Bank Of Ireland Group Plc · EURONEXT:BIRG
Bank Of Ireland — Debt Investor Presentation (March 2023)
65 slides from Bank Of Ireland's debt investor presentation, March 2023
Slide 1: FY22 Debt Investor Presentation
FY22 20 Debt Investor Presentation 22 31 December 2022 i
Slide 2: Bank of Ireland Overview
Bank of Ireland Overview 1
Slide 3: Strong strategic progress and financial performance in 2022
Strong strategic progress and financial performance in 2022 • Underlying PBT of €1.2bn FY22 financial 10.6% • Total income2 +11% y/y, reflecting higher net interest income and growth in fee income ROTE1 in • Strong cost discipline maintained; like-for-like costs lower, cost to income ratio5 performa
Slide 4: Key business line highlights
Key business line highlights +64% • €3.9bn in new mortgage drawdowns; net book growth of 2% (ex NPE disposals) y/y increase in • Market share increased to 28% (FY21 23%); 31% H2 2022 Irish Mortgages new mortgage • Performance supported by enhanced digital and green offerings, while maintaining drawd
Slide 5: Progress on ESG strategy
Commitment to green transition evidenced by 1st c.€8bn tangible outcomes First Irish bank to have Science Sustainability-related finance Based Targets validated by SBTi on balance sheet Financial Wellbeing Significant at the heart progress on our of customer > 4 million UN co-lead ESG Strategy inter
Slide 6: Strong track record of delivery through 2018-22 cycle
Strong track record of delivery through 2018-22 cycle 2018 CMD target outcomes achieved… Target Delivery Target Delivery Cost to ROTE >10% 10.6% income ratio <50% 54% Costs Cost level <€1.7bn c.€1.65bn CET1 >13% 15.4% Distributions Cost Reduced Reduced Prudent & resumed trajectory annually a
Slide 7: Highly attractive market and demographics
Highly attractive market and demographics Ireland is the +6ppts1 4.4% fastest growing Irish economic growth vs Ireland unemployment economy in the EU EU average 2023-25 (fastest in EU) rate January 2023 Ireland has a younger population and higher 33% 19% savings ratio than most of population less th
Slide 8: Differentiated business model is increasing value creation
Differentiated business model is increasing value creation Leading, full-service bank with c.440k new customers1 (+11%) Unique wealth offering; Ireland’s only bancassurer Leading ROI Leading Business Bolstered Retail and Corporate by recent market franchise franchises moves Banking Wealth >2.0m c.30
Slide 9: Strategic pillars to deliver 2025 outcomes
Strategic pillars to deliver 2025 outcomes Stronger Simpler Sustainable Relationships Business Company Activate <50% c.15% Further embedding a digital first customer Annual cost-income ratio 2023-2025 Annual ROTE target 2023-2025 acquisition model Connect +10pts #1 Improved customer experiences Impr
Slide 10: ESG strategy and sustainable financing
Managing environmental risks; leveraging c.€15bn Advisory opportunities Sustainable financing by 2025 Providing leading advice on ESG (and €30bn by 2030) (e.g. Davy Horizons for SMEs) Practical, Delivering impact meaningful across society ESG interventions through our #1 50:50 activities Position fo
Slide 11: Operational Performance
Operational Performance 10
Slide 12: Strong financial performance in 2022
Strong financial performance in 2022 FY 2021 FY 2022 • FY 22 performance reflects positive business momentum, continued y/y % (€m) (€m) focus on efficiencies and more normalised impairment charge Net interest income 2,219 2,482 12% • Operating profit pre-impairment +15% y/y reflecting Business incom
Slide 13: Net interest income 12% higher
Net interest income 12% higher Net interest income movement 2022 Performance €425m €25m (€160m) • Net interest income (NII) +12% y/y primarily driven by €2,447m €35m €2,482m – Higher liquid asset income reflecting higher interest rates and €2,157m growth in our Irish deposit franchise of €11bn (incl
Slide 14: Net interest income resilience from structural hedge
Net interest income resilience from structural hedge Structural hedge • Increased structural hedge volumes of €60bn at end 2022 reflect Period-end €37.6bn €60.5bn – Increase in current account balances volume – Hedging of current account balances previously subject to negative interest rates €129m –
Slide 15: Net lending of €1.6bn in Retail Ireland and Corporate
Net lending of €1.6bn in Retail Ireland and Corporate New lending1 by division Strong growth in Irish mortgage lending €15.6bn €14.2bn • Total new lending of €15.6bn in 2022 (+10% y/y) – Retail Ireland +36% y/y supported by 64% growth in mortgages – Corporate & Markets +2% y/y supported by 7% growth
Slide 16: Business income +27% (+15% ex Davy)
Business income1 +27% (+15% ex Davy2) FY 2021 FY 2022 • Wealth and Insurance +44% y/y following acquisition of Davy2 (+15% (€m) (€m) y/y % ex Davy) and improved performance on the existing book Wealth and Insurance (incl. Davy) 266 382 44% • Retail Ireland +27% y/y due to higher customer activity an
Slide 17: Like-for-like expenses below FY21
Like-for-like expenses1 below FY21 Cost Movement €78m €25m (€32m) €28m €1,746m €1,647m €1,640m FY21 Inflation and other2 Efficiencies FY22 like-for-like1 One-off investment in growth Davy FY22 reported opportunities FY22 operating expenses 2023 outlook • Operating expenses reduction of 0.4% y/y refl
Slide 18: Non-core items
Non-core items 2022 non-core items FY 2021 FY 2022 Non-core items (€m) (€m) • Net non-core charge of €142m primarily comprising Transformation programme costs (122) (50) – transformation programme charge (€50m) primarily related to Retail UK restructuring Acquisition costs (2) (54) – acquisition cos
Slide 19: FY22 net impairment charge of €187m or 25bps
FY22 net impairment charge of €187m or 25bps IFRS 9 models and management adjustments (PMAs) Loan loss experience and portfolio activity (€20m) charge (€167m) charge • IFRS 9 model updates (€137m) reflecting downgrade of macroeconomic outlook and • €214m charge split evenly over H1 and H2; primarily
Slide 20: Significant reduction in NPEs
Significant reduction in NPEs NPE movements – NPE ratio declines to 3.6% Non-performing exposures c.40% lower y/y • NPE ratio significantly reduced following NPE disposals in H2 2022, 5.5% (€1.3bn) now at 3.6%; 3.4% pro forma post KBC acquisition 4.4% • Proven track record of 3.6% (€0.4bn) – Sustain
Slide 21: Capital & MREL
Capital & MREL 20
Slide 22: Strong capital generation supports material step up in distributions
Strong capital generation supports material step up in distributions Fully Loaded CET1 ratio 135bps (50bps) RWAs 10bps (80bps) €46.2bn RWAs (75bps) €47.5bn 16.0% 15.4% Dec-21 Net organic capital 1 RWA2 Pension / Other Davy Proposed distribution Dec-22 post distribution Strong capital generation Dist
Slide 23: Regulatory ratios
Regulatory ratios Regulatory CET1 ratio RWAs 115bps (50bps) €46.4bn (80bps) RWAs (35bps) (75bps) €47.5bn 10bps 17.0% 15.9% Dec-21 CRD phasing Net organic RWA1 Pension / Other Davy Proposed Dec-22 post capital distribution distribution Regulatory Capital Metrics Dec-21 Dec-22 CET1 • Movement in Regul
Slide 24: Balance sheet: funding and liquidity
Balance sheet Funding & Liquidity Dec-21 Dec-22 (€bn) (€bn) • Liquid Assets reduced by c.€1bn; c.€11bn repayment of TLTRO offset by c.€6bn growth in customer deposits and c.€4bn reduction in customer Customer loans 76 72 loans Liquid assets 50 49 • LDR reduced (82% to 73%), NSFR increased (144% to 1
Slide 25: Significant buffer to potential MDA restrictions
Significant buffer to potential MDA1 restrictions Regulatory CET1 ratio vs. MDA Threshold • Regulatory CET1 ratio of 15.9% at Dec 2022 MDA MDA – Continued phase-in of existing transitional adjustments expected to 5.9% 4.7% Buffer Buffer consume c.25bps per annum in 2023/2024 0.27% 1.5% 1.45% 1.5% n
Slide 26: Risk weighted assets (RWAs) / Leverage ratio
Risk weighted assets (RWAs) / Leverage ratio Customer lending average credit risk weights – Dec 20221,2 EBA Transparency Exercise 2022 (Based on regulatory exposure class) Country by Country Average IRB risk weights Residential Mortgages – Jun 2022 EAD 3 RWA Avg. Risk (€bn) (€bn) Weight Sweden 3.9%
Slide 27: EBA Transparency Exercise: IRB RWA density vs peers
EBA Transparency Exercise 20221 Bank of Ireland’s IRB RWA density across major loan portfolios exceeds a wide distribution of European peers IRB RWA: SME Lending 2 IRB RWA: Corporate Lending 3 80% 90% 70% 80% 60% 70% 50% 60% 40% 50% 30% 40% 30% 20% 20% 10% 10% 0% 0% Bank Bank BOI Bank Bank Bank Bank
Slide 28: Regulatory capital requirements
Regulatory capital requirements Pro forma CET1 regulatory capital requirements 2022 2023 2024 Pillar 1 – CET1 4.50% 4.50% 4.50% Pillar 2 Requirement (P2R) 1.27% 1.27% 1.27% Capital Conservation Buffer (CCB) 2.50% 2.50% 2.50% Ireland Countercyclical buffer (CCyB)1 0.00% 0.61% 0.92% UK Countercyclical
Slide 29: Credit ratings
Credit ratings Instrument ratings BOIG BOIG (Stand alone (Senior ratings) BOIG GovCo BOIMB (ACS)1 BOIG GovCo BOIG GovCo ratings) Aaa Aaa Aaa C AAA AAA AAA AAA Investment Grade Aa1 Aa1 Aa1 AA+ AA+ AA+ AA+ baa1 A3 Aa2 Aa2 Aa2 AA AA AA AA Stable Stable Aa3 Aa3 Aa3 AA- AA- AA- AA- A1 A1 S A1 A+ A+ A+ A+
Slide 30: Summary highlights
Summary highlights • Significant step up in organic capital generation in H2 2022; expected to materially increase in 2023 • CET1 guidance of >14% reflects updated management consideration as Group embarks on new strategic cycle, Capital with updated distribution policy • Future capital issuance inf
Slide 31: Green Bond Framework
Green Bond Framework 30
Slide 32: Green Bond Framework
Green Bond Framework Green Bonds are an important part of the Group’s Responsible and Sustainable Business Strategy as we look to finance our customers’ transition to the low carbon economy and take an active role in combating climate change through sustainable finance. Key Features Green Bond Frame
Slide 33: Use of proceeds
Use of proceeds Green Bond Principles Eligibility Criteria Impact UN SDG Eligible Category • Residential property with an energy efficiency rating within the Top 15% in Ireland, equivalent to Annual energy BER of ‘B3’ or better efficiency Green Buildings • Residential property with a date of constru
Slide 34: Green Bond Allocation Report - 31 December 2022
Green Bond Allocation Report - 31 December 2022 Green Eligible Assets Portfolio Green Liabilities Eligibility Criteria Number of Loans Amount (EUR) ISIN Settlement Date Maturity Date Amount (EUR) Green Buildings 15,389 5,402,836,557 XS2311407352 10-Mar-21 10-May-271 750,000,000 - Residential Green B
Slide 35: Outlook
Outlook 34
Slide 36: 2023 guidance
2023 guidance1 Net interest income Business income (incl. JVs) > 12% higher than Q4 2022 High single digit % lower annualised rate of c.€3bn than 2022 due to impact of IFRS 17 Capital Organic generation to materially increase in 2023 Costs Total cost of risk Like-for-like costs broadly in line; Mid-
Slide 37: Financial Targets – Step change in returns and distributions
Financial Targets – Step change in returns and distributions FY23-25 Financial Targets FY22 Performance (all targets apply to each year) Return on Tangible Equity1 (ROTE) 10.6% c.15% Cost to Income Ratio2 (CIR) 54% < 50% 25% Building to c.40% pay-out Ordinary dividend Of statutory profits c.40-60% p
Slide 38: Financial targets based on prudent economic assumptions
Financial targets based on prudent economic assumptions Ireland 2023 2024 2025 UK 2023 2024 2025 GDP growth 4.1% 3.8% 3.4% GDP growth -0.6% 0.7% 1.7% CPI inflation 6.4% 2.7% 1.9% CPI inflation 7.6% 2.7% 1.2% Unemployment 4.9% 4.9% 4.8% Unemployment 4.4% 4.8% 4.7% House prices (HPI) 0.0% 0.0% 1.0% Ho
Slide 39: Appendix
Appendix 38
Slide 40: Appendix
Appendix Slide No. • BOI overview - customer loans / new lending volumes 40 • Irish residential mortgages 41 • Everyday banking 42 • Wealth and insurance 43 • Business and corporate 44 • Retail UK 45 • Ireland mortgage loan book 46 • Income statement - net interest income analysis 47 • Asset quality
Slide 41: Overview of customer loans
Overview of customer loans Profile of customer loans1 at Dec 2022 (Gross) Ireland UK RoW Total Total Composition (Dec 22) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 22.5 15.6 0.0 38.0 52% Non-property SME and corporate 10.9 5.2 5.4 21.5 29% Property & construction 5.1 1.5 1.8 8.2 11% Consumer 2.2 3.2 0.0
Slide 42: Irish Residential Mortgages | Capture value in a growing market
Irish Residential Mortgages | Capture value in a growing market Starting point 2025 target outcomes 2022 new lending growth Increased Market expected to grow by c.5% p.a. 93% since 2017 market share BOI market share to continue to grow Market New home construction in 30k 2022; annual underlying Posi
Slide 43: Everyday Banking | Protect and grow relationship value
Everyday Banking | Protect and grow relationship value Starting point 2025 target outcomes Market Ireland deposit market Efficient funding, Growth in customers and balances targeting 49% growth since 20171 growing >GDP stable funding and increased income Deposits & current account Deeper relationshi
Slide 44: Wealth and Insurance | Market leadership via clear brand propositions
Wealth and Insurance | Market leadership via clear brand propositions Starting point 2025 target outcomes AUM growth across our key #1 partner of choice for Wealth & Insurance in Ireland c.30% markets since 2017 5-10% p.a. AUM growth, driver of business income Market growth Substantial markets Stron
Slide 45: Business & Corporate | Serving simple and complex customer needs
Business & Corporate | Serving simple and complex customer needs Starting point 2025 target outcomes Market consolidation in 2022 Best-in-class Irish franchise delivering net following bank exits lending growth Market Leading positions in A sustain and maintain approach to Growth in business and int
Slide 46: Retail UK | Continuing to deliver returns through niche strategy
Retail UK | Continuing to deliver returns through niche strategy Starting point 2025 target outcomes New UK mortgage lending in £311bn Improve intermediary integration 12 months to Sept 2022 Selective growth Market in Bespoke Further digitise the customer experience mortgages1 Develop green mortgage
Slide 47: Ireland Mortgages: €22.5bn
Ireland Mortgages: €22.5bn New Lending volumes and Market Share Ireland Mortgages (gross) €22.9bn €22.4bn €22.5bn 28% 25.5% 23% €12.2bn €13.1bn €15.6bn €3.9bn €2.9bn €2.4bn €2.5bn €2.1bn €1.6bn €7.9bn €6.8bn €5.3bn 2020 2021 2022 Dec-20 Dec-21 Dec-22 n New Lending Volumes Market Share n Tracker n Va
Slide 48: Income statement: net interest income analysis
Income statement Net interest income analysis H1 2021 H2 2021 H1 2022 H2 2022 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) (%) (€bn) (€m) (%) (€bn) (€m) (%) (€bn) (€m
Slide 49: Non-performing exposures by portfolio
Non-performing exposures by portfolio Non-performing Impairment loss Advances Non-performing exposures Impairment loss Composition (Dec-22) (€bn) (€bn) exposures as % of allowance (€bn) allowance as % of advances non-performing exposures Residential Mortgages 38.0 0.5 1.3% 0.1 30% – Republic of Ire
Slide 50: Portfolio by stage
Portfolio by stage Gross carrying amount Composition (Dec-22) Impairment loss allowance (before impairment loss allowance) ILA % of Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total gross loans Sectoral analysis by stage €m €m €m €m €m €m €m €m €m €m Residential Mortgages 34,020
Slide 51: Non-property SME and corporate by stage
Non-property SME and corporate by stage1,2 Composition (Dec-22) Gross carrying amount Impairment loss allowance ILA % of Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total gross loans Sectoral analysis by stage €m €m €m €m €m €m €m €m €m €m Non-property SME and corporate – Manufac
Slide 52: Residential mortgages / Consumer loans
Residential mortgages / Consumer loans Gross loans by stage Residential mortgages Residential mortgages Consumer • Mortgage portfolios 53% of Group loan book €43.3bn €5.3bn – Average LTV of 53% on stock €5.2bn €1.8bn €38.0bn €0.1bn – 92% of the portfolio has LTV < 80% €0.1bn €0.5bn • Stage 2 loans i
Slide 53: Non-property SME and corporate / Property & Construction
Non-property SME and corporate / Property & Construction Gross loans by stage Non-property SME and corporate Non-property SME and corporate Property and Construction • 29% of Group loan book, well diversified by geography and sector €20.8bn €21.5bn • €0.4bn decrease in stage 2 loans since FY 2021 gi
Slide 54: Forward looking information – macroeconomic scenarios
Forward looking information – macroeconomic scenarios Ireland United Kingdom 31 December 2022 2023 2024 2025-2027 2023 2024 2025-2027 Central scenario – 45% probability weighting GDP growth1 4.1% 3.8% 3.1% (0.6%) 0.7% 1.9% GNP growth1 3.7% 2.8% 3.0% n/a n/a n/a Unemployment rate2 4.9% 4.9% 4.8% 4.4%
Slide 55: ILA sensitivity to macroeconomic scenarios
ILA sensitivity to macroeconomic scenarios The following table indicates the approximate extent to which impairment loss allowance (ILA), excluding Group management adjustments, would be higher or lower than reported were a 100% weighting applied to the central, upside and downside future macroecono
Slide 56: Ordinary shareholders’ equity and TNAV
Ordinary shareholders’ equity and TNAV Dec-21 Dec-22 Movement in ordinary shareholders’ equity (€m) (€m) Ordinary shareholders’ equity at beginning of period 8,587 10,304 Movements: Profit / (Loss) for the period 1,055 897 Impact of adopting IFRS 9 – – Dividend paid to ordinary shareholders – (54) D
Slide 57: Fully Loaded CET1 ratio
Fully Loaded CET1 ratio Capital ratios – 31 December 2022 Fully loaded ratio (€bn) Fully loaded ratio (€bn) Dec-21 Dec-22 Total Equity 11.3 11.9 Foreseeable distribution1 (0.1) (0.3) Less Additional Tier 1 (1.0) (1.0) Deferred Tax Assets (1.1) (1.0) Intangible assets and goodwill (0.5) (1.0) Expecte
Slide 58: Return on tangible equity (RoTE)
Return on tangible equity (RoTE) FY22: Headline vs. Adjusted Adjustments FY 2022 Additional gains Adjusted for FY 2022 Pension Headline & valuation items, CET1 ratio Adjusted Surplus (€m) net of tax at 14.0% (€m) Profit for the period 897 Coupon on Additional Tier 1 securities (69) Preference share
Slide 59: Cost income ratio: FY 2022
Cost income ratio: FY 2022 Headline vs Adjusted FY 2022 Pro forma FY 2022 Headline adjustments Pro forma (€m) (€m) (€m) Net interest income 2,482 2,482 Other income – Business income 774 774 – Additional gains 100 (100) – Other valuation items (122) 122 Total Income 3,234 22 3,256 Costs – Operating
Slide 60: IFRS 17 – key messages
IFRS 17 – key messages • IFRS 17 is an accounting change which impacts the phasing of profit IFRS 4 IFRS 17 Impact on Wealth and Insurance (2022)1 recognition for insurance contracts (€m) (€m) – Under IFRS 4, expected future profit on insurance contracts is recognised Income 295 135-160 as new busin
Slide 61: Defined benefit pension schemes
Defined benefit pension schemes Group IAS19 Defined Benefit Pension (deficit)/surplus Total Group defined benefit pension scheme assets (%) 3.60% €7.2bn €7.2bn €8.4bn €8.9bn €9.6bn €6.9bn 2.10% 2.00% 1.30% 1.35% 55% 0.80% 65% 65% 69% 66% 66% €0.60bn €0.70bn 21% 23% 23% 21% 24% 29% 24% (€0.14bn) (€0.
Slide 62: Corporate Structure
Corporate Structure Holding company Capital / MREL Bank of Ireland Group plc (BOIG) AT1 Tier 2 Senior unsecured 100% The Governor and Company of the Bank of Ireland (GovCo) Senior unsecured Operating subsidiaries 1 Funding 100% 100% 100% New Ireland Assurance Bank of Ireland Mortgage Bank Unlimited
Slide 63: Forward-looking statement
Forward-looking statement 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 goals and expectations relating to its future
Slide 64: Contact Details
Contact Details For further information please contact: • Group Chief Financial Officer Mark Spain tel: +353 1 250 8900 ext. 43291 mark.spain@boi.com • Investor Relations Darach O’Leary tel: +353 1 250 8900 ext. 44711 darach.oleary@boi.com Eamonn Hughes tel: +353 1 250 8900 ext. 35055 eamonn.hughes@
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Bank of Ireland Group — Debt Investor Presentation (March 2023) on 6ix