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IRELAND: 7% GROWTH IN SLUGGISH WORLD
Government debt ratio below 100%, fastest growing economy in EA
January 2016
Index
Page 3: Summary
Page 8: Macro
Page 33: Fiscal & NTMA funding
Page 49: Long-term fundamentals
Page 58: Property
Page 66: NAMA
Page 73: Banking
2
3
SUMMARY
Ireland’s credit spread narrows to around half a percentage point
Ireland outperformed again in 2015
• Ireland is growing faster than every other euro area country Ireland’s economy grew by 7% real and 11.7% nominal in the first three quarters of 2015.
Consumer spending and investment have recovered. Spending is up for seven straight quarters. Ireland has benefitted from the sharp depreciation of the euro following ECB quantitative easing, low interest rates and the dramatic decline in oil prices.
Unemployment is falling but the pace of improvement has slowed a little. The rate was 8.8% in December 2015, down from the crisis peak of 15.1% in Q1 2012.
• Government exited the EDP in 2015 and posted deficit of around 1.5% The deficit will beat the Government forecast of 2.1% of GDP for 2015. This allowed the
Government an extra 2015 stimulus of 0.75pp. For 2016, it is forecasted to fall to 1.2%.
Ireland has beaten its target for five straight years. At end-2010, the EC set Ireland a 2015 goal to exit the Excessive Deficit Procedure (EDP): no extensions were required.
• Government debt below 100% of GDP by end-2015, down from 120% The official forecast is for a ratio of 97% - it could be closer to 95% - helped by the large
excess of nominal growth over interest cost and second primary budget surplus in a row.
The return of capital to the Government from sales of equity stakes in state-owned banks and the eventual wind-up of NAMA will reduce debt in the next few years.
4
Funding has begun in 2016; set to be lighter than 2015
• Funding Plan for 2016 announced NTMA plans to issue €6-10 billion of long-term bonds over the course of 2016 Funding is low thanks to falling deficits and late-2017 being the next major
redemption
• 2016 Funding off to a successful start On January 7th, the NTMA issued a €3bn 2026 bond via syndication – at a yield of
1.156% The investor base continues to expand: 88% share of the syndication was bought
by international investors, led by the UK (32%), the Nordics (13%) and Germany (11%).
Among investor categories, the bias of the deal was to real money: asset/fund managers (37%), banks (22%) and pension/ insurance (17%).
• 2015 was a strong year for the NTMA We raised €13bn from a stated range of €12-15bn at the outset of 2015. The
lower-than-forecast Government deficit limited our need. The NTMA completed the early repayment of IMF loans in 2015. A total of €18bn
worth of loans was refinanced: total interest cost savings could exceed €1.5bn (0.8% of GDP) over 5 years. We issued our first ever 30-year bond last February.
5
Ireland’s happy bond market story has lots of milestones
6
Source: Bloomberg (weekly data)
NAMA haircuts, rising ELA &
Deauville
EU/IMF Programme
PCAR results
Moody's downgrade
EU/IMF loan rate reduction
ECB 1st LTRO
NTMA issuance recommences
NTMA returns with bond syndication
Promissory Note deal & Liquidation of IBRC
begins
EU/IMF Programme Exit
NTMA returns with regular bond auctions
-1
4
9
14
19
24
Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15
10 Year 2 Year
OMT announced
ECB QE
Trend is upwards in Ireland’s sovereign credit ratings
Rating Agency Long-term Short-term
Outlook/Trend Date of last
change
Standard & Poor's A+ A-1 Stable June 2015
Fitch Ratings A- F1 Positive Aug. 2015
Moody's Baa1 P-2 Positive Sept. 2015
DBRS A R-1 (low) Positive Sept. 2015
R&I A- a-1 Positive Dec. 2015
7
8
SECTION 1: MACRO
Recovery strengthened in 2015; Unemployment has dropped sharply from a peak of 15.1% of the labour force to 8.8% in December 2015
-10.0
-8.0
-6.0
-4.0
-2.0
-
2.0
4.0
6.0
8.0
10.0
2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016f
Domestic Demand Net Exports Change in Inventories GDP Change Forecast
Personal consumption and investment drove GDP growth in real terms in 2015
9
Source: CSO; Department of Finance(Budget 2016); * Imports of intellectual property and aircraft trade exaggerate the contribution from domestic demand and underestimates the effect of Net Exports. Excluding this factors, the contribution of Investment is closer to 40% of GDP growth while Net Exports is closer to 20%, not a small negative. Please see slide 30 for more details.
%
Domestic Demand contributing strongly in first three quarters of 2015 -
highlighting a more broad based recovery*
Nominal GDP (€bn) exceeded pre-crisis peak in 2015
10
Source: CSO; Forecasts from Department of Finance (Budget 2016)
0
50
100
150
200
250
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015e 2017f
Growth remained strong in Q3 2015, after robust H1
• 7% real GDP growth for H1 2014 – well above expectations
• Q-Q real growth outturn for Q3 2015 was 1.4%, with Q2 2015 growth at 1.9%
• Investment was nominally the driver in 2015 – although growth is overstated by the movement of Intellectual Property (IP) into Ireland.
• Personal consumption is now a key driver of growth (3.6% y-o-y to Q3 2015).
• Exports grew strongly in Q3 2015 but imports outpaced exports (due in part to IP/ intangible asset issue).
11
Source: CSO; NTMA workings
Real GDP Growth Y-o-Y %
-20%
-10%
0%
10%
20%
30%
40%
Q4 2014 Q1 2015 Q2 2015 Q3 2015
Private Consumption Investment
Government Net Exports
GDP
Ireland’s economy outperformed the euro area in 2015 and is expected to do so again in 2016
Real GDP Y-o-Y growth rates The composite PMI is a strong leading
indicator for Irish GDP growth
12
Source: Department of Finance; Euro area forecasts based on EU Commission Forecasts Source: CSO; Markit
0%
1%
2%
3%
4%
5%
6%
7%
Department of Finance(Oct-15)
Euro Area (Nov-15)
2015 2016 2017
30
35
40
45
50
55
60
65
70
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
Q12004
Q12006
Q12008
Q12010
Q12012
Q12014
Q12016
GDP PMI Composite (leading 2 Quarters)
Correlation is strongest when PMI is leading
by 2Qs
External factors such as energy prices and weaker euro boosted GDP growth in 2015
13
90
95
100
105
110
115
120
1995 1999 2003 2007 2011 2015
Source: Bloomberg Source: CBI, NTMA workings
Brent Oil €/Barrel
Most competitive since early 2000s
Real Harmonised Competitiveness Indicator
0
20
40
60
80
100
120
2005 2007 2009 2011 2013 2015
Ireland’s goods exports respond vigorously to euro depreciation; GDP higher thanks to openness
14
0.99
0.51
0.37
0.89
1.13
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
US UK EA ROW EXP EXLPHA
Source: CSO; NTMA empirical analysis
Note: All coefficients significant at 99% level
Response of Irish goods exports to 1% depreciation of the euro
• A 1% depreciation of the euro increases Irish goods exports to the US by 1%
• The equivalent response for exports to the UK is 0.5% and to the rest of world is 0.9%
• The EUR/USD exchange rate has a positive effect (elasticity of 0.37) on Irish goods exports to the euro area, due to Ireland-based multinational companies’ exports to EA for onward sale to the rest of the world
• The elasticity of total goods exports excluding pharma to the exchange rate >1
Ireland has benefited the most in the euro area from the recent euro depreciation
15
Source: Bruegel - ‘Real effective exchange rates for 178 countries: a new database’; NTMA Workings Note: REERs cover business sector excluding agriculture, construction and real estate activities and are calculated against 30 trading partners using fixed weights from Q1 2008. Data available to Nov 2015. See Darvas, Z (2012) for more details.
Yearly change in real effective exchange rate
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
Competitiveness gains not explained away by shift to highly productive/
less labour-intensive sectors
Services exports have driven export performance post-crisis
-5
0
5
10
15
20
25
30
35
40
95
100
105
110
115
120
125
130
135
140
2009 2010 2011 2012 2013 2014 2015
Goods (% of growth) Services (% of growth)
Total Exports
16
Cumulative post-crisis exports (4Q sum to end-2008 = 100)
Large increase in goods exports exaggerated by
contract manufacturing*
Source: CSO, NTMA calculations Source: CSO, World Trade Organisation * For discussion on contract manufacturing and its limited effects on Ireland’s National Accounts, please see here.
Patent Cliff 0%
1%
2%
3%
0%
10%
20%
30%
40%
50%
60%
1980 1984 1988 1992 1996 2000 2004 2008 2012
Ireland Services Export % GDP
Irish Services Export (% of Global Share, RHS)
Ireland has tripled its share of global service exports in the last 15 years
Export structure has changed dramatically, thanks to the arrival of new technology/ social media firms
17
5%
8% IT
2%
3%
3%
6%
26% Pharma
Machinery , 32%
15%
2000
Insurance & Financial Services Computer ServicesBusiness Services Other ServicesTourism AgricultureChemicals MachineryOther Goods
9%
25% IT services
10%
7% 2%
5%
26% Pharma
6%
10%
2014
Source: CSO, DataStream
Consumption is now a large contributor to growth
15
16
17
18
19
20
21
22
23
24
2000 2003 2006 2009 2012 2015f
Quarterly Consumption (€bn)
Consumption contributed positively to GDP growth in 2014 and 2015
Seven consecutive quarters of positive q-o-q growth for the volume of consumption
18
Source: CSO, NTMA calculations, Department of Finance forecasts
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
2003 2005 2007 2009 2011 2013 2015e
Consumption Rest of Economy GDP
High frequency indicators show Ireland’s uniform recovery is much stronger than euro area’s
Ireland growing faster than EA PMI composite difference (pts.)
All sectors growing (PMI chg. as cumulative index level, June 2000=100)
19
Source: Markit; Bloomberg; Investec ; NTMA workings
0
50
100
150
200
250
300
2000 2002 2004 2006 2008 2010 2012 2014
PMI Services PMI Manufacturing
PMI Construction
-10.0
-5.0
0.0
5.0
10.0
15.0
Labour market has rebounded since 2012
Unemployment rate down to 8.8% in December 2015
20
0
2
4
6
8
10
12
14
16
1999 2001 2003 2005 2007 2009 2011 2013 2015
Source: CSO
Employment up 6% from cyclical low
Down over 6pp from peak in
less than three years
000s
1,400
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
1998 2000 2002 2004 2006 2008 2010 2012 2014
Labour participation has not yet recovered – similar to US; Wages only now rising, pointing to slack in market
Participation rate hovering around 60%
21
Source: CSO
Wages and hours worked beginning to recover, although pockets of excess capacity remain
Source: CSO
56%
57%
58%
59%
60%
61%
62%
63%
64%
65%
1998 2000 2002 2004 2006 2008 2010 2012 2014
Hu
nd
red
s
35,500
35,750
36,000
36,250
36,500
36,750
37,000
31.2
31.3
31.4
31.5
31.6
31.7
31.8
31.9
Q42009
Q32010
Q22011
Q12012
Q42012
Q32013
Q22014
Q12015
Hours Worked (Annualised)
Annualised Earnings (annualised,€, RHS)
Rising employment and house price rises lift retail sales; confidence back at mid-2000s level
Consumer confidence recovers “Core”* retail sales jump (peak=100)
22
75
80
85
90
95
100
105
2005 2007 2009 2011 2013 2015
Volume Index Value Index
Source: KBC, ESRI, CSO *Excluding motor trade; 3 month average used
Massive Gap = price discounting
20
40
60
80
100
120
140
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
70
80
90
100
110
120
130
140
2009 2010 2011 2012 2013 2014 2015
Public Goods/Services Inflation
Private Goods/Services Inflation
Overall Inflation
Stagnation in consumer prices; good news that real incomes are underpinned by lower oil prices
Inflation similar to euro area… …and driven by public goods/ services
23
Source: CSO
Jan 2009 = 100
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
1999 2001 2003 2005 2007 2009 2011 2013 2015
Hu
nd
red
s
HICP Ireland HICP Euro Area
Industrial production increasing quickly due to pharma; growth from traditional manufacturing has slowed
24
Source: CSO
6 month moving averages (Jan 2005 = 100)
80
100
120
140
160
180
200
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Industrial Production Traditional Sector Modern Sector
Large increase stemming from contract manufacturing in
pharma sector
Private debt levels are high, apart from “core” domestic companies
0
50
100
150
200
250
300
350
400
450
Q1 2006 Q1 2008 Q1 2010 Q1 2012 Q1 2014
€ B
illio
ns
Resident banks OFIS ROW
NFCs and other Total
Irish Non-Financial Corporate (NFC) debt is distorted by multinationals (€bn)
Household debt ratio (% DI) declining (see next slide) but still among highest in Europe
0
50
100
150
200
250
300
25
Source: Eurostat (2014 data except 2013 data for euro area)
Source: NTMA analysis; Breakdown from Cussen, M. “Deciphering Ireland’s Macroeconomic Imbalance Indicators”, CBI * OFI = Other Fin. Intermediaries
Green bars account for true “Irish” NFC debt (€bn)
-250
0
250
500
750
1,000
2002 2004 2006 2008 2010 2012 2014
Financial Assets Liabilities
Housing Assets Net Worth
Household deleveraging continues, but at slow pace; Rising house prices bolster HH balance sheets
26
* Measure includes both loans and other liabilities. Excluding other liabilities, debt-to-income ratio is 167%
Household net worth (€bn) improved in 2015 and has underpinned consumer spending
Debt-to-income ratio in Q2 2015 at 177%*, the lowest since Q4 2005
Source: CBI, CSO Source: CBI, NTMA calculations
50
70
90
110
130
150
170
190
210
230
2003 2005 2007 2009 2011 2013 2015
Household Debt (€bn)
Household Disposable Income (€bn, annualised)
Interest burden high but suppressed by trackers; savings rate around euro area average
Interest burden on households has been suppressed by tracker mortgages and ECB..
…and falls heavily on households with non-tracker mortgages
27
Source: Eurostat Source: CBI, NTMA Analysis
Note: Interest burden is ‘actual’ (i.e. excludes FISIM adjustment) and is calculated as a share of actual gross disposable income.
0%
2%
4%
6%
8%
10%
12%
14%
2002 2004 2006 2008 2010 2012 2014
% o
f d
isp
osa
ble
Inco
me
EA Germany
Ireland Spain
Italy Netherlands
United Kingdom
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
2012 2013 2014 2015
Non-Tracker Mortgage Other Debt
Tracker Total
Gross household saving rate revised downwards significantly; helps explains consumption pick up in ‘14
28
Source: Eurostat, CSO
0
2
4
6
8
10
12
14
16
2002 2004 2006 2008 2010 2012 2014
% o
f D
isp
osa
ble
Inco
me
(4
Q M
A)
Ireland EU-28 EA-18 UK
Savings increased in 2015
Increase in investment in 2015 Q2/Q3 overstated due to large imports of Intellectual Property
Intangible asset transfer increases investment and reduces net exports
29
Source: CSO, NTMA analysis * Excl. imported IP, investment grew by 29% y-o-y
Please note that this quarterly data is volatile and not as reliable as the published annual data
0
2
4
6
8
10
12
14
1997 2000 2003 2006 2009 2012 2015
€ B
illio
ns
Total Investment Investment excl. intangibles
Machinery and Equipment
Building Investment
-20%
-10%
0%
10%
20%
30%
40%
Q3 2015 Adjusted for IP
Estimated Y-o-Y growth rate
GDP Investment Exports
Aircraft trade coupled with IP imports mean Irish National Accounts are further complicated
Further to issue of IP imports, investment and net exports are affected by the presence of aircraft trade in Ireland.
• Under new methodology, trade in aircraft by Irish resident aircraft leasing companies is now recorded in the national accounts.
• Like IP imports, this leads to an increase in imports and a subsequent decrease in net exports. There is an offsetting increase in investment.
• Again this has no effect generally on GDP and GNP.
• But excluding these two factors gives a better picture of the underlying drivers of GDP growth in 2015.
4.9%
2.7%
-0.6%
1.6%
2.6%
2.6%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
National Accounts Adjusted for IP and Aircrafttrade
Investment Net Exports Other sources
Investment is reduced & Net Exports increased in adjusted case*
30
Source: CSO, NTMA analysis *Growth for first three quarters of 2015
Investment overall is rising from a low base, but building remains mired at low levels
31
0%
5%
10%
15%
20%
25%
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014
Building Investment % GDP Mach., Equip. and R&D Investment % GDP
Source: CSO * 2015 figures estimated using first 3 quarters growth for 2015.
Economic and fiscal forecasts: Budget 2016
2013 2014 2015e 2016f 2017f
GDP (% change, volume) 1.4 5.2 6.2 4.3 3.5
GNP (% change, volume) 4.6 6.9 5.5 3.9 3.2
Domestic Demand (Contribution to GDP, p.p.) -1.2 4.2 4.3 2.9 2.0
Net Exports (Contribution to GDP, p.p.) 2.6 0.1 2.0 0.2 1.2
Current Account (% GDP) 3.1 3.6 6.9 6.2 5.4
General Government Debt (% GDP) 120.1 107.5 97.0 92.8 90.3
General Government Balance (% GDP^) -5.7 -3.9 -2.1 -1.2 -0.5
Inflation (HICP) 0.5 0.3 0.1 1.2 1.5
Unemployment rate (%) 13.1 11.3 9.5 8.3 7.7
32
Source: CSO; Department of Finance (Budget 2016)
33
SECTION 2: FISCAL & NTMA FUNDING
Ireland’s Government debt ratio dropped below 100% of GDP in 2015; will reach landmark by exiting Excessive Deficit Procedure (EDP)
Five straight years of fiscal outperformance
General Government Balance (% of GDP) Deficit forecast to be fully closed by 2018; recent
improvement may bring this forward (€bn)
34
Source: Department of Finance (Budget 2016) CSO; Eurostat; NTMA workings
0
10
20
30
40
50
60
70
80
90
1995 1999 2003 2007 2011 2015f
General Government Expenditure
General Government Revenue
-10.3
-8.0
-5.5
-4.0
-1.5 -1.2
-10.6
-8.6
-7.5
-5.1
-2.9
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2011 2012 2013 2014 2015E 2016F
GGB DoF forecasts
GGB EU target under EDP December 2010
Ireland has confirmed debt sustainability: debt is falling naturally through “snowball” effect
-15
-12
-9
-6
-3
0
3
6
9
Primary Balance Interest GGB Structural Balance (% potential GDP)
35
Source: Department of Finance; Eurostat; IMF
1.5% primary surplus expected this year
36
Ireland’s fiscal adjustment route quicker than peers
Underlying GGB % of GDP
Change to nominal GDP (%)
Source: European Commission, DataStream Note: All black markers are 2009 starting points
-14
-12
-10
-8
-6
-4
-2
0
-12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12
Ireland Portugal Spain France
GGB % GDP shrinks quickly
even during low growth period
2009
2010
2015F
EDP target 3%
Average interest on total Government below 3.5%; so interest rate-growth maths (i-g) in Ireland’s favour
37
Source: Department of Finance; DataStream
-15%
-10%
-5%
0%
5%
10%
15%
20%
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016f 2018f
Nominal GDP Growth (g) Average Interest Rate (i)
Gross Government debt fell below 100% by end-2015
38
Source: CSO; Budget 2016 (Department of Finance)
Peak
36.6
66.6
77.6
86.7 89.7 87.8
80.0 61.8
86.8
109.3
120.2 120.0
107.5
97.0 92.8
90.3 86.7
0
20
40
60
80
100
120
140
2009 2010 2011 2012 2013 2014 2015E 2016F 2017F 2018F
Net Debt Cash balances/Other EDP assets GG Debt
Following strong 2015 GDP data, debt-GDP ratio
fell below 100% 12 months earlier than
expected
Net Government debt ratio (% GDP) now below that of Belgium – our closest bond market counterpart
39
Net General Government Debt = Gross General Government Debt - EDP Assets EDP Assets = Currency and Deposits + Securities other than Shares (excluding financial derivatives) + Loans Note: EDP assets are all financial assets (excluding equities) held by general government
Source: CSO, Eurostat, NTMA analysis
87.8 80.0
93.6
178.1
119.2 111.4
78.3
0
20
40
60
80
100
120
140
160
180
200
Ireland Belgium Greece Italy Portugal Spain
169%
120%
112%
96% 88%
85% 83%
72%
60% 54% 52%
17% 14% 10%
161%
120%
109%
96% 88%
84% 78%
71%
60% 51% 51%
16%
5% 9%
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
Greece Italy Portugal Belgium France Spain Ireland UK Austria NL Germany DK Finland Sweden
Net debt % GDP Net debt (including bank stakes) % GDP
Core
Irish Govt. bank stakes worth at least 5% of GDP
40
Sources: Eurostat, Banks’ 2014 annual reports, each countries bank rescue fund, NTMA calculations
Periphery
Semi-core
H1 2015 data for Ireland
0
5
10
15
20
25
Bill
ion
s €
Bond (Fixed) IMF and Other EFSM EFSF Bond (Floating Rate) Bilateral
Improved maturity profile in recent years
41
Source: NTMA Note: EFSM loans are subject to a 7-year extension that will bring their weighted-average maturity from 12.5 years to 19.5 years. It is not expected that Ireland will refinance any of its EFSM loans before 2027. As such we have placed the EFSM loan maturity dates in the 2027-31 range although these may be subject to change.
Jan. ‘16 issuance of 2026 bond
€3bn
2016-2020 maturity profile improved significantly in recent years
0
5
10
15
20
25
30
€ B
illio
ns
Debt Profile Near-term reductions
Long-term extensions End 2013 Debt Profile
42
Source: NTMA; Eurostat; Q4 2015 figures
Various operations in last two years have led to an extension of maturity…
… with Ireland comparing favourably to other European countries
11.6
8.5 8.4 8.1 7.9
7.1 6.7 6.6 6.5 6.2 6.0 5.6
11.7
16.3
9.5
0
2
4
6
8
10
12
14
16
IR GR DK BG AT NL FR PT IT ES FN BD
Years
Govt bonds - Weighted Maturity
Govt Bonds & Programme Loans - Weighted Maturity
EA Govt Bonds - Avg Weighted Maturity
Nearly 40% of Ireland’s government debt has maturity over 10 years
General Government Debt breakdown
% share €bn
Retail 10.1% 20.6
Bonds
Short-term* 2.3% 4.7
Long-term 60.8% 124.2
Loans
Short-term* 0.7% 1.4
Long-term 26.1% 53.6
Ireland’s maturity profile in €bn
43
Source: CSO (Q2 2015 data), NTMA
*Short-term definition : Bonds issued with a maturity of less than 1 year
38%
29%
26%
7%
Over 10 years
Between 5 and 10 years
Between 1 and 5 years
<1 year
Includes €8bn April 2016
redemption
Investor base for Irish government debt is wide and varied
Country breakdown – Average over last 7 syndications
Investor breakdown – Average over last 7 syndications
44 Source: NTMA
Ireland, 13%
UK, 27%
8%
Cont. Europe,
30%
12%
10%
Ireland UK
US and Canada Continental Europe
Nordics Other
50%
24%
17%
10%
Fund/Asset Manager Banks/Central Banks
Pensions/Insurance Other
NTMA has been funding approximately 12 months in advance; Less issuance needed in 2016
45
Source: NTMA; Department of Finance
• With only two major redemptions in 2016/17 issuance is lower in 2016 than in recent years. The next bond redemption is the €8.1bn April 2016 bond.
• NTMA expected to issue €6-10bn worth of long term bonds in 2016. €3bn has already been issued.
• Exchequer had €10.9bn of cash and other liquid assets at end 2015.
Open Cash €10.9
Close Cash
c.€10.5
EBR €1.7
Long Term Debt (LT)
€6-10
EBR €4.0
Bond €8.1
Other €2.3
Bond €6.4
Other €1.5
-
2
4
6
8
10
12
Y/E 2015 c.€10.9bn
Outflow €11.3bn
Funding (€6-10bn)
Y/E 2016 c. €10.5bn
2017Outflow
Bill
ion
s €
• EBR is the Exchequer Borrowing Requirement • Cash balances excludes Housing Finance Agency (HFA) Guaranteed Notes and CSA Collateral Funding end-2015
balances . Total Cash and Other Financial Assets at end-2015 were €13.6 billion. • Other outflows includes contingencies, including for potential bond purchases. Other sources Includes short-term
paper, net State Savings (Retail) and other funding.
Central Bank of Ireland purchasing c.€700m worth of IGBs per month under ECB’s QE programme
46
Estimated Composition of ECB’s QE €60 billion/month programme
€10bn
€7.2bn
€42.1bn
Covered Bonds & ABSEuropean Institution securitiesIrish Government BondsOther Government Bonds
7.1
0
5
10
15
20
25
30
Estimated CBI Holdings
2016purchases
Holdings (end-Dec 2015)
€ Bn
Source: NTMA; ECB
IGB purchases c.€700m per month under Capital Key
Rule
With QE extended the CBI will be able
to continue purchases of IGBs
into 2017
Greater geographic balance in holdings of Irish Government Bonds (IGBs)
€ million
End quarter Dec 2013 Dec 2014 Oct 2015
1. Resident 51,747 50,805 49,987
(as % of total) (46.6%) (43.7%) (39.8%)
– Credit Institutions and Central Bank* 49,240 45,875 46,083
– General Government 2,153 1,632 757
– Non-bank financial - 2,870 2,807
– Households (and NFCs) 354 428 340
2. Rest of world 59,260 65,534 75,554
(as % of total) (53.4%) (56.3%) (60.2%)
Total MLT debt 111,007 116,339 125,541
47
Source: CBI * In March 2013 resident holdings increased significantly thanks to the IBRC Promissory Note repayment (non-cash settlement) which resulted in €25.034bn of long-dated Government bonds being issued to the Central Bank of Ireland on liquidation of IBRC. The CBI also took €3bn of 2025 IGBs formerly held by IBRC.
Breakdown of Ireland’s General Government debt
€ million 2010 2011 2012 2013 2014
Currency and deposits (mainly retail debt)
13,708 58,386 62,092 31,356 20,918
Securities other than shares, exc. financial derivatives
96,381 94,013 87,297 112,665 119,078
- Short-term (T-Bills, CP etc) 7,203 3,777 2,535 2,389 3,760
- Long-term (MLT bonds) 89,178 90,236 84,762 110,276 115,318
Loans 34,138 37,723 60,849 71,312 63,191
- Short-term 731 558 1,886 1,442 1,320
- Long-term (official funding and prom notes 2009-12)
33,407 37,166 58,963 69,870 61,870
General Government Debt 144,227 190,123 210,238 215,333 203,187
EDP debt instrument assets 33,516 55,170 58,707 54,435 37,127
Net Government debt 110,711 134,953 151,531 160,898 166,060
48
Source: CSO (Oct 2015)
49
SECTION 3: LONG TERM FUNDAMENTALS
Rebalancing achieved; Fundamentals are in place but retaining competitiveness is crucial
Much rebalancing has taken place; 2007 peak in GNI per capita surpassed in 2015
50
Source: CSO
0
20
40
60
80
100
120
140
160
180
200
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015f
Successful fiscal consolidation in
late 1980s
"Celtic Tiger" 1994-2001
Credit/Property Bubble
Bubble Burst
Recovery
Lower interest rates/
recovery in major export
markets
Delayed Convergence
(Real GNI per capita) 1995 = 100
Ireland’s openness has been critical to rebalancing
51
Exports (%GDP)
1999
Exports (%GDP)
2014
Ireland 85 113
Spain 25 32
Italy 24 29
Portugal 27 40
Belgium 67 86
Source: DataStream (value of exports) Source: CSO
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
% o
f to
tal g
oo
ds
exp
ort
s
US Euro area UK Other
Ireland benefits from export diversification by destination...
…and openness relative to other non-cores
Ireland’s current account in surplus but affected by IP imports and re-domiciled PLCs
52
Source: CSO * For estimates of the undistributed profits of redomiciled PLCs see Fitzgerald, J. (2013), ‘The Effect of Redomiciled PLCs on GNP and the Irish Balance of Payments’
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
1998 2000 2002 2004 2006 2008 2010 2012 2014
Published Adjusted for redomiciled PLCs Adjusted for PLCs and IP Imports
Historically-high current account surplus somewhat
flattered by record net factor inflows
Favourable population characteristics underpin debt sustainability over longer term
53
1.01.21.41.61.82.02.2
Hu
nga
ry
Ro
man
ia
Po
lan
d
Latv
ia
Po
rtu
gal
Ger
man
y
Spai
n
Mal
ta
Ital
y
Au
stri
a
Cze
ch R
ep.
Gre
ece
Slo
vaki
a
Cro
atia
Cyp
rus
Bu
lgar
ia
Esto
nia
Luxe
mb
ou
rg
Swit
zerl
and
Euro
are
a
Slo
ven
ia
EU-2
7
Den
mar
k
Lith
uan
ia
Net
her
lan
ds
Fin
lan
d
Bel
giu
m
No
rway
Swed
en UK
Icel
and
Fran
ce
Irel
and
Turk
ey
Source: World Bank WDI (2013); OECD (2014)
Fertility rates in Ireland are above typical international replacement rates
Old age dependency ratio (65+ : ages 15-64) compares well against OECD countries
05
1015202530354045
Wo
rld
Ch
ina
Ch
ile
Ko
rea
Isra
el
Ru
ssia
Slo
vaki
a
Irel
and
Icel
and
Cyp
rus
Po
lan
d
Un
ited
Sta
tes
Au
stra
lia
Ro
man
ia
New
Ze
alan
d
Can
ada
OEC
D -
To
tal
No
rway
Slo
ven
ia
Hu
nga
ry
Cze
ch R
ep.
Net
her
lan
ds
Spai
n
Au
stri
a
UK
Bel
giu
m
Bu
lgar
ia
Swit
zerl
and
Latv
ia
EU-2
7
Den
mar
k
Po
rtu
gal
Fran
ce
Gre
ece
Swed
en
Fin
lan
d
Ger
man
y
Ital
y
Jap
an
Workforce is young and educated - especially so in IT sector
Ireland has one of the largest % of 25-34 years old with a third-level degree…
…and the highest % of population working in IT with a third-level degree
54
0% 10% 20% 30% 40% 50%
ItalyGermanySlovakia
Czech RepPortugal
Euro areaEU28
SloveniaAustriaGreeceFinlandIceland
SpainDenmark
PolandNetherlands
BelgiumFrance
UKSweden
SwitzerlandNorwayIreland
LithuaniaLuxembourg
Cyprus
Source: Eurostat
0.0% 0.3% 0.6% 0.9% 1.2% 1.5%
ItalyGreece
PortugalGermanyLithuaniaSlovakia
PolandEuro area
BulgariaSlovenia
EU28CyprusFrance
Czech RepAustria
NetherlandsSpain
BelgiumDenmark
LuxembourgSwitzerland
SwedenIcelandFinland
UKNorwayIreland
Ireland continues to attract foreign investment (average FDI inflows per annum as a share of GDP, 2009 – 2014)
55
Source: UNCTADStat
0
10
20
30
40
50
60
D
enm
ark
G
ree
ce
It
aly
S
love
nia
F
ran
ce
G
erm
any
L
ith
uan
ia
S
lova
kia
A
ust
ria
S
wed
en
F
inla
nd
R
om
ania
S
pai
n
P
ola
nd
P
ort
uga
l
C
zech
Rep U
K
L
atvi
a
N
eth
erla
nd
s
S
wit
zerl
and
N
orw
ay
C
roat
ia
Ic
elan
d
H
un
gary
B
ulg
aria
E
sto
nia
C
ypru
s
B
elgi
um
Ir
elan
d
L
uxe
mb
ou
rg
Ireland has the second largest average annual FDI inflows as a % of GDP in the EU
Despite the underlying fundamentals competitiveness is crucial for Ireland’s future growth
56
80
90
100
110
120
130
140
150-12%
-8%
-4%
0%
4%
8%
12%
16%
1998 2000 2002 2004 2006 2008 2010 2012 2014
GDP (y-o-y % change) HCI (inverted)
Average HCI (1998 - 2015) = 110 Below avg. (Competitive) -> median GDP growth is 6.2%
Above avg. (Uncompetitive) -> median GDP growth is 3.5%
Correlation of -0.64
Source: CSO, CBI
-25
-20
-15
-10
-5
0
% d
eclin
e si
nce
pea
k
Competitveness gains as of Nov 2015 Competitveness gains as of Nov 2014
Competitiveness recovery still exceptional even when compositional effects are accounted for
57
Source: Bruegel - ‘Real effective exchange rates for 178 countries: a new database’ Note: REERs cover business sector excluding agriculture, construction and real estate activities and are calculated against 30 trading partners using fixed weights from Q1 2008. Data available to Nov 2015. See Darvas, Z (2012) for more details.
Euro depreciation has led to strong competitiveness gains for Ireland in last year
5%
58
SECTION 4: PROPERTY
Property prices rising thanks to lack of supply, reasonable starting valuations and strong capital inflows
New CBI mortgage rules impact demand before and after introduction
59
Supply tightening and demand lower below 3.0 and vice-versa
Source: ECB and CBI (Bank lending survey)
Demand & credit standards tighten following CBI rules
Mortgage drawdowns rise from deep trough (‘000s)
Source: BPFI
1.5
2
2.5
3
3.5
4
4.5
5
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Supply Demand
0
20
40
60
80
100
120
140
2006 2008 2010 2012 2014
Residential Investment Letting
Mover purchaser
First Time Buyers
Modest pick-up from low
base driven by FTBs
Residential market continues to be boosted by non-mortgage purchasers
60
Source: BPFI; Property Services Regulatory Authority; NTMA Note: Non-mortgage transactions are implied by difference between total transactions on property price register and BPFI mortgage data
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
10 2011 2012 2013 2014 2015
Nu
mb
er o
f tr
ansa
ctio
ns
Mortgage drawdowns for house purchase Non-mortgage transactions Total Property Transactions
Non-mortgage transactions accounts for
roughly half of all property transactions
Property prices have rebounded since 2012 (peak = 100 for all indices)
61
Source: CSO; IPD
House prices surge, led by Dublin Office leads commercial property
0
20
40
60
80
100
120
1995 1998 2001 2004 2007 2010 2013
Retail Office Industrial
Index 100 = Q3 2007
40
50
60
70
80
90
100
110
2005 2007 2009 2011 2013 2015
All Outside Dublin Dublin
Housing valuations are still relatively attractive
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Average Irish house prices/ disposable income per capita Rental yields still exceed 5%
62
Source: CSO; NTMA, IPD
Rental yields should be lower than before in
world of low real rates
6
7
8
9
10
11
12
13
14
15
16
1979 1984 1989 1994 1999 2004 2009 2014
Rat
io t
o D
isp
osa
ble
Inco
me
per
Cap
ita
Real commercial property prices down 52% from peak (index 1983 = 100)
63
0
50
100
150
200
250
1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Jones Lang LaSalle Real Office Estimated Rent Value (ERV) IPD Real Office Property Price Index
Source: Jones Lang LaSalle; IPD; NTMA
Real office property price moves together with Equivalent Rental Value (rents). Price is driven
by real demand in the long-run
Bubble period
3%
5%
7%
9%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Commercial Property
Ireland average commercial property equivalent yields 5yr Euro swap rate + 300bp margin
Foreign buyers interested on “carry trade” grounds
64
Source: IPD; NTMA
3.4PP positive carry
Made no sense for
foreign buyer
3%
4%
5%
6%
7%
8%
9%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Residential Property
Ireland average residential property equivalent yields 5yr Euro swap rate + 300bp margin
2.3PP positive carry
Made no sense for foreign buyer
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
NW BG UK SD FN FR DK ES IR NL BD IT GR PT
Irish house price valuation is still attractive versus European countries
65
Source: OECD, NTMA Workings Note: Measured as % over or under valuation relative to long term averages since 1990. All data updated to 2014 Q4
Deviation from average price-to-income ratio
Deviation from average price-to-rent ratio
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
BG UK FR NW SD OE NL DK IT ES FN IR BD GR PT
66
SECTION 5: NAMA
NAMA is set to make a profit of up to €2bn on wind-up
• NAMA’s operating performance is strong
Acquired 12,000 loans (over 60,000 saleable property units) related to €74bn par of loans of 758 debtors for €32bn
NAMA continues to generate net profit after impairment charges.
• Repaid €22.1bn (73%) of €30.2bn of original senior debt
NAMA is meeting its senior debt redemption targets ahead of schedule. Originally, a target of 50% of redemptions was set for 2016. The Agency now plans to redeem a total of 80% of its senior debt by 2016.
• NAMA may realise a surplus of up to €2bn, market conditions remaining favourable
• In October 2015, NAMA announced a new initiative to develop up to 20,000 housing units by 2020.
67
NAMA: over 70% of its original debt repaid
More NAMA information available on www.nama.ie
NAMA’s Residential Development Funding Programme
In reaction to the lack of housing supply, NAMA hopes to bring up to 20,000 housing units to the market by 2020 under programme
The focus will be on starter homes and will be concentrated in the Greater Dublin Area
75% of units will be houses, 25% apartments
90% of units in Greater Dublin Area (Dublin, Wicklow, Kildare & Meath)
Progress so far has been strong
In addition to the 2,300 units already delivered by NAMA, construction has begun on sites which will ultimately deliver another 3,000 units.
Another 5,000 units have received planning permission with construction expected to begin on the majority of these in 2016.
Planning applications have been lodged or will be lodged within 12 months for another 9,900 units. Another 32,500 units are at the pre-planning stage or feasibility stages.
Existing NAMA commitments are unaffected by this new programme
Plans for all senior debt to be repaid by 2018 and subordinated debt repaid by March 2020 are still in train
68
NAMA: financial summary 2011 – 2014 Financial results (€m)
• NAMA continues to generate net profit after impairment charges.
• 2014 operating profit and impairment charges much lower than previous years
69
2011 2012 2013 2014
Net interest income 771 894 960 642
Operating profit before impairment
1,278 826 1,198 648
Impairment charges (1,267) (518) (914) (137)
Profit before tax and dividends
11 308 283 510
Tax (charge)/credit and dividends
235 (76) (70) (52)
Profit for the year 246 232 213 458
Source: NAMA • €1bn of NAMA senior bonds redeemed in Oct 2015 bringing total amount redeemed to €22.1bn (73% of its senior debt liabilities)
• All of €30.2bn in NAMA senior bonds expected to be redeemed by 2018
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Mar
-11
May
-11
Sep
-11
May
-12
Dec
-12
Jun
-13
Oct
-13
Dec
-13
Mar
-14
Jun
-14
Au
g-1
4
Sep
-14
Oct
-14
Dec
-14
Mar
-15
May
-15
Sep
-15
Oct
-15
0.25 0.5 0.5
2.0 1.5 1.5
0.75 0.5
3.0 2.5
0.75 0.75 0.6
1.5 1.0
1.75 1.75
1.0
NAMA redemptions
Deliberate NAMA focus on UK disposals during 2010 – 2013 period.
ROI transactions have increased significantly since Q4 2013 - from €2bn to €10.2bn.
Disposal Trend by Location
70 Source: NAMA
London 9,342 35%
Rest of UK 3,579 13%
Dublin 7,244 27%
Rest of ROI 2,931 11%
ROW 2,074
8%
NI 960 4%
Not an Asset Sale 451 2%
Disposals by Location since Inception Nov 2015 (€26.6bn)
London 1,341 18%
Rest of UK 546 8%
Dublin 3,603 50%
Rest of ROI 1,027 14%
ROW 516 7%
NI 9
0%
Not an Asset Sale 191 3%
Disposals by Location Nov 2015 (€7.2bn)
71
Breakdown of NAMA property portfolio, June 2015
Source: NAMA
Commuter Belt 6%
Dublin 49%
Rest of ROI 4%
Urban Centres
10%
Rest of World 7%
Non Real Estate
2%
Rest of UK 6%
London 16%
Geographic Breakdown
Residential 15%
Development 21%
Office 16%
Land 16%
Retail 21%
Industrial 3%
Other 1%
Non real estate
2%
Hotel & Leisure
5%
Sector Breakdown
Over 90% of remaining portfolio in Ireland is in Greater Dublin Area or in other urban centres
Dublin Docklands Strategic Development Zone (SDZ):
A core objective of NAMA’s development funding is to facilitate the delivery of Grade A office accommodation in the SDZ.
NAMA has an interest in 14 of the 20 development blocks identified in the SDZ and has developed detailed strategies for these blocks.
It is estimated that up to 3.8m sq. ft. of commercial space and 2,000 apartments could be delivered in all sites. This includes one additional site at City Quay (just outside the SDZ). Planning achieved on 2.2m sq. ft., 0.36m sq. ft. in the planning system and over 1.2m sq. ft. at pre-planning stage
Social Housing:
A SPV – NARPSL – was established by NAMA to expedite social housing delivery. It acquires residential units from NAMA debtors and receivers and leases them directly to approved housing bodies (Department of the Environment, Community and Local Government; and the Housing Agency).
By end-December 2015, 2,000 units were delivered under this initiative. Since the start of 2012, NAMA has identified over 6,600 houses and apartments, controlled by its debtors and receivers, as available for social housing. 2,578 of these units have been confirmed as suitable by local authorities.
72
NAMA: Other strategic initiatives also progressing
73
SECTION 6: BANKING
Banks overhauled and smaller; AIB, BOI and PTSB have returned to profit
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2011 2012 2013 2014 2015H1
Pre-Provisions Post-Provisions
-5
-4
-3
-2
-1
0
1
2
3
2011 2012 2013 2014 2015H1
AIB and BOI returned to profit in 2014 (€bn); PTSB broke even in H1 2015
74
Allied Irish Bank Bank of Ireland Permanent TSB
Source: Annual reports of banks - BOI, AIB, PTSB
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2011 2012 2013 2014 2015H1
Banks fundamentally rebuild profitability
75
Source: Central Bank of Ireland Note: Margins are derived from weighted average interest rates on loans and deposits to and from households and non-financial corporations.
Net interest margins recover %
Source: Annual reports of Irish domestic banks
Cost income ratios improve dramatically
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2003 2005 2007 2009 2011 2013
Outstanding Business New Business
74%
63%
85%
96%
78%
111%
123%
88%
144%
77%
60%
119%
55% 55%
126%
48% 50%
80%
0%
20%
40%
60%
80%
100%
120%
140%
AIB BOI PTSB2010 2011 2012 2013 2014 2015 H1
Asset quality improving as impaired loans and provisions continue to fall
76
Impaired loans and provisions at PCAR banks (group and three banks)
Source: Published bank accounts
Impaired Loans % (Coverage %)1 by Bank and Asset
Dec-13 Dec-14 Jun-15 Book (€bn)
BOI Irish Residential Mortgages 14.2(49) 12.6(46) 11.1(48) 25.3 UK Residential Mortgages 2.4(24) 2.0(23) 1.8(24) 28.1 Irish SMEs 26.7(50) 25.6(51) 24.3(52) 9.5 UK SMEs 17.1(50) 16.9(44) 13.9(46) 2.6 Corporate 7.5(41) 5.6(54) 5.1(59) 8.6 CRE - Investment 42.3(38) 37.2(46) 35.8(48) 12.5 CRE - Land/Development 89.3(68) 89.5(74) 90.1(75) 2.5 Consumer Loans 8.4(90) 6.4(98) 5.3(100) 3.2
18.5(48) 18.2(50) 14.4(53) 92.4
PCAR Banks (€bn) Dec-13 Dec-14 Jun-15
Total Loans 208.9 197.1 192.6
Impaired 53.9 43.1 37.4
(Impaired as % of Total) 25.8% 21.9% 19.4%
Provisions 29.4 23.5 18.7
(Provisions as % of book) 14.1% 12.0% 9.7%
(Provisions as % of Impaired) 54.5% 54.5% 50.1%
AIB Irish Residential Mortgages 23.0(43) 22.6(40) 20.1(36) 35.3 UK Residential Mortgages 11.3(53) 11.6(59) 11.5(58) 2.6
SMEs/Corporate 30.0(64) 21.4(68) 16.8(63) 17.9 CRE 66.7(64) 56.9(62) 48.6(62) 13.8 Consumer Loans 33.2(81) 27.2(69) 23.3(75) 3.7
34.9(59) 29.2(51) 24.6(48) 73.3
PTSB Irish Residential Mortgages 26.0(47) 25.5(46) 24.0(47) 21.9 UK Residential Mortgages 1.3(85) 1.5(60) 2.3(63) 3.8 Commercial 68.7(63) 74.0(60) 71.3(61) 0.9 Consumer Loans 26.0(105) 29.7(94) 28.7(93) 0.3
23.6(51) 24.5(51) 22.6(50) 26.9
1 Total impairment provisions are used for coverage ratios (in parentheses)
Loan Asset Mix (banks Jun 15)
61% 15%
4%
21%
Mortgage Corporate/SME
Consumer
CRE
Capital and loan-to-deposit ratios strengthened
77
Loan-to-Deposit Ratios (Dec-10 to Jun-15)
• Core Tier 1 capital ratios at the PLAR banks remain well above minimum requirements.
Core Tier 1 Capital Ratios (Jun-15)
Source: Published bank accounts Source: Published bank accounts
Note: “Transitional” refers to the transitional Basel III required for CET1 ratios which came into effect 1 January 2014. “Fully loaded” refers to the actual Basel III basis for CET1 ratios. * The AIB and BOI fully loaded CET1 ratios include €3.5bn and €1.3bn of preference shares respectively. Excluding these preference shares, the ratio for AIB is 8.3% and for BOI is 11.1%.
17.4%
14.1% 15.9%
13.6% 15.4%
13.4%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
CET1 % (Transitional) CET1 % (Fully Loaded)
AIB BOI PTSB
176%
166%
108%
99%
BOI
AIB
Jun-15 Dec-10
67pp decrease
68pp decrease
Aggregated balance sheet of the “Covered” banks much slimmer and more solid
Total Assets: €249.6 bn
Loans and receivables - loans to customers
170.7
Loans and receivables - loans to credit institutions
7.1
Loans and receivables - debt instruments
12.5
Available-for-sale financial assets
32.5
Cash & cash balances with central banks
10.7
Other 16.1
Total Liabilities, Minority Interest and Equity: €249.6 bn
Deposits excl. Credit Institutions
155.7
Deposits from Credit Institutions and Central Banks
26.4
Debt Certificates 25.4
Subordinated Liabilities 4.3
Other liabilities 12.4
78
Equity & Minority Interest 25.5
Total Liabilities, Minority Interest and Equity
257.6
Source: CBI Note: Banks included in this measure are outlined here; Balance sheet calculated on consolidated basis
0%
2%
4%
6%
8%
10%
12%
14%
0 50 100 150 200 250 300 350 400 450 500 550
Introduction of CBI’s macro-prudential rules will increase resilience of banking and household sector
79
Key changes to lending rules
Banks must restrict lending for primary dwelling purchase above 80 per cent LTV to no more than 15 per cent of the aggregate value of the flow of all principal dwelling loans*
Bank must restrict lending for primary dwelling purchase above 3.5 times LTI to no more than 20 per cent of that aggregate value
Banks must limit Buy-to-Let loans (BTL) above 70 per cent LTV to 10 per cent of all BTL loans.
* First time buyers can borrow 90% of the first €220,000 and 80% of the remaining property value
Proportion of loans below 3.5 times LTI by year House price distribution for FTBs in 2014 H1
Median: €182k
€220k threshold
Source: CBI Drawdown amount (€000s)
0
0.2
0.4
0.6
0.8
1
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
First Time Buyer All Buyers
Irish residential mortgage arrears – improving but still challenging
80
• PDH mortgage arrears have fallen steady since Q3 2013. The smaller BTL market (c. 25% of total) has higher arrears but also saw declines in the same period.
• 121K PDH mortgage accounts were classified as restructured at end-Sep, reflecting a q-o-q increase of 1.9%. Of these restructured accounts, 86.6% were meeting the terms of the restructured arrangement.
Mortgage Arrears (90+ days) Total Restructured/Rescheduled Cases
Source: CBI
* ‘Other’ comprises accounts offered temporary Interest rate reductions, payment moratoriums and long-term solutions pending six months completion of payments.
%
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
20092010 2011 2012 2013 2014 15
PDH + BTL (by balance) PDH + BTL (by number)
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
200920102011201220132014 15
PDH Arrears Formation (p.p. Q-Q
by number)
Interest Only 5%
Reduced Payment
12%
Term Extension*
14%
Arrears Capitalisatio
n* 26%
Split Mortgage
20%
Other** 21%
Personal Insolvency Arrangements (PIA) and bankruptcies on the rise
• Personal Insolvency legislation enacted and in use, but take-up has been slow.
• In May 2015, the Government announced a number of new measures to support mortgage holders who are in arrears. It has agreed to give the courts the power to review and, where appropriate, to approve insolvency deals that have been rejected by banks.
• Court rules and procedures will also be streamlined to guide more cases towards the Insolvency Service.
• A Mortgage to Rent scheme will be expanded, including in particular by increasing the property value thresholds that apply.
81
65, 15%
271, 60%*
112, 25%
448 Bankruptcies and 271 Repossessions in 2014
Not applicable Family home lost/Surrendered
Family Home retained
* No. of occurrences,
% of total 0
200
400
600
800
1,000
1,200
1,400
1,600
2013 2014 2015
Total Insolvencies
New Applications Arrangements Approved
Source: ISI, Q3 2015 data
Small and medium-sized business (SME) credit trends and lending policy supports
In October 2014, the Strategic Banking Corporation of Ireland (SBCI) was formally launched with the goal of ensuring access to flexible funding for Irish SMEs.
The SBCI’s initial funding partners are the EIB, KfW (the German promotional bank) and the Ireland Strategic Investment Fund (ISIF).
These partners are providing long-term funding at attractive rates to the SBCI, which in turn will provide the funding to Irish SMEs through Irish-based credit institutions.
Range of additional funding supports include:
• Microfinance Fund - €40m available over 5 years
• Loan Guarantee Scheme - €150m per annum over 3 years
• Enterprise Ireland – upwards of €200m in 2013
• European Investment Bank , European Investment Fund (€80m through AIB) and Silicon Valley Bank partnership with the NPRF ($100m over 5 years)
82 Source: CBI
99 75
50
0%
20%
40%
60%
80%
100%
Active Enterprises Private SectorEmployment
All Enterprises GVA
SME Share of the Irish Economy
SMEs Other Enterprises
0% 10% 20% 30% 40% 50% 60%
Real Estate Activities
Wholesale and Retail
Hotels and Restaurants
Primary Industries
Business and Admin
Manufacturing
Community and Social
Construction
Other
Health and Social
Hundreds
New Lending (€3.2 billion, yr to Sep-2015) Oustanding Credit (€47 billion, Sep-2015)
-40
-30
-20
-10
0
10
20
2010 2011 2012 2013 2014 2015
Accumulated New Lending and Repayments of Non-Financial SMEs
New Lending Repayments Net Transactions
€bn
SME deleveraging continuing as dispersion in SME interest rates persisting across EA
83
Source: CBI; ECB
c. €20bn worth of necessary
deleveraging in last 5 years by
Irish SMEs
Over 200bps
Note: Annualised Agreed Rate is defined by the ECB as ‘the interest rate that is individually agreed between the reporting agent and the NFC for a loan, converted to an annual basis and quoted in percentages per annum. The rate shall cover all interest payments on loans, but no other charges that may apply.’
1
2
3
4
5
6
7
8
9
2008 2010 2012 2014
%
Rates on loans (<€1m, < 1yr) to Irish NFCs over 150bps over EA average
Max Min Ireland Euro Area
Disclaimer
The information in this presentation is issued by the National Treasury Management Agency
(NTMA) for informational purposes. The contents of the presentation do not constitute
investment advice and should not be read as such. The presentation does not constitute
and is not an invitation or offer to buy or sell securities.
The NTMA makes no warranty, express or implied, nor assumes any liability or responsibility
for the accuracy, correctness, completeness, availability, fitness for purpose or use of any
information that is available in this presentation nor represents that its use would not
infringe other proprietary rights. The information contained in this presentation speaks only
as of the particular date or dates included in the accompanying slides. The NTMA
undertakes no obligation to, and disclaims any duty to, update any of the information
provided. Nothing contained in this presentation is, or may be relied on as a promise or
representation (past or future) of the Irish State or the NTMA.
The contents of this presentation should not be construed as legal, business or tax advice.
84
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