Aib Group Plc · EURONEXT:A5G
Aib — Allied Irish Banks, p.l.c. — H1 2009 Earnings Presentation
48 slides from Aib's earnings presentation, Jun 30, 2009
Slide 1: Half-Yearly Financial Report 2009
talf- Yearly Financtal Report 2009 For the half-year ended 30 June 2009, Allied Irish Banks, p.l.c.
Slide 2: Eugene Sheehy, Group Chief Executive
Eugene Sheehy Group Chief Executive
Slide 3: 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 resu
Slide 4: 2009 Key developments to date
2009 Key developments to date Recessionary conditions continue, recovery likely to be slow Productivity further improved with a strong focus on costs Weak customer loan demand, intense competition for deposits Some easing in wholesale funding availability in Q2 but markets remain dislocated
Slide 5: Tough economic conditions continue
Tough economic conditions continue GDP % volume 2009 f 2010 f Ireland -9.0 -3.0 UK -4.4 1.0 Poland 0.5 1.5 Eurozone -4.8 0.4 US -2.8 0.9 World -1.4 2.5 Source: AIB ERU Forecasts Ireland Good initial progress in improving competitiveness, exports outperforming Difficult budget decisions must cont
Slide 6: Financial highlights
Financial highlights Basic loss/earnings per share (43.2c) - basic adjusted * (164.4c) Income 7% Costs 7% Cost / income ratio 0.9% Impaired loans 8.1% Core tier 1 capital ratio 8.5% Total capital ratio 10.7% * Basic earnings per share less profit on disposal of properties, business, hedge vola
Slide 7: Solid operating performance
Solid operating performance €1.7bn pre-provision profit €1.1bn underlying*, 6% in 6 months of unprecedented challenges Good profit mix from diverse franchises vs H1 08 % AIB Bank RoI €394m (33) Capital Markets €475m 55 AIB Bank UK £139m (17) Poland Pln 609m (4) M&T $451m ** * Excludes capital
Slide 8: Income
Income Jun Underlying €m 2009 yoy change % Net interest income 1,691 (4) Other income 1,090 (14) Total income 2,781 (7) Treasury well positioned for lower interest rates Loans 2%, deposits 12% (loans 1%, deposits 1% in year to June 09) Low loan demand in recessionary conditions Significant i
Slide 9: Costs
Costs Intense management focus on all Jun Underlying 2009 yoy chg expense lines. €m % Widespread reductions Staff costs 654 (9) Staff numbers Other costs 314 (8) Performance compensation Depreciation & amortìsation 75 7 Discretionary spending Operating expenses 1,043 (7) Payments and pro
Slide 10: Criticised loans - definitions
Criticised loans - definitions Watch Credit exhibiting weakness but with the expectation that existing debt can be fully repaid from normal cashflow Vulnerable Credit where repayment is in jeopardy from normal cash flow and may be dependent on other sources Impaired A loan is impaired if there
Slide 11: Credit deterioration
Credit deterioration Total criticised by value €m 35000 30000 7128 10804 25000 4756 4203 20000 10233 10565 8503 15000 8873 2991 1720 4302 10000 1440 2816 2250 14023 14087 11190 12269 5000 7394 8172 6531 0 Jun Sep Dec Mar Apr May Jun 2008 2009 Watch Vulnerable Impaired Criticised loans have increas
Slide 12: Credit charges – H1 2009
Credit charges – H1 2009 Specific % of IBNR % of Total % of Provision Avg Provision Avg Provision Avg P&L Advs P&L Advs (P&L) Advs €m % €m % €m % AIB Bank RoI 1,794 4.65 117 0.30 1,911 4.95 Capital Markets 171 1.31 30 0.23 201 1.54 AIB Bank UK 188 1.79 0 0.00 188 1.79 CEE 58 1.38 15 0.36 73 1.74 Gro
Slide 13: Balance sheet provisions – June 2009
Balance sheet provisions – June 2009 Specific IBNR % of Total % of Impaired % of Provision Provision Earning Provision Impaired Loans Advs (B/S) Cover (B/S) Advs (B/S) Loans €m % €m % €m % €m % AIB Bank RoI 8,516 10.9 2,439 29 1,018 1.46 3,457 41 Capital Markets 667 2.6 282 42 50 0.20 332 50 AIB Ban
Slide 14: NAMA update
NAMA update Focus on RoI and UK property & construction and land and development portfolios in particular Productive and detailed discussions progressing well Major work programmes ongoing, all information requirements being addressed Quantum of loans to be transferred and asset values not y
Slide 15: Land & development – loss provisions June 2009
Land & development – loss provisions June 2009* €bn Land Development Total RoI 9.5 7.6 17.1 UK 1.8 2.0 3.8 RoI / UK total land & development loans 20.9 H1 2009 bad debt provisions (€1.2bn at 12/2008, c. €1.6bn charge in H1 2009) 2.8 Written down loan value 18.1 Typical loan to value at inception c.
Slide 16: AIB Bank Republic of Ireland
AIB Bank Republic of Ireland Operating profit €394m 33% Profit / loss before tax (€1,522m) driven by steep increase in bad debts to €1,911m Income 22% Significant increase in cost of deposits and funding, partly offset by better loan pricing Low customer demand for loans 1%; deposits 4%
Slide 17: Capital Markets
Capital Markets Operating profit €475m 55% High income growth combined with aggressive cost management Income 31%, costs 6%; cost / income ratio from 40% to 29% Deposits 23% reflecting some reversal in Q1 of very strong Q4 2008 institutional inflows Profit before tax 13% to €252m due to in
Slide 18: AIB Bank United Kingdom
AIB Bank United Kingdom Operating profit £139m 17% Profit / loss before tax (£28m) due to bad debts charge of £168m driven by property market downturn Strong management action in low income environment Income 13%, costs 7% (excluding Financial Services Compensation Scheme, costs 9%)
Slide 19: Central & Eastern European (CEE) Division
Central & Eastern European (CEE) Division Poland Operating profit before provisions PLN 609m 4% Franchise investment coincided with significant economic downturn; 514 branches include 145 added since H2 2007 Income 4% Loans flat; underlying deposits increasing (excluding one-off large deposi
Slide 20: M&T Bank results and AIB impairment charge
M&T Strong outperformance continuing Underlying EPS $.79c* in Q2, 34% on Q1 Core deposits 24% annualised on Q1 Net interest margin to 3.43% in Q2, 3.19% in Q1 Improved fee income and strong residential mortgage banking revenues Provident Bankshares Corporation acquisition completed – acc
Slide 21: Positioning for recovery
Positioning for recovery Stronger competitive position improving our pricing power Will increase profitability as we emerge from the global downturn Diversity of our business a key positive factor Pace of recovery will vary between economies and businesses Firm resolve to manage our busine
Slide 22: John O'Donnell, Group Finance Director
John O’Donnell Group Finance Director
Slide 23: Performance snapshot
Performance snapshot Jun Jun ccy change 2008 €m 2009 % 2,445 Total operating income 2,781 (7) 1,204 Total operating expenses 1,043 (7) Group operating profit 1,241 before provisions 1,738 (6) 138 Total provisions 2,396 176 Associated undertakings / other (214) 1,279 Group profit / loss before tax (8
Slide 24: Adjusted basic EPS
Adjusted basic EPS vs Jun 2008 Euro c % Basic earnings / (loss) per share (43.2) -138 Profit on disposal / development of property (0.9) -59 Gain on redemption of capital instruments (121.8) - Hedge volatility 1.5 -57 Adjusted basic EPS (164.4) 24
Slide 25: Loan and risk weighted asset growth
Loan and risk weighted asset growth 6 months to June 2009 % -4 Group -2 -2 AIB Bank RoI -1 -8 Capital Markets -6 -4 AIB Bank UK -2 2 CEE Loan Growth RWA Growth 25
Slide 26: Deposit growth
Deposit growth % -12 Group -1 -4 AIB Bank RoI -3 -23 Capital Markets 0 -19 AIB Bank UK -10 -3 19 CEE 12 months 6 months Deposits 1% year to June 2009 Significant adverse movement in Q1 Reflects customer concern, primarily in the UK Fuelled by negative publicity about “Ireland Inc” and nation
Slide 27: Customer deposit trajectory
Customer deposit trajectory 95 €93bn 90 €87bn 85 €83bn €81bn €82bn 80 Dec 2007 Jun 2008 Dec 2008 Mar 2009 Jun 2009 27
Slide 28: Net Interest Margin
Net Interest Margin Jun 2008 Jun 2009 change 2.21% 2.03% -18 bps Key factors Higher loan margins +13 bps Higher treasury margins +17 bps Increased costs of customer deposits -39 bps Increased cost of wholesale funding -6 bps Lower return on capital -3 bps 28
Slide 29: Loan portfolios by sector
Loan portfolios by sector % of Group loan portfolio 37% 37% Dec-08 Jun-09 24% 23% 11% 11% 11% 11% 7% 7% 6% 5% 3% 3% 2% 2% Agriculture Construction & Residential Manufacturing Personal Services Transport & Other Property Mortgages Distribution 29
Slide 30: Property & construction – sub sector profile
Property & construction – sub sector profile * €m ROI UK ** CM Poland Group Commercial Investment 10,889 3,562 5,199 1,245 20,895 Residential Investment 2,407 1,317 483 36 4,243 Commercial Development 6,182 685 375 704 7,946 Residential Development 10,877 3,154 413 599 15,043 Contractors 674 334 41
Slide 31: Property & construction – credit profile
Property & construction – credit profile Satisfactory Watch Vulnerable Impaired Total €m €m €m €m €m AIB Bank RoI 14,633 5,762 3,751 6,883 31,029 Capital Markets 5,939 344 73 155 6,511 AIB Bank UK 5,523 1,570 1,126 833 9,052 CEE 2,040 435 93 156 2,724 Group 28,135 8,111 * 5,043 8,027 49,316* * exclu
Slide 32: RoI Division property & construction
RoI Division property & construction €m Land & Development Investment Contractors Watch / Vulnerable 6,103 3,336 74 Impaired 5,990 837 56 Total Criticised 12,093 4,173 130 Property & construction criticised loans 67% of total RoI criticised Land & development criticised loans 74% of RoI property
Slide 33: UK Division property & construction
UK Division property & construction £m Land & Development Investment Contractors Watch / Vulnerable 1,177 1,035 86 Impaired 620 76 13 Total Criticised 1,797 1,111 99 Credit loss most evident in N.I. land and development portfolios of £1.4bn In G.B. no compelling evidence yet of material improvem
Slide 34: International property & construction
International property & construction Capital Markets Primarily an international investment portfolio, 87% of total Poland €2.7bn portfolio, almost half in investment, less than €500m land exposure 34
Slide 35: Home mortgages
Home mortgages Republic of Ireland - €26.5bn Arrears > 30 days (RoI) bps Impaired loans 1.2% €322m up from €148m at 210 210 Dec 08 160 148 Bad debt charge 33 bps (16 bps Dec 08) 110 60 53 47 Arrears profile remains better than peers 35 34 36 10 90+ days arrears 1.4% 2003 2004 2005 2006 2007
Slide 36: Credit provisions by division & key portfolios – June 2009
Credit provisions by division & key portfolios – June 2009 PLN m Stg £m €m bps AIB Bank RoI 1911 495 - residential development 1097 2,010 - commercial development 359 1,050 - investment 106 164 - property & construction 1562 1018 - other business 184 266 - residential mortgages 43 33 - other persona
Slide 37: Funding – conditions beginning to improve
Funding – conditions beginning to improve % 100 Solid funding base with significant customer 9% 10% resources and diversified debt programmes 6% 7% 80 4% 3% Customer deposits stabilised in Q2 4% 12% Negative newsflow caused reversal in Q1 of 8% 10% strong Q4 2008 growth in institutional deposi
Slide 38: Capital – reinforcing the buffer
Capital – reinforcing the buffer Core tier 1 ratio 8.5% Tier 1 capital ratio 7.8% Total capital ratio 10.7% Capital ratios strengthened by €3.5bn Government investment and €1.1bn gain from the capital exchange offer Solid balance sheet; capital ratios well above regulatory requirements N
Slide 39: Managing and positioning for recovery
Managing and positioning for recovery In a challenging environment we are Maximising efficiency Addressing credit issues Optimising our funding and capital bases Protecting and developing customer franchises 39
Slide 40: Appendices
Appendices
Slide 41: AIB Bank RoI profit statement
AIB Bank RoI profit statement Jun Jun Change 2008 €m 2009 % 870 Net interest income 706 -19 239 Other income 160 -33 1,109 Total operating income 866 -22 518 Total operating expenses 472 -9 591 Operating profit before provisions 394 -33 89 Total provisions 1,911 - 502 Operating profit / loss (1,517)
Slide 42: Capital Markets profit statement
Capital Markets profit statement Jun Jun Change 2008 €m 2009 % 421 Net interest income 579 40 101 Other income 89 -8 522 Total operating income 668 31 209 Total operating expenses 193 -6 313 Operating profit before provisions 475 55 18 Total provisions 223 - 295 Operating profit 252 -13 295 Profit b
Slide 43: AIB Bank UK profit statement
AIB Bank UK profit statement Jun Jun Change 2008 Stg £m 2009 % 238 Net interest income 217 -9 51 Other income 34 -33 289 Total operating income 251 -13 120 Total operating expenses 112 -7 169 Operating profit before provisions 139 -17 19 Total provisions 168 - 150 Operating profit / loss (29) 1 Asso
Slide 44: CEE Division profit statement
CEE Division profit statement* Jun Jun Change 2008 PLN m 2009 % 718 Net interest income 738 3 745 Other income 671 -10 1,463 Total operating income 1,409 -4 828 Total operating expenses 800 -4 635 Operating profit before provisions 609 -4 20 Total provisions 293 - 615 Operating profit 316 -48 - Inco
Slide 45: Group profit statement
Group profit statement Jun Jun 2008 €m 2009 59 Net interest income (3) (40) Other income 652 19 Total operating income 649 81 Total operating expenses 72 - Total provisions - (62) Operating profit / loss 577 58 Associated undertaking – M&T (181) - Profit on disposal / development of property 10 6 Co
Slide 46: Republic of Ireland property investment
Republic of Ireland property investment Commercial investment: Dec 2008 Jun 2009 (€10.5bn) (€10.9bn) €m % €m % Watch loans 700 6.8 1,601 14.7 Vulnerable Loans 172 1.7 927 8.5 Impaired Loans 51 0.5 618 5.7 Residential investment: Dec 2008 June 2009 (€2.3bn) (€2.4bn) €m % €m % Watch loans 312 13.6 491
Slide 47: Republic of Ireland land & development
Republic of Ireland land & development Residential development Dec 2008 Jun 2009 (€10.8bn) (€10.9bn) €m % €m % Watch loans 1,419 13.1 2,097 19.2 Vulnerable loans 1,324 12.3 1, 604 14.7 Impaired loans 913 8.5 4,468 41.0 Commercial development Dec 2008 Jun 2009 (€6.1bn) (€6.2bn) €m % €m % Watch loans
Slide 48: Contacts
Contacts Our Group Investor Relations Department will be happy to facilitate your requests for any further information Alan Kelly [email protected] +353-1-6412162 Rose O‟Donovan rose.m.o’[email protected] +353-1-6414191 Pat Clarke [email protected] +353-1-6412381 Maura Hodnett maura.n.ho
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