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

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

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

2 2 Contents Overview of Allied Irish Banks p.l.c. The Irish Economy and the Irish Housing Market AIBs Funding Profile AIB Mortgage Banks ACS Issuance

3 3 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 18.6bn (November 2006) >17% of Irish Stock Market Index Y/E 2005 - total assets 133bn, PBT 1.7bn 1H 2006 - total assets 144bn, PBT 1.2bn Senior debt ratingsMoodysAa3 (stable outlook) S&PA+ (stable outlook) Fitch IBCAAA- (stable outlook)

4 4 Geographic profile- June 06 PBT 10% RWAs 4% 5yr Av.GDP 3.0% Shareholding of 24% in M&T Bank Contribution to PBT 7% 5yr Av.GDP 2.6% PBT 15% RWAs 18% 5yr Av.GDP 2.3% PBT 37% RWAs 41% 5yr Av.GDP 5.1% AIB Bank, ROI DivisionUK Division M&T BankPoland Division Capital Markets Division PBT 27% RWAs 37%

5 5 Divisional Performance 20052006 (H1) AIB Bank Republic of Ireland 779m 24% 453m 19% AIB GB & NI 322m 18%184m 18% Capital Markets 403m 27%300m 45% Poland 132m 13%114m 62% M&T * 148m 16%80m 11% * after tax figure Profit before tax

6 6 Strong asset quality and robust capital 2004 2005 2006(H1) 1.3%Impaired loans (ILs) 1.0% 0.8% 5.8%Criticised loans / total loans 5.1% 5.1% 0.7%Gross new ILs 0.4% 0.4% 73%Total provisions / ILs 78 % 81% 20bptsBad debt charge 15 bps 3bpts Tier 17.2% 8.0% Total Capital10.7% 11.1%

7 7 Key performance features Double digit growth in all principal franchises Cost / income ratio 2.7% and down in all divisions Investing in our people to underpin rates of retention & recruitment Operating profit 24% Strong asset quality, impaired loans to 0.8% and down / stable in all divisions Intense focus on single enterprise operations Robust capital and funding positions Confident we will continue to achieve balanced and well managed growth

8 8 The Irish Economy and Housing Market

9 9 Republic of Ireland Economic Trends

10 10 The Irish Labour Market Has Been Transformed Total Employment 00S (LHS) Unemployment Rate % (RHS) The Irish Labour Market Has been Transformed (000s)(%)

11 11 Population Growth Source: DOE and ESRI Population Age Profile Estimates (m)

12 12 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 27.4% at end 2005(e) and declining Down from 90% of GDP during the 1990s Compares very favourably to eurozone average Debt/GDB of 71% Relatively Low Tax Economy Corporation Tax @ 12 ½% ; well below eurozone average Personal Tax & Insurance Rates are LOW, no property taxes

13 13 Many Factors Underpin Strong Housing Demand Continued strong inward migration Favourable demographic trends Untapped demand – Rising Headship rates Demand for second homes Strong growth in economy and employment Maturity of Government savings scheme (SSIAs) in 2006/7 Home ownership is seen as an attractive tax efficient savings scheme, there are no personal or municipal taxes on residential property

14 14 Functional Demand for House Completions (Year to April) Avg 1996 – 2002 Avg 2002 - 2006 (e) 2007 (f) 2008 (f) Indigenous Population Growth 12,55016,50016,300 Migration Flows 13,65017,80025,80027,70024,000 Headship 1,25017,00024,00026,00021,500 Second Homes 10,80014,00011,50010,8008,600 Replacement of Obsolete Units 6,5008,300 8,8009,2009,600 Completions 44,75073,60086,40090,00080,000

15 15 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 Inflation back close to Eurozone average

16 16 Funding Profile Allied Irish Banks, p.l.c

17 17 AIBs Publicly Traded Securities Short Term Instruments Certificates of Deposit,, STG, US$, Can$, A$ US $ 10 bn Commercial Paper Programme US $ 10 bn Yankee CD Programme 5b French Certificate of Deposit Programme* Can $3b Maple Commercial Paper Programme* Long Term Instruments AIB plc ( Aa3 / A+ / AA-) 30 b EMTN programme AIB Mortgage Bank (Aaa / AAA / AAA) 15b covered bond EMTN programme

18 18 Source of funds 52% 24% 10%10% 10% 49% 25% 10%10% 7% % 4% 6% 3%

19 19 Euro 82% STG 14% US$ 4% Step-up issues – adjusted to earliest step-up date Debt Distribution October 2006 (m) Debt funding – well distributed and diversified

20 20 AIB Mortgage Banks ACS Issuance

21 21 Overview of AIB Mortgage Bank Registered as a Designated Mortgage Credit Institution License granted by Regulator – Feb 2006 Non-guaranteed, Public Unlimited Company - wholly owned by AIB plc Shareholders investment exceeds 650m 9 Directors, including 4 non-executive directors Major activities outsourced to AIB (ROI) Division, subject to terms of the Service Level Agreement 13.6bn residential mortgage loans transferred to AIB MB from AIB (ROI) Prudent Discount Factor - 15 % Pool Overcollateralisation set @ > 5%

22 22 ACS Act (2001) - Irish Legislation Restricts asset classes – currently Public Sector and Residential Mortgages Specialist bank principle - AIB Mortgage Bank Conservative valuation methodology – haircut applied to increases in value (Prudent Market Value) Prudent Market Value of Pool must be > ACS principal outstanding Interest Receivable from pool must be > interest payable on the ACS for any 12 month period Weighted Average maturity of the pool must be > ACS maturity B/S interest rate sensitivity subject to limits In the event of default - NTMA (Govt. Agency) appointed - Pool exempt from bankruptcy proceedings - Bond holders prioritised Mandatory disclosure requirements Covered Asset Monitor – independent external monitoring Legislative changes planned for 2007

23 23 ACS - Mortgage Origination Irish mortgage market drawn balances exceed 100bn, AIB has a market share of 16%+ AIB has a presence in all major towns and cities, by a network of 188 branches and 87 sub-offices 35% - 40% of the Banked Public have a primary account relationship with AIB 90%+ of our branched sourced mortgages come from existing bank account holders AIBMB currently does not book mortgages introduced through intermediaries

24 24 ACS - Credit Policy Max Loan amount determined by DSR ( Debt Service Ratio ) = the Proportion of Net Income that is prudent to allow for purposes of Mortgage Repayments DSR is stress tested to allow for increases in interest rates of 2% Max LTV = 92% Lenders have no sanctioning Targets/Quotas Loan to be repaid by scheduled retirement date Exceptions are approved by Senior Mortgage Lenders subject to the customers ability to repay Regular reporting to Regulator Arrears as % of total advances at end June - 0.4%

25 25 House mortgages - Republic of Ireland Primary focus on debt service ratio (repayment capacity) New Business Consistent LTVs (% nos of drawdowns) Dec 02Dec 04Jun 06 < 75%666765 > 75% < 90%262421 > 90%8914 Total100100100 Strong arrears profile Dec 02Dec 04Jun 06 % total mortgage advances0.8%0.5%0.4%

26 26 ACS - AIBMB Collateral Pool at November 2006 Minimum Contractual Overcollateralisation5% Actual Overcollateralisation >10% Pool Size by PMV7.8 bn Aggregate Prudent LTV38% WA indexed LTV54% Dublin/Non-Dublin31/69 No. of Properties 50,400 BTL/Owner Occupier23/77 Fixed Rate 16% Interest only 22%* Prudent Market Discount15% WA Seasoning c. 25 mths Currently no commercial mortgages Arrears > 3 months removed from pool Minimal interest rate risk * Life of interest normally <5 years then reverts to annuity

27 27 ACS – AIBs Issuance Strategy 15 billion EMTN Programme established (Aaa/AAA/AAA) Very high quality Covered Asset Pool Successful Inaugural Dual Tranche Issue - 2.5bn 3 year, 1.0bn 7 year - strong secondary market performance One issuing document to be updated annually Ongoing commitment to investor relations - Regular marketing initiatives - Establishment of web-access - Rating Reports posted on website Regular benchmark issuance across the curve Participation in Euro Private Placements To be recognised by investors as a consistent and responsible Issuer

28 28 Contacts AIB Web Site: investor relations Provides a comprehensive library of AIB & AIB Mortgage Bank programmes, listing particulars and presentations AIB Economic Research Provides comprehensive analysis of the Irish economy and housing market AIB Group Investor Relations Exec., GM Group Finance: Alan Kelly T: + 353-1-641-4191 Manager: Maurice Tracey AIB Global Chief Dealer, Debt Issuance: Sean Cremen T: + 353-1-641-7803

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