TIDMBIRG
RNS Number : 4856M
Bank of Ireland Group PLC
11 May 2020
FORMATTING AMMENT
The 'Interim Management Statement May 2020 ' announcement
released on 11 May 2020 at 07:58 under RNS No 4570M has been
reformatted.
All material details remain unchanged.
The full text is shown below.
Bank of Ireland Group plc (the "Group")
Interim Management Statement - Q1 2020 update
11 May 2020
CEO Comment: Francesca McDonagh, Bank of Ireland Group CEO:
"We made a good start to the year - growing lending, selling
more than a quarter of all new mortgages in Ireland, reducing
costs, and with the lowest level of arrears of any Irish bank.
However, right now everything is seen through the lens of
COVID-19.
The Group's purpose - to enable our customers, colleagues, and
communities to thrive - is more important than ever. COVID-19 hit
our markets fast and hard. We took immediate steps, launching a
range of supports for personal and business customers impacted by
the outbreak of the virus, with 86,000 payment breaks approved for
customers in Ireland and the UK since mid-March, and we have strong
capital, funding and liquidity to provide this support.
Our transformation investment helped us meet this surge in
demand, while at the same time changing how we operate as a
business with over 70% of colleagues working from home during this
crisis. We continue to work closely with Government, regulators and
industry, offering solutions for our customers and supporting the
economies we operate within.
The economic outlook for our core markets in Ireland and the UK
has deteriorated, with reduced levels of activity across our
businesses. The economic effects will have a material impact on the
Group's 2020 financial performance. The full impact remains
uncertain and will be driven by the duration of COVID-19
restrictions and the successful reopening of the Irish and UK
economies.
The Group is well positioned and stands ready to support this
recovery. We are playing our part in rebooting the island of
Ireland economies in line with our Group ambition and purpose."
For Q1 2020 an Interim Management Statement presentation is
available at the following link;
https://investorrelations.bankofireland.com/q1-2020-ims-announcement/
Q1 2020 Financials: (1)
-- Underlying loss of EUR235 million
-- Stable net interest income; net interest margin (NIM) of 2.07%
-- Adverse movements in valuation and other items of EUR155 million
-- Strong cost discipline; costs reduced by 3% vs. Q1 2019
-- Q1 impairment charge EUR266 million includes COVID-19 management overlay of EUR250 million
-- Net lending growth of EUR1.5 billion
-- Customer deposits increased EUR1.8 billion; Liquidity Coverage ratio 140%
-- NPE ratio at 4.2% of gross loans; 20bps improvement from end 2019
-- Strong capital position; fully loaded CET1 ratio of 13.5%
[1] The following figures are presented on a pro-forma basis
throughout the financial section to reflect a COVID-19 management
overlay of EUR250 million: impairment charges, loans & advances
to customer and capital ratios
Income Statement
Net interest income for the 3 months to March of EUR540 million
(Q1 2019: EUR538 million) was in line with expectations. NIM was
2.07% for the 3 months to March 2020, 3 basis points lower than Q4
2019 exit NIM of 2.10%, reflecting the impact of the low rate
environment on structural hedges and growth in liquid assets,
predominantly from growth in customer deposits. Business income of
EUR152 million was broadly in line with expectations.
The Group continues to maintain tight control over its costs,
while making appropriate investments in our businesses,
infrastructure and people; including our multi-year transformation
programme. We continue to expect that operating expenses (excluding
levies and regulatory charges) will reduce in 2020; operating
expenses of EUR443 million were c.3% lower in the first 3 months of
2020 compared to the same period in 2019.
Towards the end of Q1 the Group experienced the initial impact
of COVID-19 with adverse movements on valuations and other items of
EUR155 million and impairment charges of EUR266 million.
Falling equity markets and widening credit spreads generated
negative movements of EUR120 million in our Wealth and Insurance
business relating to unit linked assets and bond portfolio
valuations. A further EUR35 million movement was incurred from
Group financial instrument valuation adjustments.
The Q1 2020 impairment charge of EUR266 million includes
COVID-19 management overlay of EUR250 million primarily reflecting
the initial impact of the deteriorating economic environment. In
the quarter, the Group did not experience loan loss outcomes
related to COVID-19 and this initial charge does not reflect any
material migration from Stage 1 to Stage 2 loans.
Balance Sheet
Customer loan volumes were EUR79.6 billion at the end of March
2020, an increase of EUR0.1 billion since the end of December 2019,
(EUR1.4 billion on a constant currency basis) with net lending
growth of EUR1.5 billion largely offset by FX movements. New
lending before drawdowns on revolving credit facilities (RCFs) in
the first 3 months of 2020 was 17% higher than the same period in
2019 with growth across all divisions; drawdowns on RCFs by
Corporate customers were EUR1.4 billion in Q1 2020. The Group's
market share of new mortgage lending in Ireland increased to 26% in
the first 3 months of 2020, reflecting positive momentum in market
share of mortgage applications in the second half of 2019 .
Asset quality continued to improve; NPEs reduced by EUR0.1
billion since the end of December 2019 to EUR3.4 billion at the end
of March 2020, equivalent to an NPE ratio of 4.2%. The Group
entered 2020 with a strengthened balance sheet, diversified across
portfolios and geographies. The Group has a strong track record on
credit risk management and working with customers to implement
sustainable solutions.
Customer deposits were EUR85.8 billion (EUR86.7 billion on a
constant currency basis), an increase of EUR1.8 billion since the
end of December 2019; reflecting continued growth in our Retail
Ireland and Retail UK deposit franchises. Wholesale funding was
EUR10.6 billion at the end of March 2020. The Group's Liquidity
Coverage and Net Stable Funding ratios at the end of March were
140% and 131% respectively.
Capital Position
The Group's fully loaded CET1 ratio decreased by a net 30bps
from 13.8% at December 2019 to 13.5% at the end of March 2020. The
Group's organic capital generation and the cancellation of the 2019
dividend during the quarter were more than offset by investments in
risk weighted assets associated with new lending, investments in
our transformation programme and the impact of the COVID-19
management overlay.
The Group's regulatory CET1 ratio was 14.4%, and the Group's
Total Capital ratio was 17.9% at the end of March 2020. The Group's
capital ratios do not include a foreseeable dividend deduction in
respect of 2020.
The Group's minimum CET1 regulatory capital requirements have
reduced by c.215bps, reflecting actions announced by the Irish and
UK regulators on Countercyclical buffers and the ECB's changes to
P2R composition. Incorporating these changes, at end March, the
Group's regulatory CET1 ratio of 14.4% is c.510bps above the
Group's minimum regulatory capital requirement of 9.27% for 2020
(excluding Pillar 2 Guidance). We also note the Irish Minister of
Finance confirmation of the deferral of the introduction of a
Systemic Risk Buffer in Ireland.
2020 Outlook
COVID-19 is having a material impact on 2020 results:
-- Lower business activity impacting gross lending volumes, 2020
new lending could be between 50% - 70% of 2019 volumes (EUR16.5
billion)
-- NIM to decline reflecting low interest rate environment and growth in liquid assets
-- Business income expected to be 30% - 40% lower due to reduced economic activity
-- Macroeconomic outlook remains uncertain with expected
increased impairment and loan loss experience over the course of
2020
-- 2020 costs expected to be lower than 2019, in line with previous guidance
-- In a range of scenarios, fully loaded CET1 ratio would remain
above our previous minimum CET1 regulatory capital requirement of
11.45%
-- No dividend deduction in Q1, aligned to ECB recommendations
Additional information
The Group's response to COVID-19
The Group is committed to supporting our customers, colleagues
and communities since the onset of the COVID-19 pandemic.
Customers
-- For personal customers, payment breaks and flexible arrangements on mortgages and loans
-- For business customers, payment breaks, emergency working capital, and FX products
-- Innovation has enabled rapid response to urgent needs; 64% of
Irish mortgage payment breaks processed digitally
-- c.18k customers have activated the Group's Online service
between mid-March and the end of April
-- Other supports include:
- Tailored services for vulnerable customers
- Dedicated phone line for healthcare workers
- Waived contactless fees and increased limit to EUR50
-- High resilience of all Bank systems in unprecedented crisis,
reflecting core banking investments
-- The Group's NPS has seen a 12 point increase in 2020,
reflecting the actions taken to support customers in Ireland
Colleagues
-- 70% staff working from home; prior rollout of Agile working
supported increased capacity and ways of working
-- Temporarily closed smaller branches reflecting reduced
footfall; enables colleagues to be reallocated to services most in
demand, and to support social distancing
-- Colleague supports include mental and physical wellbeing app,
24/7 health support line, and COVID-19 communications hub
-- Supporting colleagues required to provide childcare or family support
-- Allowance scheme for colleagues working in front line and on site locations
Communities
-- Constructive engagement with Irish Government and state
bodies to support re-boot of Irish economy, with particular focus
on SMEs
-- Fast track of payments to all the Group's SME suppliers to support cash flow
-- Donated EUR1 million in emergency funding for communities
with urgent needs, with 13 projects fast-tracked
-- Launched a new Begin Together Fundmed at supporting those who
are supporting others during COVID-19
-- Active programme of senior management engagement with shareholders throughout crisis
-- Group AGM will be staged in virtual format
Q1 2020 Financials (2,3)
Mar-19 Mar-20
(EURm) (EURm)
================================= ========== ==========
Net interest income 538 540
Business income 148 152
Valuation and other items 18 (155)
Total Income 704 537
Operating expenses (457) (443)
Levies and Regulatory charges (69) (62)
================================= ========== ==========
Operating profit pre-impairment 178 32
Net impairment charges (43) (266)
Share of associates / JVs 8 (1)
================================= ========== ==========
Underlying profit before
tax 143 (235)
Non-core Items (20) (6)
================================= ========== ==========
Profit before tax 123 (241)
================================= ========== ==========
[2] Unaudited
[3] The following figures are presented on
a pro-forma basis throughout the financial
section to reflect a COVID-19 management
overlay of EUR250m: impairment charges, loans
& advances to customers and capital ratios
Loans and advances to customers - Staging
(4)
Dec-19 Mar-20
================================= ========== ==========
Loans & advances to customers EUR79.5bn EUR79.6bn
(net)
Customer deposits EUR84.0bn EUR85.8bn
Risk weighted assets EUR49.9bn EUR50.8bn
Fully loaded CET 1 ratio 13.8% 13.5%
Liquidity Coverage Ratio 138% 140%
NPE Ratio 4.4% 4.2%
Composition (Mar 20) Stage 1 - Stage 2 - Stage 3 - Purchased / Total Total
12 month ECL Lifetime ECL Lifetime ECL Originated (EURbn) (%)
(not credit (not credit (credit Credit
impaired) impaired) impaired) Impaired
(EURbn) (EURbn) (EURbn) (EURbn)
----------------------------------- -------------- -------------- -------------- ------------ --------- ------
Residential Mortgages 42.0 1.8 1.6 0.0 45.4 56%
Republic of Ireland 20.6 1.1 1.3 0.0 23.0 28%
UK 21.4 0.7 0.3 0.0 22.4 28%
Non-Property SME and Corporate 18.3 2.4 0.8 0.0 21.5 27%
Republic of Ireland SME 5.8 1.0 0.5 0.0 7.3 9%
UK SME 1.3 0.2 0.1 0.0 1.6 2%
Corporate 11.2 1.2 0.2 0.0 12.6 16%
Property and Construction 6.3 1.4 0.5 0.1 8.3 10%
Investment Property 5.7 1.2 0.5 0.1 7.5 9%
Land and Development 0.6 0.2 0.0 0.0 0.8 1%
Consumer 5.3 0.2 0.1 0.0 5.6 7%
Republic of Ireland Loans 0.7 0.1 0.0 0.0 0.8 1%
UK Loans 1.2 0.0 0.1 0.0 1.3 2%
Republic of Ireland Credit Cards 0.4 0.0 0.0 0.0 0.4 0%
Republic of Ireland Motor 0.8 0.0 0.0 0.0 0.8 1%
UK Motor 2.2 0.1 0.0 0.0 2.3 3%
Total loans and advances to
customers 71.9 5.8 3.0 0.1 80.8 100%
=================================== ============== ============== ============== ============ ========= ======
Impairment loss allowance 0.1 0.2 1.0 0.0 1.3
=================================== ============== ============== ============== ============ =========
Impairment coverage % 0.1% 3.4% 33.3% 0.0% 1.6%
=================================== ============== ============== ============== ============ =========
[4] Figures do not reflect COVID-19 management overlay of
EUR250m
Non-performing exposures by portfolio (4,5)
Composition (Mar Advances Non-performing Non-performing Impairment loss Impairment loss
20) (EURbn) exposures exposures as % of allowance (EURbn) allowance as % of
(EURbn) advances non-performing
exposures
-------------------- --------- -------------------- ------------------- -------------------- --------------------
Residential
Mortgages 45.4 1.9 4.1% 0.4 23%
- Republic of
Ireland 23.0 1.4 6.2% 0.3 26%
- UK 22.4 0.5 2.0% 0.1 14%
Non-property SME
and Corporate 21.5 0.8 3.9% 0.5 59%
- Republic of
Ireland SME 7.3 0.5 7.6% 0.3 54%
- UK SME 1.6 0.1 5.4% 0.0 50%
- Corporate 12.6 0.2 1.6% 0.2 77%
Property and
construction 8.3 0.6 6.8% 0.2 38%
- Investment
property 7.5 0.6 7.2% 0.2 37%
- Land and
development 0.8 0.0 3.2% 0.0 69%
Consumer 5.6 0.1 2.0% 0.2 153%
==================== ========= =================== ==================== ====================
Total loans and
advances to
customers 80.8 3.4 4.2% 1.3 39%
==================== ========= ==================== =================== ==================== ====================
Composition (Dec Advances Non-performing Non-performing Impairment loss Impairment loss
19) (EURbn) exposures exposures as % of allowance (EURbn) allowance as % of
(EURbn) advances non-performing
exposures
-------------------- --------- -------------------- ------------------- -------------------- --------------------
Residential
Mortgages 46.3 1.9 4.2% 0.4 22%
- Republic of
Ireland 23.1 1.5 6.3% 0.3 25%
- UK 23.2 0.5 2.1% 0.1 13%
Non-property SME
and Corporate 20.4 0.9 4.3% 0.5 55%
- Republic of
Ireland SME 7.3 0.6 7.5% 0.3 54%
- UK SME 1.7 0.1 6.3% 0.0 46%
- Corporate 11.4 0.2 2.0% 0.2 60%
Property and
construction 8.1 0.6 7.3% 0.2 39%
- Investment
property 7.2 0.6 7.7% 0.2 37%
- Land and
development 0.9 0.0 3.8% 0.0 64%
Consumer 5.7 0.1 1.7% 0.2 159%
==================== ========= ==================== =================== ==================== ====================
Total loans and
advances to
customers 80.5 3.5 4.4% 1.3 37%
==================== ========= ==================== =================== ==================== ====================
[5] Non-Property SME and Corporate includes Wholesale / Retail
EUR2.6bn, Hospitality EUR1.8bn and Acquisition Finance EUR4.9bn
Economic outlook (6,7,8)
Ireland 2019 2020 2021
(f) (f)
============== ===== ======= =====
GDP 5.5% (8.0%) 7.5%
Unemployment 5.0% 13.5% 8.0%
UK 2019 2020 2021
(f) (f)
============== ===== ======= =====
GDP 1.4% (8.5%) 6.5%
Unemployment 3.8% 9.0% 6.2%
-------------- ----- ------- -----
[6] Sources: Forecasts by Bank of Ireland Economic Research
Unit
[7] GDP - annual real growth
[8] Unemployment - annual average
Ends
http://www.rns-pdf.londonstockexchange.com/rns/4570M_1-2020-5-11.pdf
For further information log on to www.bankofireland.com/investor or contact:
Bank of Ireland
Myles O'Grady, Group Chief Financial Officer +353 (0)766 23
4714
Darach O'Leary , Head of Group Investor Relations +353 (0)766 24
4224
Damien Garvey, Head of Group External Communications and Public
Affairs +353 (0)766 24 6716
Forward - Looking Statement
This announcement contains forward-looking statements with
respect to certain of Bank of Ireland Group plc ('BOIG plc') and
its subsidiaries' (collectively the 'Group') plans and its current
goals and expectations relating to its future financial condition
and performance, the markets in which it operates and its future
capital requirements. These forward-looking statements often can be
identified by the fact that they do not relate only to historical
or current facts. Generally, but not always, words such as 'may,'
'could,' 'should,' 'will,' 'expect,' 'intend,' 'estimate,'
'anticipate,' 'assume,' 'believe,' 'plan,' 'seek,' 'continue,'
'target,' 'goal,' 'would,' or their negative variations or similar
expressions identify forward-looking statements, but their absence
does not mean that a statement is not forward-looking.
Examples of forward-looking statements include, among others:
statements regarding the Group's near term and longer term future
capital requirements and ratios, level of ownership by the Irish
Government, loan to deposit ratios, expected impairment charges,
the level of the Group's assets, the Group's financial position,
future income, business strategy, projected costs, margins, future
payment of dividends, the implementation of changes in respect of
certain of the Group's pension schemes, estimates of capital
expenditures, discussions with Irish, United Kingdom, European and
other regulators and plans and objectives for future operations.
Such forward-looking statements are inherently subject to risks and
uncertainties, and hence actual results may differ materially from
those expressed or implied by such forward-looking statements.
Nothing in this announcement should be considered to be a
forecast of future profitability, dividends or financial position
of the Group and none of the information in this announcement is or
is intended to be a profit forecast, dividend forecast or profit
estimate. Any forward-looking statement speaks only as at the date
it is made. The Group does not undertake to release publicly any
revision to these forward-looking statements to reflect events,
circumstances or unanticipated events occurring after the date
hereof.
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END
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