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1 Allied Irish Banks, p.l.c. Introduction to AIB Mortgage Bank (AIB MB) Covered Bond Programme Aaa / AAA / AAA Inaugural Transaction March 2006.

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Presentation on theme: "1 Allied Irish Banks, p.l.c. Introduction to AIB Mortgage Bank (AIB MB) Covered Bond Programme Aaa / AAA / AAA Inaugural Transaction March 2006."— Presentation transcript:

1 1 Allied Irish Banks, p.l.c. Introduction to AIB Mortgage Bank (AIB MB) Covered Bond Programme Aaa / AAA / AAA Inaugural Transaction March 2006

2 2 zA 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. zAll comparisons in this presentation are relative to 2004 pro forma IFRS figures visit Allied Irish Banks, p.l.c.

3 3 zIntroduction to Allied Irish Banks Group zThe Irish Economy & Housing Market zIrish Covered Bond Legislation zAIB Mortgage Bank – Structure & Mortgage Pool zAIB Group Funding Strategy, Role of AIB Mortgage Bank zProposed Transaction Contents

4 4 Introduction to Allied Irish Banks Group

5 5 zIrelands largest publicly quoted company zStrong franchises with leading market shares in core banking products. zBy market capitalisation 16.5 bn (Feb, 2006) 16.3% of Irish Stock Market Index 11th/47 DJ E Stoxx Bank Index 24th/54 FTSE Eurotop Bank Index z Total Assets 133bn, PBT 1.7bn zSenior debt ratingsMoodysAa3 (stable outlook) S&PA+ (stable outlook) Fitch IBCAAA- (stable outlook) Allied Irish Banks, p.l.c.

6 Highlights zVery positive momentum, all Divisions performing strongly zAsset Quality maintained, Provisions decline to 15bpts from 20bpts zCost Income Ratio 55.2% (2004=57.7%) zContinued commitment for investment in systems and people Allied Irish Banks, p.l.c.

7 7 PBT10% 5yr Av.GDP3.0% Investment in 22.5% of M&T Bank Contribution to PBT12% 5yr Av.GDP 2.6% PBT28% 5yr Av.GDP 2.3% PBT50% 5yr Av.GDP5.1% IrelandUK USAPoland Allied Irish Banks, p.l.c.

8 8 AIB plc - AIB Bank (RoI) Division Y/e 2005 z779m Pre Tax Profits by 15%, 51.3% (52.7%) z39bn Risk Weighted Assets zProvision Charge % of Av Loans 0.11% (0.14%) zA Market Leader in key segments with increased shares in deposit and lending sectors zOver 270 outlets zMajor portfolios which experienced strong growth: Business banking Residential mortgages Personal banking Private banking

9 9 AIB plc – AIB (GB & NI) Division Y/e 2005 z322m Pre Tax Profits by 18%, 48.7% (51.5%) z18.4bn Risk Weighted Assets zProvision Charge % of Av Loans 0.13% (0.11%) Great Britain zFocused on key selected segments, professional, not for profit, owner/ managed businesses zIncreasing activity by organic growth Loan growth by 31%, Deposits by 21%, Northern Ireland zFull service clearing bank, strong retail & commercial franchise zLoan growth by 25%, Deposits by 12%

10 10 AIB plc – Capital Markets Division Y/e 2005 z403m Pre Tax Profits by 27%, 47.5% (54.4%) z38bn Risk Weighted Assets zProvision Charge % of Av Loans 0.22% (0.27%) zCore businesses Corporate Banking Global Treasury Investment Banking

11 11 AIB plc – Poland Division Y/e 2005 z132m Pre Tax Profits by 13%, 65.7 % (67.4%) z4.6bn Risk Weighted Assets ; Total Assets 7.8bn zProvision Charge % of Av Loans 0.40% (0.91%) zCore Business Improving economic recovery is supporting profit growth BZ-WBK is benefiting from significant re-structuring Full service clearing bank with strong retail deposit franchise 400+ outlets, mainly located in Western Poland Increasing activity by organic growth Loan growth by 4%, Deposits growth by 8% Non-performing loans below market average

12 12 The Irish Economy & Housing Market

13 13 Republic of Ireland Economic Trends

14 14 The Irish Labour Market Has Been Transformed Total Employment 00S (LHS) Unemployment Rate % (RHS) The Irish Labour Market Has been Transformed (000s)(%)

15 15 Robust Public Finances zGovernment budget Surpluses average 1.5% of GDP since 1997 Budget close to balance in coming years Large current budget surpluses Significant capital expenditure/borrowing zGen 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% zRelatively Low Tax Economy Well below eurozone average Low PRSI/income tax, no local taxes

16 16 Population Growth Source: DOE and ESRI Population Age Profile Estimates (m)

17 17 Mortgage Debt at 16% of Housing Assets in 05 Growth in Mortgage Debt and Housing Assets ( m)

18 18 Many Factors Underpin Strong Housing Demand zContinued strong inward migration zFavourable demographic trends zUntapped demand: Rising headship rates zDemand for second homes zStrong growth of economy and employment zComfortable repayment affordability: longer term mortgages, lower cost units, low interest rates zGovernment incentivised savings scheme (SSIAs) will mature in 2006/7 zHome ownership is seen as an attractive tax efficient savings scheme, there is no taxation on personal residential property

19 19 Summary: A Sound Economy zPublic finances to remain close to balance zVery low national debt. Declining debt/GDP ratio zLow tax economy attracting FDI and workers zVirtual full employment despite high immigration zFavourable demographics supporting growth zFurther boost to growth from SSIAs in zInflation back down at eurozone average

20 20 Irish Covered Bond Legislation zAsset Covered Securities Act 2001

21 21 Summary of ACS Act 2001 (1) zIn Ireland, Asset Covered Securities can only be issued by a specialist bank – Designated Credit Institution (DCI) zTo obtain a license to operate a DCI from the Irish Financial Services Regulator – the applicant must Be owned by a regulated bank Be separately capitalised Have non-executive board membership Agree to publish information Provide a detailed account of the business Agree a Prudent Discount Factor for calculating LTVs Appoint a Covered Asset Monitor

22 22 Summary of ACS Act 2001 (2) zEligibility for assets classes to be held by a DCI The Act restricts the asset classes, and Requires the Regulator to issue a Regulatory Notice (RN) for each asset class RNs have only been issued for Public Sector credits, Residential mortgages zThe Act also allows Commercial Mortgages to be included but the RN has yet to be approved by the Regulator

23 23 Summary of ACS Act 2001 (3) zThe combined effect of The Act and the RN ensures the quality of the residential mortgage collateral cannot be compromised by changes in property market prices; the restrictions extend to controlling both the aggregate collateral holding and the actual collateral Pool Each LTV is subjected to movement of the IL&P/ESRI Property Index; any increase is to be discounted by the Prudent Discount Factor, and any declines to be in full. The result is used to compute the Prudent Market Value of the Pool At any point in time, the aggregate of all the mortgage assets of the DCI must not exceed a Prudent LTV of 80% Any mortgage held in the Pool cannot be awarded a value that exceeds 75% of the Prudent LTV zThe ACS Bondholders are protected at all times, since The Prudent Market Value of the Pool must be > the ACS principal outstanding The interest receivable from the Pool must be > the interest payable on the ACS for any 12 month period The weighted average maturity of the pool must be > the ACS maturity

24 24 Summary of ACS Act 2001 (4) zThe Pool will be over-collateralised zBalance Sheet Interest rate sensitivity is subject to limits zIn the Event of Default The regulator will appoint the NTMA (a government agency) or other suitable manager to manage the pool The Covered Asset Pool is exempt from bankruptcy proceedings and bond holders interests are prioritised ahead of non-pool creditors zFinancial Statements are required to disclose the Pools performance z2006 – Proposed amendments Overcollaterisation to be legislated at a minimum of > 3% A number of technical adjustments

25 25 AIB Mortgage Bank zOverview zOrigination – Branch Distribution zOrigination – Portfolio Data zOrigination – Credit Policy zOrigination – Review by LTV zIndicative Collateral Pool

26 26 Overview of AIB Mortgage Bank zRegistered as a Designated Mortgage Credit Institution zLicense granted by Regulator – Feb 2006 zNon-guaranteed, Public Unlimited Company - wholly owned by AIB plc zShareholders investment exceeds 650m z9 Directors, including 4 non-executive directors zMajor activities outsourced to AIB (ROI) Division, subject to terms of the Service Level Agreement z13.6bn residential mortgage loans transferred to AIB MB from AIB (ROI) zPrudent Discount Factor - 15 % zPool Overcollateralisation > 5%

27 27 Origination – Branch Network Distribution zIrish mortgage market drawn balances are estimated at 100bn+, AIB has a market share of 16%+ zAIB has a presence in all major towns and cities, by a network of 188 branches and 87 sub-offices z35% - 40% of the Banked Public – have a primary account relationship with AIB z90%+ of our branched sourced mortgages come from existing bank account holders zAIB MB currently does not book mortgages introduced through intermediaries

28 28 Origination - Portfolio Data

29 29 Origination - Credit Policy zMax LTV = 92% zMax Loan amount determined by DSR ( Debt Service Ratio ) = the Proportion of Net Income that is prudent to allow for purposes of Mortgage Repayments zDSR is stress tested to allow for increases in interest rates of 2% zLenders have no sanctioning Targets/Quotas zLoan to be repaid by scheduled retirement date zExceptions are approved by Senior Mortgage Lenders subject to the customers ability to repay zRegular reporting to Regulator

30 30 Origination – Review by Loan To Value zPrimary focus on debt service ratio (repayment capacity) New Business

31 31 Indicative Collateral Pool zMinimum Contractual Overcollateralisation 5% zPool Sizec.5.0bn zAggregate Prudent LTV*40% zUn-indexed LTV63% zDublin/Non-Dublin30/70 zNo. of Propertiesc. 35,000 zBTL/Owner Occupier23/77 zPrudent Market Discount15% zCurrently no commercial mortgages zNo arrears > 3 months included in pool zMinimal interest rate risk * Aggregate Outstanding Mortgages as a % of aggregate PMV of property

32 32 AIB Group Funding Strategy & Role of AIB Mortgage Bank zAIB Group Funding Strategy Statement zAIB Group Funding Profile zAIB Group Debt Distribution as at 31 Dec 2005 zRole for AIB Mortgage Banks ACS issuance zIssuing Strategy

33 33 AIB Group Funding Strategy zMaximise resource generation through the Group franchise and ensure access to competitively priced wholesale market funding sources in order to support the profitable growth of the Group z2005 Annual results comment on AIB Groups market share of Irish deposit market is increasing Available capacity in a range of wholesale markets and instruments

34 34 AIB Group – Funding Profile Significant opportunities available to increase issuance into global markets, e.g. CP – Euro, US$, EMTN benchmarks and structured notes

35 35 AIB Debt Distribution as at 31 Dec 2005 Euro – 76% STG - 18% US$ - 5% Other – 1% Step-up issues – adjusted to earliest call date Debt Distribution (m)

36 36 Role of AIB Mortgage Banks ACS programme zThe role of the programme is to provide the AIB Group with a competitive funding tool that will Leverage from the quality of security held on Balance Sheet Generate funding at a competitive price Provide the Group with a product that can be marketed efficiently in all markets for all maturities zEMTN programme established to facilitate issuance of up to 15bn of Aaa / AAA / AAA rated securities zProvides the Group with an opportunity to cultivate an investor base which requires Aaa / AAA / AAA rated securities

37 37 Issuing Strategy zOne issuing document – a Euro Medium Term Note Programme – to be updated annually zOn-going commitment to investor relations, including Regular marketing initiatives Establishment of web-access Reports on collateral pool performance zResponsible Primary Market Strategy, involving the employment of high profile Management Groups who will commit to secondary market making zAt least one benchmark issue per annum zParticipation in Euro Private Placements, and at a later date issuance in non- euro currencies

38 38 Proposed Transaction

39 39 zIssuer:AIB Mortgage Bank zDocument:EMTN programme zListing:Dublin zRating : Aaa / AAA / AAA zOvercollaterisation: Minimum = 5% zLTV: Aggregate Prudent < 40%, Un-indexed < 63% zMaturity Extention: Up to 1yr, interest set at uribor +50bpts zAmount: Euro benchmark zCoupon:Fixed Rate, Paid annually zLaunch:Week of 27 March 2006 zSyndicate :Leads – AIB Group Treasury, Barclays Capital, Deutsche Bank, Morgan Stanley Co-Leads – Citigroup, DZ Bank, HVB,LBBW, UBS Proposed Transaction : AIB MB – Asset Covered Securities Inaugural Issue

40 40 Contacts AIB Mortgage Bank T: Chief Executive : David Kelly Treasury Director: Gerry OConnor AIB Group Investor Relations Exec., GM Group Finance: Alan Kelly T: Manager: Maurice Tracey AIB Global Chief Dealer, Funding: Duncan Farquhar T: Dealer: Jim McKeever

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