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 forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, as amended (the Securities Act ) and Section 21E of the US Exchange Act of 1934, as amended. The words "expect", "anticipate", "intend", "plan", "estimate", "aim", "forecast", "project", "target", "goal", "believe", "may", "could", "will", "seek", "assume" and similar expressions (or their negative) identify certain of these forward-looking statements. These forward-looking statements are statements regarding permanent tsb Group Holdings plc's (the Group's") intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial condition, liquidity, prospects, growth, strategies and the banking industry. The forward-looking statements in this presentation are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. Forward-looking statements involve inherent known and unknown risks, uncertainties and contingencies because they relate to events and depend on circumstances that may or may not occur in the future and may cause the actual results, performance or achievements of the Group to be materially different from those expressed or implied by such forward looking statements. Many of these risks and uncertainties relate to factors that are beyond the Group's ability to control or estimate precisely, such as future global, national and regional economic conditions, levels of market interest rates, credit or other risks of lending and investment activities, competition and the behaviour of other market participants, the actions of regulators and other factors such as changes in the political, social and regulatory framework in which the Group operates or in economic or technological trends or conditions. Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance. The Group expressly disclaims any obligation or undertaking to release any updates or revisions to these forward-looking statements to reflect any change in the Group s expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based after the date of this presentation or to update or to keep current any other information contained in this presentation. Accordingly, undue reliance should not be placed on the forward-looking statements, which speak only as of the date of this presentation. 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. The securities referred to in this presentation have not been, and will not be, registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements under the Securities Act. This presentation should be considered with the Group s Interim Financial Report for 2015 and all other relevant market disclosures, copies of which can be found at the following link: www.permanenttsbgroup.ie/investor-relations 1
Welcome Group Chairman, Alan Cook 2
Table of Contents H1 2015 Highlights 4 Financial Performance 9 Key Topics 21 Summary 26 3
H1 2015 Highlights Group CEO, Jeremy Masding 4
H1 2015 Highlights On Track To Achieve Medium Term Targets Group: Underlying Loss is reduced by 172m Core Bank: Profit Before Exceptional Items of 9m Significant reductions in Non-Performing Loans H1 2015 Group H1 2014 Change NIM 100bps 88bps 12 bps Cost Income Ratio¹ 86% 114% 28 ppts Impairment Charges ( 24m) ( 149m) 125m Accelerated pace of Deleveraging Profit / (Loss) Before Exceptional Items 1m ( 171m) 172m New business acquisition is improving June 2015 Dec 2014 Change Restructuring Plan approved Capital Plan delivered; 500m returned to the State Tangible Net Asset Value (TNAV) 2,185m 2,212m ( 27m) CET1 Ratio (Fully Loaded) 13.4% 12.4% 1.0% Loan to Deposit Ratio 122% 138% 16 ppts 1. Underlying Basis Before Exceptional Items of 432m 5
Thousands Thousands Delivering For Our Customers Current Accounts ROI Retail Deposits Mortgage Drawdowns Personal Lending 4% increase to 2.7bn Since Dec 14 Remain broadly flat at 11.4bn Up 5% to 187m YoY Term Lending pay-outs up 44% YoY Key Product And Service Innovation Acquiring New Customers Targeting Undeveloped Business Areas Adapting To Our Customers Way Of Banking 600 Of our Current Account customers have downloaded our Mobile App 200 500 180 400 160 300 140 New Digital Strategy Implementation Website Redesigned, Apps Launched Branch Network Upgrading 200 120 100 100-80 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 OTC Self Service Individual Mobile Logins (Rightside axis) 6
Delivering For Our Customers In Arrears Overall Arrears Levels¹ > 90 days by cases ROI Home Loan Arrears > 90 days by cases ROI BTL Arrears > 90 days by cases -15%² -14%² -18%² Close to 28,000 Long Term Forbearance treatments offered so far Continue to be ahead of the industry on early and late arrears across Home Loans and Buy To Let portfolios ROI residential mortgage NPLs reduced by 9% ROI Residential Mortgage NPLs ( bn) 6.4-9% 5.9 Continued fall in arrears > 90 Days (15%) and > 2 years (6%) since Dec 2014, based on number of cases³ Actively managing to reduce the level of NPLs to improve risk weights and capital ratios Dec-14 Jun-15 1. ROI Residential Mortgages 2. Since Dec 2014 3. Cases does not include any shortfall cases post the sale of properties which have been taken into possession (i.e. unsecured debt) but does include loans where the balances have been charged off i.e. transferred to an off-balance sheet recoveries ledger. 7
Performance Versus Medium Term Targets FY 2014 H1 2015 2018 Target Balance Sheet Group LDR 138% 122% <130% Group CET1 Ratio (Fully Loaded) 12.4% 13.4% >11% Income Statement Core Bank NIM 121bps 131bps c.170bps Core Bank Cost:Income Ratio 86% ¹ 80% c.50% Core Bank Cost of Risk 40bps ² 25bps <40bps Core Bank RoE c.10.0% ³ 1. On an underlying basis adjusted for non-recurring items 2. Excludes writebacks 3. RoE target based on a notional Fully Loaded CET1 ratio of 11% 8
Financial Performance Group CFO, Glen Lucken 9
Group Income Statement m H1 2015 H1 2014 Change Net Interest Income 167 158 9 Other Income 14 33 19 ELG Fees (9) (32) 23 Total Operating Income 172 159 13 Total Operating Expenses (147) (181) 34 Pre-Impairment Profit / (Loss) 25 (22) 47 Impairment Charge (24) (149) 125 Profit /(Loss) Before Exceptional Items 1 (171) 172 Exceptional Items (Net) (432) - Loss Before Tax (431) (171) Key Metrics H1 2015 H1 2014 Change Net Interest Margin 100bps 88bps 12bps Cost Income Ratio 86% 114% 28ppts Cost of Risk ¹ 18bps 100bps 82bps 1. Annualised Cost of Risk Moderate increase in Net Interest Income of 9m reflecting higher NIM NIM growth driven by falling Cost of Funds which fell from 1.57% in FY2014 to 1.30% in H1 2015 Other Income down by 19m due to a number of one-off gains in H1 2014 ELG Fees significantly reduced as more covered liabilities matured in 2015 Total Operating Expenses were down by 34m: in part due to lower provisions for Legacy Legal and Compliance Related Costs in H1 2015 Legacy Legal and Compliance related Costs reduced from 40m last year to 10m Cost Income Ratio continues to decline to 86% from 114% driven by higher Total Operating Income and lower Total Operating Expenses Impairment Charge reduced significantly by 125m mainly driven by higher level of loan cures and lower new default flow Exceptional Items include 380m of net loss on Deleveraging and 52m in relation to loss on repurchase of the Contingent Convertible Capital Note Loss Before Exceptional Items reduced by 172m 10
Core Bank Income Statement m H1 2015 H1 2014 Change Net Interest Income 167 164 3 Other Income 13 30 17 ELG Fees (9) (32) 23 Total Operating Income 171 162 9 Total Operating Expenses (137) (165) 28 Pre-Impairment Profit/ (Loss) 34 (3) 37 Impairment Charge (25) (101) 76 Profit/(Loss) Before Exceptional Items 9 (104) 113 Key Metrics H1 2015 H1 2014 Change Net Interest Margin 131bps 119bps 12bps Net Interest Income remained flat against last year NIM growth driven by falling cost of funds which fell from 1.21% in FY2014 to 0.99% in H1 2015 Other Income down by 17m due to one-off gains in H1 2014 ELG Fees reduced significantly as more covered liabilities matured in 2015 Total Operating Expenses were down by 28m; in part due to lower provisions for Legacy, Legal and Compliance Related Costs Cost Income Ratio continues to decline to 80% from 102% primarily driven by lower Total Operating Expenses Impairment Charge reduced significantly by 76m mainly driven by higher level of loan cures and lower new default flow Profit Before Exceptional Items of 9m, improved by 113m Cost Income Ratio 80% 102% 22 ppts Cost of Risk ¹ 25bps 98bps 73 bps 1. Annualised Cost of Risk 11
Net Interest Margin Group NIM and NIM Drivers 0.82% 0.82% 0.88% 0.90% 1.00% 2.63% 2.48% 2.50% 2.32% 2.25% 1.96% 1.75% 1.70% 1.44% 1.30% H1 13 H2 13 H1 14 H2 14 H1 15 NIM Asset Yield Cost of Funds Asset Yields have reduced by 16bps mainly due to a reduction in Treasury Asset yields linked to the maturity of high yield portfolios Cost of Funds continue to fall due to rate actions in Retail Deposits. Blended PTSB ROI Retail Rate is 96bps at end June; Blended Market Rate was 63bps at end April The cost of Corporate and Institutional Deposits continues to fall Repaid CoCo and maturity of an expensive MTN in the first half also contributed to the overall fall in the Cost of Funds Cost of Funds for Q2 was 1.14%; Q2 NIM was 1.17% Changes to SVR pricing impact expected to be c.7/8bps on NIM expect to be fully offset by Cost of Funds reduction Core Bank NIM and NIM Drivers Group NIM Drivers H1 2015 FY 2014 0.93% 1.05% 1.19% 1.23% 1.31% Asset Yields Balance ¹ Avg. Yield ² Balance ¹ Avg. Yield ² 2.66% 2.49% 2.49% 2.40% 2.30% bn % bn % Treasury Assets ³ 6.0 2.03 7.1 2.62 1.73% 1.44% 1.30% 1.17% 0.99% Core Bank Loans 19.7 2.54 20.1 2.57 Non-Core Loans 4.3 1.69 8.1 1.87 Total 30.0 2.25 35.3 2.41 H1 13 H2 13 H1 14 H2 14 H1 15 Cost Of Funds NIM Asset Yield Cost of Funds Deposits 19.6 1.41 20.4 1.68 1. Balances at period end. Loan balances presented are net of provisions 2. Gross Interest Income/Average Net Loans 3. Treasury Assets include Debt Securities and Loans and Advances to Banks Wholesale Funding 7.3 1.12 7.6 1.53 Subordinated Liabilities 0.0 16.7 0.4 18.1 System Funding 3.7 0.05 4.9 0.19 Total 30.6 1.30 33.3 1.57 12
Operating Expenses m H1 2015 H1 2014 Change Staff Cost 64 60 4 Staff Pension Cost 5 6 1 Total Staff Cost 69 66 3 Depreciation and Amortisation 10 9 1 Other Costs 68 106 38 Staff Cost increased marginally compared with H1 2014 Average number of employees increased by c.4% due to investment in regulatory and control related functions Other Expenses reduced by 38m due to fall in one-off provisions for Legacy Legal and Compliance related costs Cost Income Ratio continues to decline driven by both growth in total income and reduction in total operating expenses Total Operating Expenses 147 181 34 Average No. of Staff 2,348 2,263 85 Cost Income Ratio 86% 114% 28 ppts 13
Asset Quality Impairment Charge Breakdown by Portfolio ( m) H1 2015 H1 2014 Change ROI Home Loans 32 129 97 ROI BTLs (10) (14) 4 Total ROI Residential Mortgages 22 115 93 Consumer Finance (2) (3) 1 CRE 1 19 18 UK Residential Mortgages 3 18 15 Total Charge 24 149 125 Performance Charge of 24m for H1 2015 against 149m in H1 2014 driven by significantly lower new defaults and increasing no. of NPLs curing Charge on new defaults higher than the backbook Reduction is seen across all the portfolios Model Calibration ROI Residential Mortgage NPLs and Cost of Risk 6.6bn 6.4bn 110ps 6.2bn 6.0bn 22bps 5.8bn 6.4bn 5.6bn 5.9bn 5.4bn 5.2bn 5.0bn FY 2014 H1 2015 137bps 87bps 37bps -13bps -63bps -113bps No significant changes to any provisioning assumptions; minor refinements to the provision models based on loss experience Write-backs from house price improvements remains a potential upside to capital over and above medium term guidance ROI Resi Mtg NPLs Cost of Risk 14
Asset Quality Arrears Performance Continue to be ahead of the industry across all categories Late Arrears¹ Home Loans (Case Numbers) Late Arrears¹ BTL (Case Numbers) 14.0% 28.0% 12.0% 10.0% 8.0% 9.9% 9.5% 8.9% Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 23.0% 18.0% 13.0% 8.0% 21.2% 12.4% 11.3% Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 PTSB Industry PTSB Industry Early Arrears² Home Loans (Case Numbers) Early Arrears² BTL (Case Numbers) 6.0% 8.0% 4.0% 2.0% 4.1% 3.7% 3.5% 6.0% 4.0% 2.0% 4.5% 3.5% 3.5% 0.0% Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 0.0% Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 PTSB Industry PTSB Industry The above PTSB data is published on the same basis as the industry data. It does not include any shortfall in cases post the sale of properties which have been taken into possession (i.e. unsecured debt) but does include loans where the balances have been charged off i.e. transferred to an off-balance sheet recoveries ledger. 1. Late Arrears = >90 Days 2. Early Arrears =<90 Days 15
Asset Quality Balance Sheet ROI HL: Gross Loans 16.1bn June 2015 Dec 2014 Change > 90 Days Cases (#) 12,290 14,251 1,961 Early and late arrears continue to reduce significantly NPLs ( m) 3,982 4,226 244 Provision Charge 32 129 97 Provision Stock ( m) 1,564 1,574 10 Provision Coverage Ratio ¹ 40% 38% 2ppt % Loans in Long Term Treatments (by value) 20% 19% 1ppt NPLs decreased by 6%; >90 Days arrears (cases) reduced by 14% PCR has increased to 40% and remains robust Loans in Long Term Treatment increased by 1ppt HPI provision assumption remains appropriate including a >10ppts buffer relative to CSO Peak-To-Trough Index ROI BTL: Gross Loans 5.8bn June 2015 Dec 2014 Change > 90 Days Cases (#) 2,448 3,003 555 NPLs ( m) 1,918 2,241 323 Provision Reversal (10) (14) 4 Provision Stock ( m) 920 1,099 179 Provision Coverage Ratio ¹ 60% 59% 1ppt % Loans in Long Term Treatments (by value) 22% 22% - 1. Calculated as Impairment provisions as a % of loans greater than 90 days in arrears and/or impaired Early and late arrears continue to reduce significantly NPLs decreased by 14% partly due to disposals; >90 Days arrears (cases) reduced by 18% PCR has increased to 60% and remains robust 22% loans in Long Term Treatment HPI provision assumption remains appropriate including a >10ppts buffer relative to CSO Peak-To-Trough Index 16
Summary Group Balance Sheet bn June 2015 Dec 2014 Change Net Loans 22.9 27.2 (4.3) Treasury Assets 5.9 7.2 (1.3) Assets Held For Sale 1.1 1.0 0.1 Other Assets 3.8 0.9 2.9 Total Assets 33.7 36.3 (2.6) Movements in Assets Loan balances decreased mainly due to Deleveraging Treasury Assets reduced in line due to maturities and NAMA bond redemptions Assets Held For Sale include 0.5bn of Irish CRE loans and 0.5bn of CHL mortgages currently being marketed Customer Deposits 19.6 20.4 (0.8) Wholesale Funding 7.3 7.6 (0.3) ECB Funding 3.7 4.9 (1.2) Other Liabilities 0.8 1.1 (0.3) Total Liabilities 31.4 34.0 (2.6) Other Assets includes consideration receivable on the derecognition of the 2.5bn CHL sale which is completing end July (P&L impact taken at 30 June 2015) Movements in Liabilities Customer Deposits reduced as Corporate & Institutional Deposits priced away and reduction in repos Total Equity (incl. AT1) 2.3 2.3 - Total Equity and Liabilities 33.7 36.3 (2.6) Wholesale Funding reduced due to repurchase of CoCo and maturity of an MTN offset by a 0.3bn new issuance earlier in the year ECB Funding is 12% of funding base; down from 34% at peak 17
Funding Funding Composition Current Accounts Total Funding 33.3bn 30.6bn 1% 0% Represent 9% of Total Funding; grown by 4% Retail Deposits 23% 24% 15% 12% Represent 40% of Total Funding Remain stable despite rate action to date Focussed on maintenance 61% 64% Corporate & Institutional Deposits Dec-14 Customer Deposits Wholesale Jun-15 System Subordinated Liabilities Represent 15% of Total Funding Priced away as Current Account volumes build up and Non-Core assets are disposed Wholesale Key Funding Metrics June 2015 Dec 2014 Change New 300m of senior unsecured issued May consider more such issuances over the medium term NSFR 95% ¹ 91% 4% LDR 122% 138% 16 ppts 1. Based on latest estimate System Represents 12% of Total Funding Will continue to be part of the funding stack as a strategic choice 18
Liquidity Liquidity Buffer ( bn) Liquidity position has improved significantly since 2011 Total liquidity buffer of 5.1bn made up of cash, cash equivalents and unencumbered collateral; HQLA ¹ of 2.7bn 0.2 5.1 Basel 3 Liquidity Coverage Ratio ² of 135% Deleveraging expected to generate c. 3bn of cash being returned to the Group: 2011 2015 Liquidity Portfolio Composition Irish RMBS 44% - Continue to build liquidity portfolio - Provides opportunity to re-price aggressively the non-retail deposit base - Available for general corporate purposes Credit Line 5% NAMA Bonds 20% Government Bonds 31% 1. HQLAs: High Quality Liquid Assets 2. Ratio of the stock of high quality liquid assets to expected net cash outflows over the next 30 days under a stress scenario. CRD IV requires that this ratio exceed 60% on 1 January 2015 and 100% on 1 January 2018 19
Capital Capital Ratios and RWAs 14.8bn 13.6bn Transitional CET1 Dec 14 V June 15 2.7% 14.2% 12.4% 15.4% 13.4% 14.2% 0.7% 0.2% 0.1% 15.4% 2.1% Dec-14 RWA Transitional Jun-15 Fully Loaded Dec-14 Capital raise Loss on Deleverage RWA LAT(Excluding Prudential Deleveraging) Filters and other reserve movements Movement in TNAV ( m) Robust CET1 ratios with significant buffer for loss management and to regulatory minimum Total Leverage Ratio¹ of 5.3% on a Fully Loaded basis (31 Dec 2014: 4.5%) 373 40 2,212 16 2,185 RWAs reduced due to Deleveraging 432 24 RWA Intensity ² (57%) to increase in the short term as deleveraged UK mortgages carry lower risk weightings TNAV at 31.12.2014 Equity Raise Underlying Profit Exceptional Items AFS Reserve Movement CFH Reserve Movement TNAV at 30.06.2015 TNAV broadly unchanged as impact from losses on Deleveraging was offset by equity raise 1. The leverage ratio is calculated by dividing Tier 1 Capital by gross balance sheet exposure (total assets and off-balance sheet exposures) 2. Risk Weighted Assets divided by Net Loans to Customers (including Assets Held For Sale) 20
Key Topics Group CFO, Glen Lucken 21
PTSB HPI Assumptions More Conservative Than External Forecasts (25)% (28)% (30)% (34)% (31)% (37)% (35)% (40)% (42)% (43)% (45)% (46)% (50)% (48)% 2014 2015 2016 2017 2018 Current Model ESRI Goodbody Impairments Model Recalibration Key Messages No significant changes to any provisioning assumptions (house prices, repossession levels and collateral haircuts) in the Group s impairment models from year end 2014 Minor refinements to the provision models based on loss experience Market indices and activity have not demonstrated sufficient levels or stability of movement to warrant recalibration House Prices No assumption changes from December 2014 CSO Index virtually unchanged from December 2014 Provision Model Forecast HPI retains buffer to CSO index CSO House Price Index HPI Curves Impact¹ -30% -35% -40% -38.1% Current assumption Medium Term Plan 2015-2018 Current Estimate 95m Roadshow Upside to Medium Term Plan -45% -50% -55% -60% Jan-13-40.8% CSO (Dublin) CSO (non Dublin) Jun-15 ESRI-HPI² 335m 325m Goodbody-HPI³ 500m 475m Note: Sensitivity assumes all other factors remain the same 1. Impact relates to progression from 2014 to 2016 HPI assumption while maintaining a buffer 2. ESRI and Goodbody modelled on basis of curve (buffer removed) 3. HPI curve with buffer is aligned to MTP curve with a differential of circa 12% through time. 22
Impairments Performance 200 Impairment Charge on New to Default Cases ( m) Performance positive with all-in Impairment Charge of 24m equating to 18bps (annualised) of Net Loans (Gross Loans minus Provisions Stock) for the Group and 25bp for the Core Bank 150 100 50 0-50 146 104 56 57 20-20 H1 2014 H2 2014 H1 2015 Net Charge New Defaults The overall charge is below medium term expectations for the on-going Cost of Risk of 40bps owing to provision release on prior period defaults New defaults rates fell by 49% in the first half compared to H1 2014 and decreased across all portfolios, driven in particular by the improving economic conditions The underlying charge on new defaults was 54bps for the ROI Residential Mortgages Hence, no changes to the previously announced medium term target cost of risk of 40bps 23
Tracker Mortgage Book And Margin Irish Tracker Book ( bn) Tracker Margin Impact at H1 2015 (bps) Group Core Bank 15.6 15.3 15.1 14.8 Average Customer Rate 118 118 - ECB Repo Rate ¹ 5 5 14.3 - Average Fixed Spread 113 113 Cost of Funds (130) (99) Net Interest Margin (12) 19 1. Average ECB bank rate for the period Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 24
Deleveraging Gross Loans At Constant FX Rate ( bn) Non-Core Loan Book Summary ( bn) RoI UK CRE Perf. CRE NPL CHL IPI ¹ Total 40 Gross Loans 0.4 0.7 3.5 0.3 4.9 Provisions 0.0 0.4 0.1 0.0 0.5 35 Net Loans 0.4 0.3 3.4 0.3 4.4 30 1.0 NPLs - 0.7 0.2 0.0 0.9 NPL% of Gross Loans - 100% 4% 1% 18% 25 3.9 PCR % - 52% 49% 69% 58% 20 15 34.0 32.0 26.9 RWAs ( bn) 0.4 0.2 1.5 0.1 2.2 Note: CRE Performing and CRE Non Performing both include a Residential and a Commercial Segment 1. Irish Permanent Isle of Man (IoM) Limited 1.5bn Irish CRE sale completed in June and was capital accretive 10 5 0 2013 2014 H1 2015 22.0 Gross Loans Core Non-Core Held For Sale 2.5bn CHL sale legal closure expected shortly (P&L impact taken already); residual 2.5bn to be sold in accordance with RP commitments Sale agreed for 0.5bn of the remaining Irish CRE NPL portfolio (capital impact c. 25m) Geared Property Loans (c. 0.2bn included in CRE NPLs) expected to be sold by end 2015 Performing CRE transferred to Core Bank Loan book continues to reduce; new lending expect to overtake repayments in 2017/18 25
Summary Group CEO, Jeremy Masding 26
Mortgage Redress Programme Recap We have acknowledged the serious failure by the Group in the management of certain mortgage accounts (the majority of failures for impacted accounts occurred between 2006 and 2011) The majority of the impacted accounts (1,152) were accounts of permanent tsb. A further 220 were accounts of Springboard Mortgages Ltd, which is a subsidiary of permanent tsb. We have apologised unreservedly on behalf of the Group to all impacted customers Focus now is on implementing the MRP, addressing position of impacted customers, learning from this issue and moving forward The cost of this programme consists of the Redress cost and the Compensation payments, which may rise somewhat depending on the outcome of appeal cases which may be taken by impacted customers. Further costs may arise from, for example, fines and professional fees. The Group has made a provision for this in its financial statements and the Board considers the level of provision to be appropriate. 27
Risks & Opportunities Risks Cost of BRRD Levies and DGS Contributions Retention of Human Capital Constrained Housing Supply International Issues (e.g. Grexit, Brexit) Opportunities Improved Economic Backdrop Growth In Lending Market Reduction In Cost Of Funds Improved Underlying Cost Of Risk Impairment Write-Backs Driven By HPI Movement 28
Recap, Priorities & Outlook Recap Improved Results Capital Raise Restructuring Plan Deleveraging Priorities Serving Customers Improving NIM Managing Costs Competitive Proposition Managing Risk & Control Delivering Total Shareholder Return Outlook On track to deliver Board s full year expectations Fully committed to the Medium Term Targets 29
30 Additional Information
Slide No. Trading Conditions 32 Segmental Income Statement 33 Interest Income / Interest Expenses Analysis 34 Other Income Analysis 36 Loan Book Profile 37 NPL Composition 38 Loans In Forbearance Treatments 39 Negative Equity Balances 40 Treasury Portfolio Overview 41 Regulatory Capital 42 31
Thousands Thousands Trading Conditions GDP Unemployment Rate % Source: CSO Source: CSO 4.8 3.7 3.4 3.3 11.3 9.6 8.2 7 2014 2015(f) 2016(f) 2017(f) 2014 2015(f) 2016(f) 2017(f) Stock Of Properties Listed For Sale (Base Jan 2005 = 100) Source: CSO Residential Property Price Index (Base Jan 2005 = 100) Source: CSO 50 40 30 20 10 8 6 4 2 140 110 80 0 Mar-11 0 May-15 50 Jan-06 May-15 Dublin (Right Axis) National Ex Dublin Dublin (Right Axis) National Ex Dublin 32
Segmental Income Statement Group Core Non-Core m H1 2015 H1 2014 H1 2015 H1 2014 H1 2015 H1 2014 Interest Income 378 453 Interest Expense (211) (295) 294 356 84 97 (127) (192) (84) (103) Net Interest Income (excl. ELG) 167 158 167 164 - (6) ELG Fees (9) (32) (9) (32) - - Other Income 14 33 13 30 1 3 Total Operating Income 172 159 171 162 1 (3) Total Operating Expenses (147) (181) (137) (165) (10) (16) Pre-Provision Profit/(Loss) 25 (22) 34 (3) (9) (19) Impairments (Charge) / Write-back (24) (149) (25) (101) 1 (48) Profit/(Loss) Before Exceptional Items 1 (171) 9 (104) (8) (67) Exceptional Items (Net) (432) - Loss Before Taxation (431) (171) Taxation 21 (29) Loss For The Period (410) (200) 33
Interest Income Gross Average Balances ( bn) Gross Yields Interest Income ( m) H1 2015 H1 2014 H1 2015 H1 2014 H1 2015 H1 2014 Core Bank Tracker 14.6 15.3 X 1.2% 1.3% 86 100 Core Bank Fixed and Variable 7.5 7.8 X 4.3% 4.0% = 159 156 Consumer Finance 0.4 0.4 X 10.2% 9.9% 18 18 = = ROI Non-Core 1.8 2.5 X 2.4% 2.6% 21 32 = UK Non-Core 7.1 7.0 X 1.2% 1.4% 42 50 = Treasury Assets Other 1 Underlying Interest Income 6.3 6.8 X 2.0% 2.7% 63 91 = 2 2 391 449 Deferred acquisition costs (13) (13) Total Interest Income 378 436 H1 2014 interest income and interest expense are not consistent with published accounts. A 17.5m hedging cost has been reclassified from interest expense to interest income for consistent comparison 1. Other income includes Loans and Advances to Banks, Lease and installment finance and Losses on interest rate hedges on assets 34
Interest Expense Average Balances ( bn) Cost of Funds Interest Expense ( m) H1 2015 H1 2014 H1 2015 H1 2014 H1 2015 H1 2014 Current Accounts ¹ 2.8 2.5 X 0.0% 0.0% = 1 - Retail Deposits (ex Current Accounts) 11.4 11.3 X 1.3% 1.9% = 76 105 Corporate Deposits 2.9 1.9 X 2.2% 2.8% = 32 27 Institutional Deposits 2.4 4.0 X 1.0% 1.1% = 12 22 IoM Deposits Wholesale Funding 0.6 0.5 X 1.8% 1.9% = 6 5 7.5 7.3 X 1.8% 2.6% = 67 94 System Funding 1. Current account cost of funds is 0.04% in H12014 and H12015 X 4.3 6.2 0.1% 0.3% = 1 9 Underlying Interest Expense 195 262 Amortisation of Core Bank deposit intangibles 16 16 Total Reported Interest Expense 211 277 H1 2014 interest income and interest expense are not consistent with published accounts. A 17.5m hedging cost has been reclassified from interest expense to interest income for consistent comparison 35
Other Income Analysis ( m) H1 2015 H1 2014 Change Retail Banking And Credit Card Fees 22 21 1 Brokerage And Insurance 4 8 4 Other Fee Income 1 1 - Total Fee And Commission Income 27 30 3 Fee and Commission Expense (9) (8) 1 Net Fee And Commission Income 18 22 4 Net Trading (Expense) / Income (4) 11 15 Total Other Income 14 33 19 36
Loan Book Profile June 2015 ROI HL ROI BTL UK HL UK BTL CRE Consumer Total Gross Loans ( bn) 16.1 5.8 0.3 3.5 0.9 0.3 26.9 Performing Loans % 75% 67% 85% 97% 28% 69% 75% NPLs % 25% 33% 15% 3% 72% 31% 25% Provisions Stock bn 1.5 0.9-0.1 0.4 0.1 3.0 PCR¹ % 40% 60% 6% 56% 61% 93% 48% Dec 2014 ROI HL ROI BTL UK HL UK BTL CRE Consumer Total Gross Loans ( bn) 16.5 6.3 0.4 6.4 2.0 0.3 31.9 Performing Loans % 74% 64% 88% 98% 23% 70% 74% NPLs % 26% 36% 12% 2% 77% 30% 26% Provisions Stock bn 1.5 1.1-0.1 0.9 0.1 3.7 PCR¹ % 38% 59% 20% 50% 60% 94% 48% 1. Provision Coverage Ratio calculated as impairment provisions as a % of loans greater than 90 days in arrears and/or impaired 37
NPL Composition ROI Home Loan NPLs ( bn) ROI Buy-To-Let NPLs ( bn) 5 4 3 2 1 4.5 0.8 0.2 0.2 0.3 2.5 4.2 0.9 1.1 0.2 1.4 4.0 0.9 0.0 1.2 0.2 1.2 3 2 1 2.5 0.8 0.1 0.2 1.2 2.2 1.9 0.8 0.7 0.1 0.2 0.0 0.1 0.1 0.9 0.6 0 0.5 0.6 0.6 Dec-13 Dec-14 Jun-15 0 0.2 0.2 0.3 Dec-13 Dec-14 Jun-15 Long Term Treated Short Term Long Term Treated Short Term Splits (Treated but Impaired) Technically Held Splits (Treated but Impaired) Technically Held > 90 Days Arrears / Legal Closures > 90 Days Arrears / Legal Closures 38
Loans in Forbearance 4.56bn in Total Forbearance, 69% Non Performing & 72% Home Loan ROI Home Loan in Forbearance- Non Performing 2.22bn ROI BTL in Forbearance- Non Performing 0.94bn Trials, 16% Term Extension/ Capitalisation, 16% Part Capital & Interest, 11% Short Term, 4% Split, 13% Trials, 9% Term Extension/ Capitalisation, 11% Part Capital & Interest, 17% Split, 51% Interest Only, 1% Interest Only, 47% Short Term, 3% ROI Home Loan in Forbearance- Performing 1.05bn ROI BTL in Forbearance- Performing 0.35bn Short Term, 7% Interest Only, 0% Short Term, 8% Trials, 1% Split, 0% Trials, 8% Term Extension/ Capitalisation, 26% Part Capital & Interest, 46% Term Extension/ Capitalisation, 20% Part Capital & Interest, 65% 39
Negative Equity Balances 2.2bn at June 15 which is down 13% from December 14 ROI Home Loans and Buy-To-Let Mortgages 3.8bn -7% 3.5bn 1.6 1.5-32% 2.4bn 1.1-13% 2.2bn 1.1 2.2 2.1 1.3 1.1 Dec-13 Jun-14 Dec-14 Jun-15 Performing Non-Performing 40
Treasury Portfolio Overview Treasury Portfolio Summary Treasury Portfolio Mix Asset Type Balance ( bn) Gross Yield ¹ % Debt Securities 4.2 3.30 17% Government 3.2 4.30 Corporate 0.0 2.60 10% 41% NAMA 1.0 1.80 Loans and Advances to Credit Institutions (cash and equivalents) 1.7 0.12 32% o/w Restricted in Securitisation Vehicle Balances 0.5 Debt Securities Government Total 5.9 2.03 1. Gross income/average balance for H1 2015 2. NAMA Bonds priced off 6 month Euribor. However, EIR accounting adjustments, including those arising from redemptions, have given rise to a higher yield NAMA Loans and Advances to Credit Institutions 41
Regulatory Capital 30-Jun-15 31-Dec-14 Transitional Fully Loaded Transitional Fully Loaded bn bn bn bn RWAs 13.6 13.6 14.8 14.8 Capital Resources: CET1 Capital 2.1 1.8 2.1 1.8 Additional Tier 1 0.1 0.1 0.0 0.0 Tier 1 Capital 2.2 1.9 2.1 1.8 Tier 2 Capital 0.1 0.1 0.1 0.1 Total Capital 2.3 2.0 2.2 1.9 Capital Ratios: CET1 Capital 15.4% 13.4% 14.2% 12.4% Tier 1 Capital 16.3% 14.3% 14.2% 12.4% Total Capital 17.0% 15.0% 14.9% 13.1% Leverage Ratio 6.0% 5.3% 5.1% 4.5% 30-Jun-15 31-Dec-14 Transitional Fully Loaded Transitional Fully Loaded m m m m Total Equity 2.3 2.3 2.3 2.3 Less: AT1 Capital (0.1) (0.1) 0.0 0.0 CoCo 0.0 0.0 (0.1) (0.1) Adjusted Capital 2.2 2.2 2.2 2.2 Prudential Filters: Intangibles 0.0 0.0 (0.1) (0.1) Deferred Tax 0.0 (0.4) 0.0 (0.4) Cashflow Hedge Reserve 0.0 0.0 0.1 0.1 AFS Reserves (0.1) 0.0 (0.1) 0.0 Revaluation Reserve 0.0 0.0 0.0 0.0 Common Equity Tier 1 2.1 1.8 2.1 1.8 42