AIB Group plc · EURONEXT:A5G
AIB — Allied Irish Banks, p.l.c. — FY2003 Earnings Presentation
46 slides from AIB's earnings presentation, February 2004
Slide 1: Preliminary Results 2003
Preliminary Results 2003 Preliminary Resultsfor the year ended 31 December 2003 Allied Irish Banks, p.l.c.
Slide 2: Forward looking statement
Forward looking statement 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 Private Securities Litigation Reform Act of 1995. Actual results may differ
Slide 3: Preliminary Results - Michael Buckley, Group Chief Executive
Preliminary Michael Buckley Results Group Chief Executive
Slide 4: Financial headlines
Financial headlines Reported Underlying** Adjusted EPS 11% Adjusted EPS 3% Dividend 10% Excl. currency 7% Tangible Return on Equity 20%* * includes loss on disposal of Govett, restructuring / * * excludes impact of lower Other Finance Income, early retirement costs, and impact of Allfirst di
Slide 5: Key features
Key features (continuing activities) Volume growth more than offsetting margin attrition income 6.5% Investment for growth and efficiency costs 6% sustaining operating performance building an enterprise-wide business support model Strong asset quality improved trends in non-perfo
Slide 6: Operating performance - a high growth story
Operating performance - a high growth story Reconciliation of growth to underlying adjusted EPS: Underlying* profit growth in Operating Divisions 2003 v. 2002 Operating Divisions 12 % M&T / Allfirst / 14% 15% 12% 12% share buyback eps neutral * Sub-total 9.5% Poland Allfirst shares in trust / AIB Ba
Slide 7: Strategic Intent
Strategic Intent „The AIB Way‟ Leadership, communication & Best products Best service measurement Brand values: Distinctive Superior dependable, engaging Customer Profit & pioneering Proposition Growth Employee values: respect, integrity & teamwork Best enablement Best relationships One consistent a
Slide 8: Executing our strategy
Executing our strategy Converting strategy to results Operations progressively aligned with strategic intent Management & support Customer Relationship Focus infrastructure Dedicated relationship managers; Business, customer & employee Credit & sector specialists; metrics driving performance CRM too
Slide 9: Executing our strategy: What our people think
Executing our strategy What our people think AIB employee attitude survey AIB above ISR Global Financial Services Norm since 1989 Leadership 15 86% employee participation Teamwork 12 Employee attitude closely aligned to strategy Training & skills 10 Continued improvement on all Commitment &
Slide 10: Executing our strategy: What our customers think
Executing our strategy What our customers think United Kingdom Customers rank us in top quartile of all UK companies Voted “Best Business Bank” in GB since 1994 Republic of Ireland Strong upward trend in customer service ratings over past 2 years Critical building block for authentic CRM
Slide 11: AIB Bank Republic of Ireland
AIB Bank Republic of Ireland 14% Extending our lead over all other full service banks Strong growth in banking operations; Significant outperformance in loan volumes; Ark Life profit growth resumed Net new lending up €6bn 15% AIB Market 14% overall loans 28% 18% 6% business / other personal
Slide 12: AIB Bank Great Britain & Northern Ireland
AIB Bank Great Britain & Northern Ireland 15% Focused G.B. banking franchise creating premium brand loans 28%, deposits 18% Continuing strong profit growth Gaining share in key N.I. markets loans 21% (mortgages 32%), 21% deposits 13% 15% 10% Milestone in UK productivity cost
Slide 13: Capital Markets
Capital Markets 12% Corporate banking a top class domestic and international franchise - profit 15% a leading CDO fund manager in Europe Solid performance in Treasury low utilisation of risk limits Productivity cost / income ratio 57% (57% in 2002) income 2%, costs 2% disposa
Slide 14: Poland
Poland 17% Profit impacted by: 2003 v 2002 PLN m sharp fall in interest rates effect on deposit income -200m depreciation on new banking platform -82m Restructuring for efficiency programme successfully executed other costs 12% +60m cost / income ratio 78% (74% in 2002) Business gain
Slide 15: M&T
M&T (US GAAP) Net income 26% Diluted net operating EPS 11% Run rate of merger cost savings now achieved Allfirst integration on track no further significant merger related expenses Efficiency ratio 53.6% (51.3% in 2002) positive cost / income gap anticipated in 2004 Improved asse
Slide 16: Geographical diversity
Geographical diversity Positioned in markets that will outperform GDP Growth % 2004 (f) 2005 (f) Rep. of Ireland 4.0 5.0 UK 3.0 2.8 USA 4.8 4.0 Poland 4.5 5.0 Eurozone 1.8 2.5 OECD 3.0 3.2 Executing single transportable approach to banking
Slide 17: The future: Great Britain
The future Great Britain Business banking franchise - 14% CAGR in profit 2001 - 2003 Differentiated by our distinctive customer proposition in chosen niches Significant market shares now e.g. > 10% in legal and education sectors On track to double capacity in 3 years to 2005 Opportunity to
Slide 18: The future: Poland
The future Poland Top class retail & commercial banking franchise investment programme to optimise locations, business support and efficiency now complete 5 strategically positioned business centres opened superior delivery channel to mid-corporate and SME markets complements extensive bra
Slide 19: The future: USA
The future USA M&T partnership restores momentum to our US business double digit earnings growth forecast in 2004 Already achieving mutual measurable benefits AIB‟s input to maximising integration synergies $ value of investment 25% since merger announcement (at close of business on 19/0
Slide 20: Our business health check
Our business health check Continuing focus on our priorities ……. Growing income faster than costs, without increasing our risk profile (positive gap to widen in 2004) Investing in people, locations and systems Investing in a transportable business model Investing to build world class governa
Slide 21: Preliminary Results - Gary Kennedy, Group Director Finance
Preliminary Gary Kennedy Results Group Director, Finance & Enterprise Technology
Slide 22: Operating income
Operating income (continuing activities) Underlying 2002 €m 2003 change %* 1,830 Net interest income 1,840 6 63 Other finance income 14 - 1,055 Other income 1,124 8 2,948 Total operating income 2,978 6.5 37.9% Other income ratio 38.2% * excludes the impact of currency movements and reduction in othe
Slide 23: Income
Income 6.5%* Interest income driven by strong loan growth 21% and deposit growth 11% Loan growth also a key driver of non interest income 8% banking fees & commissions 15% Loan growth benefits outweigh associated cost Margin attrition of 21 bps primarily due to (a) loans growing x 2 times
Slide 24: Net Interest Margin
Net Interest Margin (continuing activities) 2002 2003 Change on 2002 % % bps Group 2.91 2.70 -21 Domestic 2.73 2.54 -19 Foreign 3.20 2.98 -22
Slide 25: Operating expenses
Operating expenses (continuing activities) Underlying * 2002 €m 2003 change % 1,046 Staff costs 1,082 8 536 Other costs 515 1 165 Depr. & amort. 170 9 1,747 Operating expenses 1,767 6 - Restructuring / integration 72 1,747 Total Operating expenses 1,839 58% Tangible cost / income ratio 58% * exclude
Slide 26: Costs
Costs 6%* Continued investment in our franchises Building scaleable, integrated and efficient enablement systems seeking to invest once for groupwide benefit shared services and expertise IAS, Basel II, best in class governance & compliance First year depreciation charge on new technolog
Slide 27: Restructuring / Early Retirement Programmes
Restructuring / Early Retirement Programmes Sale of Govett €153m Goodwill previously written off to reserves, charged to P&L following sale of management contracts to Gartmore Investment Management p.l.c. Early retirement €62m Provision for early retirement option offered to employees in RoI, NI
Slide 28: Asset Quality
Asset Quality (continuing activities) NPL‟s 1.4% of average volumes (2% at Dec 2002) Provision charge to 0.33% of average balances (0.37% at Dec 2002) No quality compromise to achieve loan growth outperformance Criticised loans / total loans in all divisions Good provision cover total
Slide 29: Provisions
Provisions (continuing activities) €m 2002 2003 Bad and doubtful debts 110 * 142 Contingent liabilities & commitments 2 9 Investment provisions 43 16 Total Provisions 155 167 *€150 million before release of €40 million unallocated credit provision relating to one specific case in Allfirst
Slide 30: Underlying bad debt provisions
Underlying bad debt provisions (continuing activities) 2002 2003 bps bps Bad and doubtful debts 27 31* Release from unallocated 10 - Gross provision rate 37 31 Off balance sheet - 2 Underlying rate 37 33 * includes relevant charge relating to credit element for fixed asset investments
Slide 31: Actuarial valuation of Group Pension Schemes
Actuarial valuation of Group Pension Schemes Actuarial review completed in H2 2003 Valuation results in line with expectations Increase in cash contribution rate to defined benefit schemes recommended Minimal impact on 2004 Profit & Loss Account or Earnings Per Share
Slide 32: Impact of currency translation & hedging activity
Impact of currency translation & hedging activity 2003 2002 Average Average Average Accounting Effective Effective Rates Rates Rates US Dollar 1.1346 1.01 0.90 Sterling 0.6901 0.67 0.63 Polish Zloty 4.4157 4.28 4.13 US dollar, sterling and Polish zloty weakened relative to the euro by 17%, 9% and
Slide 33: 2004 Outlook
2004 Outlook Continuing strong volume growth c.20% loan growth expected in RoI and GB & NI divisions margin attrition in a range of 20 - 25 bps Positive gap between income and cost growth widening further c. €20m investment in groupwide enablement will be absorbed Robust asset quality -
Slide 34: Preliminary Results 2003
Preliminary Results 2003 Preliminary Resultsfor the year ended 31 December 2003 Allied Irish Banks, p.l.c.
Slide 35: Additional Information
Additional Information
Slide 36: BZWBK relative to Poland Division
BZWBK relative to Poland Division 2003 PLN €m % BZWBK consolidated Polish GAAP * 305 69 -22 BZ Goodwill amortisation (25) Other Group adjustments ** (24) Poland division 20 -17 * excluding restructuring costs ** including central costs, transfer of Poland treasury profits to Capital Markets Division
Slide 37: Tangible cost / income ratios
Tangible cost / income ratios* (continuing activities) 78% 74% 2002 2003 58% 58% 57% 57% 52% 51% 50% 49% Group AIB Bank AIB Bank Capital Poland ROI GB&NI Markets * excluding goodwill & restructuring / early retirement costs
Slide 38: Risk weighted asset & loan growth
Risk weighted asset & loan growth* (continuing activities) 21% Group 23% 28% AIB Bank ROI 28% 25% AIB Bank GB & NI 26% 4% Capital Markets 18% Poland 4% ** 4% RWA growth Loan growth * excludes the impact of currency movements ** 6% excluding central writedowns
Slide 39: Deposit growth
Deposit growth* (continuing activities) Group 11% AIB Bank ROI 9% AIB Bank GB & NI 15% Capital Markets 18% Poland 0% * excludes the impact of currency movements
Slide 40: Bad debt provisions by division
Bad debt provisions by division (continuing activities) Average Average 2002 Loans % €m 2003 Loans % 52 0.26 AIB Bank ROI 58 0.24 22 0.26 AIB Bank GB & NI 19 0.21 36 0.35 Capital Markets 27 0.42 * 41 1.22 Poland 32 1.03 (40) Group 5 110 0.27 Total 142 0.33* * includes relevant charge relating to cre
Slide 41: Non-Performing Loans by Division
Non-Performing Loans by Division (continuing activities) As at December 31, 2002 As at December 31, 2003 NPLs/ Total NPLs/ Total Actual Provisions/ Actual Provisions/ NPLs Advances NPLs NPLs Advances NPLs €m % % €m % % 194 0.9 108 AIB Bank Rep Ire 209 0.8 109 88 1.0 138 AIB Bank GB & NI 84 0.8 148 1
Slide 42: Balance sheet
Balance sheet 31 Dec €m 31 Dec Underlying * 2002 Assets: 2003 change % 44,193 Loans to customers # 50,999 21 38,568 Customer accounts # 40,984 11 70,397 Total assets 80,960 21 * excludes the impact of currency movements and sale of Allfirst # excludes money market funds Dec 2002 Tier 1 Dec 2003 6.9%
Slide 43: Return on Equity
Return on Equity Dec 2002 Dec 2003 Tangible return on equity*# 27.4% 20.0% Reported return on equity* 23.7% 14.5% * not comparable year on year due to Allfirst / M&T transaction # excludes the impact of goodwill
Slide 44: Risk weighted assets
Risk weighted assets (continuing activities) 31 Dec 31 Dec Underlying 2002 €m 2003 Change %* 18,821 AIB Bank RoI 24,119 28 8,666 AIB Bank GB & NI 10,055 26 22,833 Capital Markets 24,506 18 3,549 Poland 3,259 4 54,126 Total RWA 62,615 23 * excludes the impact of currency movements
Slide 45: Return on risk weighted assets
Return on risk weighted assets €bn 70.0 3.0% 60.0 2.5% 2.0% 50.0 1.8% 1.6% 1.7% 1.7% 1.7% 2.0% 1.6% 1.6% 40.0 1.1% 1.5% 30.0 1.0% 20.0 10.0 0.5% 19.3 22.1 29.1 37.4 45.2 60.2 64.6 68.6 61.7 0.0 0.0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 Average RWA (LHS) Return (RHS) 2003 return on risk weigh
Slide 46: 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
Allied Irish Banks, p.l.c. — FY2003 Earnings Presentation on 6ix