1 PAGE 2010: RESULTS INTERIM INTERIM RESULTS 2010
Forward looking statement PAGE 2 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 the US Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in the forward looking statements. Factors that could cause actual results to differ materially from those in the forward looking statements include, but are not limited to, global, national and regional economic conditions, levels of market interest rates, credit or other risks of lending and investment activities, competitive and regulatory factors and technology change. Irish Life & Permanent 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 of the date on which they are made. INTERIM RESULTS 2010
Index PAGE 3 SECTION: PAGE: Business review 05 Review of life business 11 Review of banking business 20 Strategic agenda & Summary Financial Review 23 Group earnings 28 Funding 29 Arrears 32 Loan impairments 34 Capital 36 Outlook 38 Additional information INTERIM RESULTS 2010
Business Review PAGE 4 � Life* profits recover RECOVERY UNDERWAY � Bank losses stabilise � Overall results -€10m � Operating profit � 40% LIFE PERFORMANCE NORMALISING � Business retention improving � Good progress on funding BANK MANAGING KEY ISSUES � Net interest income stable � Provisioning � 21% STRATEGIC OPPORTUNITIES � EBS proposal * Life & Fund Management KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Life: Normalising the Performance PAGE 5 � Profitability � Retention � Sales KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Life: Recovery in Profitability PAGE 6 � New business €m ▲ % H1 2010 � Improved margins 28 +22 New business � Increased overall sales volumes 90 +48 In-force � In-force Operating profit 118 +40 � Strong risk profits � Lower persistency variance KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Life: Retention Improving PAGE 7 Retail: Returning to long term lapse assumptions Retail � Lapses peaked Q1 2009 2010 2009 Lapses v LTA � Significant improvement this year to date Quarter 1 136% 192% � Actions on: Quarter 2 125% 159% � Seller / distribution remuneration Quarter 3 � 105%* 139% Product features / flexibility � MIS and activity management Quarter 4 147% * forecast Corporate � Policy lapses peaked in H2 2009 � Normalising towards end of 2010 KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Life: Sales Recovery PAGE 8 � Retail Life � Sharp declines in 2008 & 2009 but stabilising in 2010 2009 2010 2011 2012 � Driven by strong consumer confidence and improvement in RETAIL DECLINE STABLE RECOVERY GROWTH markets CORPORATE DECLINE DECLINE STABLE RECOVERY � Corporate Life � ILIM GROWTH GROWTH GROWTH GROWTH Declines in 2009 & 2010 � Resumption of salary and employment growth will drive Bottom of cycle sales � ILIM - track record drives continued growth through cycle KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Life: Sales outcome PAGE 9 Overall sales � 22% � €m ▲ % H1 2010 � Single premium life sales � 7% � Investment bonds � 29% 65 (4) Retail Pension � 2% � 70 (23) Corporate � Annual premium life sales � 25% 141 +107 ILIM & ILI � Low salary growth and recruitment � SME cash-flow weak 276 +22 Total � ILIM continues to outperform * APE basis � Inflows double to €1.2bn KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Life: Outlook PAGE 10 >>> SALES: Recovery in line with expectations >>> RETENTION: Revert to long term assumptions by year end >>> PROFITABILITY: Further recovery KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Banking: Managing Key Areas PAGE 11 � Funding � Impairments � Profitability KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Bank: Funding Strategy PAGE 12 � Focus on maximising “stable funding” 2010 2011 2012 - retail deposits and long-term funding % % % � Aim to have 70% of funding comprising retail deposits and long- Retail Deposits 27 31 34 term debt by 2012 33 Long Term Debt 34 36 � Residential mortgage book provides large pool of quality collateralised Stable funding 60 65 70 assets to cover any risks to short- Short Term Debt 40 35 30 term funding 100 100 100 � H1 2010 loan to deposits ratio of 240% and stable funding ratio of 56% KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Bank Deposit Funding Progress PAGE 13 Retail Deposit Growth � Retail inflows of €0.8bn in H1 2010 � Branch networks � Brokerage � 25,000 current accounts � Full year Retail target of €1.7bn � Corporate deposits � Down slightly � Manage transition as guarantee changes end September KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Bank: Term Funding Programme PAGE 14 � Refinancing requirement of €6.4bn in total for 2010, of which €5.1bn raised Year Main Amount YTD Status � Balance of €1.3bn refinancing to be done by year end � Further issuance of up to €1.5bn Guaranteed €1.3bn – €2.8bn 2010 (H2) targeted to improve funding mix � Strategy to migrate from guaranteed 2011 Secured €2.0bn funding to normalised term issuance Secured €2.0bn 2012 � Secured / unguaranteed issuance of €2bn in 2011 and Unsecured €2.0bn 2013 2012 � Unsecured / unguaranteed issuance of €2bn in 2013 KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Bank: Loan Arrears & Impairments PAGE 15 Irish Residential Mortgage Arrears Cases � Continue to work with customers experiencing difficulties with mortgage repayments � ROI residential arrears continuing to rise, early arrears more slowly � Reductions in ROI consumer finance UK Mortgage Arrears Cases and UK residential arrears � Impairment provisions at €150m, � 21% on H1 2009 � Impairments peaked in 2009, arrears to peak in 2010 KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Bank: Loan Book PAGE 16 Loan Balances Loan book � 2% in H1 2010, � constant currency basis � Gross new lending €350m in H1 2010 � Low level of redemptions impacting level of new lending � UK book closed to new business Total Loan Book €38.7bn (Dec 2009: €38.9bn) KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Bank: Profitability - N.I. Margin PAGE 17 � Margin stable in H1 2010 � Higher funding costs � SVR increases in February and August 2010 � New Government Guarantee add further to bank funding costs KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Bank: Profitability - Cost Reduction PAGE 18 � Continuing cost reductions � � 15% from peak in 2008 � Voluntary redundancy programme in Q1 � 140 FTEs staff � Cost €18m � Annualised cost saving of €9m � Accenture review � Long term cost reductions � Income generation opportunities � On hold KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Bank: 3 Year Targets PAGE 19 2013 H1 2010 Target Actual >1% NII 0.81% Normalised Impairment charge €150m >10% Tier 1 capital 10.7% <170% L/D ratio 240% 70% Stable funding rate 56% >10% Return on equity (ROE) Negative KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Strategic Opportunities PAGE 20 Banking � EBS Building Society � Irish Nationwide Building Society � ICS Building Society Insurance � New Ireland � Other Fund Management � Bank of Ireland Asset Management � Allied Irish Bank Investment Managers KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Summary PAGE 21 LIFE - STRONG PROFIT GROWTH BANKING - PATH TO RECOVERY STRATEGY - MAKING PROGRESS KEVIN MURPHY: GROUP CHIEF EXECUTIVE INTERIM RESULTS 2010
Financial Review PAGE 22 � Earnings � Funding � Asset quality � Capital � Outlook DAVID MCCARTHY: GROUP FINANCE DIRECTOR INTERIM RESULTS 2010
Group Earnings PAGE 23 � Small operating loss due to: H1 10 H1 09 Change � Strong recovery in life business €m €m % � Bank continuing to experience Operating (loss) / profit higher funding costs and 118 84 • Life 40 significant impairment provisions (131) (132) • Banking 1 � Life embedded value changed by: 3 (3) • Associate / other � Property and equity markets flat (10) (51) Operating (loss) 80 compared with large property falls in H1 2009 Life embedded value: � Negative impact from change in (11) (80) • Investment fluctuations reserving basis for financial options & guarantees (7) (89) • Economic assumptions � Increase in risk discount rate to • Consol. adjustment (4) 0 8.1% (2009: 7.5%) as a results (Loss) before tax (32) (220) of an increase in Irish gilt yields DAVID MCCARTHY: GROUP FINANCE DIRECTOR INTERIM RESULTS 2010
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