Aib Group Plc · EURONEXT:A5G
Aib — Allied Irish Banks, p.l.c. — H1 2017 Earnings Presentation
43 slides from Aib's earnings presentation, Jun 30, 2017
Slide 1: Half-Yearly Financial Results 2017
Half-Yearly Financial Results 2017 For the six months ended 30 June 2017 Allied Irish Banks, p.l.c.
Slide 2: Forward Looking Statement
Forward Looking Statement This presentation should be considered with AIB’s Half-Yearly Financial Report 2017, Trading Update April 2017 and all other relevant market disclosures, copies of which can be found at the following link: http://aib.ie/investorrelations Important Information and forward-lo
Slide 3: Performance & Strategic Objectives
Forward Looking Statement This presentation should be considered with AIB’s Annual Financial Report 2016, Trading Update April 2017 and all other relevant market disclosures, copies of which can be found at the following link: http://aib.ie/investorrelations Important Information and forward-looking
Slide 4: H1 2017 in Summary
H1 2017 in Summary Strong Financial Performance Successful IPO - €3.4bn raised and returned to the State Consistently delivering sustainable underlying profitability and generating capital Further improvement in asset quality and reduction in impaired loans Market leading franchise, strong cus
Slide 5: Consistent Strong Capital Generation
Consistent Strong Capital Generation Focused on Delivering Shareholder Returns • Strong sustainable profit on a total and underlying basis €0.8bn Profit before tax • Higher operating income; lower one-off benefits and yoy provision €1.0bn in H1 2016 writebacks 2.54% • Positive NIM trajectory; NIM 2.
Slide 6: Growing Economy with Attractive Market Dynamics
Growing Economy with Attractive Market Dynamics Well Positioned for Growth Economic Growth Expected Despite Brexit Uncertainties Total Employment Levels Rising as Unemployment Falls Real GDP Growth, % Unemployment Rate (%) Total Employment (‘000s) 17.0 2,150 4.0 3.6 3.1 1.7 1.8 1.6 11.0 1,925 5.0 1,
Slide 7: Customer First Approach Continues to Drive Commercial Success
Customer First Approach Continues to Drive Commercial Success Tangible Customer and Efficiency Outcomes Customer First Simple & Efficient Risk & Capital Management Talent & Culture Focused Investment of €870m (2015-2017) Investment in Key Customer Propositions and Increased Customer Interaction Sign
Slide 8: Increased New Term Lending and Continued Strong Market Shares
Increased New Term Lending and Continued Strong Market Shares Growth in Core Lending Sectors Increase in New Term Lending Momentum Across Key Sectors Drawdowns (€bn) Mortgage Lending (€bn) • 41% increase in new mortgage lending 4.3 • #1 market share position 37%(1) (3) in a growing market 0.8 1.1 3.
Slide 9: Continued Progress in Reducing Legacy Risk Assets
Continued Progress in Reducing Legacy Risk Assets 73% Reduction in Impaired Loans Since Peak Tangible Progress to Date Track Record of Delivery €bn • €1.3bn reduction in impaired loans in H1 2017 30.7 28.9 • €21bn (73%) reduction in impaired loans to €7.8bn since Dec 2013 • Net impaired loans of €4.
Slide 10: Delivering Against Medium Term Financial Targets
Delivering Against Medium Term Financial Targets Strong Customer Franchise, Capital Accretion and Returns and Sustainable Growth Organic Capital Generation Investment in Fully Loaded (FL) CET1 Ratio (%) Customer First 16.6% agenda driving 15.3% growth 13.0% 11.8% Target returns on Maintain strong €3
Slide 11: Financial Performance
Forward Looking Statement This presentation should be considered with AIB’s Annual Financial Report 2016, Trading Update April 2017 and all other relevant market disclosures, copies of which can be found at the following link: http://aib.ie/investorrelations Important Information and forward-looking
Slide 12: Financial Highlights H1 2017
Financial Highlights H1 2017 Strong Performance Against Key Metrics Sustainable profitability underpinned by positive NII and margin trajectory NIM 2.54%; excluding cured loan interest(1) 2.47% Continued focus on cost control, H1 2017 in line with expectations Stable costs and strong income, CIR
Slide 13: Income Statement
Income Statement Sustainable Profitability Summary income statement (€m) HY 2017 HY 2016 • Operating income €1.5bn Net interest income 1,077 945 • Net interest income up 14% Other income 452 295 • NIM excluding cured loan interest up 48bps to 2.47% Total operating income 1,529 1,240 • Stable underly
Slide 14: Average Balance Sheet
Average Balance Sheet Further NIM Expansion Driven by Stable Asset Yields and Lower Funding Costs Half Year ended 30 June 2017 Half Year ended 30 June 2016 • Strong reported NIM 2.54% Average Balance(1) Interest Average Rate Average Balance(1) Interest Average Rate • excluding cured loan interest NI
Slide 15: Other Income
Other Income Stable Net Fee and Commission Income Net Fee & Commission Income • Stable fee and commission income of €195m €m • Current accounts represent >50% of net fees and commission 193 195 22 25 income 25 26 37 35 • Increase from wealth related products and enhanced proposition 109 109 • Other
Slide 16: Costs
Costs Continued Focus on Cost as Strategic Investment Programme Completes • Disciplined cost management Operating Expenses (1) • H1 2017 operating expenses €693m (+2%) in line with expectations €m 45% 55% • Factors impacting cost: 677 693 • Stable staff costs having absorbed wage inflation (2.75%) 3
Slide 17: P&L - Other Items
P&L - Other Items Bank Levies and Regulatory Fees as Expected; Provisions Normalising Other PL items (€m) HY 2017 HY 2016 • Bank levies and regulatory fees €45m(1); full year expectation of c. Operating profit before provisions 836 563 €100m Bank levies and regulatory fees (45) (48) • Single Resolut
Slide 18: Balance Sheet
Balance Sheet Strengthened Balance Sheet and Strong Capital Ratios; Well Positioned for Growth Balance Sheet €bn Jun-17 Dec-16 Assets Gross loans to customers 63.9 65.2 Provisions (4.1) (4.6) • Net loans €59.8bn Net loans to customers 59.8 60.6 Financial investment AFS 14.3 15.4 Financial Investemnt
Slide 19: Customer Loans
Customer Loans New Lending +15% to €4.3bn Earning Impaired Specific IBNR • Earning loan book (ex-FX) up €0.5bn Customer loans (€bn) Gross loans Net loans loans loans provisions provisions Opening balance (1 Jan ‘17) 56.1 9.1 65.2 (4.1) (0.5) 60.6 • New lending at higher grades and relatively stable
Slide 20: Asset Quality
Forward Looking Statement This presentation should be considered with AIB’s Annual Financial Report 2016, Trading Update April 2017 and all other relevant market disclosures, copies of which can be found at the following link: http://aib.ie/investorrelations Important Information and forward-looking
Slide 21: Asset Quality & NPE Deleveraging Strategy
Asset Quality & NPE Deleveraging Strategy On the Path to Normalised Levels Significant progress since peak of Dec 2013 €bn June 2017 Dec 2016 Impaired 7.8 9.1 73% reduction in Impaired from €28.9bn to €7.8bn 90DPD, collateral disposals & 4.3 5.0 61% reduction in NPEs from €30.7bn to €12.1bn probat
Slide 22: Asset Quality
Asset Quality Continued Progress as Impaired Loans Reduce Across All Sectors Jun-17 Non-property Residential Property and Other Personal business Total €bn Mortgages Construction lending Loans and receivables to customers 34.4 3.1 9.1 17.4 63.9 Impaired 3.8 0.4 2.4 1.2 7.8 Impaired loans net of Bala
Slide 23: Momentum in NPE Reduction Continues
Momentum in NPE Reduction Continues Significant progress in de-risking the balance sheet Significant Progress to Date in Reducing Impaired Impaired to NPE Reconciliation €bn 12.1 28.9 2.7 0.7 22.2 0.9 7.8 13.0 13.1 10.8 9.1 6.9 7.8 5.1 4.3 51% 47% 44% 45% 2013 2014 2015 2016 H1, 2017 Impaired 90 Day
Slide 24: Momentum in NPE Reduction Continues
Momentum in NPE Reduction Continues Various levers to reach European norms Net Impaired Loans(1) Reducing Across All Portfolios Targeting Further Deleveraging to European Norms €bn €bn 13.0 2.1 10.8 1.5 5.0 6.9 European 3.4 0.9 5.1 €4.3bn Norms(2) 0.3 0.3 12.1 c. 5% 1.8 0.7 0.2 1.4 0.5 5.6 5.6 0.2 1
Slide 25: Funding and Capital
Forward Looking Statement This presentation should be considered with AIB’s Annual Financial Report 2016, Trading Update April 2017 and all other relevant market disclosures, copies of which can be found at the following link: http://aib.ie/investorrelations Important Information and forward-looking
Slide 26: Funding Structure
Funding Structure Stable Deposit Base Driving Strong Funding Position Total Funding Wholesale Funding - Maturity Profile from June 2017 €bn €bn €92.0bn €87.4bn 3.2 Customer 1.9 2.0 69% Customer Accs: 63.5 73% 0.6 1.0 0.8 1.0 Accs: 63.7 7.7 1.0 17% 5.0 <1year 1-3 year 3-5 year 5 year+ 5.9 1.0 3.7 12%
Slide 27: Capital Ratios
Capital Ratios Strong Capital Position – 130bps Capital Generation to 16.6% Capital Capital Ratios (Fully Loaded) • Strong capital position – fully loaded CET1 of 16.6%; total capital % 19.0% 17.6% 19.0% • Increase of 130bps CET1 - primarily due to profit €0.7bn in the period and RWA decrease of €0.
Slide 28: Medium Term Financial Targets
Medium Term Financial Targets Focused on Delivering Sustainable Performance Medium Term Metric (3-5 Years) Guidance & Targets H1 2017 Commentary Net Interest Margin 2.40%+ 2.54% Excluding cured loan interest Maintain strong and stable NIM, 2.40%+ 2.47% Stable costs. CIR 51% excluding Cost / Income R
Slide 29: Appendix
Forward Looking Statement This presentation should be considered with AIB’s Annual Financial Report 2016, Trading Update April 2017 and all other relevant market disclosures, copies of which can be found at the following link: http://aib.ie/investorrelations Important Information and forward-looking
Slide 30: Impact of Investment on the Target Architecture
Impact of Investment on the Target Architecture Harvesting benefits through simplification and efficiencies Retail Customer Business Customer WIB Customer 4 1 CUSTOMER ENGAGEMENT CAPABILITY SECURITY Modular approach – no “big-bang” IT Contact Relationship Manager / CAPABILITY Mobile Tablet Web Centr
Slide 31: How We Think About Returns
How We Think About Returns (PAT – AT1 Coupon + DTA Utilisation) / (FL CET1 @ 13% + DTAs) (€m) H1, 2017 PAT 652 (-) AT1 coupon 18 Profit (1) (+) DTA utilisation 76 Profit on Profit (Numerator) 710 CET1 @ 13% of RWAs + Profit (Annualised) 1,431 DTAs RWAs 53,639 CET1 at 13% RWAs 6,973 CET1 @ 13% of DTA
Slide 32: Financial Investments
Financial Investments €17.6bn Portfolio of Financial Investments Including €3.3bn as HTM Key Components of AFS - Debt Securities(1) AFS - Components of Government Securities €bn €bn 5.1 4.9 8.0 7.6 4.5 4.2 3.4 3.3 0.9 0.9 1.1 1.1 1.7 1.5 0.3 0.2 0.6 0.5 Held to Maturity Government Supranational Bank
Slide 33: 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 34: Capital Requirements
Capital Requirements Steady-state target CET1 range of 13% CET1 Evolution Target CET1 Range Minimum capital requirements/SREP(1) • 9% CET 1 requirement for 2017 is composed of Min CET1 13.0% (%) • 4.50% Pillar 1 (P1) 11.75% • 3.25% Pillar 2 Requirement (P2R) 1.50% CET1 / 9.00% • 1.25% Capital Conser
Slide 35: Capital Movements
Capital Movements Transitional and Fully Loaded ratios AIB Group - CRD IV Transitional Capital Ratios AIB Group - Fully loaded Capital Ratios Risk Weighted Assets (€m) 30-Jun-17 31-Dec-16 Risk Weighted Assets (€m) 30-Jun-17 31-Dec-16 Total Risk Weighted Assets 53,532 54,235 Total Risk Weighted Asset
Slide 36: Earning Loans Increasing by Segment and Sector in Ireland
Earning Loans Increasing by Segment and Sector in Ireland Impaired Loans are Reducing Retail & Commercial Banking RoI Mortgages €bn €bn 38.7 38.7 29.0 29.0 7.9 7.0 4.4 3.7 Earning loans Impaired loans Earning loans Impaired loans Dec-16 Jun-17 Dec-16 Jun-17 Wholesale, Institutional and Corporate Ban
Slide 37: ROI Residential Mortgages
ROI Residential Mortgages ROI Mortgage Portfolio – June 2017 Impairment writeback/(Charge) Fixed €bn 10% €m Buy-to- let Tracker 13% 34% 66 67 Owner- occupier 87% Variable Jun-16 Jun-17 56% €32.7bn • 87% of the RoI mortgage portfolio is owner occupier and 13% is buy to let • Continued improvement in
Slide 38: Other Personal
Other Personal Personal Loan Portfolio – June 2017 Impairment writeback/(Charge) €bn €m Vulnerable Impaired 36 9% 13% Watch 4% -8 Jun-16 Jun-17 Satisfactory 74% €3.1bn • Portfolio comprises €2.3bn loans and overdrafts and €0.8bn in credit card facilities Impaired Loans • Increase in demand for perso
Slide 39: Property & Construction
Property & Construction Property & Construction Portfolio – June 2017 Impairment writeback/(Charge) €bn €m Housing 111 Contractors Associations 5% Land & 3% Development 16% 19 Investment Jun-16 Jun-17 76% €9.1bn • Overall portfolio has reduced by €0.3bn (3%) since Dec ‘16 primarily due to Impaired L
Slide 40: Non-Property Business
Non-Property Business Non-Property Business Portfolio – June 2017 Impairment writeback €bn €m Agriculture Other 10% Hotels & 27% Licensed 1 Premises 16% -58 Retail/ Wholesale/ Other Jun-16 Jun-17 Other Services 32% Distribution 15% €17.4bn • Portfolio comprises Corporate and SME lending Overall impr
Slide 41: Balance Sheet Provisions
Balance Sheet Provisions Working Well Within Provision Stock Residential Property and Non-Property Other Personal Total Balance Sheet Provisions Movement (€m) Mortgages Construction Business Opening Balance Sheet Provisions 1 Jan 2017 Specific 1,728 252 1,350 717 4,047 IBNR 274 38 99 131 542 Balance
Slide 42: ROI Mortgages – Stock of Forbearance
ROI Mortgages – Stock of Forbearance of which: loans > 90 days of which: loans > 90 days June 2017- Total in arrears and/or impaired Dec 2016 - Total in arrears and/or impaired Forbearance type by mortgage Number Balance (€m) Number Balance (€m) Number Balance (€m) Number Balance (€m) Interest only
Slide 43: Non-Mortgage – Stock of Forbearance
Non-Mortgage – Stock of Forbearance June 17 Dec 16 Non-property Non-property Property business Property business Other and lending Other and lending Personal construction Balance Personal construction Balance Forbearance Type by Non-Mortgage Balance (€m) Balance (€m) Balance (€m) Total (€m) Balance
Allied Irish Banks, p.l.c. — H1 2017 Earnings Presentation on 6ix