Aib Group Plc · EURONEXT:A5G
Aib — H1 2022 Earnings Presentation
49 slides from Aib's earnings presentation, Jul 29, 2022
Slide 1: Backing Our Customers – Half-Yearly Financial Results 2022
BACKING OUR Half-Yearly Financial Results For the six months ended 30 June 2022 CUSTOMERS AIB Group plc
Slide 2: Forward looking statement
Forward looking statement This document contains certain forward looking statements with respect to the financial condition, results of operations and business of AIB Group and certain of the plans and objectives of the Group. These forward looking statements can be identified by the fact that they
Slide 3: H1 2022 Highlights
H1 2022 Highlights Supporting our customers as the Irish economy remains resilient Irish economic growth of 4-5% expected in 2022, c. 4% expected in 2023 and 2024 New lending up 20% to €5.4bn; Green lending €1.3bn representing 23%; >200k new accounts opened Strong profitability underpinned by robust
Slide 4: Open and resilient Irish economy
Open and resilient Irish economy Supported by favourable demographics, low unemployment, low leverage and high deposits Strong growth forecast for 2022-24 despite clear headwinds Employment levels rise sharply while unemployment falls Inflation increases in Ireland in-line with elsewhere % % 2,600 1
Slide 5: Delivering on our strategic priorities
Delivering on our strategic priorities Halfway through three-year plan 2 Dec 2020 H1 2022 2023 Legacy items Cost-savings plan Reshaped business Plan to accelerate strategy Customer product gaps delivering sustainable through transformation Organic & inorganic growth returns Customer recruitment Unde
Slide 6: Closing out legacy issues
Closing out legacy issues Key milestone passed with a clear path to c. 3% by 2023 Proven track record in reducing NPEs (€bn) NPEs 4.2% of gross loans; on track to meet c. 3% target by 2023 25.0% 16 Track record of resolving NPEs 21.6% 14 80% reduction in five years to €2.4bn or 4.2% 20.0% 12 Legacy
Slide 7: Focus on c. €230m cost-savings plan against inflationary backdrop
Focus on c. €230m cost-savings plan against inflationary backdrop Continued progress notwithstanding changing market dynamics and need for agility as two banks exit Project Annual Progress in H1 2022 Status Savings An Post: Enhanced long-standing agreement to expand “AIB at An Post” across c. 920 lo
Slide 8: Organic growth - new lending of €5.4bn in H1 2022
Organic growth - new lending of €5.4bn in H1 2022 20% increase in new lending; leading market shares ROI driving strong new lending growth New lending across asset classes* Drawdowns (€bn) Mortgages (€bn) Property (€bn) +45% +54% 5.4 0.2 +20% 1.8 UK -5% 1.2 0.3 1.0 0.5 ROI +83% 4.5 H1 2021 H1 2022 H
Slide 9: M&A helping to fill product gaps and provide growth opportunities
M&A helping to fill product gaps and provide growth opportunities Leading financial services provider Acquisitions and joint ventures significantly enhance our wealth management, investments and capital markets propositions AIB Group plc Expanding the product range 2020 2023 Mortgages Credit cards M
Slide 10: Changing banking landscape provides unique opportunity
Changing banking landscape provides unique opportunity Growing our customer base with increased digital adoption Account openings Customer base to grow to c. 3 million Growth in digital transactions (m) 2.8 2.8 2.8 3.0 (m) 2.7 2.7 2.9 75% 2.6 66% 61% 1.8 1.9 900k 52% 52% 54% 1.5 205k 100k H1 2021 H1
Slide 11: Continuous investment in technology
Continuous investment in technology Delivering a simplified, modern, resilient and customer-focused IT infrastructure 2012-2014 2015-2017 2018-2020 Strategy 2023: 2021 -2023 Strategy 2023+ onwards Investment €870m ‘modular Rationalisation of Annual investment Annual average Annual average investment
Slide 12: Pacesetter for the ESG agenda
Pacesetter for the ESG agenda 70% reduction in CO2 emissions from 2009 base Assets: Focus area 2022 Progress Growth in Energy, Climate Action & Infrastructure loan book €10bn €5.9bn €bn new climate & environment lending by 2023 green lending since 2019 70% 23% E of new lending to be green / transiti
Slide 13: Our H2 2022 priorities
Our H2 2022 priorities Delivering our strategy to simplify, streamline and strengthen AIB Changing landscape and operating environment Global Two banks Rising Inflationary Geo-political macro exiting interest rates pressures risks economic uncertainty Priorities for the remainder of the year Maintai
Slide 14: Financial performance
BACKING Financial OUR performance CUSTOMERS AIB Group plc
Slide 15: Financial performance H1 2022
Financial performance H1 2022 Profit after tax of €477m, increase of 74% on H1 2021 Includes 8% increase in total income; €309m ECL writeback Total income €1,274m Net interest income €895m (+2%) and other income €379m (+26%) Costs €782m(1) up 6%, FTEs at H1 2022 9,027 flat versus H1 2021 Costs up 1%
Slide 16: Income Statement
BACKING Income Statement OUR CUSTOMERS AIB Group plc
Slide 17: Income statement – profit after tax €477m
Income statement – profit after tax €477m Summary income statement (€m) H1 2022 H1 2021 Net interest income up 2% Net interest income 895 881 • UK interest rates more favourable Other income(1) 379 302 Total operating income 1,274 1,183 • c. €16bn deposits on negative rates Total operating expenses(
Slide 18: Net interest income €895m; up 2%
Net interest income €895m; up 2% NII – material movements (€m) NII €895m up €14m / 2% from H1 2021 impacted by: Q2 Exit NIM (€14m increase in NII / 3bps increase in NIM) 1.52% • +€4m lower cost of liabilities including: • +€25m customer accounts primarily due to negative rates pricing strategy 2 bps
Slide 19: NII sensitivity – benefiting from rising rates
NII sensitivity – benefiting from rising rates NII Sensitivity as at Jun 2022 (€m) -100bps +25bps +50bps +100bps NII sensitivity estimates are based on certain simplifying assumptions such as; a static/constant balance sheet, parallel Euro (301) 75 150 301 rate movements and pass through assumptions
Slide 20: Other income +26%; net fee & commission +35%
Other income +26%; net fee & commission +35% Net fee and commission income (€m) H1 2022 H1 2021 Customer accounts 111 99 Other income €379m up 26% Credit related fees 25 26 • Includes €33m for Goodbody Card 49 32 Wealth / insurance 20 19 Net fee and commission income €286m up €74m / +35% Customer re
Slide 21: Costs €782m; 1% increase on an underlying basis
Costs €782m; 1% increase on an underlying basis Operating expenses (1) (€m) Costs €782m, up 6% • 1% increase on an underlying basis(3) 782 739 Factors impacting costs: 140 148 • lower average FTEs offset by wage inflation and impact of Goodbody 239 262 • wage agreement for 10% increase over three ye
Slide 22: ECL writeback €309m / 106bps; 85% of loans in Stage 1
ECL writeback €309m / 106bps; 85% of loans in Stage 1 ECL material stock movements (€bn) ECL writeback (€m) H1 2022 €0.5bn decrease ECL Stock Macroeconomic assumptions 48 Redemptions / repayments/ other(1) 87 Post-model adjustments 174 1.9 3.2% Total ECL writeback 309 0.1 0.1 0.6 0.1 0.1 1.4 0.1 2.4
Slide 23: Balance Sheet
BACKING Balance Sheet OUR CUSTOMERS AIB Group plc
Slide 24: Balance sheet – strong funding & liquidity to support our customers
Balance sheet – strong funding & liquidity to support our customers Balance sheet (€bn) Jun 2022 Dec 2021 Performing loans 56.1 55.3 Assets Non-performing loans 2.4 3.1 Performing loans increased by €0.8bn Gross loans to customers 58.5 58.4 New lending €5.4bn exceeded redemptions €4.9bn Expected cre
Slide 25: Loan book growth in H1; 8% CAGR expected to 2024
Loan book growth in H1; 8%* CAGR expected to 2024 Net loans movement: €0.6bn increase to €57.1bn Gross loans (€bn) (€bn) 30 +5.4 (4.5) c. +8% CAGR 25 (0.4) (0.6) +0.2 +0.5 20 58.4 58.5 15 56.5 57.1 8.2 7.5 10 5 16.0 17.1 0 Dec-21 New lending Redemptions Redemptions Portfolio sales Ulster Bank ECL Ju
Slide 26: NPEs at 4.2% declined 22%; target c. 3% by 2023
NPEs at 4.2% declined 22%; target c. 3% by 2023 NPEs (€bn) Legacy NPE Non-legacy NPE 32% 0.2 15% 23% 3.1 40% (0.4) 28% (0.1) 16% €0.3bn €2.1bn (0.4) 2.4 1.1 9% 6% 63% 0.9 0.8 28% 0.2 2.4 0.6 0.2 1.0 0.6% 3.6% 0.7 NPEs Net flow to Redemptions Portfolio sales Restructures NPEs Dec 2021 NPEs Jun 2022 M
Slide 27: Funding and capital
BACKING Funding and capital OUR CUSTOMERS AIB Group plc
Slide 28: Strong funding driven by increased customer deposits
Strong funding driven by increased customer deposits Total funding (€bn) Liquidity metrics (%) Jun 2022 Dec 2021 €124.4bn €127.6bn +16% 4.5 4.9 Loan to deposit ratio (LDR) 59 61 37.0 Liquidity coverage ratio (LCR) 215 203 NBFI (1) 36.0 Corporate / SME Customer accounts Net stable funding ratio (NSFR
Slide 29: CET1 (FL) 15.3%; -130bps impact UB corporate & commercial loans
CET1 (FL) 15.3%; -130bps impact UB corporate & commercial loans Capital ratios fully loaded (FL) (%) €56.6bn RWAs CET1 (FL) ratio 15.3%; Dec 21 16.6% €52.4bn RWAs • + 90bps profit generated 21.9% 20.2% • +10bps calendar provisioning release 3.1 • - 20bps investment securities 2.9 2.2 2.0 • - 20bps b
Slide 30: Capital requirements and CET1 outlook
Capital requirements and CET1 outlook Dec-23 Capital requirements Dec-22 CET1 comfortably ahead of capital requirements look through* Pillar 1 4.50% 4.50% • SREP P2R reduced by 25bps to 2.75% from 3.00%; CET1 portion reduced from 1.69% to 1.55% Pillar 2 requirement (P2R) 1.55% 1.55% • CCyB changes i
Slide 31: 2022 Guidance and evolving environment
2022 Guidance and evolving environment Guidance FY 2022(1) Evolving environment NII: expected to grow c. 10% Two banks exiting Medium-term targets under review Other income: c. €700m given the rapidly changing interest rate environment Rising interest rates Upside potential to >9% RoTE target Costs:
Slide 32: Appendices
BACKING Appendices OUR CUSTOMERS AIB Group plc
Slide 33: H1 2022 – ESG progress and Recognition
H1 2022 H1 2022 – ESG progress and Recognition RATINGS On 24 June 2022 AIB received an ESG Risk Rating of 11.0, was assessed by H1 2022 Progress Sustainalytics to be at Low Risk of experiencing material financial impacts from ESG Own Footprint - Tendering Corporate Purchase Power Agreement factors a
Slide 34: Average balance sheet
Average balance sheet H1 2022 H1 2021 Average Volume Interest Yield Average Volume Interest Yield €m €m % €m €m % Assets Customer loans 57,713 920 3.21 57,823 922 3.22 Investment securities 16,743 45 0.54 18,762 31 0.33 Loans to banks / other 47,210 (56) (0.24) 30,573 (42) (0.27) Interest earning as
Slide 35: Customer loans
Customer loans €bn Performing Loans Non-Performing Loans Customer Loans Gross loans (1 Jan 2022) 55.3 3.1 58.4 New lending 5.4 - 5.4 Redemptions of existing loans (4.5) (0.4) (4.9) Portfolio acquisition 0.2 - 0.2 Portfolio sales (0.2) (0.4) (0.6) Net flow to NPE (0.2) 0.2 - Restructures and Write of
Slide 36: Loan book by staging and coverage
Loan book* by staging and coverage Jun 2022 Total Loan book by staging – €58.2bn loan exposures Stage 1 Stage 2 Stage 3** Gross loan exposures (€bn) exposure Mortgages 27.3 1.2 0.8 29.3 Stage 1 loan exposures increased by €1.3bn to Personal 2.2 0.2 0.2 2.6 Property & Construction 5.9 1.4 0.4 7.7 €49
Slide 37: Stage movements
Stage movements Jun 2022 Stage movements (excluding Mortgages & Personal) Gross loan exposures (€bn) Stage 1 Stage 2 Stage 3* Total exposure (excluding Mortgages & Personal) Stage 1 loan exposures increased €1.0bn primarily due to Property & Construction 5.8 1.4 0.5 7.6 new lending and upward stagin
Slide 38: Asset quality by portfolio
Asset quality by portfolio €bn Mortgages Personal Property Corporate & SME Total Jun 2022 Customer loans* 29.3 2.6 7.9 18.6 58.5 Total ECL cover** (%) 1% 7% 3% 4% 2.4% of which NPEs 0.7 0.2 0.6 0.9 2.4 of which legacy NPEs 0.2 0.0 0.1 0.1 0.3 of which non legacy NPEs 0.5 0.2 0.6 0.8 2.1 ECL on NPE 0
Slide 39: Asset quality – total portfolio
Asset quality – total portfolio Total portfolio (€bn) Loans by geography 58.4 58.5 Dec-21 Jun-22 32% 5.4% 28% 2.3 4.2 % 3.0 4.5 7.8% 4.0 6.8% 4% 4% 4% 5% 15% 14% 50.7 86.9% 52.0 89.0% 77% 77% Dec-21 Jun-22 ROI UK North America ROW Strong / Satisfactory Criticised NPE ECL/NPE coverage 39
Slide 40: Asset quality - mortgages
Asset quality - mortgages Credit quality (€bn) RoI mortgages Dec-21 Jun-22 29.4 30% 28% 29.3 3% 2% 21% 20% 1.0 0.7 1.4 5% 1.3 5% 40% 49% 31% 39% 92% €28.3bn €28.3bn 93% 27.0 27.3 Tracker Variable Fixed Residential mortgage split Dec-21 Jun-22 6% 5% Dec-21 Jun-22 Strong / Satisfactory Criticised NPE
Slide 41: Asset quality – property & construction
Asset quality – property & construction Credit quality (€bn) Loans at amortised cost by segment 7.9 7.6 Dec-21 Jun-22 21% 0.7 8% 28% 0.8 11% 0.3 4% 0.5 6% 4% 6% 4% 7% 18% 19% 6.9 88% 70% 6.3 83% 72% Dec-21 Jun-22 Strong / Satisfactory Criticised NPE Investment Land and development Contractors Housin
Slide 42: Asset quality – corporate & SME
Asset quality – corporate & SME Credit quality (€bn) Loans by sector Jun-22 Agriculture 18.7 18.6 29% 6% 23% 0.9 5% 1.1 Energy 13% 2.2 12% 2.5 18% 9% Manufacturing 13% Hotels & Licensed premises 15.1 81% 15.5 83% Retail/wholesale & Other Distribtuion 22% 10% Transport 12% Dec-21 Jun-22 Financial & o
Slide 43: Asset quality – personal portfolio
Asset quality – personal portfolio Credit quality (€bn) Lending split Dec-21 Jun-22 2.7 2.6 64% 64% 23% 24% 0.2 9% 0.2 8% 0.2 6% 0.2 7% 77% 76% 2.3 85% 2.3 85% Credit cards Loans/overdrafts Dec-21 Jun-22 Strong / Satisfactory Criticised NPE ECL/NPE coverage 43
Slide 44: Asset quality – internal credit grade by ECL staging
Asset quality – internal credit grade by ECL staging* Jun 2022 Dec 2021 €m Stage 1 Stage 2 Stage 3 POCI** Total Stage 1 Stage 2 Stage 3 POCI Total Strong 38,279 1,016 - 4 39,299 36,521 895 - 4 37,420 Satisfactory - 2 - 3 10,748 1,892 12,642 11,023 2,220 13,246 Total strong / - 6 - 7 satisfactory 49,
Slide 45: Investment securities – debt securities €16.9bn
Investment securities – debt securities €16.9bn Key components €bn 7.3 6.8 4.0 4.2 1.5 1.5 1.7 1.8 Government Supernational Euro bank Non Euro bank securities banks and gov securities securities agencies Dec-21 Jun-22 €16.9bn up from €16.7bn mainly due to €0.4bn increase in asset backed securities a
Slide 46: Reported capital ratios
Reported capital ratios Transitional capital ratios Fully loaded capital ratios Jun 22 Dec 21 Jun 22 Dec 21 Total risk weighted assets (€m) 56,776 52,637 Total risk weighted assets (€m) 56,629 52,358 Capital (€m) Capital (€m) Shareholders equity excl AT1 and dividend 11,522 12,427 Shareholders equit
Slide 47: Loan book analysis and ECL sensitivities
Loan book analysis and ECL sensitivities Concentration by sector (%) H1 2022 ECL sensitivities* Agriculture 3 Customer loans Downside Downside Upside FYEnergy 2020 macroeconomic scenarios and 4 H1 2022 Base scenario 1 scenario 2 scenario Manufacturing 5 weightings: €m Reported 100% 100% 100% 100% Pr
Slide 48: Credit ratings
Credit ratings As at 30 Jun 2022 AIB Group plc (HoldCo) A3 BBB BBB- Long term issuer rating Outlook Stable Stable Stable Investment grade AIB p.l.c. (OpCo) A1 BBB+ A- Long term issuer rating Outlook Stable Stable Stable Investment grade 48
Slide 49: Contact details
Contact details Our Investor Relations Department are happy to facilitate your requests for any further information Name Email Telephone Niamh Hore [email protected] +353 1 6411817 Head of Group IR Siobhain Walsh [email protected] +353 1 6411901 Head of Debt IR Bernie Glynn bernie.a.glynn@ai