Aib Group Plc · EURONEXT:A5G
Aib — Allied Irish Banks, p.l.c. — H1 2015 Earnings Presentation
42 slides from Aib's earnings presentation, August 2015
Slide 1: Half-Yearly Financial Results 2015
Half-Yearly Financial Results 2015 For the six months ended 30 June 2015 Allied Irish Banks, p.l.c.
Slide 2: Important information and forward looking statement
Important information and forward looking statement STRICTLY CONFIDENTIAL - COMMERCIALLY SENSITIVE MATERIAL Important Information AIB has 523,438,445,437 (excluding 35,680,114 treasury shares) ordinary shares in issue, c. 99.8% of which are held by the Ireland Strategic Investment Fund (ISIF), mainl
Slide 3: Progress & Performance
STRICTLY CONFIDENTIAL - COMMERCIALLY SENSITIVE MATERIAL Progress & Performance Bernard Byrne Chief Executive Officer Allied Irish Banks p.l.c. 3
Slide 4: H1 2015 highlights
H1 2015 highlights STRICTLY CONFIDENTIAL - COMMERCIALLY SENSITIVE MATERIAL Profitable and well positioned to return capital to the Irish State – Strong contribution from each business – Additional gains positively impacting capital Improvement in asset quality with further progress in reducing arr
Slide 5: Momentum in operating and financial performance
Momentum in operating and financial performance STRICTLY CONFIDENTIAL - COMMERCIALLY SENSITIVE MATERIAL Total Generated operating income of €1.3bn including c.€100m additional gains operating Total €1.3bn income (c.€200m H1 2014). Income growth driven by 32bps improvement in net income + €0.1bn year
Slide 6: Number 1 banking franchise in Ireland
Number 1 banking franchise in Ireland STRICTLY CONFIDENTIAL - COMMERCIALLY SENSITIVE MATERIAL Core geographies Significant scale 2.6m retail and business €63.8bn net customer €64.5bn customer customers loans deposits UK – First Trust UK - AIB GB Omni-channel strategy 132k 105k 238k 227k daily daily
Slide 7: Fundamental need to change
Fundamental need to change STRICTLY CONFIDENTIAL - COMMERCIALLY SENSITIVE MATERIAL Banking industry New consumer challenges behaviours Past conduct & trust Mobile & web usage Customer engagement Social media Disintermediation Personalisation Commoditisation Channel blending Profita
Slide 8: Promoting a customer first culture
Promoting a customer first culture STRICTLY CONFIDENTIAL - COMMERCIALLY SENSITIVE MATERIAL Customer led strategy focusing on value and reducing cost to serve ….. Re-orient around Deliver superior Develop deeper customer experience distinct segments, Customer customer insights supported by people, se
Slide 9: Supporting customer values
Supporting customer values STRICTLY Putting customers first with personal and business CONFIDENTIAL - COMMERCIALLY SENSITIVE MATERIAL propositions 3 hours Approval for personal lending Personal First job loan Product innovation “Backing doing” 99.9% ATM availability Market leading performance 30 min
Slide 10: Strong growth in new lending
Strong growth in new lending STRICTLY CONFIDENTIAL - COMMERCIALLY SENSITIVE MATERIAL Strong growth in approvals and drawdowns Approvals Drawdowns Approvals Drawdowns % year on year Mortgages c.€1.0bn c.€0.8bn • Market leading proposition with 39% of c.€6.9bn c.€4bn +42% +61% drawdowns in Q1 2015 (up
Slide 11: Half-Yearly Financials 2015
Half-Yearly Financials 2015 Mark Bourke Chief Financial Officer 11
Slide 12: Financial highlights H1 2015
Financial highlights H1 2015 Capital accretive and well positioned to return capital to the Irish State Improved financial performance across all metrics Sustainable underlying profitability Strong momentum in restructuring activity Normalisation of balance sheet Allied Irish Banks, p.l.c.
Slide 13: Key financial metrics
Key financial metrics • Operating profit before provisions €701m Summary income statement (€m) HY 2015 HY 2014 Change % Net interest income 940 807 16% Other income 409 439 -7% • Profit before tax of €1.2bn, a €0.8bn improvement Total operating income 1,349 1,246 8% on H1 2014 (1) Total operating ex
Slide 14: Improving net interest income
Improving net interest income Half year ended 30 June 15 Half-year ended 30 June 14 Average Average Average Average balance Interest Rate balance Interest Rate €m €m % €m €m % Assets Loans and receivables to customers 65,129 1,115 3.45 66,244 1,108 3.37 NAMA senior bonds 8,683 20 0.46 14,168 47 0.67
Slide 15: Net interest margin trajectory
Net interest margin trajectory % NIM trajectory • NIM (ex ELG) increased 32bps to 1.92% - excluding the impact of low yielding NAMA 2.08% 1.97% senior bonds, NIM increased to 2.08% 1.82% 1.92% 1.67% 1.78% 1.42% 1.60% • Spread between asset yields and cost of funds 1.45% 1.28% widened from 122bps H1
Slide 16: Other income
Other income €m Other income • Strong underlying net fee and commission income, up 6% year on year 439 - increased customer activities 409 244 202 • Other down primarily due to - lower one-off AFS disposal gains of €51m 195 207 versus €109m in H1 2014 H1 2014 H1 2015 Net fee & commission income Othe
Slide 17: Disciplined cost management
Disciplined cost management €m Operating Expenses (1) • Total operating expenses reduced by €38m (6%) year on year 881 754 686 648 349 • Lower staff costs driven by overall lower staff numbers, down 306 297 292 €33m year on year 532 - pay discussions at the Labour Relations Commission 448 389 356 re
Slide 18: Aggregate writeback of provisions
Aggregate writeback of provisions €m Total credit provisions (charge) / writeback (1) • Further improvement in credit quality reflecting a lower risk business 24 bps (144) bps • Net provision writeback of €540m in the half year - €163m specific provisions charge for new impairments (43bps) 540 - Imp
Slide 19: Balance sheet strengthened and positioned for further growth
Balance sheet strengthened and positioned for further growth Balance Sheet €bn Jun-15 Dec-14 % Change Assets Gross loans to customers 73.3 75.8 -3% Provisions (9.5) (12.4) -23% • Net loans to customers showing signs of growth Net loans to customers 63.8 63.4 1% • AFS portfolio decreased by €0.4bn to
Slide 20: Increase in performing loan book
Increase in performing loan book Customer Loans (€bn) Earning Loans Impaired Loans Gross Loans Specific Provisions IBNR Provisions Net Loans Opening balance (1 January 2015) 53.6 22.2 75.8 (11.3) (1.1) 63.4 New lending volumes 4.0 0.0 4.0 0.0 0.0 4.0 New impaired loans (0.4) 0.4 0.0 (0.2) 0.0 (0.2)
Slide 21: Reducing balance sheet provisions and impairments
Reducing balance sheet provisions and impairments Balance Sheet Provisions Movements (€m) • Significant increase in provision write offs due to 01-Jan-15 RBB CIB UK Total Specific 8,903 694 1,718 11,315 progress on case by case restructuring process IBNR 853 153 85 1,091 Total 9,756 847 1,803 12,406
Slide 22: Robust capital ratios
Robust capital ratios Capital structure considerations % Transitional CET 1 Ratio Fully loaded CET 1 ratio(1) • Capital accretive and well positioned for returning capital to the Irish 17.4% State 16.4% 14.1% 11.8% - Dividend payments of c. €440m on 2009 Preference Shares and €1.6bn Contingent Capit
Slide 23: Profitable across all segments
Profitable across all segments Segmental reporting • New segmental reporting focuses on the needs of our customers, combining groups with similar needs into franchises to deliver co- ordinated services • Loan restructuring activity previously reported in Financial Solutions Group (FSG) now reported
Slide 24: Improvement in asset quality
Improvement in asset quality €bn • Improvement in asset quality across all loan sectors Impaired loans by segment 20 17.5 -22% • Significant progress and momentum in restructuring customers in 15 13.7 financial difficulty 10 -15% -5% • Impaired loans reduced by €4.2bn to €18bn 5 2.9 2.8 1.8 1.5 – ex
Slide 25: Impaired balances lower in all major loan books
Impaired balances lower in all major loan books Jun-15 Residential Property and Non-property Other Personal Total €m Mortgages Construction business lending Loans and receivables to customers 37,937 3,690 13,799 17,909 73,335 Impaired 7,388 860 6,713 3,014 17,975 Balance sheet provisions (specific +
Slide 26: Summary
Summary Bernard Byrne Chief Executive Officer 26
Slide 27: Key priorities and growth drivers
Key priorities and growth drivers Strong position to deliver future returns Strategic ambitions Achieving targets Attractive returns Medium Term Targets H1 2013 H1 2015 Franchise growth No. 1 Irish Bank No. 1 market shares No. 1 market shares New lending €7bn-€10bn p.a €1.9bn €4.0bn Net interest mar
Slide 28: Summary
Summary Delivering strong and sustainable financial performance in a growing macro-economic environment Leading franchise with customer led strategy focused on delivering value and enhanced experience Improving risk model with ongoing proactive credit quality management Well positioned to re
Slide 29: Appendices
Appendices 29
Slide 30: Positive domestic economic conditions and outlook
Positive domestic economic conditions and outlook ROI GDP (% change in real terms) ROI GNP (% change in real terms) 6.9 5.2 5.0 4.5 4.6 4.5 4.0 1.4 2013 2014 2015 (f) 2016 (f) 2013 2014 2015 (f) 2016 (f) Average Unemployment Rate (%) Irish Government Budget Deficit (% GDP) 5.7 13.1 11.3 4.1 9.5 8.3
Slide 31: Measured and balanced return to funding markets
Measured and balanced return to funding markets Funding transactions since regaining market access 2012 2013 2014 2015 ACS ACS ACS ACS Cr. Card ACS Senior Senior ACS Issuance Issuance Issuance Senior Issuance Secured Issuance Unsecured Unsecured Issuance November January September Unsecured January
Slide 32: Available for sale portfolio
Available for sale portfolio €bn Key components of debt securities €bn Components of Government securities 12.7 9.1 9.1 12.4 3.9 4.2 2.9 2.5 1.3 1.1 1.2 1.1 0.9 0.8 0.5 0.3 Government Securities Supranational Banks Euro Bank Securities and Gov agencies Irish France Italy Spain Rest of Government Wor
Slide 33: Components of regulatory capital structure
Components of regulatory capital structure AIB Group 2009 Preference Shares CRD IV Transitional • €3.5bn perpetual, non-cumulative Preference Shares Capital Adequacy Information (€m) 30-Jun-15 31-Dec-14 • 8% fixed non-cumulative annual coupon, no coupon step up, payable either by cash or an issue of
Slide 34: Growth in performing loans across all portfolios
Growth in performing loans across all portfolios €bn Residential Mortgages €bn Other Personal 30.3 30.5 2.8 2.7 Dec 14 Jun 15 Dec 14 Jun 15 €bn Property and Construction €bn Non-property Business 14.9 7.1 6.7 13.8 Dec 14 Jun 15 Dec 14 Jun 15 Allied Irish Banks, p.l.c. – Half-Yearly Financial Results
Slide 35: Criticised loans and definitions
Criticised loans and definitions €bn Watch The credit is exhibiting weakness but with the Credit profile – criticised loans expectation that existing debt can be fully repaid from normal cash flows. 50 42.7 41.8 40 34.0 Vulnerable Credit where repayment is in jeopardy from normal cash flows and may
Slide 36: Improving asset quality
Improving asset quality Jun-15 Dec-14 RBB CIB AIB UK Total RBB CIB AIB UK Total €m Residential mortgages 35,180 146 2,611 37,937 36,155 169 2,522 38,846 of which: owner-occupier 29,177 38 2,260 31,475 29,580 51 2,177 31,808 of which: buy-to-let 6,003 108 351 6,462 6,575 118 345 7,038 Other personal
Slide 37: ROI residential mortgages
ROI residential mortgages Asset profile components Jun 2015 €m Impairment writeback 17% -29 83% €35.3bn (3% decrease) -322 Owner Occupier Buy to Let H1 2014 H1 2015 Impaired loans (€bn) • ROI mortgage portfolio comprises 38% tracker rate, 52% variable rate and 10% fixed rate mortgages 33% 31% 8.2 7.
Slide 38: Other personal lending
Other personal lending Asset profile components Jun 2015 €m Impairment charge / writeback 23% 48 10% -8 61% 6% €3.7bn (4% decrease) H1 2014 H1 2015 Satisfactory Watch Vulnerable Impaired Impaired loans (€bn) • Overall portfolio has reduced by 4% since Dec 14; an 18% reduction in the impaired categor
Slide 39: Property and construction
Property and construction Asset profile components Jun 2015 €m Impairment charge / writeback 4% 3% 24% 28 69% -99 €13.8bn (11% decrease) Land & Development Investment Property H1 2014 H1 2015 Contractors Housing Associations Impaired loans (€bn) • Overall portfolio has reduced by 11% since Dec 14 ma
Slide 40: Non-property business lending
Non-property business lending Asset profile components Jun 2015 €m Impairment charge / writeback 10% 23% 16% 46 18% 33% €17.9bn (2% decrease) -110 Agriculture Retail / Wholesale / Other H1 2014 H1 2015 Hotels & Licensed premises Other Services Other • 70% of portfolio is from ROI and 30% from the UK
Slide 41: ROI Mortgages - stock of forbearance measures
ROI Mortgages - stock of forbearance measures of which: loans > 90 days of which: loans > 90 days June 2015 - Total Dec 2014 - Total in arrears and/or impaired in arrears and/or impaired Balance Balance Balance Balance Number Number Number Number Forbearance type by mortgage (€m) (€m) (€m) (€m) Inte
Slide 42: Non-mortgage - stock of forbearance measures
Non-mortgage - stock of forbearance measures Jun-15 Dec-14 Non-property Non-property Property and Property and Other Personal business Other Personal business construction construction lending lending Balance Balance Balance Total Balance Balance Balance Total Forbearance Type by Non-Mortgage €m €m
Allied Irish Banks, p.l.c. — H1 2015 Earnings Presentation on 6ix