise, Capital Accretion and Returns, and Sustainable Growth Investment Investmentinin Customer CustomerFirst First agenda agendadriving driving growth growth Target Targetreturns returnson on Maintainstrong Maintain strongan
Slide 122: Slide 122
Slide 123: Appendix
AIB Appendix
Slide 124: AIB Segment Performance – Dec 2016
AIB Segment Performance – Dec 2016 Segmental Financials RCB WIB UK Group AIB Group Earning Impaired Contribution statement (€m) 2016 2016 2016 2015 2016 2015 2016 2015 2016 2015 2016 Net interest income 1,131 142 1,273 1,220 269 226 224 252 247 229 2,013 Other income 398 0 398 382 51 43 65 50 103 22
Slide 125: Improving Asset Quality by Segment
Improving Asset Quality by Segment Dec-16 Dec-15 €m RCB WIB UK Group Total RCB WIB UK Group Total Residential mortgages 33,408 36 1,795 35,239 34,372 48 2,362 36 36,818 of which: owner-occupier 28,624 7 1,564 30,195 28,834 10 2,048 36 30,928 of which: buy-to-let 4,784 29 231 5,044 5,538 38 314 5,890
Slide 126: Improving Asset Quality by Segment
Improving Asset Quality by Segment Balance Sheet Provisions Movement (€m) RCB WIB UK Group Total Opening Balance Sheet Provisions 1 Jan 2016 Specific 4,896 218 1,027 17 6,158 IBNR 556 47 71 0 674 Balance Sheet Provisions 5,452 265 1,098 17 6,832 Income Statement - Credit Provision Charge/Writebacks
Slide 127: Criticised Loans and Definitions
Criticised Loans and Definitions Credit Profile – Criticised Loans Credit Profile – Criticised Loans €bn €bn 18.7 42.7 41.8 7.0 1.7 3.0 6.8 34.0 6.3 6.1 5.2 2.8 24.8 6.6 18.7 1.2 4.3 7.4 3.0 0.9 NPE 29.4 28.9 6.6 22.2 9.1 13.1 9.1 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-16 Impaired Vulnerable Watch I
Slide 128: ROI Residential Mortgages – Arrears Significantly Lower
ROI Residential Mortgages – Arrears Significantly Lower ROI Mortgage Portfolio – Dec 2016 Impairment Writeback €bn €m Buy-to-let Fixed 463 14% Owner- 10% occupier Tracker 86% 35% 109 Variable 55% €33.4bn Dec-15 Dec-16 Impaired Loans 86% of the RoI mortgage portfolio is owner occupier and 14% is bu
Slide 129: Other Personal
Other Personal Personal Loan Portfolio – Dec 2016 Impairment Writeback €bn €m Impaired Vulnerable 14% 9% 22 Watch 8 4% Satisfactory 73% €3.1bn Dec-15 Dec-16 Impaired Loans Portfolio comprises €2.2bn loans and overdrafts and €0.9bn in credit card facilities €bn 69% 70% 58% Increase in demand for
Slide 130: Property & Construction
Property & Construction Property & Construction Portfolio – Dec 2016 Impairment Writeback €bn €m Contractors Housing 4% Associations Land & 214 3% Development 145 16% Investment 77% Dec-15 Dec-16 €9.4bn Impaired Loans Overall portfolio has reduced by €2.1bn (19%) since Dec 2015 primarily due to: €
Slide 131: Non-Property Business
Non-Property Business Non-Property Business – Dec 2016 Impairment Writeback €bn Other Agriculture €m 26% 10% 225 Hotels & Licensed Premises 16% 16 Retail/Wholesale/Other Other Services Distribution 33% Dec-15 Dec-16 15% €17.5bn Impaired Loans Portfolio comprises Corporate and SME lending €bn − 56%
Slide 132: ROI Mortgages – Stock of Forbearance
ROI Mortgages – Stock of Forbearance of which: loans > 90 days of which: loans > 90 days Dec 2016 - Total in arrears and/or impaired Dec 2015 - Total in arrears and/or impaired Forbearance Type by Mortgage Number Balance (€m) Number Balance (€m) Number Balance (€m) Number Balance (€m) Interest only
Slide 133: Non-Mortgage – Stock of Forbearance
Non-Mortgage – Stock of Forbearance Dec-16 Dec-15 Non-Property Non-Property Property Business Property Business Other and Lending Other and Lending Personal Construction Balance Personal Construction Balance Forbearance Type by Non-Mortgage Balance (€m) Balance (€m) Balance (€m) Total (€m) Balance (
Slide 134: Funding Market Access
Funding Market Access 2013 2014 2015 2016 ACS Issuance Senior Senior Tier 2 AT1 ACS Issuance Senior ACS Issuance ACS Issuance ACS Issuance ACS Issuance September Unsecured Unsecured November December January 2013 Unsecured March 2014 January 2015 July 2015 January 2016 2013 April 2014 March 2015 201
Slide 135: Shareholders’ Equity
Shareholders’ Equity Year ended 31 December Year ended 31 December Shareholders’ Equity €m 2016 €m 2015 €m Opening Shareholders’ Equity 12,148 11,572 PAT 2016 1,356 1,380 Net actuarial gains in retirement benefit schemes 103 743 Net change in fair value of AFS securities (359) 103 Net change in cash
Slide 136: Regulatory Capital and Ratios
Regulatory Capital and Ratios Transitional Basis Fully Loaded Basis Regulatory Capital Ratios Regulatory Capital (€m) 31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015 Shareholders’ equity 13,148 12,148 13,148 12,148 Transitional Basis Less: AT1 capital (494) (494) (494) (494) 31 Dec 2016 31 Dec 2015