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Forward Looking Statements A number of statements we make in our presentation, and in the accompanying slides, will not be based on historical fact but will be forwardlooking statements within the meaning of the US Private Securities Litigation Reform Act of 1995. 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 1 of lending and investment activities, competitive and regulatory factors and technology change. 1 permanent tsb Group Holdings plc undertakes no obligation to update the forward looking statements contained in this presentation. Forward looking statements made in this presentation relate only to events as at the date on which they are made. 1
Road to Recovery Year Key Milestones Stage 2012 Overhauled the Group Architecture New Senior Management Team Restructuring Plan Submission Building Capabilities Including Establishing the AMU 2013 Completion of Internal Reorganisation Return to Lending Successful product Launches particularly Current Accounts Return to Funding Markets Submission of an Updated Restructuring 2 Plan Engaged with over 80% of customers in financial difficulties 2 Laying the Foundations and Building Momentum 2014 Improve Customer Experience Continue To Innovate with Simple Products 2015 Increase Market Share in Key Product Areas Approach Breakeven 2016 Return to Profitability Agree and execute an Exit Strategy with the Minister for Finance 2017 Grow and Trend to Profitability Privatise and Return Value to State 2
Agenda 1 Summary and Progress To Date 3 2 Financial Performance 3 Arrears Management 3 4 5 Recap & Priorities Q & A 3
4 1 Summary and Progress To Date Jeremy Masding 4 4
Turning the Corner Successful re entry into the market; force for competition 5 Permanent tsb SBU profitable in 2014 System Funding reduced by 35%; returned to wholesale market Arrears have peaked and are now in decline Engaged with over 80% of customers in financial difficulties CBI Balance Sheet Assessment addressed; no further capital required and capital remains in excess of regulatory minimum 5 5
Summary Financial Performance (1) Loss after tax of 261m including two significant one off accounting 6 adjustments for pension schemes and deferred tax assets Loss pre exceptional items flat versus 2012 at 977m; operating loss preimpairment charge reduced by 44% Total operating income increased by 28%; modest improvement in NIM Staff related costs decreased by 15% 6 Impairments increased by 4% including impact of BSA (c. 0.3bn) and new Central Bank Provisioning Guidelines 6
Summary Financial Performance (2) Funding and Liquidity positions improved 7 o 2.6bn Senior Debt repaid + System funding down by 35% o Market access signified by 500m of RMBS issuance in 2013 o Customer deposits increased by 2.9bn to 56% of total funding requirement Core Tier 1 ratio of 13.1% including impact of BSA Basel III transitional Common Equity Tier 1 ratio of 13.4 % 7 7
Core Bank permanent tsb Group 8 permanent tsb bank Asset Management Unit Non Core (UK) Non Core (ROI) An end to end Irish Retail Bank; serving customers and an asset for the State permanent tsb providing competition in the Irish Market Place AMU Best in class collections unit 8 8
Core Bank permanent tsb permanent tsb bank has returned successfully to the market, with major gains in Current Accounts and Lending. 9 Deposits Retail Deposits up by 0.5bn Current Accounts Over 40,000 new Current Accounts opened Lending Close to 300m new Mortgages approved; over 200m paid out 9 650,000 Deposit Account Customers 13% market share of Retail Deposits Over 500,000 Current Account Customers Increased market share driven by switchers 225,000 Mortgage Customers 12% market share Personal lending 36m payouts +71% on 2012 9
Core Bank permanent tsb Success has been driven by a range of simple, innovative, customer friendly products, supported by new technology. 10 New Initiatives New Products: Fee free Switch Current Account 100m home improvement fund Market Leading Car Finance Offering Managed Variable Rate Mortgages Tracker Mover Products New BTL suite Booster Bonus Deposit Account Approval in Principle: 15 minutes for Mortgages and 5 minutes for Personal Loans Saturday opening hours (trial) New Technology 10 Mobile Banking App available for iphone and Android devices Tablet and Mobiles Payments App launching soon Redesign of the Online Banking (Open24) under way Active Twitter Support Plan for increase in engaging customers through more social channels Early 2014 signs encouraging Strong pipeline Greater customer awareness leading to increased demand Continuing momentum 10
Core Bank AMU Collections through to Recoveries is an integral part of an end to end banking platform Invested heavily to build and develop this capability and skillset in the AMU 11 The AMU has 3 Key Objectives: 1. Deliver a better bottom line 2. Support ptsb frontend efforts 3. Meet all Central Bank targets Best in class early collections capability Wide range of restructure arrangements Cured AMU 11 loans can return to ptsb Minimise new arrears cases in ptsb Proposed long term solutions to more than 18,000 customers More than 12,500 accepted by end 2013 Optimised property management 11
Non Core permanent tsb Group 12 permanent tsb bank Asset Management Unit Non Core (UK) Non Core (ROI) Capital Home Loans Isle of Man CRE Springboard Non Core being managed in line with expectations; 12 Outsourced management of CRE book to enhance value Increasing buyer appetite for Irish Non Core assets; CRE and Springboard being prepared for sale CHL & IoM good quality but low yielding Driving efficiencies and managing for value 12
13 2 Financial Performance Glen Lucken 13 13
Group Income Statement m 2013 2012 Change Net Interest Income 309 300 3.0% Other Income (net) 48 62 22.6% ELG Fees (105) (165) 36.4% Total Operating Income 252 197 27.9% Operating Expenses (300) (283) 6.0% Pre Impairment Loss (48) (86) 44.2% Impairment Charges (929) (891) 4.3% Underlying Loss (977) (977) Before Exceptional Items Exceptional Items (Net) 309 58 Loss Before Tax (668) (919) 27.3% Tax 407 (77) Loss After Tax (261) (996) 73.8% Net Interest Margin 0.82% 0.72% 10 Bps 14 Total Operating Income Increased by 28% largely due to reduction in ELG NIM (excluding ELG) has increased to 0.82%, primarily due to reduction in cost of funding and one off gains from disposals Operating Expenses Operating expenses increased by 6% due to oneoff provisions Impairment Charge Overall increase of 4%, mainly driven by the ROI Home Loan and BTL portfolios Includes the effect of BSA and new CBI provisioning guidelines of c. 0.3bn Exceptional Items (Net) Includes write back of pension liabilities of 329m offset by restructuring costs of 20m. Tax Relates to recognition of deferred tax asset on previously unrecognised carried forward tax losses 14 14
Segmental Performance 2013 2012 15 ptsb AMU Non Core Group Group Underlying Loss Before Exceptional Items ( 153m) ( 561m) ( 283m) ( 977m) ( 977m) NIM 1.03% 0.11% 0.21% 0.82% 0.72% Loans to Customers 14.2bn 6.4bn 8.7bn 29.3bn 31.8bn Total Assets 21.9bn 6.4bn 9.3bn 37.6bn 40.9bn 15 ptsb reported an underlying loss before exceptional items of 153m and a NIM of 1.03% (before ELG costs) AMU s results are impacted by high impairment charges of 496m Non Core losses mainly attributable to impairment charge on Commercial Real Estate (CRE) Portfolio which represented 86% of the total Non Core impairments 15
Operating Expenses 283m 150m 133m 300m 127m 173m 16 Staff Costs Staff costs reduced by 23m or 15% due to changes on pension entitlements, other staff benefits and savings achieved from VSS Average staff numbers increased mainly due to significant staffing up in the AMU (c.300), offset by staff reductions in other parts of the Group Other Costs 16 2012 2013 Other Costs Staff Costs Increase in other costs relates to oneoff provisions 2,018 Avg. Staff No. 2,041 16
Impairment Charges m Impairment Charges PCR 17 2013 2012 Change 2013 2012 ROI Mortgages HLs 439 292 50% 37% 34% BTLs 290 224 30% 58% 50% UK Mortgages 21 25 16% 31% 28% CRE 160 320 50% 63% 66% Consumer 19 3017 37% 97% 101% Total Group 929 891 4% 47% 45% Impairments on ROI HLs increased by 147m or 50% and on ROI BTLs by 66m or 30% The charges for HL, BTL and CRE include a combined c. 0.3bn of charge arising as a result of the impact of the BSA and the implementation of the new CBI provisioning guidelines CRE impairments decreased by 160m or 50% as 2012 included a one off review which resulted in a large impairment charge PCR on all key portfolios has increased except CRE which remains high at 63% 17
Funding Balance Sheet Metrics bn 2013 2012 Balance Sheet Metrics 2013 182012 Wholesale Funding: Monetary Authorities Market 6.9 7.9 10.7 9.6 Deposits: Retail 14.0 13.5 Corporate 5.5 3.1 ECB Funding 20% 29% LDR 150% 191% System funding reduced by 3.8bn or 35%; reduced 18 to 20% of total funding New RMBS issuance of 500m in 2013 Senior Debt of 2.6bn repaid in 2013 Continuing focus on optimising the funding mix: 2.9bn growth in deposits across both Retail and Corporate channels at an improved rate Reliance on short term debt reduced to 16% Deposits now increased to 56% of total funding LDR improved due to a combination of deposit growth and loan book run down Continuing reduction in Cost of Funds into 2014 Funding Mix: Deposits Long Term Debt Short Term Debt 56% 28% 16% 100% 45% 33% 22% 100% 18
Capital 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Capital Ratios at 31 December 2013 13.1% 13.4% 10.5% CT1% CET1% Transitional 10.9% 8% 8% CET1% Fully Loaded These ratios reflect outcomes from the Balance Sheet Assessment including: Increase in RWAs (c. 3.3bn) Increase in impairment provisions (c. 0.3bn) Core Tier 1 ratio at 31 December 2013 was 13.1% 19 Proforma Common Equity Tier 1 ratio under Basel III transitional basis was 13.4% Common Equity Tier 1 ratio under Basel III fully loaded basis was 10.9% 19 19
Conclusion Rebuilding Profitability NIM increased to 0.82% from a trough of 0.66% in H2 2012; 1.03% in ptsb SBU Staff costs down by 15%, other costs increased due to oneoff provisions; further actions being taken to manage costs down 20 Impairments remain elevated but outlook stabilising Funding Position Capital Position System funding 20reduced by a further 35% Deposit base increased by 17%, aligned to improvements in funding mix No impact from ELG withdrawal Strong Core Tier 1 Capital Base at 13.1% Strong CET1 ratio at 13.4% Continuous effort to optimise RWAs 20
21 3 Arrears Management 21 Jeremy Masding 21
Arrears Management Headlines Arrears have peaked and now in decline 22 PCR improved across all key portfolios ROI HLs 73% of ROI residential mortgages are HLs; of these 58% are ECB trackers Early Arrears continue to reduce and are ahead of industry; Late Arrears show signs of stabilisation and declined for the first time since 2010 in Q4 2013 ROI BTLs PCR has increased by 3ppts to 37% 22 27% of ROI residential mortgages are BTLs; of these 85% are ECB trackers Both Early and Late Arrears continuing to reduce with a widening positive gap to the industry Private rental market demonstrated further recovery in 2013 PCR has increased by 8ppts to 58% Provisioning assumptions include 55% peak to trough fall (compared to actual fall of 46%) plus other adjustments for forced sale discounts, disposal costs Residential property prices increased in 2013 by 6.4% at national level; 15% in Dublin 22
Asset Quality: Total Portfolio Composition 1% Gross Loans 3% 1% NPLs 23 6% 20% 19% 54% ROI HL ROI BTL CRE CHL Consumer 23 17% 26% 53% ROI HL ROI BTL CRE CHL Consumer ROI HL ROI BTL CRE CHL Consumer Total Gross Loans bn 17.6 6.4 2.1 6.8 0.4 33.3 Performing % 74% 65% 17.7bn 31% 96% 3.9bn72% 74% NPLs* % 26% 35% 69% 4% 28% 26% Provisions bn 1.7 1.3 0.9 0.1 0.1 4.1 PCR % 37% 58% 63% 31% 97% 47% *Non Performing Loans are defined as loans which are greater than 90 days in arrears or impaired 23
Arrears Levels ROI HLs and ROI BTLs ROI HL: 17.6bn 24 24 ROI BTL: 6.4bn Source: CBI 24
Long Term Treatments ROI HLs and ROI BTLs For the 12 months to 31 December 2013 Total Long Term Treatments Offered Accepted (so far) HLs (# of Cases) 14,845 10,305 HLs ( m) 2,151 1,445 BTLs (# of Cases) 3,221 2,035 BTLs ( m) 1,172 751 25 25 AMU continues to make good progress in replacing Short Term with Long Term Solutions that are Sustainable and Affordable Sale or Foreclosure options are pursued where a Long Term Treatment is not suitable Customer contact levels and cash collection has increased All CBI Mortgage Arrears Resolution Targets met in 2013 (Q4 subject to CBI verification) 25
26 4 Recap & Priorities 26 26
2013 Recap & Priorities Recap Priorities Encouraging progress in 2013; years 1 and 2 of laying the foundation and building momentum complete Successful re entry into the market; force for competition Arrears have peaked and now in decline Good traction on mortgage restructurings Improvements in macro economic and commercial factors encouraging 27 Further improve customer experience Further increase market share in key product areas Continue to support recovery of the Irish economy, increase lending and drive competition Continue progress on long term solutions for customers in arrears Return to profitability 27 27
Debunking myths about permanent tsb 28 Myths Tracker Mortgages Restructuring Plan Stress Tests 28 Reality Returning to Profitability Growing Market Share and Competing Vigorously Here to Stay 28
29 5 Q & A 29 29