AIB Group plc · EURONEXT:A5G
AIB — Allied Irish Banks, p.l.c. — FY2004 Earnings Presentation
48 slides from AIB's earnings presentation, February 2005
Slide 1: Preliminary Results 2004
Preliminary Results 2004 Preliminary Results for the year ended 31 December 2004 Allied Irish Banks, p.l.c.
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: Michael Buckley, Group Chief Executive
Michael Buckley Group Chief Executive
Slide 4: Highlights
Highlights Adjusted earnings per share 22% vs 118c base 2003* 13% Tangible cost / income ratio 2% Dividend 10% Tangible return on equity 29.6% * excludes M&T / Poland restructuring charges and early retirement programme
Slide 5: Strong performance built on firm foundations
Strong performance built on firm foundations Gaining share in high growth markets Improving productivity income growing faster than costs, reducing cost / income ratio High quality asset portfolios Strong capital ratios Tier 1 7.9% Total capital 10.7%
Slide 6: Income - successfully managing the components
Income - successfully managing the components 28% 14% 11% 11% 11% - 28 bps Loans Deposits -20 . Net Interest Other income Total Operating -8 * Income Income Net Interest Margin Includes income reduction of €36m re investigation * 8bps relates to technical factor
Slide 7: Increasing income momentum
Increasing income momentum Income growth 12 11 10 8 6 6.5 6 4 2 0 2002 2003 2004
Slide 8: Cost management in a high growth environment
Cost management in a high growth environment Costs 7%* Includes f.x. investigation charge, impact 1% Industry wide regulatory costs pressures Income / cost growth gap +4% * before restructuring / early retirement costs
Slide 9: Income / cost gap driving productivity
Income / cost gap driving productivity 12 60 10 58 8 56 6 54 4 52 59.0% 57.8% 58.3% 56.3% 2 50 2001 2002 2003 2004 Cost growth Income growth Cost/income ratio
Slide 10: Asset quality - well managed growth
Asset quality - well managed growth Dec 03 Dec 04 1.4 Non-performing loans (NPLs) % 1.2 6.7 Criticised loans / total loans % 5.7 0.9 Gross new NPLs % 0.7 94 Total provisions / NPLs % 87 30 Bad debt charge bps 20 General provision 2 times provision rate to December „04
Slide 11: Asset quality - positive trends
Asset quality - positive trends bps 2.0% 37bps 40 36bps 30bps * 35 30 25 20bps 1.0% 20 15 10 5 2.0% 1.8% 1.4% 1.2% 0.0% 0 2001 2002 2003 2004 NPLs Bad debt charge * continuing activities
Slide 12: Demanding compliance / regulation agenda
Demanding compliance / regulation agenda Preparations on track for host of new / increased industry wide requirements Working on repairs post charging investigation Enterprise wide compliance, risk management, finance and internal audit functions blueprint facilitating simplification agenda
Slide 13: Positioned in high growth economies
Positioned in high growth economies GDP % 2004 (e) 2005 (f) Ireland 5.5 5.5 UK 3.1 2.6 USA 4.4 3.5 Poland 5.4 5.0 Eurozone 1.8 1.8
Slide 14: Profit momentum - strong, consistent and broad based
Profit momentum - strong, consistent and broad based constant currency AIB Bank Republic of Ireland €695m 11% * AIB GB & NI €289m 16% Capital Markets €329m 30% Poland €80m 135% M&T €195m 15% ** * underlying (pre investigation charge) 19% ** relative to Allfirst Q1 2003 and 9 mon
Slide 15: AIB Bank Republic of Ireland
AIB Bank Republic of Ireland 11% Underlying* profit 19% Fuelled by customer support Loans 30%, deposits 16% Growing share of a competitive market Year on year growth est. Market AIB ROI 30% 30% 29% 26% 26% 24% 16% 12% Total loans Business / other Mortgage lending Deposits personal lending
Slide 16: AIB Bank Great Britain & Northern Ireland
AIB Bank Great Britain & Northern Ireland 16% Investing to sustain strong growth Income 12%, costs 11% Cost / income ratio 49.5% (49.8% in 2003) GB Loans 33%, deposits 19% High quality, high growth franchises Actively recruiting high calibre 21% people 16% 12% Selective targeting of ne
Slide 17: Capital Markets
Capital Markets 30% Material productivity gains Income 12%, costs 5% Cost / income ratio 52% (57% in 2003) Outstanding momentum in Corporate Banking, 54% High performing international / niche franchises, domestic market leader Consistent, recurring customer demand, loans 32% Fine treas
Slide 18: Poland
Poland 135% Significant rebound on to solid growth platform Successful restructuring complemented by early stage income revival Income 8%, costs 9% Cost / income ratio 67% (79% in 2003) Strong focus on other income 13% Market share up in weak lending market, loans 6% Deposits 10% in hi
Slide 19: M&T
M&T 15%* Reported net operating income 16% Interest income boosted by commercial lending Costs well contained, cost / income ratio 50.6% in Q4 (53.9% Q4 2003) Significant reduction in NPLs, 0.45% (0.67% 2003) 2005 M&T guidance 10% - 13% growth in GAAP EPS M&T focused on organic growth
Slide 20: A high quality, sustainable growth story
A high quality, sustainable growth story Extending our no. 1 position in Ireland, record customer activity Best UK business bank, playing to our relationship strength Beginning to harvest potential of Polish franchise Selection of international / niche growth opportunities to leverage compet
Slide 21: Gary Kennedy, Group Director, Finance & Enterprise Technology
Gary Kennedy Group Director, Finance & Enterprise Technology
Slide 22: Adjusted EPS growth
Adjusted EPS growth 13%* Driven by dynamic operating performance 4% currency translation impact absorbed Tax and technical benefits added 3c * vs 118c base in 2003
Slide 23: Operating income
Operating income Underlying 2003 €m 2004 change %* 1,840 Net interest income 2,036 11 14 Other finance income 18 28 1,124 Other income 1,210 11 2,978 Total operating income 3,264 11 38.2% Other income ratio 37.6% Includes investigation related charge of €36m Banking fees & commissions up 9% ** (
Slide 24: Deposit growth
Deposit growth* Group 14% AIB Bank ROI 16% AIB Bank GB&NI 15% Capital Markets 6% Poland 10% * excludes the impact of currency movements
Slide 25: Risk weighted asset & loan growth
Risk weighted asset & loan growth* 28% Group 26% 30% AIB Bank ROI 29% 29% AIB Bank GB&NI 25% 31% Capital Markets 25% 6% Poland 16% RWA growth Loan growth * excludes the impact of currency movements
Slide 26: Interest income - asset driven
Interest income - asset driven Republic of Ireland Division Loan income 60% % 35 Volume 30 Interest 25 20 15 10 5 0 Loans Deposits
Slide 27: Loan growth analysis
Loan growth analysis Loans 28% Other 38% Property & Construction 37% House Mortgages 25%
Slide 28: Loan portfolios by sector
Loan portfolios by sector % of Group loan portfolio 26% 26% 2003 2004 25% 22% 14% 14% 14% 13% 9% 9% 8% 7% 5% 4% 3% 3% Agriculture Construction & Residential Manufacturing Personal Services Transport & Other Property Mortgages Distribution
Slide 29: Property & construction - quality focus
Property & construction - quality focus Excellent credit quality NPLs 0.5% v total NPLs 1.2% Typical emphasis % of portfolios investment strong covenants 55 house building/development pre-sold / pre-let 40 contracting strong track records 5 100 Well diversified portfolio by: type (commercial
Slide 30: House mortgages - Republic of Ireland
House mortgages - Republic of Ireland Primary focus on debt service ratio (repayment capacity) New Business Consistent LTVs (% no’s of drawdowns) Dec 01 Dec 02 Dec 03 Dec 04 < 75% 72 66 67 67 > 75% < 90% 22 26 25 24 > 90% 6 8 8 9 Total 100 100 100 100 Strong arrears profile Dec 01 Dec 02 Dec 03 De
Slide 31: Net interest margin
Net interest margin bps 2004 2003 change Continuing activities 2.42% 2.70% -28 Indicative breakdown of bps change Funding effect of loans growing faster than deposits -13 Other -7 Sub total -20 Technical change in reinvestment of capital -8 Total -28 2005 guidance -20
Slide 32: Business mix
Business mix Republic of Ireland Division 1998 2002 2003 2004 % of loan book % of loan book % of loan book % of loan book Branch loans 32 14 11 9 Home loans 29 31 34 34 Market / other loans 39 55 55 57 Total loans 100 100 100 100 Some adverse mix effect on deposit margins Changed profile of branch
Slide 33: Operating expenses
Operating expenses Underlying * 2003 €m 2004 change % 1,082 Staff costs 1,132 5 515 Other costs 581 13 170 Depr. & amort. 164 -3 1,767 Operating expenses 1,877 7 58.3% Tangible cost / income ratio 56.3% Includes f.x. investigation charge of €14m Continuing investment in single enterprise M.I.S.,
Slide 34: Non-performing loans by Division
Non-performing loans by Division As at December 31, 2003 As at December 31, 2004 NPLs/ Total NPLs/ Total Actual Provisions/ Actual Provisions/ NPLs Advances NPLs NPLs Advances NPLs €m % % €m % % 209 0.8 109 AIB Bank ROI 221 0.6 104 84 0.8 148 AIB Bank GB & NI 139 1.0 91 82 0.8 149 Capital Markets 10
Slide 35: Bad debt provisions by division
Bad debt provisions by division Dec Average Dec Average 2003 Loans % €m 2004 Loans % 58 0.24 AIB Bank ROI 42 0.14 19 0.21 AIB Bank GB & NI 13 0.11 28 0.27 Capital Markets 32 0.27 32 1.03 Poland 29 0.91 5 - Group - - 142 0.30 Total 116 0.20
Slide 36: Capital
Capital 2004 Total tier 1 capital €6,220m Total capital €8,410m Total risk weighted assets €79 bn Lending must exceed: EVA hurdle rates and Return from alternative use of capital
Slide 37: Tier 1 capital
Tier 1 capital 2003 2004 16% 27% Equity Preference Shares Tier 1 Capital Ratio 7.1% 7.9%
Slide 38: Source of funds
Source of funds € bn 100 90 10% 80 22% Capital 70 10% 60 Deposits by banks 25% 13% 50 5% Commercial CDs/Listed 40 securities 30 Customer a/cs 55% 20 61% 10 0 2003 2004
Slide 39: Summary
Summary Strong sustainable performance throughout our business Improving productivity High quality loan portfolios Prudent capital and funding Business pipelines underpin momentum Targeting 2005 adjusted EPS range 142c - 144c (Irish GAAP)
Slide 40: Additional Information
Additional Information
Slide 41: Provisions
Provisions €m 2003 2004 Bad and doubtful debts 142 116 Contingent liabilities & commitments 9 20 Investment provisions 16 (1) Total Provisions 167 135
Slide 42: Tangible cost / income ratios
Tangible cost / income ratios* 78% 67% 58.3% 57% 56.3% 52.5%** 52.4% 52% 49% 49% Group ROI GB&NI Cap Mkts Poland 2003 2004 * excludes goodwill ** investigation related charges of €5om included
Slide 43: Poland Division relative to BZWBK
Poland Division relative to BZWBK 2004 Underlying PLN €m change % BZWBK consolidated Polish GAAP 570 126 87** BZ goodwill amortisation (25) Other Group adjustments* (21) Poland division 80 135** * includes central costs and other adjustments in line with AIB segmental reporting ** excludes restructu
Slide 44: Balance sheet
Balance sheet 31 Dec €m 31 Dec Underlying * 2003 Assets: 2004 change % 50,999 Loans to customers 65,441 28 40,984 Customer accounts 47,096 14 80,960 Total assets 102,240 26 * excludes the impact of currency movements Dec 2003 Dec 2004 Tier 1 7.1% 7.9% Total 10.4% 10.7%
Slide 45: Risk weighted assets
Risk weighted assets 31 Dec 31 Dec Underlying 2003 €m 2004 Change %* 24,119 AIB Bank Rep Ire 31,194 29 10,055 AIB Bank GB & NI 12,531 25 24,506 Capital Markets 29,650 25 3,259 Poland 4,238 16 62,615 Total RWA 78,539 26 * excludes the impact of currency movements
Slide 46: Return on risk weighted assets
Return on risk weighted assets €bn 80.0 3.0% 70.0 2.5% 60.0 2.0% 1.8% 1.7% 2.0% 50.0 1.6% 1.6% 1.7% 1.7% 1.6% 1.5% 40.0 1.5% 1.1% 30.0 1.0% 20.0 0.5% 10.0 19.3 22.1 29.1 37.4 45.2 60.2 64.6 68.6 61.7 78.5 0.0 0.0% 1995 1996 1997 1998 1999 2000 2001 2002 2003* 2004 Average RWA (LHS) Return (RHS) * 20
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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 Maurice Tracey [email protected] +353-1-6414191 Pat Clarke [email protected] +353-1-6412381 Mary Gethings mary.gethi
Allied Irish Banks, p.l.c. — FY2004 Earnings Presentation on 6ix