Aib Group Plc · EURONEXT:A5G
Aib — H1 2003 Earnings Presentation
38 slides from Aib's earnings presentation, 2003
Slide 1: AIB Group Interim Results 2003
AIB Group Interim Results 2003
Slide 2: Forward looking statements
Forward looking statements A number of statements we will be making in our presentation and in the accompanying slides will not be based on historical fact, but will be “forward-looking” statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Actual resul
Slide 3: EPS: why it is a more appropriate measure than profit before tax
EPS Why it is a more appropriate measure than profit before tax M&T / Allfirst merger completed on 1st April 2003 Consideration was 22.5% of M&T plus US$886m cash Had cash not been part of consideration, AIB would own c.29% of M&T Cash used to buy back 55.8m shares, costing €750m approx. l
Slide 4: Earnings per Share
Earnings per Share Reported adjusted earnings per share 58.5c* 5% FRS 17, Govt levy, M&T restructuring 5.6c Excluding above items 4% EPS most accurate performance gauge because of cash element of M&T deal, share buybacks Currency translation impact of 4% on adjusted earnings per share After ta
Slide 5: Overview
Overview Solid volume growth - loans 9%*, deposits 4%* Good asset quality Strong growth in our Irish and British banking businesses Resilient performance in Capital Markets Share of M&T earnings plus buyback will be modestly earnings accretive in full year integration on track * excludes
Slide 6: Overview (contd.)
Overview (contd.) Translation effect of stronger euro Weaker result in Poland ARK Life’s non-recurring income from SSIAs in early part of 2002
Slide 7: Productivity
Productivity Income expected to grow faster than costs for 2003 Underlying income 6%, costs 7% in H1 Income growth constrained by non-recurring SSIA effect Good cost discipline in operating divisions Investing for risk and Basel II / MIS benefits Additional costs relating to the U.S. F
Slide 8: Asset quality
Asset quality Non-performing loans to 1.7% (2.0% at end 2002) NPLs / total advances reduced in all divisions Criticised advances / total advances reduced in all divisions Annual provision charge expected not to exceed 40 bps Prudent provision cover Total provisions / NPLs 84% General p
Slide 9: Currency - a function of geographic diversity
Currency - a function of geographic diversity Active hedging policy and practice Significant euro appreciation US dollar 18% Sterling 9% Polish zloty 14% Negative impact of depreciating currencies reduced EPS growth by 4% Expected full year currency effect - 4% dilution
Slide 10: Capital Management
Capital Management Dividend 10% 28% of Allfirst consideration in cash; repatriation to shareholders in low rate environment €742m repaid through buybacks Further buybacks to be considered as part of ongoing capital management activities Strong capital ratios; Tier 1 7.7%, total 10.5%
Slide 11: AIB Bank Republic of Ireland
AIB Bank Republic of Ireland Profit 6% Banking business 16%, Ark Life 48% Income 7%, costs 5%, cost / income ratio to 50% Service and value driving increased market share and offsetting impact of margin erosion Significantly higher profit growth where customer portfolio managers in place f
Slide 12: Ark Life
Ark Life Ending of SSIA campaign had a dramatic effect Excluding SSIA income, operating profit unchanged Persistent low level of customer demand for investment products Strong growth in protection products Market repositioning well advanced AIB / Ark Life distribution now integrated Op
Slide 13: AIB Bank Great Britain & Northern Ireland
AIB Bank Great Britain & Northern Ireland Profit 18% * Income 10%*, costs 8%*, cost / income ratio to 50% Strong volume growth, loans 10%*, deposits 11%* Business pipeline underpins positive outlook * in sterling terms
Slide 14: AIB Bank Great Britain & Northern Ireland: Great Britain, Northern Ireland
AIB Bank Great Britain & Northern Ireland Great Britain Ongoing investment in business development capability, people and channels 5 new offices opened, 40 new business development managers appointed Increasing recognition as bank of choice in selected segments, e.g., professional, not for pro
Slide 15: USA
USA Transition period - Allfirst / M&T 2003 / 2002 relative profit not comparable Successful merger integration Confident of rewarding partnership M&T Q2 results: Net operating income 38% Good progress on cost benefits, confident of $100m annual cost reduction Full year earnings expe
Slide 16: Capital Markets
Capital Markets Profit 4%* Underlying cost/income ratio stable Good cost management Continuing profit growth in Corporate Banking Growing international presence Strong growth in fee income Solid treasury performance, low risk utilisation Lower investment banking / asset management re
Slide 17: Poland
Poland Profit 32%* Underlying profit 19%** Interest rate dichotomy Loan volumes unchanged Improving asset quality, provisions rate to 1.0% Non-interest income 7% Further 8% reduction in cost base to be made * in zloty terms and excluding goodwill ** in zloty terms and excluding goodwil
Slide 18: AIB positioned in geographies that will outperform
AIB positioned in geographies that will outperform % 2003 2004 USA 2.2 3.5 UK 1.8 2.6 Ireland 2.2 4.0 Poland 3.0 4.0 Eurozone 0.6 2.0 OECD 1.8 3.0
Slide 19: Single customer centric strategic model
Single customer centric strategic model Best service Best products Customer Best enablement Best relationships Turning a distinctive customer proposition into superior profit growth
Slide 20: Operating income
Operating income (continuing activities) H1 H1 Underlying 2002 €m 2003 change %* 917 Net interest income 919 5 29 Other finance income 7 - 549 Other income 562 7 1,495 Total operating income 1,488 6 38.6% Other income ratio 38.2% 10% increase in banking fees and commissions driven by strong loan g
Slide 21: Risk weighted asset & loan growth
Risk weighted asset & loan growth * (continuing activities) RWA growth v. Dec 2002 Loan growth v. Dec 2002 9 Group 11 13 AIB Bank ROI 13 10 AIB Bank GB & NI 11 4 Capital Markets 9 0 Poland 5 0 2 4 6 8 10 12 14 * excludes the impact of currency movements
Slide 22: Deposit growth
Deposit growth* (continuing activities) Group 4 AIB Bank ROI 3 AIB Bank GB & NI 11 Capital Markets 4 Poland -3 -4 -2 0 2 4 6 8 10 12 AIB Bank GB&NI average deposits up 6% from December 2002 * excludes the impact of currency movements
Slide 23: Net interest margin
Net interest margin (continuing activities) H1 H1 Change on 2002 2003 H1 2002 bps Group 2.97 2.80 -17 Domestic 2.78 2.74 -4 Foreign 3.26 2.90 -36 Margin reduction factors: Changes in product mix, loans growing faster than deposits, impact of lower interest rates in Ireland and Poland Further rate
Slide 24: Operating expenses
Operating expenses (continuing activities) H1 H1 Underlying * 2002 €m 2003 change % 518 Staff costs 533 8 259 Other costs 250 4 78 Depr. & amort. 88 19 855 Operating expenses 871 7 ** 56.2% Tangible cost / income ratio 57.6% Stable cost income ratio in operating divisions Increased investment in
Slide 25: Tangible cost / income ratios
Tangible cost / income ratios* (continuing activities) 80% 80% 75% 74% 70% 65% 60% 56.2% 57.6% 55% 54% 55% 51% 50% 51% 50% 50% 45% Group ROI GB&NI Cap Mkts Poland H1 2002 H1 2003 * excludes goodwill
Slide 26: Provisions
Provisions (continuing activities) €m H1 2002 H1 2003 Bad and doubtful debts 48* 66 Contingent liabilities & commitments - 7 Investment provisions 20 9 Total Provisions 68 82 *€76 million before release of unallocated provision
Slide 27: Bad debt provision - underlying analysis
Bad debt provision - underlying analysis (continuing activities) H1 2002 H1 2003 bps bps Bad and doubtful debts 24 29 Release from unallocated 14 - Gross provision rate 38 29 Off balance sheet - 4 Underlying rate 38 33
Slide 28: Bad debt provisions
Bad debt provisions (continuing activities) H1 Average H1 Average 2002 Loans % €m 2003 Loans % 25 0.28 AIB Bank ROI 28 0.25 11 0.27 AIB Bank GB & NI 6 0.13 19 0.38 Capital Markets 16 0.33 21 1.24 Poland 16 1.00 (28) -0.14 Group - - 48 0.24 Total 66 0.29
Slide 29: Poland Division relative to BZWBK
Poland Division relative to BZWBK Jun 2003 Underlying PLN €m change % BZWBK consolidated Irish GAAP 132 31 -19 BZ Goodwill amortisation (12) Other Group adjustments* (11) Poland division 8 * includes central costs and other adjustments in line with AIB segmental reporting
Slide 30: USA Operating Profit
USA Operating Profit* €m H1 2002 H1 2003 Allfirst 117 54 22.5% share of M&T - 42 Operating profit 117 96 Cash element of consideration used for buyback Combined EPS impact modestly accretive in 2003 * excludes restructuring costs and goodwill amortisation
Slide 31: Balance sheet
Balance sheet (continuing activities) 31 Dec €m 30 June Underlying * 2002 Assets: 2003 change % 44,342 Loans to customers 46,753 9 38,567 Customer accounts 39,005 4 70,470 Total assets 76,103 12 * excludes the impact of currency movements Dec 2002 Jun 2003 Tier 1 6.9% 7.7% Total 10.1% 10.5%
Slide 32: Return on Equity
Return on Equity (continuing activities) Jun 2002 Jun 2003 Tangible return on equity* 25% 25% Reported return on equity** 22.2% 18.7% * excludes the impact of goodwill ** not comparable year on year due to Allfirst / M&T transaction
Slide 33: Summary
Summary Customer demand fuelling volume growth and business momentum; countering lower margin environment Good operating cost control while continuing to invest for growth Resilient asset quality Active capital management, strong capital ratios M&T / Allfirst integration points to successf
Slide 34: Additional Information
Additional Information
Slide 35: Risk weighted assets
Risk weighted assets (continuing activities) 31 Dec H1 Underlying 2002 €m 2003 Change %* 18,820 AIB Bank Rep Ire 21,248 13 8,666 AIB Bank GB & NI 9,059 11 22,720 Capital Markets 23,692 9 3,663 Poland 3,555 5 54,126 Total RWA 58,115 11 * excludes the impact of currency movements
Slide 36: Return on risk weighted assets
Return on risk weighted assets % €bn 3.0 70 60 50 2.0 40 30 1.0 20 10 1.63 1.61 1.74 1.96 1.78 1.65 1.66 1.56 1.58 0.0 0 1995 1996 1997 1998 1999 2000 2001 2002 H1 2003 Return Average RWA (€bn)
Slide 37: Non-performing loans by Division
Non-performing loans by Division (continuing activities) As at December 31, 2002 As at June 30, 2003 NPLs/ Total NPLs/ Total Actual Provisions/ Actual Provisions/ NPLs Advances NPLs NPLs Advances NPLs €m % % €m % % 194 0.9 108 AIB Bank ROI 202 0.8 110 88 1.0 138 AIB Bank GB & NI 78 0.8 149 115 1.1 1
Slide 38: Contacts
Contacts Our Investor Relations Department will be happy to facilitate your requests for any further information Alan Kelly [email protected] +353-1-6412162 David O’Callaghan david.a.o’[email protected] +353-1-6414191 Pat Clarke [email protected] +353-1-6412381 Mary Gethings mary.gethi