AIB Group plc · EURONEXT:A5G
AIB — Allied Irish Banks, p.l.c. — FY2015 Earnings Presentation
51 slides from AIB's earnings presentation, 2016
Slide 1: Allied Irish Banks, p.l.c. Annual Financial Results 2015
Allied Irish Banks, p.l.c. Annual Financial Results 2015 1
Slide 2: Important information and forward looking statement
Important information and forward looking statement This presentation should be considered with AIB’s Annual Financial Report 2015, Interim Management Statement November 2015 and all other relevant market disclosures, copies of which can be found at the following link: http://investorrelations.aib.i
Slide 3: Performance & Strategic Objectives
Performance & Strategic Objectives Bernard Byrne Chief Executive Officer Allied Irish Banks, p.l.c. Annual Financial Results 2015 3
Slide 4: 2015 highlights
2015 highlights Simplified and strengthened capital structure with significant repayment of capital to the State Strong financial performance, sustainably profitable and further improvement in asset quality Momentum in new lending growth supported by a growing macroeconomic environment, capita
Slide 5: Continued progress and underlying sustainable profitability
Continued progress and underlying sustainable profitability Financial Highlights 2015 2014 Change Strong underlying profitability benefiting from net credit Profit before tax €1.9bn €1.1bn 72% provision writebacks of €925m Operating Ongoing cost control and management €1.3bn €1.4bn 8% Reduction of c
Slide 6: Payment of €6.5bn to the State by July 2016
Payment of €6.5bn to the State by July 2016 €bn • € 4.7bn of State aid payment to date 20.8 • €1.7bn preference share redemption 18.2 • €3.0bn of fees, coupons, dividends & €1.8bn payment on the levies maturity of the CoCo • A further €1.8bn will be paid in July 2016 4.7 • Maturity of € 1.6bn Contin
Slide 7: Customer centric approach driving sustainable performance
Customer centric approach driving sustainable performance Strategic priorities At the heart of our customers’ financial lives by Compelling, sustainable capital returns Ambition always being useful, always informing and always and a considered, transparent, and providing an exceptional customer expe
Slide 8: Competitive market position
Competitive market position Leading Franchise Bank AIB Ireland • Pillar bank supporting economic recovery • Personal, Private, Business and Corporate Banking • Two distinct brands AIB GB • AIB is a leading, highly recognised financial brand First Trust • EBS is a challenger brand Bank 2.3m retail an
Slide 9: Strong franchise with leading market shares
Strong franchise with leading market shares Strong momentum in approvals and drawdowns Approvals Drawdowns 14.4 Approvals - €14.4bn (+10%) Drawdowns - €8.7bn (+49%) 13.2 % year on year % year on year 2.4 1.9 44% 60% Mortgages c.€2.0bn + 16% c.€1.7bn + 32% 8.7 Personal c.€0.8bn + 13% c.€0.5bn + 40% 5
Slide 10: Investment aligned with strategic priorities already delivering
Investment aligned with strategic priorities already delivering Risk & Capital Customer First Simple & Efficient Talent & Culture Management Focused Investment of €870m (2015- 2017) Clear • Simple and innovative • Resilient and agile • Risk adjusted return • Customer-first culture services technolog
Slide 11: Omni-channel model driving efficiency, growth & customer advocacy
Omni-channel model driving efficiency, growth & customer advocacy No.1 Physical & Digital Channel With Growing Levels of Customer Distribution Network in Ireland Interaction and Adoption 203 Branches 20 Business Mobile 14 Campus Centres App Locations All Delivering Substantial Improvements in Custom
Slide 12: Progress on addressing legacy challenges
Progress on addressing legacy challenges €bn Impaired Loans Delivering for customers in financial difficulty • Case by case restructuring of personal and 29 - 55% business customers in financial difficulty 22 Impaired loans • €9.1bn reduction in non-performing loans to net of specific €13bn in 2015
Slide 13: Improving economy supporting performance
Improving economy supporting performance Consumer confidence at a 15 year high Employment at 7 year high 120 Consumer Confidence (ESRI - KBC) 4 Employment % change (year on year) 100 2 80 0 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 60 -2 -4 40 -6 20 -8 0 01/01/05 01/01/07 01/01/09 01/0
Slide 14: Focused on delivering sustainable performance
Focused on delivering sustainable performance Robust and efficient operating model Enhanced Attractive return customer on equity experience Controlled risk Strongly profile capitalised Allied Irish Banks, p.l.c. Annual Financial Results 2015 14
Slide 15: Summary
Summary Profitable with strong capital base and well positioned to deliver capital to the State Ongoing improvement in asset quality with significant reduction in impaired loans Market leading brand supporting lending growth through a differentiated and efficient customer centric business mode
Slide 16: 2015 Financial Results
2015 Financial Results Mark Bourke Chief Financial Officer Allied Irish Banks, p.l.c. Annual Financial Results 2015 16
Slide 17: Financial highlights
Financial highlights Momentum and improvement across key performance metrics Improved financial performance across all metrics and sustainable underlying profitability Strong growth in new lending Significant reduction in impaired loans Strong capital stack and ratios Allied Irish Banks, p.l
Slide 18: Operating performance
Operating performance Allied Irish Banks, p.l.c. Annual Financial Results 2015 18
Slide 19: Income Statement
Income Statement Underlying operating profit up 18% to €1.3bn Summary income statement (€m) 2015 2014 Change % • Operating profit before provisions €200m higher (+18%) to €1.3bn Net interest income 1,927 1,687 14% - higher levels of net interest income (+14%) Other income 696 843 -17% - lower operat
Slide 20: Average balance sheet
Average balance sheet Stable asset yields and lower funding costs driving NIM expansion Year ended 31 December 2015 Year ended 31 December 2014 Average Average Average balance Interest Rate balance Interest Average Rate €m €m % €m €m % Assets Loans and receivables to customers 64,868 2,214 3.41 65,3
Slide 21: Structure of net interest margin
Structure of net interest margin Underlying NIM >2%; further structural factors to impact % Growth in NIM(1) • NIM(1) of 1.97% 2.12% 1.89% Exit NIM(2) 1.54% 2.02% There are a number of structural factors impacting NIM: 1.97% 1.69% • Contingent Capital Notes 1.37% - scheduled redemption of €1.6bn in
Slide 22: Other income
Other income Increased customer activity supporting fees and commissions €m Other income • Higher net fee and commission income of €405m, up 843 4% year on year - higher fee income due to increased current 696 account activity 437 163 - increase in wealth commissions, insurance 128 profit share and
Slide 23: Costs
Costs Managing cost while continuing to invest in customer proposition and infrastructure €m Operating expenses(1) • Since 2012, total operating expenses down 26% reaching cost reduction target of €450m 1,748 1,470 1,403 707 1,296 • Cost income ratio reduced from 55% to 49% 619 636 571 • Total opera
Slide 24: P&L - Other items
P&L - Other items Significant provision writeback driven by improving economic environment and restructuring activity Summary income statement (€m) 2015 2014 Operating profit before provisions 1,327 1,127 • Bank levies €68m includes Bank levies (68) (60) - Irish bank levy €60m Provisions 923 188 - B
Slide 25: Balance sheet and Asset quality
Balance sheet and Asset quality Allied Irish Banks, p.l.c. Annual Financial Results 2015 25
Slide 26: Balance sheet
Balance sheet Strong funding ratios reflective of efficient balance sheet management Balance Sheet €bn Dec-15 Dec-14 % Change Assets Gross loans to customers 70.1 75.8 -8% Provisions (6.9) (12.4) -45% • Net loans to customers stable at €63.2bn Net loans to customers 63.2 63.4 0% - new lending drawdo
Slide 27: Customer loans
Customer loans New lending up 49% to €8.7bn, driving 6% performing loan book growth Customer loans (€bn) Performing 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 8.7 0.0 8.7 0.0 0.0
Slide 28: Customer loans
Customer loans Performing loans increasing; impaired loans significantly down with good coverage €bn Residential mortgages (incl UK) €bn Other Personal 38.8 36.8 30.3 30.8 3.8 3.5 2.9 2.0 2.8 2.8 0.7 0.5 8.5 1.0 6.0 0.7 Gross Loans Performing Loans Impaired Loans Gross Loans Performing Loans Impaire
Slide 29: Customer loans
Customer loans Business banking driving new lending growth €bn Dec 2015 –Dec Performing loans 2015 – Performing loans €bn Dec 2015 – New lending % % €7.2bn €2.8bn 13% €16.2bn Residential Mortgages Residential Mortgages €1.4bn 5% 29% €4.8bn Other Personal 16% Other Personal 55% Property & constructio
Slide 30: Impaired loans
Impaired loans Significant reduction in impaired loans €bn Dec 2015 - Impaired loans • Impaired loans down €9.1bn – reduction across all portfolios % – reflective of extensive engagement with customers to €4.3bn restructure facilities, redemptions and provision write- 33% €2.1bn 16% Residential Mort
Slide 31: Asset quality
Asset quality Continued progress as impaired loans reduce across all sectors Dec-15 Non-property Residential Property and Other Personal business Total €bn Mortgages Construction lending Loans and receivables to customers 36.8 3.5 11.5 18.3 70.2 Impaired loans net of Impaired 6.0 0.7 4.3 2.1 13.1 sp
Slide 32: Balance sheet provisions
Balance sheet provisions Successful engagement with customers in difficulty Non- Residential Other Property & property Balance sheet provisions movement (€bn) Mortgages Personal construction business Total Opening Balance sheet provisions 1 Jan 2015 Specific 2.9 0.7 5.5 2.2 11.3 IBNR 0.6 0.1 0.2 0.3
Slide 33: Financial investments
Financial investments €20bn portfolio of Financial investments - €3.5bn reclassified to HTM €bn Key components of AFS - Debt Securities(1) €bn Components of Government securities 12.9 9.1 8.7 5.4 3.9 4.6 2.9 1.3 1.2 2.0 1.2 1.2 0.8 0.6 0.5 0.3 Government Securities Supranational Banks Euro Bank Secu
Slide 34: Funding & Capital
Funding & Capital Allied Irish Banks, p.l.c. Annual Financial Results 2015 34
Slide 35: Funding structure
Funding structure Normal market participant €bn Total Funding • Customer accounts funding loan book 101.7 98.7 – 64% of total funding requirement Customer Accounts – 100% loan to deposit ratio 64.0 63.4 Wholesale Funding & Capital • Continued access to markets with issuances including – 7 year AIB M
Slide 36: Capital ratios
Capital ratios Strong capital base with total capital 18.9% - normalised capital stack % Transitional total capital Fully loaded CET1 • 2015 transitional total capital ratio of 18.9% 18.9% – includes successful issuances of €500m AT1 and 18.1% LT2 2.2% €750m LT2 AT1 0.8% 13.0% • Robust transitional
Slide 37: Summary
Summary Momentum and improvement across key performance metrics Sustainable underlying profitability Normalised funding structure and strong capital base Allied Irish Banks, p.l.c. Annual Financial Results 2015 37
Slide 38: Appendix
Appendix Allied Irish Banks, p.l.c. Annual Financial Results 2015 38
Slide 39: Macroeconomic story
Macroeconomic story ROI GDP (% change in real terms) ROI GNP (% change in real terms) 6.9 6.5 5.2 5.0 5.0 4.5 4.5 4.0 2014 2015 (e) 2016 (f) 2017 (f) 2014 2015 (e) 2016 (f) 2017 (f) Average Unemployment rate (%) Irish Government Budget Balance (% of GDP) 11.3 9.4 0.5 -0.5 8.0 7.0 2014 2016 (e) 2016
Slide 40: AIB segments
AIB segments AIB Ireland AIB UK (£m) Group & International Contribution statement (€m) 2015 2014 2015 2014 2015 2014 Net interest income 1,445 1,298 215 198 185 143 Other income 443 436 36 56 203 339 Total operating income 1,888 1,734 251 254 388 482 Total operating expenses (755) (828) (117) (130)
Slide 41: Funding market access
Funding market access 2013 2014 2015 2016 ACS Issuance Senior Senior Tier 2 AT1 ACS Issuance Senior ACS Issuance ACS Issuance ACS Issuance ACS Issuance September Unsecured Unsecured November December January 2013 Unsecured March 2014 January 2015 July 2015 January 2016 2013 April 2014 March 2015 201
Slide 42: Criticised loans and definitions
Criticised loans and definitions €bn Watch The credit is exhibiting weakness but Credit profile – criticised loans with the expectation that existing debt can be fully repaid from normal cash 42.7 41.8 flows. 7.0 6.8 34.0 Vulnerable Credit where repayment is in jeopardy 6.3 6.1 from normal cash flow
Slide 43: Improving asset quality
Improving asset quality Dec-15 Dec-14 €m Group & Group & Ireland UK Intl Total Irel a nd UK Intl Tota l Res i denti a l mortga ges 34,456 2,362 0 36,818 36,324 2,522 0 38,846 of whi ch: owner-occupi er 28,880 2,048 0 30,928 29,631 2,177 0 31,808 of whi ch: buy-to-l et 5,576 314 0 5,890 6,693 345 0 7
Slide 44: Balance sheet provisions by segment
Balance sheet provisions by segment Group & Balance sheet provisions movement (€m) Ireland UK Intl Total Opening Balance sheet provisions 1 Jan 2015 Specific 9,563 1,718 34 11,315 IBNR 1,001 85 5 1,091 Balance sheet provisions 10,564 1,803 39 12,406 Income statement - credit provision charge/writeba
Slide 45: ROI residential mortgages – arrears significantly lower
ROI residential mortgages – arrears significantly lower €bn ROI Mortgage Portfolio – Dec 2015 €m Impairment (charge) / writeback 11% 16% 37% 93 463 52% 84% -822 €34.5bn (5% decrease) Owner-occupier Tracker Variable Fixed Buy-to-let 2013 2014 2015 €bn Impaired Loans • 84% of the RoI mortgage portfoli
Slide 46: Other personal
Other personal €bn Personal Loan Portfolio – Dec 2015 €m Impairment (charge) / writeback 20% 8 10% -15 5% 65% -125 €3.5bn (8% decrease) Satisfactory Watch Vulnerable Impaired 2013 2014 2015 €bn • Overall portfolio has reduced by 8% in 2015 mainly driven Impaired Loans by a reduction in impaired loan
Slide 47: Property & construction
Property & construction €bn Property & Construction Portfolio – Dec 2015 €m Impairment (charge) / writeback 4% 4% 244 214 22% 2013 2014 2015 70% €11.5bn (26% decrease) Investment Land & Development Contractors Housing Associations -724 €bn • Overall portfolio has reduced by €4bn (26%) in 2015 Impair
Slide 48: Non-property business
Non-property business €bn Non-property business portfolio – Dec 2015 €m Impairment (charge) / writeback Agriculture 225 10% 26% 17% Hotels & Licensed Premises Retail/Wholesale/Other Distribution 15% 2013 2014 2015 32% Other Services -127 Other €18.3bn (4% increase) -251 €bn Impaired Loans • Overall
Slide 49: ROI Mortgages – stock of forbearance
ROI Mortgages – stock of forbearance of which: loans > 90 days of which: loans > 90 days Dec 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) Interest only
Slide 50: Non-mortgage – stock of forbearance
Non-mortgage – stock of forbearance Dec-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 €m €m €m
Slide 51: Capital movements 2015
Capital movements 2015 AIB Group - CRD IV Transitional Capital Ratios AIB Group - Fully loaded Capital Ratios Risk Weighted Assets (€m) 31-Dec-15 31-Dec-14 Risk Weighted Assets (€m) 31-Dec-15 31-Dec-14 Total Risk Weighted Assets 58,549 59,114 Total Risk Weighted Assets 59,058 59,114 Capital (€m) Cap
Allied Irish Banks, p.l.c. — FY2015 Earnings Presentation on 6ix