Bank of Ireland. Joint Oireachtas Committee on Finance, Public Expenditure and Reform. 5 November 2014

Transcription

1 Bank of Ireland Joint Oireachtas Committee on Finance, Public Expenditure and Reform 5 November 2014 Information disclosed or capable of being disclosed to market generally

2 Forward looking statement This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934 and Section 27A of the US Securities Act of 1933 with respect to certain of the Bank of Ireland Group s (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 buy include to among let 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. Such risks and uncertainties include, but are not limited to, the following: geopolitical risks, such as those associated with crises in the Middle East and increasing political tensions in respect of the Ukraine, which could potentially adversely impact the markets in which the Group operates; concerns on sovereign debt and financial uncertainties in the EU and in member countries and the potential effects of those uncertainties on the Group; general and sector specific economic conditions in Ireland, the United Kingdom and the other markets in which the Group operates; the ability of the Group to generate additional liquidity and capital as required; the effects of extensive asset quality review and stress tests being conducted in advance of the European Central Bank assuming responsibility for supervision and any further capital or other assessments undertaken by regulators; property market conditions in Ireland and the United Kingdom; the potential exposure of the Group to various types of market risks, such as interest rate risk, foreign exchange rate risk, credit risk and commodity price risk; deterioration in the credit quality of the Group s borrowers and counterparties, as well as increased difficulties in relation to the recoverability of loans and other amounts due from such borrowers and counterparties, have resulted in significant increases, and could result in further significant increases, in the Group s impaired loans and impairment provisions; implications of the Personal Insolvency Act 2012 and measures introduced by the Central Bank of Ireland to address mortgage arrears on the Group s distressed debt recovery and impairment provisions; the performance and volatility of international capital markets; the effects of the Irish Government s stockholding in the Group (through the NPRFC) and possible changes in the level of such stockholding; the impact of downgrades in the Group s or the Irish Government s credit ratings or outlook; the stability of the eurozone; changes in the Irish and United Kingdom banking systems; changes in applicable laws, regulations and taxes in jurisdictions in which the Group operates particularly banking regulation by the Irish and United Kingdom Governments together with implementation of the Single Supervisory Mechanism and establishment of the Single Resolution Mechanism and the conduct and outcomes of asset quality reviews and stress tests; the exercise by regulators of powers of regulation and oversight in Ireland and the United Kingdom; the introduction of new government policies or the amendment of existing policies in Ireland or the United Kingdom; the outcome of any legal claims brought against the Group by third parties or legal or regulatory proceedings or any Irish banking inquiry more generally, that may have implications for the Group; the development and implementation of the Group s strategy, including the implications of the continuing obligations components of the Group s revised EU Commission restructuring plan and the Group s ability to achieve net interest margin increases and cost reductions; the responsibility of the Group for contributing to compensation schemes in respect of banks and other authorised financial services firms in Ireland, the United Kingdom and the Isle of Man that may be unable to meet their obligations to customers; the inherent risk within the Group s life assurance business involving claims, as well as market conditions generally; potential further contributions to the Group sponsored pension schemes if the value of pension fund assets is not sufficient to cover potential obligations; the exposure of the Group to NAMA losses in the event that NAMA has an underlying loss at the conclusion of its operations, which could adversely impact the Group s capital and results of operations; the impact of the continuing implementation of significant regulatory developments such as Basel III, Capital Requirements Directive (CRD) IV, Solvency II and the Recovery and Resolution Directive; and the Group s ability to address weaknesses or failures in its internal processes and procedures including information technology issues and equipment failures and other operational risks. Nothing in this document should be considered to be a forecast of future profitability or financial position and none of the information in this document is or is intended to be a profit 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. The reader should however, consult any additional disclosures that the Group has made or may make in documents filed or submitted or may file or submit to the US Securities and Exchange Commission. 2

3 Contents 1. Executive Summary Progress over 12 months 4 2. Economic Overview 7 3. About Bank of Ireland Group 9 4. Financial Information Asset Quality - Mortgage Arrears Bank of Ireland - Irish Businesses - Consumer Banking - Business Banking - Corporate and Treasury Governance Training and Learning Corporate Social Responsibility Conclusion Priorities for the balance of 2014 and beyond 69 3

4 1 Executive Summary Progress over 12 months 3. Progress Update

5 Executive Summary / 1 Good progress against all Key Strategic Objectives Economic environment in our core markets of Ireland and UK has continued to improve Full repayment of Irish taxpayers cash investment in Bank of Ireland at a cash profit a. 6.0 billion cash returned to Irish taxpayers 4.8 billion cash injected by Irish taxpayers 1.2 billion Plus b. Irish taxpayers discretionary holding of 14% of Bank of Ireland equity stock. Bank of Ireland market capitalisation billion at 3 November 2014 Bank of Ireland profitable and generating capital 0.4 billion PBT H CET1 ratio increase 190bps December 2013 June 2014 Comprehensive Assessment passed with significant capital buffers Robust funding and Capital Ratios providing security and supporting strategic growth objectives Loan to Deposit ratio 111% at September 2014 CET 1 ratio 14.1% at September 2014 Total Capital ratio 17.5% at September

6 Executive Summary / 2 Income H H up 24% to 1.5 billion Net Interest margin 1.65% H to 2.08% year to September 2014 Costs flat versus H H savings reinvested in our people, businesses and infrastructure (particularly payments) Defaulted loans reduced by 1.9 billion June 2013 September 2014 Coverage Ratios > 50% Challenged loans are being restructured and restructures meeting revised arrangement CBI targets for challenged Irish mortgages and Irish SMEs all met New Lending on target Ireland 33bn target H provided: > 50% of SME and Agri new lending in the market > 1 in 3 new mortgages Largest lender into the Irish economy Positive momentum across all businesses 6

7 2 Economic Overview Ireland October Progress Update

8 Economic Infograph 1 8

9 3 About Bank of Ireland Group 3. Progress Update

10 About Bank of Ireland Group An Overview Bank of Ireland is the largest lender into the Irish economy We are the number 1 bank for SMEs providing over 50% of new non-property lending to SMEs in 2014; We have had a particularly strong performance in our agricultural, motor finance and commercial finance businesses; Bank of Ireland continues to provide more than 50% of new lending into the agricultural sector; Ireland s number 1 Corporate Bank with > 30% market share and well over 50% FDI We have a market share of 25% of savings products; Our mortgage business is providing one out of every three mortgages in Ireland; and, Our life assurance business, New Ireland / Bank of Ireland Life, is the number 2 overall provider in the life, pensions and investment market in Ireland Bank of Ireland in Great Britain and Northern Ireland Universal bank offering in Northern Ireland from a sustainable cost base Through our partnership model with the Post Office, we are one of the largest challenger consumer banking franchises with c.3 million customers; Our foreign exchange joint venture with the Post Office is the largest provider of consumer foreign exchange in the UK. Our UK businesses are self funded and separately capitalised Bank of Ireland internationally A profitable diversified Acquisition Finance business, well known and respected in our markets 10

11 BOI Overview Ireland Comprehensive multi-channel distribution platform c.250 branches c.1,700 Self-service devices c.55% of customers are active online & mobile channel users c.350k mobile customers 24 x 7 Market leading positions Consumer Banking c.1 out of every 3 new mortgages in 2014 Wealth Management incl. New Ireland Life Assurance c.24% APE Market Share Business Banking #1 Business Bank > 50% of new SME / Agri lending in H Corporate Banking #1 Corporate Bank > 30% Corporate Market share Strong relationships with customers c.1.6m Customers > 625k Customers c.180k SME Customers Well over 50% FDI 11

12 Reimbursing and rewarding taxpayers support January 2009 June 2014 c.14% Shareholding + Risk to the State dealt with Since 2009, c. 4.8bn cash invested by the State Cumulative c. 6bn cash returned to the State State continues to hold valuable discretionary c.14% equity shareholding IBRC promissory note structure c. 4.8bn c. 6.0bn c. 6.1bn Facilitated 2012 repo transaction Successfully repaid in 2013 Group has invested in Irish Cash invested by the State Cash returned to date Irish Government Bonds owned by BOI Government Bonds > 6bn 12

13 BOI Overview Attractive international franchises Challenger consumer banking franchise in GB Leveraged acquisition finance Trusted brand, established customer base and expanding product range c.1.6m Savings Accounts c.200k Mortgages with dedicated advisors and new L&G partnership in place Retail FX Market leader with c.25% share > 500K travel money cards c.530k + Credit Cards / Pre-paid cards / Personal Loans More branches than other retail banks combined in GB c.560k + Insurance Policies Current Accounts Pilot underway Well recognised lead arranger / underwriter US / European Business Focused on mid-market transactions Expertise developed over 20 years Profitable with strong asset quality c. 3.3bn in credit facilities c.11,500 Post Office branches c.2,500 Post Office / BOI ATMs Online Mobile Telephone London Frankfurt Full service bank in Northern Ireland USA Paris Universal offering through 36 branches and product specialists Specialist motor / agri lending business 13

14 Regulatory Change Banking Union Key components of Banking Union I. Single Supervisory Mechanism II. Single Resolution Mechanism Single Supervisory Mechanism (SSM) ECB assumed banking supervision responsibilities for 130 banks (including Bank of Ireland) on 4 November 2014 In advance, ECB conducted comprehensive assessment to assess resilience under base and stress economic scenarios Exercise based on uniform methodology and harmonised definitions Scale of exercise unprecedented Bank of Ireland passed the comprehensive assessment with substantial capital buffers 14

15 ECB Comprehensive Assessment Results 26 October 2014 BOI Announcement The overall result for Bank of Ireland confirms that the Group has passed the ECB Comprehensive Assessment, with substantial capital buffers over the threshold capital ratios in both the baseline and adverse stress test scenarios as follows: BOI Threshold Buffer Baseline scenario 12.43% 8% 4.43% Adverse scenario 9.31% 5.5% 3.81% 15

16 4 Financial Information 3. Progress Update

17 Interim Management Statement 31 October 2014 The Group has continued to trade in line with its expectations in the period since 30 June The positive economic environment in our key markets of Ireland and the UK has, amongst other things, benefited collateral values and new business origination. As anticipated, the Group s net interest margin (NIM) has increased further in the third quarter, and we achieved a NIM of approximately 208 bps during the period. Lower funding costs and the positive impact of new lending volumes at higher margins are both contributing to the improvement. ELG fees are reducing in line with expectations. Fees and other income are broadly in line with the first half of The Group remains focussed on tight cost control while continuing to invest in our people, businesses and infrastructure. The Group has now concluded its discussions with staff and, where appropriate, staff representative bodies regarding a future career and remuneration framework, which should assist with the Group and its employees having a single Group wide career framework with increased flexibility and a sustainable remuneration structure going forward. The IBOA Trade Union has recommended acceptance of the framework to a ballot of its members employed by the Group. The bank levy of 38 million was paid to the Irish State in October

18 Interim Management Statement 31 October 2014 Asset quality Asset Quality trends have continued to improve in line with our expectations. This reflects the work we are doing with our customers, the continuing improvement in the Irish and UK economies and the ongoing improvements in collateral values. Total defaulted loans across our portfolios continue to decline. Notwithstanding currency impacts in relation to UK assets, we have reduced the volume of defaulted loans by 1.9 billion from 30 June 2013 to a level of 16.4 billion at 30 September Irish mortgage early and default arrears continued to reduce in the third quarter, with reductions achieved in both Owner Occupied and Buy to Let mortgage books. The Group continues to keep under review its provisioning assumptions on its Irish residential mortgage books. Supported by the actions we have been and are taking, we expect asset quality trends to continue to improve and we anticipate further reductions in impairment charges towards more normalised levels. 18

19 Interim Management Statement 31 October 2014 Balance sheet The Group s customer loan volumes were 83.3 billion at the end of September 2014, compared to 83.4 billion at the end of June 2014, partially reflecting the c.3% increase in the value of sterling since June Repayments, redemptions and asset sales continued to exceed new lending during the third quarter, albeit the quantum of gross new lending has continued to increase. Customer deposits were c. 75 billion at the end of September 2014, a marginal increase on the volume at June 2014, giving rise to a loan to deposit ratio of 111%. Wholesale funding reduced from 23 billion at June 2014 to c. 21 billion at the end of September 2014, of which 5 billion was Monetary Authority funding including 2.7 billion related to NAMA senior bonds. The IAS 19 accounting required discount rate for the Group s sponsored defined benefit pension schemes has reduced since June 2014 with a consequent increase in the IAS 19 defined benefit pension schemes liabilities and deficits, notwithstanding an increase in the values of the assets of the schemes during the same period. 19

20 Interim Management Statement 31 October 2014 Capital As announced on 26 October 2014, the Group passed the ECB Comprehensive Assessment with substantial capital buffers. The Group continues to generate capital at a significant pace with a further increase of 90bps in our transitional Common Equity Tier 1 (CET 1) ratio during the third quarter to 14.1% at the end of September 2014, compared to 13.2% at the end of June 2014 and a pro-forma ratio of 12.3% on 1 January The Group s Total Capital ratio was 17.5% at the end of September 2014, compared to 16.4% at the end of June The Group s fully loaded CET 1 ratio (excluding the 2009 preference shares) was 8.3% at the end of September 2014, an increase of 200 bps since December On a fully loaded basis (including the 2009 preference shares), the Group's CET 1 ratio was 11.0% at the end of September 2014, compared to 10.0% at the end of June 2014 and 9.0% at December The increase in our capital ratios during the period reflects our trading performance 1, a more efficient capital structure in our life assurance subsidiary (which improved the Group s transitional CET 1 ratio by c.25bps) and a modest reduction in risk weighted assets. The Group continues to expect to maintain a buffer over a CET 1 ratio of 10 per cent on a Basel III transitional basis, while prioritising the capital we are generating towards facilitating the de-recognition of the 1.3 billion of 2009 Preference Stock between January 2016 and July Capital ratios have been presented including the benefit of the retained profit for the third quarter of

21 Financial Information An Overview H Key metrics continue to improve Greater than 700m improvement in Underlying PBT 4.3bn new lending in H1 2014; up > 50% vs. H Strong new lending performance across our portfolios ROI Mortgages up > 40% vs. H1 2013; loan book now growing ex tracker ROI SME up > 15% vs. H1 2013; new lending broadly in line with redemptions ROI Corporate up > 100% vs. H1 2013; new lending exceeding redemptions UK Mortgages up > 100% vs. H1 2013; expect further significant growth in H Customer deposits - 75bn Account for > 75% of the Group s funding Predominantly Retail customer oriented Capital and customer deposits equal customer lending 21

22 Group Income Statement H H ( m) H ( m) Total income 1,188 1,475 Net interest income 968 1,161 Other Income ELG fees (99) (21) Operating expenses 1 (820) (813) Greater than 700m improvement in Underlying PBT Increased net interest income - 193m higher; reflecting higher NIM offset by lower average interest earning assets Reduced ELG fees - 78m lower Operating profit pre-impairment Impairment charges Customer loans (780) (444) NAMA bonds - 70 Share of associates / JVs Underlying (loss) / profit before tax (395) 327 Non-core items (121) 72 Significantly reduced loan impairment charges - 336m lower Additional gains of 140m primarily relating to a write back on NAMA subordinated debt ( 70m) and from gains arising on liquid asset portfolio rebalancing Greater than 900m improvement in Statutory PBT Reflects increased underlying PBT and non-core gains (primarily changes to pension benefits) Statutory (loss) / profit before tax (516) H operating expenses reflect a reclassification of FSCS charges of 12m from H

23 Net interest income H Net interest margin 1.65% 2.03% 2.05% 3.13% 3.23% 3.16% 1.65% 1.26% 1.15% Net interest income - 1,161m In line with H2 2013, with higher NIM offset by lower average interest earning assets NIM NIM improved to 2.05% reflecting H H H Net interest margin Asset Yield Cost of Funds Average interest earning assets 118.8bn 111.6bn 110.1bn 29.6bn 25.1bn 25.9bn 89.2bn 86.5bn 84.2bn H H H Net loans and advances to customers Liquid Assets 1 Includes Credit Balances 1 Lower funding costs Positive impact of new lending volumes; partially offset by Impact of ECB rate cuts in Nov 13 and Jun 14 Expiry of certain capital hedges Further NIM expansion from here will reflect lower deposit pricing, the volume of new lending and future official interest rate increases Average interest earning assets Reduction of c. 1.5bn (constant currency - 3bn) vs. H reflects Lower loan assets as redemptions are currently exceeding new lending Higher liquid asset holdings Liquid assets expected to decline over time 23

24 Loans and advances to customers H Rate Defaulted of reduction Loans is Volumes slowing H H H Pace of reduction in loan book is slowing; expect pace to slow further as new lending increases 3.9bn 5.7bn 1.1bn 2.4bn 2.4bn 3.4bn Net change in loan balances (reported) Net change in loan balances (constant currency) New lending volumes 4.3bn new lending in H1 2014; up > 50% vs. H Strong new lending performance across our portfolios ROI Mortgages up > 40% vs. H1 2013; loan book now growing ex tracker ROI SME up > 15% vs. H1 2013; new lending broadly in line with redemptions ROI Corporate up > 100% vs. H1 2013; new lending exceeding redemptions UK Mortgages up > 100% vs. H1 2013; expect further significant growth in H LAF book up slightly 1.6bn Irish businesses +59% +55% +70% 2.5bn 0.9bn UK businesses 1.3bn 0.3bn Leveraged Acquisition Finance 0.5bn H H % change half on half Redemptions in H were 6.4bn Reduction in ROI tracker mortgages of c. 0.7bn Increased levels of re-financing in Business and Corporate GB the EU mandated run down books Confident of achieving loan target over time, supported by: Strong market positions and supportive dynamics in Ireland Attractive overseas franchises, and Current business momentum 24

25 Balance Sheet H Capital and Liquidity available to support planned growth Dec 13 ( bn) Jun 14 ( bn) Customer deposits - 75bn Customer loans Account for > 75% of the Group s funding Predominantly retail customer oriented Liquid assets ROI 36bn, UK 27bn ( 21bn) and Corporate 12bn BOI Life assets Other 6 7 Total assets Customer deposits Wholesale funding - 23bn Requirement continues to reduce Continuing to access wholesale markets at reducing costs 2.3bn issuance during H Wholesale funding Repaid 2bn of ECB funding during 2014 Private sources Monetary Authorities BOI Life liabilities Other Robust Liquidity ratios Loan to Deposit Ratio 112% Net Stable Funding Ratio 116% Liquidity Coverage Ratio 104% Stockholders equity 8 8 Total liabilities

26 Accreting Capital and increasing TNAV As at 30 September 2014 Customer loans (net) Dec 13 Sept bn 83.3bn Customer loans reduced by 1.2bn New lending on target and increased in Q Redemptions, repayments and asset sales exceeded new lending Defaulted loans further reduced Defaulted loans CET1 1 ratio (Basel III transitional) Total capital ratio 17.1bn 16.4bn 12.3% 14.1% 14.1% 17.5% Capital ratios are robust Increased CET 1 ratio to 14.1% Increased Total capital ratio to 17.5%; reflects 750m Tier 2 issuance and capital accretion Continue to expect to maintain a buffer above a CET 1 ratio of 10%, on a transitional basis, while prioritising the capital we are generating towards facilitating the de-recognition of the 1.3bn of 2009 Preference Shares between January 2016 and July

27 5 Asset Quality Mortgage Arrears 3. Progress Update

28 Mortgage Arrears ROI Mortgage Arrears Executive Summary ROI Mortgage Arrears Executive Summary Owner Occupied buy Buy to let to Let BoI Private Dwelling Home (PDH) accounts and balances in arrears continue to reduce. At 30 September 2014 PDH Significant progress continues to be made in the resolution of mortgage arrears in Bank of Ireland accounts in arrears had reduced by 24% from peak levels. BoI Buy to Let (BTL) accounts and balances in arrears are also reducing. At 30 September 2014 BTL accounts in arrears had reduced by 12% from peak levels. Nine of every ten BoI PDH accounts and eight out of ten BoI BTL accounts are up to date. Reflecting the actions we have taken in each of the last four years our proportion of PDH mortgages >90 days past due (DPD) 1 has fallen compared to the industry 2 average (from 67% at December 2009 to 49% at December 2013). This favourable trend continued in H whereby the BoI proportion of the industry average has fallen to 47%. BoI has exceeded all Mortgage Arrears Resolution Targets (MART), as set out by the Central Bank of Ireland (CBI). The most recent results submitted were: PDH June 2014 BTL June 2014 Target Achieved Target Achieved Proposed Solutions 75% 83% 75% 81% Concluded Solutions 35% 63% 35% 62% Terms Being Met 75% 91% 75% 90% 1 Consistent with published quarterly Central Bank of Ireland (CBI) arrears statistics whereby impaired mortgages 90 DPD are excluded from the statistics. 2 Industry statistics as published quarterly by the CBI, excluding BoI. 28

29 Mortgage Arrears ROI PDH Mortgages: 20.2bn H Defaulted loan volumes 2,151m 2,051m 1,911m Profile of assets 94% on a capital and interest repayment basis 53% or 10.6bn of PDH mortgages at 30 June 2014 were ECB trackers Market environment 824m 869m -8.6% default. 863m loans Jun 13 Dec 13 Jun 14 Impairment charge (6-month) Coverage ratio 2 Defaulted Loans Jun 13 Dec m 108m 38% 42% Provision Stock Jun 14 11m 45% Residential property prices continue to recover Impairment provisions currently accommodate a 55% peak to trough fall in prices (in addition, further provision is made for forced sale discounts and disposal costs) Portfolio performance 9 out of 10 accounts up to date Arrears levels at 47% of industry 1 Lower impairment charges reflect improving economic conditions and arrears trends > 8 out of every 10 restructured mortgages are meeting their agreed arrangements Further reductions in arrears and defaults 1 At June 2014, BoI s arrears levels (based on number of accounts >90 days in arrears) was 6.3% compared to 13.3% for the industry ex BoI. Source: Central Bank of Ireland. 2 Impairment provisions as a % of defaulted loans (loans where arrears are > 90 days past due and / or impaired). 29

30 Mortgage Arrears ROI PDH Mortgages Book profile H Up to date Book Number of Accounts (145k) Arrears Book Number of Accounts (15k) 91% Early Arrears Late Arrears Forbearance & Overpayment Resolution Consensual/ Legal process 1% 2% 3% 3% 9 out of 10 mortgage accounts are in the up to date book Early arrears are customer accounts with arrears <90 days past due Late arrears are customers whom we continue to work with, on a case by case basis, to identify and agree a suitable forbearance or resolution strategy Forbearance is where a customer s mortgage contract has been revised on a case specific basis Overpayment reflects cases where the customer pays greater than 100% of the mortgage repayment, thus reducing their arrears Resolution: Consensual process is a non-legal resolution agreed with the customer such as voluntary sale or Mortgage-to-Rent Resolution: Legal process means the Group has initiated legal proceedings against the customer for the recovery of the debt 30

31 Mortgage Arrears ROI BTL Mortgages: 6.0bn H Defaulted loan volumes 1,707m 1,745m 1,787m Profile of assets 68% of loans on capital and interest repayment basis at June % or 4.6bn of mortgages are ECB Trackers at June m 994m -8.6% default. loans 1,037m Jun 13 Dec 13 Jun 14 Defaulted Loans Provision Stock Market environment Private rental market recovering Residential property prices continue to recover Impairment provisions currently accommodate a 55% peak to trough fall in prices (in addition, further provision is made for forced sale discounts and disposal costs) Impairment charge (6-month) Jun 13 Dec m 211m Jun 14 81m Portfolio performance 8 out of 10 accounts up to date Arrears levels at 69% of industry 1 Coverage ratio 2 50% 57% 58% Lower impairment charges reflect improving economic conditions and arrears trends > 8 out of every 10 restructured mortgages are meeting their agreed arrangements Further reductions in arrears and defaults 1 At June 2014, BoI s arrears levels (based on number of accounts >90 days in arrears) was 16.4% compared to 23.8% for the industry ex BoI. Source: Central Bank of Ireland. 2 Impairment provisions as a % of defaulted loans (loans where arrears are > 90 days past due and / or impaired). 31

32 Mortgage Arrears ROI BTL Mortgages Book profile ROI H1 BTL 2014 Mortgages Book profile Up to date Book Number of Accounts (27k) Net interest margin (NIM) target of >2% achieved Arrears Book Number of Accounts (7k) 78% Early Arrears Late Arrears Forbearance & Overpayment Resolution Consensual / Legal process 2% 5% 5% 10% 8 out of 10 mortgage accounts are in the up to date book Early arrears are customer accounts with arrears <90 days past due Late arrears are customers whom we continue to work with, on a case by case, basis to identify and agree a suitable forbearance or resolution strategy Forbearance is where a customer s mortgage contract has been revised on a case specific basis Overpayment reflects cases where the customer pays greater than 100% of the mortgage repayment, thus reducing their arrears Resolution: Consensual process is a non-legal resolution agreed with the customer, such as voluntary sale Resolution: Legal process means the Group has initiated legal proceedings against the customer for the recovery of the debt including the appointment of fixed charge receivers 32

33 Mortgage Arrears ROI PDH Mortgage Arrears versus industry ROI PDH Mortgage Arrears versus industry BoI PDH arrears >90 DPD 1 are running significantly below the industry 2 average level Net interest margin (NIM) target of >2% achieved 6.3% of BoI PDH mortgage accounts are >90 DPD compared to an average of 13.3% for the total industry 2 at June This means that the % of BoI PDH mortgage accounts >90 DPD was 47% of the total industry 2 average. 70% 65% 60% 55% 50% 45% 40% 67% 67% BoI % of accounts in arrears as a % of the industry Rate of reduction -29% Q Q Q Q Q Q % 47% The proportion of the BoI PDH mortgage book >90 DPD continues to remain below the industry average and has been reducing consistently, from 67% of the industry average at December 2009 to 47% at June Consistent with published quarterly CBI arrears statistics whereby impaired mortgages 90 DPD are excluded from the statistics. 2 Based on published June 2014 CBI Mortgage Arrears Statistics, excluding Bank of Ireland. Industry statistics exclude impaired mortgages 90 DPD. 33

34 Mortgage Arrears ROI PDH Mortgage Arrears versus ROI industry PDH Mortgage Arrears versus industry BoI has c. 1 in 5 PDH mortgage accounts in the market 1 whilst only accounting for c. 1 in 10 PDH mortgages >90 DPD 2 22% 20% BoI % market share of all PDH mortgage accounts is increasing 18% 16% 14% BoI % of industry total PDH mortgage accounts >90 DPD is decreasing BoI market share of all PDH mortgage accounts BoI as % of all PDH mortgage accounts >90 DPD 12% 10% Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Jun-14 BoI s share of the industry total PDH mortgages increased from 20.1% to 21.0% whilst BoI s proportion of the industry total PDH mortgages >90 DPD 2 decreased significantly from 14.4% to 11.1% for the period December 2009 to June Based on published quarterly CBI mortgage arrears statistics at a total industry level. 2 Consistent with published quarterly CBI arrears statistics whereby impaired mortgages 90 DPD are excluded from the statistics. 34

35 Mortgage Arrears ROI PDH Mortgages ROI Some PDH comparative Mortgages analysis some comparative analysis Group Income Statement PDH Mortgages (at 30 June 2014) Bank of Ireland AIB PTSB Loans volume 20.2bn 30.1bn 17.1bn >90 DPD and/ or impaired loans volume - as % of total loans volume 1.9bn 9.4% 5.5bn 18.3% 4.7bn 27.3% Forborne loans volume - as % of total loans volume 2.0bn 10% 3.5bn 12% 2.9bn 17% Total provision stock - as % of >90 DPD and/ or impaired loans volume 0.9bn 45% 2.0bn 36% 1.8bn 38% Weighted average LTV 89%?? Negative equity quantum relating to PDH >90 DPD and/ or impaired loans volume 0.3bn?? Data has been extracted from published 2014 interim reports and accounts of BOI, AIB and PTSB 35

36 Mortgage Arrears ROI Mortgage Forbearance Measures ROI Mortgage Forbearance Measures In H we offered forbearance in over 8 out of 10 cases to customers who, through a completed SFS, were identified as having potential or actual financial difficulties BoI has exceeded all CBI arrears targets for proposed and concluded solutions. The Group has a range of suitable forbearance options available to support customers with sustainable mortgages who encounter financial difficulties. Total of 19.7k accounts in forbearance at 30 June % Full Interest 14% Part Capital (with full interest) Term Extension 31% Capitalisation of Arrears 12% Combination of forbearance measures 23% 7% 1% Split Mortgages Other 86% of BoI restructured accounts are meeting the terms of the arrangement compared with 80% for the remainder of the industry 1 1 Source: CBI Q statistics (published 2 September 2014) excluding BoI. 36

37 Mortgage Arrears ROI PDH Mortgage forbearance as % of ROI industry PDH Mortgage forbearance forbearance as % of industry forbearance BoI represents 15% of all PDH forbearance in place across the industry 1 We have a wide range of suitable forbearance options available to suit our customers. We are actively engaged with our customers who anticipate or are in financial difficulty. Each customer s situation is assessed individually on a case by case basis. BoI % of all PDH mortgage accounts in forbearance at 30 June % Arrears Capitalisation, 25.7k 12% Other 2, 16.8k 31% Term Extension, 15.8k 23% 9% 19% 3% Part Capital with Full Interest, 13.8k Split Mortgages, 12.9k Full Interest, 11.6k Reduced Payment (<full interest) and/ or Payment Moratorium, 5.4k BoI Other Lenders k 2k 4k 6k 8k 10k 12k 14k 16k 18k 20k 22k 24k 1 Based on published quarterly CBI mortgage arrears statistics at a total industry level. 2 Includes combination-forbearance measures and Deferred Interest Scheme. 37

38 Mortgage Arrears PDH Proposed, Concluded & Terms Being Met CBI targets exceeded (June 2014) 83% 1 Proposed achieved versus the CBI target of 75% 63% 1 Concluded achieved versus the CBI target of 35% Balance sheet restructuring complete 91% Terms Being Met achieved in respect of the Concluded population versus the CBI target of 75% Concluded Solutions - Restructures 5,560 (79%) Concluded Solutions - Consensual / Legal / PI 1,492 (21%) With regard to Consensual/ Legal, our experience indicates that we achieve a greater level of borrower engagement as we initiate and progress through the consensual/ legal process. 1 All MART 2014 reporting is expressed as a function of the stock of accounts >90 DPD at December

39 Mortgage Arrears BTL Proposed, Concluded & Terms Being Met CBI targets exceeded (June 2014) 81% 1 Proposed achieved versus the CBI target of 75% 62% 1 Concluded achieved versus the CBI target of 35% Balance sheet restructuring complete 90% Terms Being Met achieved in respect of the Concluded population versus the CBI target of 75% Concluded Solutions - Restructures 1,518 (43%) Concluded Solutions - Consensual / Legal / PI 2,032 (57%) With regard to Consensual/ Legal, our experience indicates that we achieve a greater level of borrower engagement as we initiate and progress through the consensual/ fixed charge receiver appointment/ legal process. 1 All MART 2014 reporting is expressed as a function of the stock of accounts >90 DPD at December

40 Personal Insolvency Update Activity in the 12 months since launch Protective Certs / Approvals Debt Settlement Arrangements Balance sheet restructuring complete Personal Insolvency Total Arrangements ISI National Statistics Total Protective Certs Issued Arrangements Approved 59 (80%) 80 (67%) 139 (72%) Bank of Ireland Participation Total Protective Certs a party / % of total 40 (38%) 109 (37%) 149 (37%) Lapsed (no creditors vote) WIP at end Sept BoI Yes vote 27 (90%) 45 (76%) 72 (81%) ISI National Statistics BoI Participation Total Debt Covered 400m 40.5m (10%) 40

41 UK Residential mortgages: 20bn/ 25bn H Defaulted loan volumes 507m 492m 457m Profile of assets UK residential mortgage books continue to perform well 127m -8.6% default. loans 116m 102m Market environment Economic conditions continuing to improve Jun 13 Dec 13 Jun 14 Impairment charge (6-month) Defaulted Loans Jun 13 Dec 13 24m 3m Provision Stock Jun 14 ( 3m) Portfolio performance Arrears levels are below the industry average Impairment charges reflect improving economic and property market conditions and continued low level of arrears Charge/(credit) bps (annualised) 16bps 2bps (3bps) Coverage ratio 25% 24% 22% 41

42 SME & Corporate loans: 21bn H ROI SME - 10bn UK SME - 2bn/ 3bn Corporate - 8bn 2,880m 2,747m 2,656m 1,329m 1,379m 1,358m 553m 241m 476m 238M 344m 152m 1,115m 449m 593m 725m 244m 279m Jun 13 Dec 13 June 14 Jun 13 Dec 13 Jun 14 Jun 13 Dec 13 Jun 14 Defaulted Loans Provision Stock Defaulted Loans Provision Stock Defaulted Loans Provision Stock Jun 13 Dec 13 Jun 14 Jun 13 Dec 13 Jun 14 Jun 13 Dec 13 Jun 14 Impairment charge (6-month) 95m 138m 64m Impairment charge (6-month) 46m 50m 17m Impairment charge (6-month) 59m 63m 44m Coverage ratio 46% 50% 51% Coverage ratio 43% 50% 44% Coverage ratio 40% 41% 38% More favourable environment and improved trading conditions in certain SME sectors Resolution strategies agreed with more than 9 out of 10 challenged customers; > 90% of restructured customers meeting their new arrangements Lower charges reflect more positive macroeconomic conditions and strengthening consumer and business sentiment Change in coverage ratio primarily reflects the completion of our resolution strategy for a single highly provisioned connection Pace of migration of new cases into our challenged portfolios remains low Increase in defaulted loans reflects a small number of individual case specific factors Domestic Irish and international corporate portfolios benefitting from improving economic conditions 42

43 Property & Construction: 16.7bn H Investment Property bn Land and Development - 3.1bn 5,940m 5,766m 5,689m 2,075m 2,183m 2,321m 3,012m 2,825m 2,755m 1,888m 1,935m 2,004m Jun 13 Dec 13 Jun 14 Defaulted Loans Provision Stock Jun 13 Dec 13 Jun 14 Defaulted Loans Provision Stock Jun 13 Dec 13 Jun 14 Jun 13 Dec 13 Jun 14 Impairment charge (6-month) 181m 162m 135m Impairment charge (6-month) 110m 130m 80m Coverage ratio 35% 38% 41% Coverage ratio 63% 68% 73% 51% loans ROI, 47% UK and 2% RoW 90% is defaulted with a coverage ratio of 73% 36% Retail, 22% Office, 6% Industrial, 36% Other/mixed Improved investor sentiment and transaction levels in the Irish commercial property market supported by economic recovery and outlook UK commercial property values continue to rise 43

44 6 Bank of Ireland Irish Businesses 3. Progress Update

45 Bank of Ireland Consumer Banking Ireland 3. Progress Update

46 Consumer Banking Overview Over 1 million customers We provide a broad range of innovative and market leading propositions and we are continuously innovating to meet the needs of consumers today and into the future. By leveraging the strength of the Bank of Ireland franchise, brand and extensive distribution capabilities we are the pre-eminent Consumer Bank in Ireland, and we increasingly look to international best practice to benchmark our channel capabilities and customer propositions. Mortgages W We are keen to lend: We have fully approved our 2 billion mortgage fund launched in October 2012 and we have a further 2 billion fund available to meet demand. Our mortgage business is providing one out of every three new mortgages in Ireland. Mortgages anytime / anywhere: Expert mortgage advice available to customers in each of our 250 branches nationwide, Mobile Mortgage Managers nationwide who can meet applicants in their home or workplace at any time including the weekends, expert phone advice available 8am to 8pm weekdays and 10am to 2pm on Saturdays, and bench-marked interactive mortgage websites under the Bank of Ireland brand and challenger brand mortgagestore.ie. A mortgage to suit every need: First Time Buyer, Mover, Buy to Let, Equity Release with a choice of competitive fixed and variable rates and terms up to 35 years for First Time Buyers and 30 years for Movers (to max age 70) Customer propositions based on customer and internal feedback including our 24 hour promise where we commit to a decision on mortgage applications within 24 hours, providing formal approval that customers can act on not just approval in principle (complex cases can take a little longer), House hunter approval that approves customers for a mortgage amount even before they have found a suitable property, and 1% Stamp Duty offer where we pay First Time Buyers and Movers 1% of their mortgage amount after they draw down to help cover their Stamp Duty costs. Deposits A growing deposit book: With competitive regular savings and lump sum investment options, we are attracting new deposit customers in a contracting domestic market while at the same time we are very successful in retaining our existing savers We hold a 25% share of the savings market We are continuously working to enhance our customer offering with recent digital enhancements that include our 365 monthly saver account that customers can open easily and quickly even on their Mobile phone or Tablet 46

47 Consumer Banking Overview Personal Current Account Strong customer base: 1.2 million consumers have chosen Bank of Ireland for their personal banking, equating to over a third of the current account market. We have recently introduced significant enhancements for our current account customers to help make banking easier including capability to open a second current account and young saver accounts online We have introduced a new simplified pricing structure for personal current account customers that makes it cheaper for customers to carry out electronic transactions. Credit Cards & Loans Leading market share of the Credit Card markets both Consumer and Commercial Market leading motor finance proposition Our customers can apply for a personal loan in just 3 minutes on our website General Insurance We provide our customers with very competitive general insurance propositions for Home, Motor and Travel. Our customers like to stay with us as evidenced by our market leading Home Insurance retention levels. We are very proud of our claims process, managed in conjunction with our Insurance partners, which is quick, simple and hassle free. 47

48 Market Outlook Key Trends ,463m New Mortgage Lending Market 2,637m 2,494m Q4 Q3 Q2 Q1 Reflecting increased levels of activity, property prices nationally rose by 15.0% y-o-y in September 2014 (Source: CSO) Stability Momentum Confidence Availability However, there is significant regional divergence with each sub-market exhibiting different trends: asking prices in Limerick, Clare, Mayo Donegal and Cavan are still lower year on year (Source: Daft.ie), whilst we are also seeing a slow down in the rate of growth on a monthly basis 1.8% in Sept 14 vs. 2.9% in Jun 14 (Source: CSO) The number of property transactions continued to rise in the first eight months of both Dublin and the rest of the country recorded year on year growth in the order of 37% (c.22,558 to Aug 2014; +37% vs. PY) (Source: PPR) Scale of cash buyers remains well above normalised levels at c.40% based on value and c.50% based on number of transactions in Q Consumer confidence is improving against a backdrop of increasing employment and households having a more positive perception of the economic outlook in the future. It is currently at its highest level since February (Source: ESRI) Unemployment peaked in Q at 15.0% and has fallen incrementally to 11.1% at September 2014 (lowest since March 2009) (CSO) On the supply side, strong demand is still outstripping supply in sought after areas, particularly in Dublin. New Supply at c.5.8k completions to July 2014 continues to trend significantly behind estimated requirement of units per annum. Market Size Total new mortgage lending at a market level for H was 1,388m, up 64% vs. H The latest market forecast for new lending at an industry level is c. 3.8billion (+50% vs. 2013) (Goodbody). Most estimates of normalised mortgage lending in the Irish market range between 8bn and 10bn per annum (Merrion/Goodbody). BOI information classification : Purple - confidential 48

49 We have a strong mortgage proposition Mortgages Anytime Anywhere 250 branches nationwide 8am openings Mobile Mortgage Managers Our 24 hour promise 2-minute form online Contact centre sales team Mortgagestore.ie 1% Stamp Duty offer 1% Self-Build Bonus Real approval in 24 hours not just approval in principle House-Hunter Mortgage Approval BOI information classification : Purple - confidential 49

50 Bank of Ireland Business Banking Ireland 3. Progress Update BOI information classification : Purple - confidential 50

51 Business Banking SME Lending Overview Bank of Ireland > 50% of the flow of new non-property lending in last four quarters measured, including Q Strong growth in Motor, Agri, Healthcare and Hotel and Leisure Applications >50k, up high single digits on last year 8 out of 10 Applications approved Drawdowns up high late teen digits on last year Working Capital / Overdraft utilisation at circa one third of capacity - below historic norms of >50% 51

52 Business Banking SME Sector Activity Agri The Agri sector continues to expand, approvals in H increased by 16% over the same period in 2013, funding approvals for agri land acquisition are running at c.400 acres per week in Motor Strong new car sales in 2014, sales in July (18,776) saw a 61% increase on the same month last year (11,620). The Motor market is up by 30% across the total industry and BOI s performance is in excess of this. Hotels & Leisure RevPAR (revenue per available room) up three years in a row in Dublin and up in all geographies throughout The bank continues to grow market share in this sector. Property Development Commercial property prices grew strongly throughout the first half of 2014, we made funds of 250m available for property development and following a slow start are beginning to see greater demand. 52

53 Business Banking Government Schemes and Strategic Banking Corporation Ireland Credit Guarantee Scheme > ¾ of industry approvals/ utilisation. The Bank continues to work closely with the Scheme operators, Capita and the Department of Jobs, Enterprise and Innovation (DJEI) in promoting the Scheme and helping to make revisions to encourage greater utilisation. Microfinance Ireland (MFI) We have promoted awareness of MFI throughout the branch network and processes have been put in place to ensure that customers are referred to MFI where applicable. Bank of Ireland work closely with MFI and include a paragraph in decline letters issued to customers advising of their right to approach MFI, where eligible. Credit Review Office (CRO) We continue to liaise with the Credit Review Office and aim to work towards a mutual agreement. Ten applications were referred from the CRO in Q (11 were referred in Q2 2014). Strategic Banking Corporation Ireland (SBCI) We are participating in the SBCI initiative, and are already engaged with NTMA on implementation. 53

54 Business Banking Supporting Enterprise National Enterprise Week Bank of Ireland will host its 11th National Enterprise Week on the 14 to 21 November. A range of activity is planned across the country to help SMEs to showcase their businesses, to network and to support the SME community across the country. Enterprise Town The concept involves Bank of Ireland facilitating and enabling a number of business and community initiatives through the local Branch and a dedicated Town Committee. The initiative focuses on the three key pillars of Business, Community and Schools to promote local trade and job creation and highlight all the town has to offer. Bank of Ireland Accelerator Programme (Cork) 8 selected Start-up companies undertake an intensive programme designed to move their businesses to the next level. In addition, the companies receive financial support and bespoke coaching and mentoring from Irish and European business experts such as Bill Liao and Sean O Sullivan. Google Programme for SME s Our exclusive partnership with Google offers places to SMEs (both Bank of Ireland and non-bank customers) to attend a training course over a 90-day period to enable them maximise the potential of their web presence and develop sales revenue digitally. 54

55 Business Banking Supporting Irish SMEs Enterprise Lounge The Bank of Ireland Enterprise Lounge in Grafton St, Dublin 2 is a unique amenity offering entrepreneurs and business start-ups a host of free services and facilities including free work space with WiFi and a place to host meetings and presentations. Range of Specialist Funds to support SMEs at appropriate stages of their development Bank of Ireland s Seed and Venture funds: Seed and Early Stage Equity Fund / MedTech Accelerator Equity Fund 2009 ( 32m) Investments made to 63 businesses Start-Up and Emerging Sectors Equity Fund 2010) Investments made across 25 companies. BDO Development Capital Fund (DCF) (of which Bank of Ireland funding of 20m) A range of specialist Funds including property and 1bn agri fund are also available. 55

56 Bank of Ireland Life Over 500,000 customers and funds under management of 15 billion Looking after the protection, pension and investment needs of Irish customers Multichannel distribution through Bank of Ireland branches, independent brokers and a team of financial advisors with a combined market share of 24% in 2013 New Ireland voted Best Life Insurance Company 2013 by PIBA Brokers New Ireland voted Best small Contact Centre 2013 Strong and robust capital position maintained throughout the financial crisis in the Life Insurance Division Strong momentum in the business as consumer confidence returns and Irish people look to secure their financial well being 56

57 Bank of Ireland Corporate and Treasury 3. Progress Update

58 Corporate and Treasury Overview The Corporate & Treasury Division comprises the following business units: 1. Corporate Banking 2. Global Markets 3. IBI Corporate Finance Corporate Banking #1 Corporate Bank in Ireland, providing a full service offering to large corporates >30% share of the Irish market, including well over 50% share of Irish foreign direct investment Bank of Ireland remains the key Irish commercial funder for the provision of long term debt to Irish Public Private Partnerships, funding key infrastructure projects in Ireland Leading debt provider to the Irish construction and investment market recovery over the last 18 months Corporate Banking provided new lending in the six months to 30 June 2014, well up from the six months to 30 June

59 Corporate and Treasury Overview Global Markets is Ireland s leading treasury services provider Leading provider of fx, hedging, and interest rate products to retail and commercial customers Provides trade finance to Irish exporters, facilitating their exporting goods and services to Eastern European, Middle East and African counties Manages the fx and interest rate risk for the Bank of Ireland Group Executes the Group s funding strategy in the capital markets; and Manages the portfolio of Government bonds and other securities held by the Bank for liquidity purposes. IBI Corporate Finance is Ireland's longest-established corporate finance adviser Ranked as the No. 1 financial adviser in Ireland since 2004 in the annual review of international mergers and acquisitions activity by specialist M&A publisher, Mergermarket 59

60 7 Governance 3. Progress Update

61 Strong Risk Governance confirmed by Independent Reviews 61

62 Bottom Up Risk Aggregation, Reporting, Escalation & Action Strong Risk Governance confirmed by Independent Reviews The Risk Governance enables and reconciles Top-down and Bottom-up Risk information flow and enhances strategy execution and decision-making by enabling the evaluation and challenge of Group risk appetite, the establishment and cascade of limits, the evaluation of activities creating or destroying value and optimising return versus risk throughout the business RISK GOVERNANCE PYRAMID ROLE KEY RESPONSIBILITIES RISK OVERSIGHT On the top of the risk pyramid, has the ultimate oversight and accountability for the risk and related control environment in the Group Court of Directors Court-Level Risk Committees (CRC & GAC) Senior Executive Risk Committee (GRPC) Group Functions (eg, GC&MR, GGR, etc.) Top Down Risk Appetite, Limit Setting and Monitoring NON-EXECUTIVE CHALLENGE RISK ESCALATION, DEBATE & ACTION RISK AGGREGATION & ANALYSIS Is responsible for reviewing and approving risk appetites, risk framework and policies Providing effective and independent risk oversight (eg, via Court Risk Report, Top 5 risks process, review & challenge, etc.) Scrutinising and challenging senior management risk committee actions and proposals Approval of ICAAP incorporating Solvency Stress Testing, Reverse Stress Testing, etc. Reviewing, debating and challenging risk information and escalation issues Using aggregated risk information to support decision making and drive management actions Aggregating, analysing and coordinating risk management activities and processes (eg, as represented in Divisional Risk Reports, Court Risk Report, etc.) Business Units RISK ASSESSMENT & OWNERSHIP Identifying, assessing and reporting risks inherent to the business in line with the group risk management framework and standards Comprehensive Assessment (SSM) 2014 thorough review of policies, procedures, methodologies, processes and accounting for loan classifications and provisioning 62

63 8 Training and Learning 3. Progress Update

64 Training and Learning in Bank of Ireland Key Points Bank of Ireland Group Learning provides a broad curriculum of over 400 development programmes to all staff supporting their individual development in line with business requirements. In Q1 to Q we have delivered 90,170 training hours on an extensive range of programmes delivered through a blend of media including class room, web, iphone, and conference calls. Our curriculum brings a blend of internally developed programmes along with programmes delivered Sept in 2014 partnership with Irish, Oct to UK Nov and 2014 US universities Dec to Jan and 2015 business schools. Jan to Feb 2015 We also support individuals in obtaining 3 rd level education qualifications that are required to fulfil their role. We provide programmes to a broad range of charitable organisations and customers in conjunction with our strategic partners. We are proud to have been recognised for a number of our programmes at a major external awards events in Skillsoft European (EALA) Awards overall winner of the Best elearning Project Irish Institute of Training & Development (IITD) awards recognised in two categories 1. Innovative Use of Technology 2. Excellence in Coaching CIPD UK Awards highly commended for Best Use of Technology only Irish organisation recognised. 64

65 9 Corporate Social Responsibility 3. Progress Update

66 Corporate Social Responsibility in Bank of Ireland Key Points Significant emphasis in building a strong and credible Corporate Social Responsibility Programme (CSR) across the Group during Actions include: 1. College Green Cultural and Heritage Centre 2. Sept Give 2014 Together Oct to Nov 2014 Dec to Jan 2015 Jan to Feb Work with flagship charities 4. LearningZone 1. College Green Cultural and Heritage Centre: A new public exhibition space being made available to the State for a ten year period Space will be accessible to all members of the public via the Westmoreland Street entrance to the College Green buildings Bank of Ireland to undertake the extensive refurbishment of the space preparing it for exhibition use and will support the animation of the space by the Department of Arts, Heritage and the Gaeltacht Exhibition facilities will be c.600 sqm and will be a significant addition to cultural and tourism core of Dublin City Centre 66

67 Corporate Social Responsibility in Bank of Ireland Key Points 2. Give Together Bank of Ireland runs a charitable and community investment programme, Give Together, which facilitates Employee Fundraising and Volunteering and has been in place since Through Give Together: Sept 2014 Oct to Nov 2014 Dec to Jan 2015 Every employee has a day to volunteer for the cause of their choice Jan to Feb 2015 The Bank provides matched fundraising support Since Give Together was launched in 2007, over 22 million has been donated to good causes in the communities in which we do business. In 2013, over 2.4 million was donated to good causes by our employees including the matched giving by Bank of Ireland. To date in 2014 over 2.2m has already been raised through Give Together to the benefit of the community and charitable sector in Ireland. 67

68 Corporate Social Responsibility in Bank of Ireland Key Points 3. Work with flagship charities The Bank is also working with a number of well known flagship charities to provide fundraising and volunteering opportunities to employees who prefer to get involved in an organised event. With over 11,500 employees, the Bank provides a useful platform for these flagship charities, which will be refreshed on a regular basis to provide opportunities to other charities in Ireland. These Sept charities 2014 are: Oct to Nov 2014 Dec to Jan 2015 Jan to Feb 2015 St. Vincent de Paul Irish Cancer Society Barnardos Pieta House Co-operation Ireland While the principle focus of giving is in the communities where we are based, Bank of Ireland is also proud to support the Bank of Ireland Staff Third World fund, which was established by employees over 30 years ago and is one of the oldest payroll giving schemes in Ireland. Throughout this time, the fund has provided grants totalling 17m to support c. 1,100 projects on behalf of deprived communities in the developing world benefitting c. 1 million people across 45 countries. 4. LearningZone Since 2012, the Bank s bespoke learning facility which it runs in partnership with Accenture, LearningZone, has hosted over 500 dedicated days training to staff of charitable and community organisations. 68

69 10 Conclusion 3. Progress Update S BOI information classification : Purple - confidential 69

70 Conclusion / 1 Priorities for the balance of 2014 and beyond - Total focus on delivering Continue to support and benefit from Irish and UK economic recovery Continue to develop relationships with existing and new customers Utilising our multi-product, multi-channel offering in Ireland and partnership model in GB Customers Enhancing customer services, infrastructure and distribution platforms Achieving our lending and revenue growth ambitions in Ireland, the UK and in our Acquisition Finance business Continue to provide and develop appropriate solutions for customers in financial difficulty Effectively manage the developing regulatory environment, having passed the 2014 ECB Comprehensive Assessment Capital and Funding Capital generation priority is planned de-recognition of 2009 preference shares in 2016 Maintain: I. Trend reduction in and term out of wholesale funding II. III. Diversity, mix and volumes of customer deposits Reduction in cost of liability base Risk Management Proactive Management of Risks including inter alia; Credit, Market, Regulatory, Conduct, Operational (including technology risk) 70