Market background. A. Macroeconomics B. Banking sector

Transcription

1 Market background A. Macroeconomics B. Banking sector Copenhagen, December 14, 2004

2 A. Macroeconomics Overview (1/2) Republic of Northern The Republic of was the fastest growing economy in the European Union from 1994 to 2002 Northern is the fastest growing regional economy in the United Kingdom The strong growth has been driven by: - Favourable demographic trends - Benign interest rate environment - Low corporate tax rates - Economic support from the European Union The economy is expected to continue to exhibit strong growth momentum - Forecasted GDP growth rates for the period are in the 3.5%-5% range - Growth is predicted to slow in the outer years - Given a continuation of high population growth, GDP per capita will not grow at the same pace as currently has a significantly higher savings ratio than the United Kingdom The strong relative growth has been driven by: - Structural funding and grant support from the EU - government support The Northern Irish economy has been stable in recent years despite adverse global conditions and outstanding political issues Economic growth is expected to continue at a more modest pace - Growth will remain slightly above that of the overall economy, which is expected to grow in the range of 2%-2.5% in the coming years - Northern is expected to benefit from approximately GBP 2.7bn of infrastructure expenditure through public private partnerships and private finance initiatives 2

3 A. Macroeconomics Overview (2/2) Republic of Northern Employment: - Low unemployment rate - Main sectors in terms of employment are manufacturing industries, education, health, and wholesale and retail trade Employment - Low unemployment rate - Main sectors in terms of employment are public administration, defense and wholesale and retail Trade 3

4 A. Macroeconomics Key economic indicators Republic of Business environment Population (2002) 3.9m Gross value added (GVA) 1 EUR 103.2bn - CAGR % GVA per person (2001) EUR 26,894 - CAGR % Economic status of population At work 57.6% Unemployed 5.6% Other 36.8% Household statistics Average household size (persons) 2.94 Owner-occupied housing with a mortgage (% of total) 37.9% Companies VAT-registered enterprises (2002) 212,070 - CAGR % 1 GDP excl. VAT Source: Economist Intelligence Unit 4 Northern Business environment Population (2002) 1.7m Gross value added (GVA) 1 GBP 19.1bn - CAGR % GVA per person (2001) GBP11,311 - CAGR % Economic status of population At work 57.8% Unemployed 4.4% Other 37.8% Household statistics Average household size (persons) 2.58 Owner-occupied housing with a mortgage (% of total) 39.4% Companies VAT-registered enterprises (2002) 55,810 - CAGR %

5 Irish banking market (1/5) - Overview Favourable demographics and net inward migration likely to boost demand for banking services in the medium term Key market driver remains mortgage growth, but SME lending also robust - Yearly mortgage growth has been above 10% in every one of the last ten years Consumer banking heavily dominated by two players, Bank of and Allied Irish Banks, with 75% market share of current accounts Mortgage lending is dominated by Permanent TSB, Bank of, FirstActive and Allied Irish Banks, with a 59% market share of the mortgage stock Commercial banking segment heavily dominated by the two main players, BoI and AIB, with a combined market share of 82% of current accounts m Slowing, but still strong mortgage loan growth % E 2004E 0 Mortgage loans outstanding Growth rates (y/y) Source: Goldman Sachs Economic Research 5

6 Irish banking market (2/5) - Retail: Slowing but still strong retail lending growth bn Retail bank lending, Rep. of Annual growth, (right hand scale) % E 2005E 2006E Source: Central Bank & Financial Services of /Danske Bank 6

7 Irish banking market (3/5) - Comparison with other markets 90% 88% 87% 87% 81% 80% 74% 66% 62% 61% 56% 55% 20% 16% 4.6x 3.3x 3.3x 3.0x 2.7x 2.3x 2.2x 1.7x 1.7x 1.5x 1.4x 6.6% 5.4% 5.3% 4.9% 4.8% 4.6% 4.3% 4.1% 3.9% 3.8% 3.7% 3.6% 3.5% 2.6% 2.2x 1.7x 1.6x 1.4x 1.3x 1.3x 1.1x 0.9x 0.8x 0.7x 0.7x 34,720 33,785 32,674 28,306 27,406 26,540 26,429 25,983 22,365 21,998 19,345 17,380 13,639 12, x 1.6x 1.6x 1.2x 1.1x 1.1x 1.0x 1.0x 0.9x 0.9x 0.6x 1.3x 1.2x 0.7x 0.6x 0.6x 0.4x 0.5x 0.4x 0.4x GDP/Capita () Deposits/GDP Long-term GDP growth Loans/GDP Top five market share Total banking assets / GDP Sources: Eurostat, EBF, EIU, Canadian Bankers Association, Federal Reserve, Reserve Bank of 7

8 Irish banking market (4/5) - Benchmarking vs. European banking sector Number of banks per inhabitant 1 Number of branches per inhabitant Luxembourg Iceland Finland Switzerland Denmark Norway Sweden Belgium Netherlands United Kingdom Iceland Belgium Luxembourg Denmark Switzerland Norway Finland Netherlands Sweden United Kingdom Banks staff/population (000) Banks total assets 2 /population ,784 1, NA Luxembourg Switzerland Iceland Netherlands United Kingdom Denmark Belgium Norway Finland Sweden Iceland Luxembourg Denmark Norway Switzerland Sweden Netherlands Belgium United Kingdom Finland Source: European Banking Federation 8 1 Population data in millions 2 Banks total assets in billions of euros

9 Irish banking market (5/5) - Market shares corporate Custom/Corporate 1 Package 2 42% 40% 44% 36% 12% 4% 0% 0% 12% 5% 2% 1% Allied Irish Banks Bank of Ulster Bank NIB Permanent TSB Other Allied Irish Banks Bank of Ulster Bank NIB Permanent TSB Other Micro 3 Unallocated 43% 37% 43% 38% 11% 5% 3% 1% 13% 4% 1% 1% Allied Irish Banks Bank of Ulster Bank NIB Permanent TSB Other Allied Irish Banks Bank of Ulster Bank NIB Permanent TSB Other Note: Business segment definitions are those of ph group. They are not the same as the Groups segment definitions. Source: ph Group (Aug. 2004) 9 1 Custom/Corporate defined as 10+ employees 2 Package defined as 5-9 employees 3 Micro defined as 1-4 employees

10 Northern banking market - Overview The main banks in Northern are: - Northern Bank, Ulster Bank (owned by RBS), Bank of, and First Trust (owned by Allied Irish Banks) These main banking players compete with former building societies and other financial institutions in the retail segment Northern is a natural geographical extension for the major banking players - Incumbent players are experiencing increased competition from banks - Local banks have not seen their competitive position challenged except in mortgages, where Halifax (HBOS), Abbey National and Alliance & Leicester have a combined market share of 52% The banking sector has benefited from the benign macroeconomic environment following both EU and structural and regional aid - Fastest growing region in the United Kingdom - Rapid growth in the Republic of has had a spillover effect on Northern Retail banking is heavily dominated by three players - Northern Bank, Ulster Bank (RBS) and First Trust (Allied Irish Banks) - They command a combined 66% market share in current accounts Mortgage lending is dominated by the banking players HBOS, Alliance & Leicester and Abbey National Business banking is split between four players, with Northern Bank commanding the strongest market position through a 36% market share in the corporate segment - Northern Bank, Ulster Bank, Bank of and First Trust have a combined market share of 97% in the custom/corporate segment 10

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