Presentation on theme: "1 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."— Presentation transcript:
1 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 Actual results may differ materially from those projected in the forward looking statements. Factors that could cause actual results to differ materially from those in the forward looking statements include, but are not limited to, global, national and regional economic conditions, levels of market interest rates, credit or other risks of lending and investment activities, competitive and regulatory factors and technology change. Any forward-looking statements made by or on behalf of the Group speak only as of the date they are made. Allied Irish Banks plc Capital & Funding May 2006
2 Allied Irish Banks, p.l.c. Irelands largest publicly quoted company Retail & commercial bank with strong franchises in all geographies # 1 bank in Ireland with leading market shares in core banking products By market capitalisation 16bn (May 2006) 15.7% of Irish Stock Market Index 14th/47 DJ E Stoxx Bank Index 26th/53 FTSE Eurotop Bank Index total assets 133bn, PBT 1.7bn Senior debt ratingsMoodysAa3 (stable outlook) S&PA+ (stable outlook) Fitch IBCAAA- (stable outlook)
3 Executive Structure Group Executive Committee x new appointments
4 Performance Highlights - Continued Positive Momentum Basic earnings per share c - adjusted basic * c 15% * Excludes (i) profit on new bankcentre development and (ii) hedge volatility under IFRS Positive income / cost gap5% Cost / income ratio 2.5% Impaired loans1% Dividend 10% Return on equity20.6% Tier 1 capital ratio7.2%
5 Buoyant Customer Demand Driving Income Net Interest Margin -20 bps Organic growth - best use of capital - solid capital and funding positions
6 Divisional profile - Dec 2005 PBT 8% RWAs 5% 5yr Av.GDP 3.0% Investment in 23.5% of M&T Bank Contribution to PBT 9% 5yr Av.GDP 2.6% PBT 17% RWAs 18% 5yr Av.GDP 2.3% PBT 44% RWAs 39% 5yr Av.GDP 5.1% AIB Bank, ROI DivisionUK Division M&T BankPoland Division Capital Markets Division PBT 22% RWAs 38%
7 Divisional Performance AIB Bank Republic of Ireland779m 24% AIB GB & NI322m 18% Capital Markets403m 27% Poland132m 13% M&T 148m * 16% * after tax figure Profit before tax
8 Underlying profit 15% (pre 2004 investigation charge) Cost / income ratio 51.3% (52.7% in 2004) Reinforcing our no. 1 position in Irish banking AIB Bank Republic of Ireland 24% Customer demand creating abundance of opportunities Uncompromising on quality Net 500 people in 2005, over 300 vacancies now Competition effect in line with expectations
9 AIB Bank UK Division 18% 18% 25% 11% AIB Bank GB&NI Great Britain Northern Ireland 322m169m153m Cost / income ratio 48.7% (51.5% in 2004) GB Selective business sector focus driving outperformance Loans 31%, deposits 21% Market share gains in: - private education - legal & accounting - healthcare - hotels People acquisition a high priority Almost 50% in business developers since 2003 NI Good performance in a lower growth environment Loans 25%, deposits 12% Strong focus on cost management High quality, high growth franchises
10 Capital Markets 27% Cost / income ratio 47.5% (54.4% in 2004) Outstanding performance in Corporate Banking 33% Loans 29% Solid profit growth in premium Irish franchise > 70% profit from international franchises Harvesting carefully planned skills transfer Strong growth in U.K., New York, structured / acquisition finance and debt management Robust treasury performance 2% Strong customer business Low risk positions; trading profits not a material % of AIB Investment Banking at centre of Irish corporate activity 22%
11 Poland 13% Underlying profit 29% (pre disposal of business in 2004) Cost / income ratio to 65.7% (67.4% in 2004) Performance driven by: Non interest income 10% Tight cost management 3% Further provision reductions 54% Early signs of loan book momentum 4% following flat H1 Personal cash loans 80% Maintaining risk discipline Top tier mutual funds provider; income 115%, market share12.6% Qtr continuation of strong profit growth momentum
12 M&T 16% Partnership Approach 23.5% shareholding (Dec 2005) Acquired in 2003, equity accounted IRR 24% Best performing US Regional Bank Stock Strong management driving performance in challenging environment Cost management offsetting slow income growth Cost / income ratio 51.2% (53.5% in 2004) Further reduction in non performing loans and provisions Qtr performance in line with expectations
13 Operations – single enterprise approach Core business banking and payment system Vendor agreement signed Cross divisional application: staged roll out over 2 years Core retail banking system; implementation 2007 – new data centres – capacity & risk benefits Home mortgages - improvement in response times Risk Managed Cost Service Quality Operational Excellence Major investment programme underway
14 Growing our presence in competitive markets Ireland Great Britain Poland Rest of World Over 70,000 more customers than in 2004; increases in both business and personal sectors Improving trend in customer satisfaction Continuing migration from small to mid- market customers Consistent customer satisfaction underpins best business bank status Over 100,000 more customers than in 2004 Customer recruitment spread over key sectors and products Leveraging competencies developed in Capital Markets Selective international expansion High quality, sustainable growth
15 Positive jaws in all franchises 5% 3% 6% 3% 15% %
16 Income / cost gap; a healthy relationship %
17 Well contained costs 1,136Staff costs 1, Other costs Depr. & amort ,859 Operating expenses 2,0117 run rate increase of + 5% Performance compensation + 1% Regulatory / compliance costs+ 1% + 7% Underlying * 2004m2005 change % * excludes impact of currency movements 2006 full year forecast + 9%
19 Tier 1 - Components 2005 Requlations Core T(1) must exceed 51% of Total T (1) Innovative cannot be >15% of Total Tier (1)
20 Funding 55%55% 22% 10%10% 9% 52%52% 24%24% 10%10% 10%10% % Resource gathering is dominated by relationship sources. Wholesale sources remain under utilised, at year-end 2005 Total bond issuance was equivalent to only 9% of Balance Sheet.
21 AIB Debt Distribution - April 2006 Euro 82% STG 14% US$ 4% Step-up issues – adjusted to earliest step-up date Debt Distribution (m)
22 Looking Forward 2006 Guidance: 16 May - Trading Statement, targeting mid to high teens growth in adjusted basic earnings per share (EPS)…Loans are expected to increase by 25% (in 2006) ….and customer deposits by 15%.... Targets: consistent double digit EPS growth ….ROE in excess of 20%.....positioned to be in the top quartile of FTSE Eurotop Bank Index (E3Bank) on an adjusted EPS basis ………….3% Cost vs. Income Gap : JAWS Strategies: Aggressive organic growth agenda Disciplined capital management e.g. monetising value of balance sheet assets Investing to manage growth centralisation of business locations single Enterprise wide systems Implementation of Basel II, targeting Foundation Level Diversify range of funding instruments
23 Contacts AIB Group Investor Relations Executive : Alan KellyT: Manager: Maurice Tracey T: AIB Global Head of Liquidity & Funding : Gerry OConnor T: Chief Dealer, Liquidity : Finbarr Dowling T: Chief Dealer, Funding: Duncan Farquhar T:
24 Appendix 1 The Irish Economy & Housing Market
25 Republic of Ireland Economic Trends
26 The Irish Labour Market Has Been Transformed Total Employment 00S (LHS) Unemployment Rate % (RHS) The Irish Labour Market Has been Transformed (000s)(%)
27 Robust Public Finances Government budget Surpluses average 1.5% of GDP since 1997 Budget close to balance in coming years Large current budget surpluses Significant capital expenditure/borrowing Gen Gov Debt/GDP ratio <30% at end 2005(e) and declining Down from 90% of GDP in past decade Much less than half of eurozone average: 72% Relatively Low Tax Economy Well below eurozone average, similar to UK Low PRSI/income tax, no local taxes
28 Population Growth Source: DOE and ESRI Population Age Profile Estimates (m)
29 Rise in Housing Assets Housing Assets (m)
30 Many Factors Underpin Strong Housing Demand Continued strong inward migration Favourable demographic trends Untapped demand: Rising headship rates Demand for second homes Strong growth of economy and employment Comfortable repayment affordability: longer term mortgages, lower cost units, low interest rates Government incentivised savings scheme (SSIAs) will mature in 2006/7 Home ownership is seen as an attractive tax efficient savings scheme, there is no taxation on personal residential property
31 Summary: A Sound Economy Public finances to remain close to balance Very low national debt. Declining debt/GDP ratio Low tax economy attracting FDI and workers Virtual full employment despite high immigration Favourable demographics supporting growth Further boost to growth from SSIAs in Inflation back down at eurozone average
33 AIB Trading Update Allied Irish Banks, p.l.c. (AIB) [NYSE:AIB] is issuing the following update on trading following a review of performance in the year to date. All trends in this update are in constant currency terms. Since issuing guidance in February 2006 business in all our principal franchises has been strong and these positive trends are being sustained. Customer demand is buoyant and both the pipelines of new business and their high levels of conversion at good rates of return on capital underpin our confidence in the future. Asset quality is very strong and recoveries of impaired loans are particularly high in the year to date. Productivity continues to improve and we are targeting income growth to exceed cost growth at enterprise and individual division level. Economic conditions in our international and domestic markets are good and create a very positive environment for us to develop high quality business. We continue to invest heavily in our people and systems to underpin and sustain profitable growth. The investment programme in our operations is also designed so that we are well positioned and prepared to meet industry wide regulatory requirements. Profit is expected to increase in each of our operating divisions this year. We also anticipate a good increase in the contribution from our investment in M&T. For the full year 2006, we are now targeting mid to high teens growth in adjusted basic earnings per share (EPS).* This guidance is relative to the 2005 number of 145.9c. The rate of EPS growth for the interim 6 months to June is expected to exceed that of the full years due to a level of impaired loan recoveries in the current period that we consider to be exceptional. Our planned growth will be supported through a combination of capital we generate internally and capital we select from a suite of other available sources. Our funding profile is conservative and was recently boosted by the successful and efficient raising of 3.5bn in the fixed income market. * Excludes profit on Bankcentre sale and development, profit on Aviva / ARK Life transaction and hedge volatility under IFRS REPUBLIC OF IRELAND DIVISION Our domestic retail and commercial banking franchise is performing strongly. A higher interest rate environment is expected to temper rather than materially reduce customer demand and we are now targeting loans to increase this year by around 25%, higher than previously guided in February. We expect growth in customer deposits to be around 15%. Competition remains intense although its impact is as anticipated. Our recently revised suite of products and services further underpins the resilience and potential of our market position.
34 AIB Trading Update cont…./ We have agreed a framework for performance related pay with our staff that sets us apart from our peers. This action reflects our confidence in the future and ensures we continue to attract and retain key people to sustain long term growth. It increases the proportion of variable costs and together with other discretionary investments in our business will mean an above trend growth in costs this year. However, we expect the rate of income growth to be greater than the rate of increase in costs. UK DIVISION In Great Britain our focus on chosen business sectors continues to deliver high quality growth. The consistent high grade customer service we provide is creating an abundance of opportunities and there is strong momentum in both loans and deposits. Our aggressive business development plan is being executed by high calibre teams in which we continue to invest and supplement with additional skilled people. Branch and office locations are being upgraded or relocated to ensure we optimise the potential of our market position. First Trust in Northern Ireland is performing well and in line with expectations. Full year loan growth for the division is expected to be over 20% and deposits are expected to grow by around 15%. CAPITAL MARKETS Corporate Banking, which comprises over half this divisions profit, is enjoying another outstanding year. We have a proven ability to identify and establish premium positions in attractive international markets from which we derive over 70% of Corporate Bankings profit. This ability, allied to a strong domestic franchise is the hallmark of Corporate Bankings consistent outperformance. We are targeting loans to increase by around 20% this year and expect the pattern of strong profit growth to continue. Global Treasury is performing well. Performance in our customer business is well distributed and robust across the major product lines of foreign exchange, cash management and interest rate risk management. Performance in our wholesale business is in line with expectations with our bond management activities a highlight. Goodbody Stockbrokers and our corporate finance teams are notable contributors to an overall good performance anticipated in Investment Banking.
35 AIB Trading Update cont…./ POLAND DIVISION A year of strong profit growth is expected in Poland. Buoyant demand for our best-in-class investment funds products is a particular highlight. Momentum in the latter months of 2005 has continued and inflows from new and existing customers are running at record levels. An increase in our loan book of around 10% is anticipated with good demand evident for personal loans. Demand for local currency mortgages is beginning to recover which we see as a welcome development. The business lending environment is gradually improving and while liquidity amongst corporates is still high there is a positive outlook for investment spending which should increase loan demand. In the savings market, customers are primarily focused on investment funds; we expect a single digit increase in our deposits this year. M&T BANK CORPORATION A good contribution is expected again in 2006 as M&T maximises opportunities in a relatively lower growth environment. In the first quarter of this year, M&T once again exceeded market consensus. Both efficiency gains and further improvements in asset quality were highlights of performance. MARGINS In line with our guidance at the announcement of our 2005 results in February we continue to expect around 20 basis points of reduction in our net interest margin this year. The causes are the same as they have been for some time – loans growing faster than deposits, lower reinvestment rates for customer account funds, business mix and competition. NON INTEREST INCOME We are now targeting a significant increase of around 12% in In Poland, asset management, stockbroking and payment processing fees are all growing strongly. Activity levels and business pipelines are also well up on last year in our Irish corporate finance business. COSTS We are confident that we will again achieve our core objective of maintaining a positive gap of at least 3% between income and cost growth. This year we expect an above trend cost increase of around 9%.
36 AIB Trading Update cont…./ In this time of exceptional opportunity and income buoyancy we consider it prudent to invest so that the long term health of our business is assured. People recruitment and reward, building common operating systems and a resilient risk, compliance and corporate governance framework across the enterprise are all essential ingredients vital to achieving this goal. In the event of an income slowdown, the pace of investment would be moderated without impairing our business ASSET QUALITY All leading indicators of asset quality are solid. We remain vigilant in our assessment and management of risk; while this is an exceptionally benign credit environment, there are currently no trends or developments that lead us to foresee an imminent deterioration. We now expect the bad debt provision charge in 2006 not to exceed 15 basis points of average loans. As referred to earlier in this update, very high non recurring recoveries in the first half are likely to mean a lower charge in the interim period to June. NOTE Group results for the interim period to 30 th June 2006 will be announced on 1 st August 2006.