interim results 2016 - investis digitalipm.production.investis.com/~/media/files/i/irish-life... ·...

Interim Results 2016

Interim Results 2016 For the Six Months Ended 30 June 2016

27 July 2016


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 US Securities legislation. The words "expect", "anticipate", "intend", "plan", "estimate", "aim", "forecast", "project", "target", "goal", "believe", "may", "could", "will", "seek", "assume" and similar expressions (or their negative) identify certain of these forward-looking statements. These forward-looking statements are statements regarding Permanent TSB Group Holdings plc's (the “Group's") intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial condition, liquidity, prospects, growth, strategies and the banking industry. The forward-looking statements in this presentation are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. Forward-looking statements involve inherent known and unknown risks, uncertainties and contingencies because they relate to events and depend on circumstances that may or may not occur in the future and may cause the actual results, performance or achievements of the Group to be materially different from those expressed or implied by such forward looking statements. Many of these risks and uncertainties relate to factors that are beyond the Group's ability to control or estimate precisely, such as future global, national and regional economic conditions, levels of market interest rates, credit or other risks of lending and investment activities, competition and the behaviour of other market participants, the actions of regulators and other factors such as changes in the political, social and regulatory framework in which the Group operates or in economic or technological trends or conditions. Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance. The Group expressly disclaims any obligation or undertaking to release any updates or revisions to these forward-looking statements to reflect any change in the Group’s expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based after the date of this presentation or to update or to keep current any other information contained in this presentation. Accordingly, undue reliance should not be placed on the forward-looking statements, which speak only as of the date of this presentation. Permanent TSB Group Holdings plc undertakes no obligation to update the forward-looking statements contained in this presentation. Forward-looking statements made in this presentation relate only to events as at the date on which they are made. The securities referred to in this presentation have not been, and will not be, registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements under the Securities Act. This presentation should be considered with the Group’s lnterim Report for 2016 and all other relevant market disclosures, copies of which can be found at the following link: www.permanenttsbgroup.ie/investor-relations

1

Forward Looking Statements

http://www.permanenttsbgroup.ie/investor-relations








Agenda

2

H1 Highlights 3

Financial Performance 8

Recap & Outlook 21

Interim Results 2016 3

H1 Highlights

Jeremy Masding Group CEO


Financial Highlights

Net Interest Margin

143bps H1 2015 100bps

Cost Income Ratio¹

87% H1 2015 86%

Impairment Write-Back / (Charge)

H1 2015 (€24m)

Profit Before Exceptional Items

and Tax

H1 2015 €1m

€117m €61m

1. Excludes Visa Europe Share Sale gain and Exceptional Items.

System Funding

TNAV Per Share

Dec 2015 €4.7bn Dec 2015 €4.92

€5.03 €2.6bn

NPLs CET1 Ratio (Fully Loaded)

15.9% €6.2bn Dec 2015 €6.6bn Dec 2015 15.0%


Transactional Banking, Savings & Investments

• ‘Explore Account’ launched in June

• An innovative current account that rewards customers for regular banking behaviour

€3.1bn Current Account Balances

>2,200 Explore Accounts Opened

Since Launch +3% Since Dec 2015

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16

Blended ROI retail rate Blended market rate

Premium to Market*

Dec 14 Jun 16

50bps 12bps

Retail Rates and Spread to the Market

*Blended Market Rate as of May 16 Source: CBI Data

€10.4bn ROI Retail Deposits

Retail Deposits

Current Accounts

42% of Funding

*


Mortgages, Consumer Finance, Insurance & SME

SME Insurance

‘3in1’ Launch

Applications

Drawdowns

Approvals

€211m

€275m

€798m +3% YOY

+16% YOY

+4% YOY

Mortgages Consumer Finance

• New Credit Rules to support less documentation implemented

• Overhaul of Consumer Finance sales process underway

• Launch of new End-to-End process with Omni-channel drawdown will go live in H2

• 15,000 active BUSINESS24 users

• >5,000 Debit Cards issued since launch

• Over 1,000 new SME Current Accounts opened

• 650 Loan applications

• In conjunction with Irish Life, PTSB launched a new Bancassurance product – OnePlan Protection

• The introduction of Bill Cover is a first in the European protection market

Commissions Earned +17% YOY +7% YOY Avg. Home Insurance

Policy Premium

€0.31bn Total Portfolio Size

(Gross Loans)

€0.25bn*

Total Portfolio Size (Gross Loans)

*Predominantly comprising of a legacy Commercial Mortgage portfolio


Arrears and NPLs

49% 55% 56%

51% 45% 44%

Dec-14 Dec-15 Jun-16

Treated NPLs Untreated NPLs

ROI Residential Mortgage NPLs3,4

7

1. Peak : Q3 2013, > 90 days in arrears 2. By Cases as a % of Mortgage Book 3. Based on balances 4. Treated NPLs include Split Mortgages, Other Long Term and Short Term Treated Loans. Untreated

NPLs include Technically Held, Loans in Closures and > 90 DPD Cases In Legal.

Overall Arrears Levels¹

-47% Since Peak

>90 DPD %2 >720 DPD % 2

ROI Residential Mortgages

-4%

Since Dec 2015

a. Includes pre, early and late arrears cases b. Includes assessments made on BTL cases where no SFS is required c. 93% are <31 DPD; 88% are 0 DPD

c.39k Assessmentsa Completed Since 2013

Restructure solutions have been offered in 90% (or >35k) of casesb where an assessment has been made

93% of sustainable solutions are meeting the termsc of the arrangement

June 2015 9.2%

8.4%

June 2015 5.5%

5.4%

32% 47% 48%

31% 28% 28%

37% 25% 24%

Jun-15 Dec-15 Mar-16

Engaged Non-engaged Under Assessment

Evolution of NPLs >90 Days*

35%

Of Untreated NPLs are paying greater than the

contractual interest payment

* The above chart represents the evolution of a population of c.16,000 loans that were over 90 days in arrears in March 2015, across Engaged, Non-Engaged and Under Assessment.


Financial Performance

Patricia Carroll Interim Group CFO


Income Statement – Group

€m H1 2016 H1 2015 Change

Net Interest Income (NII) 198 167 31

Other Income 9 14 5

Gain from Visa Europe Share Sale 29 - 29

ELG Fees (3) (9) 6

Total Operating Income 233 172 61

Total Operating Expenses Excluding Regulatory Costs

(158) (147) 11

Regulatory Costs (19) - 19

Pre-Impairment Profit / (Loss) 56 25 31

Impairment Write-Back / (Charge) 61 (24) 85

Profit Before Exceptional Items & Tax 117 1 116

Exceptional Items (Net) (9) (432)

Profit / (Loss) Before Tax 108 (431)

Key Metrics H1 2016 H1 2015 Change

Net Interest Margin 1.43% 1.00% 43bps

Cost Income Ratio1,2 87% 86% 1ppts

Cost of Risk3 (23bps) 18bps 41bps

• NII and NIM

- NII increased by €31m reflecting higher NIM which grew to 1.43%

- NIM growth primarily driven by reduced Cost of Funds

• Other Income

- Decrease due to FX movements

• ELG Fees continue to reduce

• Gain from the sale of a share held in Visa Europe of €29m is non-recurring

• Total Operating Expenses excluding Regulatory Costs

- Increase mainly due to higher spend on key mandatory regulatory projects

• Regulatory Costs

- Increase due to full year SRF and DGS contributions

• Impairment Write-Back / (Charge)

- HPI-Linked Write-Backs of €35m

- Performance Write-Backs of €26m due to sustained loan cures

- Cost of Risk2 improved by 41bps

• Exceptional Items include:

- €14m with respect to certain Restructuring Costs

- €5m of net Deleveraging credits on Non-Core portfolios

• Profit Before Exceptional Items of €117m, improving from a profit of €1m in H1 2015

1Calculated excluding Visa Europe Share sale gain 2 Cost Income Ratio improves to 77% when (Visa Europe Share sale gain and) Regulatory Costs are excluded so as to be like for like with H1 2015 3Calculated excluding HPI-linked Write-Backs and annualised


Income Statement – Core Bank

€m H1 2016 H1 2015 Change

Net Interest Income (NII) 210 167 43

Other Income 9 13 4

Gain from Visa Europe Share sale 29 - 29

ELG Fees (3) (9) 6

Total Operating Income 245 171 74

Total Operating Expenses Excluding Regulatory Costs (148) (137) 11

Regulatory Costs (19) - 19

Pre-Impairment Profit 78 34 44

Impairment Write-Back / (Charge) 75 (25) 100

Operating Profit – Core Bank 153 9 144

Operating Loss – Non-Core (36) (8) 28

Profit Before Exceptional Items 117 1 116


Profit Before Tax – Group 108 (431)

Key Metrics – Core Bank H1 2016 H1 2015 Change

Net Interest Margin 1.76% 1.31% 45bps

Cost Income Ratio1,2 77% 80% 3ppts


1Calculated excluding Visa Europe Share sale gain 2 Cost Income Ratio improves to 69% when (Visa Europe Share sale gain and) Regulatory Costs are excluded so as to be like for like with H1 2015 3Calculated excluding HPI-linked Write-Backs and annualised


Net Interest Margin

Group NIM Drivers H1 2016 FY 2015

Asset Yields Avg. Balance €bn

Avg. Yield / Cost %4

Avg. Balance

€bn

Avg. Yield / Cost %4

Treasury Assets2 5.1 1.80 6.3 1.92

Core Bank Loans3 19.3 2.42 19.6 2.42

Non-Core Loans3 3.3 0.99 5.7 1.70

Total Int. Earning Assets 27.7 2.14 31.6 2.18

Cost Of Funds

Deposits 17.5 0.80 19.5 1.26

Wholesale Funding 4.2 1.27 6.3 1.07

Sub. Liabilities 0.0 0.0 0.0 0.0

System Funding 4.2 0.02 4.6 0.05

Total Int. Bearing Liabilities 25.9 0.75 30.4 1.11

1. CBI Data as of end May 2016 2. Treasury Assets include Debt Securities and, Loans and Advances to Banks 3. Loan balances presented are net of provisions 4. Gross Interest Income/Average Balance

• NIM Improved to 1.43% in H1 2016 principally reflecting lower funding costs

• Asset Yields have reduced by 11bps to 2.14% in H1 2016 mainly due to certain high yielding Treasury Asset maturities and the impact of ECB rate reductions in March 2016

• 21k existing customers switched from SVR to MVR – €4m negative impact in H1 2016

• Cost of Funds fell from 1.30% in H1 2015 to 0.75% in H1 2016

• Retail Deposit market premium reduced to 12bps (PTSB 46bps v Market 34bps1)

• The cost of Corporate and Institutional Deposits continues to fall

• Wholesale Funding cost is increasing due to the issuance of new funding facilities

• Q2 NIM was 1.39%; H2 NIM expected to be lower than the first half due to change in funding mix and maturity of higher yielding bonds

• Average Interest Earning Assets reduced to €27.7bn (2015: €31.6bn) mainly due to Deleveraging and Treasury Assets maturities

2.48% 2.50% 2.32% 2.25% 2.11% 2.14%

1.75% 1.70% 1.44% 1.30%

0.88% 0.75%

H2 13 H1 14 H2 14 H1 15 H2 15 H1 16

Asset Yield Cost of Funds

NIM and NIM Drivers

1.28%

NIM

0.82% 0.88% 1.00% 0.90% 1.43%


Total Operating Expenses

€m H1 2016 H1 2015 Change

Staff Costs 66 64 2

Staff Pension Costs 5 5 -

Total Staff Costs 71 69 2

Depreciation and Amortisation 10 10 -

Other Costs 71 59 12

Legacy Costs (MPRG) 6 9 3

Total Operating Expenses Excluding Regulatory Costs

158 147 11

SRF Contribution 9 - 9

DGS Contribution 10 - 10

Total Operating Expenses Including Regulatory Costs

177 147 30

Average No. of Staff 2,354 2,348 6

Cost Income Ratio1,2 87% 86% 1ppt

• Cost Income Ratio increase due to Regulatory Costs and certain short-term mandatory projects such as IFRS 9

• Staff Costs increased marginally

• Average number of employees broadly remained same

• Other Costs increased by €12m due to higher spend on certain regulatory and mandatory projects (such as IFRS 9); Not expected to be a continuing component of the cost base

• SRF contribution for 2016 is €9m; however, level of contribution for 2017 onwards remains uncertain and exact quantum of DGS contribution for 2016 not yet known with certainty

• Bank Levy of €27m will be booked in H2

• Excluding the Bank Levy, H2 Operating Expenses expected to be lower than H1

1Calculated excluding Visa Europe Share sale gain and exceptional items 2Cost Income Ratio improves to 77% when (Visa Europe Share sale gain and) Regulatory Costs are excluded


Asset Quality – Impairment Charge / (Write-Backs)

Breakdown by Portfolio (€m) H1 2016 H1 2015 Change

ROI Home Loans (29) 32 61

ROI BTLs (34) (10) 24

Total ROI Residential Mortgages (63) 22 85

Consumer Finance (9) (2) 7

CRE (3) 1 4

UK Residential Mortgages 14 3 11

Total (Write-Backs) / Charge (61) 24 85


• Write-Backs of €61m for H1 2016 compared to a €24m Charge in H1 2015

Performance

• The Write-Backs include €26 million in relation to better underlying net performance reflecting sustained loan cures

• Within this, the Group has allowed for some uncertainty on its UK portfolio relating to the UK Referendum outcome

• An Impairment Charge from performance expected in the second half due to new default levels stabilising and write-backs from loan cures moderating

• Long-term expected Cost of Risk unchanged from 40bps or less

HPI Adjustments

• HPI adjustment resulted in a Write-Back of €35m in H1 2016.

• Continue to maintain c.12-15% of buffer over the CSO Residential House Price Index in the context of flattening house price curves in H1 2016 and expected macro uncertainties created by UK referendum outcome.

• We will continue to review these assumptions through the year-end

1Calculated excluding HPI-linked Write-Backs and annualised


Asset Quality – NPL Composition

1. Technically Held loans refer to loans which are NPLs due to the fact that some of the borrower’s other loans are non-performing 2. As part of the Regulator’s ongoing review of NPLs across Europe, we have been required to reclassify certain loans (€0.5bn) as NPLs during the first half. These

relate to Part Capital and Interest loans which are all in long term treatments. The comparative NPL balances at 31 December 2015 and 2014 have also been restated accordingly by €0.5bn and €0.3bn respectively.

0.6 0.5 0.4

1.3 1.1 1.1

0.2

0.2 0.2

1.0 1.2

1.2

1.3 1.3

1.2

0.1 0.1

0.1


Closures > 90 Days Arrears / Legal Technically Held Splits (Treated but Impaired) Long Term Treated Short Term1 2

ROI Buy To Let NPLs ROI Home Loan NPLs (€bn)

Included in the below a total of €1.0bn (Dec 2015: €1.0bn) loans that are not impaired and not in arrears > 90 days

4.2 -5% -4%

In Treatment 60%

57% 52%

43%

44% In Treatment

47%

-18%

-6%

2.2

1.7

1.8

4.6

4.4

0.2 0.2 0.3

0.8 0.5

0.5

0.2

0.2 0.1

0.1

0.1 0.1

0.8

0.8 0.7

0.1



Asset Quality – NPL Metrics

Jun 2016 Dec 2015 Change

Total Loan Book

Gross Loans (€bn) 24.8 25.8 1.0

Total NPLs (€bn)5 6.2 6.6 0.4

Total NPLs as % of Gross Loans 25% 26% 1ppt

Provision Stock (€bn) 2.6 2.7 0.1

Provision Coverage Ratio1 41% 41% -

ROI HLs and BTLs

Gross Loans (€bn) 21.1 21.5 0.4

ROI HL and BTL NPLs (€bn)5 5.9 6.2 0.3

% of Treated ROI HL and BTL NPLs2 56% 55% 1ppt

NPLs as % of Gross Loans 28% 29% 1ppt

NPLs Excluding Treated Loans as % Gross Loans

12% 13% 1ppt

Provision Stock (€bn) 2.4 2.5 0.1

Provision Coverage Ratio1 40% 40% -

Texas Ratio3 128% 134% 6ppts

Texas Ratio Excluding Treated NPLs4 72% 79% 7ppts

• Total NPLs decreased by 6% mainly due to reduced new defaults and sustained loan cures

• Total NPLs as % of Gross Loans remains elevated; however, over 50% of the NPLs are treated

• c.95% of the Total NPLs are ROI HLs and BTLs, of which 56% are treated up from 55% in 2015

• ROI HL and BTLs NPLs amount to 28% of Gross Loans; however, reduces to 12% when Treated Loans are removed

• Downward trend in NPLs expected to continue in H2

• PCR on ROI HL and BTLs NPLs remains robust at 40%

• Texas Ratio remains elevated at 128%; however, drops significantly to 72% when Treated Loans are removed

1. Calculated as Impairment Provision Stock as a % of NPLs 2. Treated NPLs include Split Mortgages, Other Long Term and Short Term Treated Loans. Untreated NPLs

include Loans in Closures, > 90 DPD Cases In Legal and Technically Held NPLs 3. Calculated as Total NPLs as % of the total of Tangible Net Asset Value and Provision Stock 4. Calculated as Total NPLs excluding Treated Irish Home Loans and BTLs as % of the total of Tangible Net

Asset Value and Provision Stock excluding Provisions associated with Treated Irish Home Loans and BTLs 5. As part of the Regulator’s ongoing review of NPLs across Europe, we have been required to reclassify

certain loans (€0.5bn) as NPLs during the first half. These relate to Part Capital and Interest loans which are all in long term treatments. The comparative NPL balances at 31 December 2015 have also been restated accordingly by €0.5bn.


Summary Balance Sheet – Group

€bn June 2016 Dec 2015 Change

Net Loans 22.2 23.0 (0.8)

Treasury Assets 4.5 5.5 (1.0)

Assets Held For Sale 0.0 0.1 (0.1)

Other Assets 0.8 0.7 0.1

Total Assets 27.5 29.3 (1.8)

Customer Deposits 17.0 18.6 (1.6)

Wholesale Funding 5.0 3.0 2.0

System Funding 2.6 4.7 (2.1)

Other Liabilities 0.5 0.6 (0.1)

Total Liabilities 25.1 26.9 (1.8)

Total Equity (incl. AT1) 2.4 2.4 0.0

Total Equity and Liabilities 27.5 29.3 (1.8)

Movements in Assets

• Net Loans decreased mainly due to:

- repayments and redemptions exceed new business volumes in Core Bank loan book; and

- deleveraging of certain CRE portfolios

• Treasury Assets reduced due to maturities and NAMA bond redemptions

Movements in Liabilities

• Customer Deposits reduced mainly due to reduction in Institutional Deposits and Irish Retail Deposits

• Wholesale Funding increased due to new secured funding transactions

• System Funding reduced due to more normalised long-term levels


Funding

70% 69%

18% 10%

12% 21%

Dec-15 Jun-16

Customer Deposits System Wholesale

Retail Deposits

• Irish Retail Deposits represent 42% of Total Funding

• Reduction due to rate actions at manageable levels

• IOM1 represents 2% of Total Funding

Current Accounts

• Represent 13% of Total Funding

Corporate & Institutional Deposits

• Represent 12% of Total Funding

• Fall mainly due to reduction in NTMA Repos

• Expect to further reduce in 2016 due to scheduled maturities

Wholesale

• Represents 21% of Total Funding

• Increase due to new secured funding transactions during the period

System

• Represents 10% of Total Funding

• Reduction due to repayments

Key Funding Metrics

• LCR of 147%, above minimum regulatory requirement

• The Group is on a glide path towards compliance with the 2018 Basel 3 NSFR requirements

€26.3bn €24.6bn

Total Funding

1. Permanent Bank International Deposits (an Isle of Man subsidiary of the Group)


Non-Core Loan Book


Non-Core Loan Book at Constant Exchange Rate1

Non-Core Loan Book Summary

• Irish Non-Core Portfolio sale is expected to complete shortly

• Residual UK Loans

• remains Non-Core to the Group;

• timing of the sale uncertain due to UK’s EU referendum outcome; and

• actively engaging with the authorities in relation to Restructuring Plan Commitments

• Majority of the Group’s GBP assets are now directly funded in GBP over the medium term

• Portfolio well seasoned and has an LTV of c.70%

(€bn)

1. Using exchange rate at 30 June 2016 2. Refers to Irish Permanent Isle of Man (IoM) Limited

9.7

4.1

(€m) UK

Total CHL IPI2

Gross Loans 2,805 260 3,065

Provisions 53 2 55

Net Loans 2,752 258 3,010

NPLs 110 3 113

NPL% of Gross Loans 4% 1% 4%

PCR % 48% 66% 54%

RWAs 1,077 118 1,195

3.1


Capital

17.1% 17.9%

15.0% 15.9%

Dec-15 Jun-16Transitional Fully Loaded

99

(9) (28) (10)

TNAV atDec 2015

UnderlyingProfit

ExceptionalItems

ReserveMovements

AT1Coupon

TNAV atJun 2016

• Robust CET1 ratios

- 0.9% increase in Fully Loaded CET1 ratio

- 0.8% increase in Transitional CET1 ratio

- Increase mainly due to profits in the period

• SSM CET1 SREP requirement for 20162 of 11.45%, on a Transitional Basis

• Total Capital Ratio of 19.4% on a Transitional Basis; 17.1% on a Fully Loaded basis

• Leverage Ratio3 of 6.6% on a Fully Loaded basis (31 Dec 2015: 5.9%)

2,237 2,289

(€m)

1. On a Fully Loaded Basis 2. SREP requirement is subject to annual review by the SSM 3. Calculated as Tier 1 Capital as % of gross balance sheet exposures (Total Assets and Off Balance Sheet Loan

Commitments) 4. Underlying Profit is calculated as Profit for the Year minus Exceptional Items and movements in Intangible Assets 5. Reserve movement includes movements in AFS, Cash Flow Hedge and Currency Translation Reserves

CET1

5 4

TNAV

• TNAV increased by €52m

• Increase mainly due to profits in the period

RWA1

12.3 11.9

€bn


Summary

Net Interest Margin improved to 1.43%

NPLs declined by €0.4 billion

CET1 Ratio increased to 15.9% (Fully Loaded) and 17.9% (Transitional)

Impairment Charge down by €85m

Improved Profitability by over €100m


Recap & Outlook

Jeremy Masding Group CEO


Risks & Opportunities

Opportunities

Commercial Momentum

Reducing Cost of Funds

Improvement in Collateral Prices

Positive Trends in Arrears

Government Housing Action Plan

Increased Costs associated with

Regulation

Limited Growth of Housing Supply

EU-Wide RWAs Harmonisation

‘Lower for Longer’ Interest Rate Environment

Risks

Uncertainty Caused by Brexit


Priorities for 2016

Developing Clear Competitive Positioning

Deepen existing relationship and

attract new customers

Design our Products and Processes through

the eyes of the Customers

Embed a collaborative mindset to deliver

what matters to our customers

Maintaining Effective Arrears Management

Identify and implement

appropriate customer treatments as

circumstances change

Conduct efficient day to day collections

activity

Returning To Sustainable Profitability

Develop a diverse income stream within

Retail and SME Banking

Reduce the cost of serving customers by maximising operating

efficiency

Maximising Non-Core Value

Continue to explore opportunities to

complete the deleveraging programme

Building a Safe, Stable and Resilient Group

Continue to build and optimise capital while

maintaining robust buffers above

regulatory minimum

Embed a strong risk discipline and culture

throughout the organisation


Appendices Trading Conditions 25

Permanent TSB Overview 26

Our Purpose & Strategy 27

Historical Financial Results 28

Medium Term Target 29

Segmental Income Statement 30

Interest Income Analysis 31

Interest Expenses Analysis 32

Tracker Book and Margin 33

Other Income Analysis 34

Impairments – Write-Back Potential 35

Loan Book Profile 36

Asset Quality – Arrears Performance 37

Asset Quality – NPL Definition 38

Asset Quality – Forbearance Treatments 39

Negative Equity Balances 40

Treasury Portfolio Overview 41

Liquidity 42

RWAs 43

Regulatory Capital (1/2) 44

Regulatory Capital (2/2) 45


Source: CSO, Department of Environment, Davy

Trading Conditions

-25

-20

-15

-10

-5

0

5

10

15

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Retail SalesConsumer Spending (yoy %)

% YoY

0

20

40

60

80

100

Tho

usa

nd

s 15,200 17,800

-10

-5

0

5

10

15

2000 2003 2006 2009 2012 2015

Net TradeChange in StocksInvestmentGovernment SpendingConsumer SpendingGDP

% change, year on

14.0%

12.0%

10.2% 8.9%

7.8%

Dec 12 Dec 13 Dec 14 Dec 15 Jun 16

Unemployment Rate GDP to expand to close to 5% in 2016

House Building Completions Recovery in Consumer Spending

25


Permanent TSB Overview

Mobile Branch Online Phone Broker

Mortgages Investments Consumer Finance Current Accounts Savings Protection General Insurance Pensions

Employees c.2,300

Customers Served c.1.1 million

Presence 77 Branches

Our Channels

South: 16 branches

West: 14 branches

South East: 15 branches

Dublin Region 17 Branches

North East: 15 branches

Affinity

Our Products

Our Customers

Retail

SME

Our Profile

The Group’s ‘Participation Strategy’ focuses on Retail Personal and Retail SME banking in Ireland. Our products are simple, straightforward, mainstream retail banking products. We have a multi-channel customer offer that provides accessibility and convenience for our customers to meet their changing needs.


Our Purpose & Strategy

Please find further detail on Our Business Model & Strategy on page 11 of the 2015 Annual Report

Clear Competitive Positioning

Effective Arrears

Management

Maximising Non-Core Value

Building a Safe, Stable and

Resilient Group

Sustainable Profitability

We set out our Strategic Priorities and Medium Term Financial Targets in our Equity Prospectus. We have presented our Corporate Strategy in the 2015 Annual Report both to express our purpose more explicitly, and to provide a construct to guide the execution of those priorities.

We set out our Strategic Priorities page 92 of the 2015 Equity Prospectus

We will maximise shareholder value

over time

by developing a personal banking relationship with

our customers

while operating within the strict boundaries of

our risk appetite

Participation Strategy

Competitive Strategy

Relative Total Shareholder Return

Our Purpose

Corporate Strategy


Historical Financial Results

€m FY 2015 FY 2014 FY 2013 FY 2012

Net Interest Income 358 329 309 300

Other Income 34 38 48 62

ELG Fees (14) (59) (105) (165)

Total Operating Income 378 308 252 197

Total Operating Expenses (317) (389) (300) (283)

Pre-Impairment Profit / (Loss) 61 (81) (48) (86)

Impairment (Charge) / Write-back (35) 42 (929) (891)

Profit /(Loss) Before Exceptional Items 26 (39) (977) (977)

Exceptional Items (Net) (460) (9) 309 58

Loss Before Tax (434) (48) (668) (919)

Key Metrics FY 2015 FY 2014 FY 2013 FY 2012

Net Interest Margin 1.12% 0.90% 0.82% 0.72%

Cost Income Ratio 84% 126% 113% 166%

NPLs €6.6bn2 €8.7bn2 €8.6bn €7.0bn

CET1 Ratio (Fully Loaded Basis) 15.0% 12.4% 11.3% 18.0%1

LDR 125% 138% 151% 191%

1 Core Tier 1 Ratio under the Basel II regime 2 Includes NPL Reclassification


Medium Term Targets

FY 2015 H1 2016 2018 Target

Balance Sheet

Group LDR 125% 131% <130%

Group CET1 Ratio (Fully Loaded) 15.0% 15.9% >11%

Income Statement

Core Bank NIM 142bps 176bps c.170bps

Core Bank Cost:Income Ratio 78% 77%1 c.50%

Core Bank Underlying Cost of Risk2 (37bps) (42bps)3 <40bps

Core Bank RoE c.10.0%4

1. Calculated excluding Visa Europe Share sale gain 2. Calculated excluding HPI-linked Write-Backs and Model Calibration Adjustments 3. Annualised 4. Based on Equity required for a Fully Loaded CET1 ratio of 11%


Group Core Non-Core

€m H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015

Interest Income 294 378 263 294 31 84

Interest Expense (96) (220) (53) (127) (43) (84)

Net Interest Income (excl. ELG) 198 167 210 167 (12) -

ELG Fees (3) (9) (3) (9) - -

Other Income 38 14 38 13 - 1

Total Operating Income 233 172 245 171 (12) 1

Total Operating Expenses Excluding Regulatory Costs (158) (147) (148) (137) (10) (10)

Regulatory Costs (19) - (19) - - -

Pre-Provision Profit/(Loss) 56 25 78 34 (22) (9)

Impairments Write-back / (Charge) 61 (24) 75 (25) (14) 1

Profit/(Loss) Before Exceptional Items 117 1 153 9 (36) (8)


Profit/(Loss) Before Taxation 108 (431)

Taxation (28) 21

Profit/(Loss) For The Year 80 (410)

Segmental Income Statement

30


Gross Average Balances (€bn) Gross Yields1 Interest Income (€m)

H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015

Core Bank Tracker 13.7 14.2 1.2% 1.2% 79 82

Core Bank Fixed and Variable 7.4 7.8 4.0% 4.2% 149 162

Consumer Finance 0.3 0.4 9.3% 9.2% 16 17

ROI Non-Core 0.5 2.2 2.1% 1.9% 5 21

UK Non-Core 3.3 6.6 0.7% 1.3% 12 42

Treasury Assets 5.1 6.4 1.8% 2.0% 46 65

Other - 2

Underlying Interest Income 307 391

Deferred Acquisition Costs (13) (13)

Total Interest Income 294 378

1. Gross yield shown are net of hedging costs

X

X

X

X

X

X

=

=

=

=

=

=

Interest Income Analysis

31


Interest Expenses Analysis

Average Balances (€bn) Cost of Funds Interest Expense (€m)

H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015

Current Accounts 3.1 2.8 0.0% 0.0% - 1

Retail Deposits (ex Current Accounts) 10.7 11.4 0.7% 1.3% 37 75

Corporate Deposits 2.5 2.9 1.6% 2.2% 20 32

Institutional Deposits 0.6 2.4 0.8% 1.0% 3 12

IoM Deposits 0.4 0.6 1.1% 1.8% 2 6

Wholesale Funding (including Subordinated Liabilities) 4.2 8.2 1.3% 1.7% 26 68

System Funding 4.2 4.3 0.0% 0.1% 1 1

Underlying Interest Expense 89 195

Amortisation of Core Deposit Intangibles 7 16

Total Interest Expense 96 211

X =

X =

X =

X =

X =

X =

X =

32


Tracker Margin Impact at H1 2016

1. Average ECB bank rate for the year

Dec 14 Dec 15 Jun 16

Gross Irish Tracker Book (€bn)

33

(bps) Group Core Bank

Average Customer Rate 117 117

- ECB Repo Rate1 2 2

- Average Fixed Spread 115 115

Cost of Funds -75 -66

Net Interest Margin Impact 42 51

Tracker Book And Margin

14.8

14.2

13.9


(€m) H1 2016 H1 2015

Retail Banking And Credit Card Fees 22 22

Brokerage And Insurance 5 4

Other Fee Income 1 1

Total Fee And Commission Income 28 27

Fee and Commission Expense (9) (9)

Net Fee And Commission Income 19 18

Net Trading Expense (10) (1)

Net Other Operating Income / (Expenses) 291

(3)

Total Other Income 38 14

Other Income Analysis

34

1. Relates to one-off gain on sale of Visa Europe Share


Impairments – Write-Back Potential

PTSB HPI Assumptions More Conservative Than External Forecasts

33.2%

-35.2%

-35.7%

-60%

-55%

-50%

-45%

-40%

-35%

-30%

Jan

-00

Jan

-00

Jan

-00

Jan

-00

Jan

-00

Jan

-00

Jan

-00

Jan

-00

Jan

-00

Jan

-00

Jan

-00

Feb

-00

Feb

-00

Feb

-00

Feb

-00

Feb

-00

Feb

-00

Feb

-00

National Dublin Ex-Dublin

Key Messages

• No significant changes to any house price assumptions in the Group’s impairment models in 2015

• Overall property prices increased by 6.9% in the last 12 months; Dublin 4.8%, Rest of Ireland 8.5%

• Continue to maintain c.12-15% of buffer over the CSO Residential House Price Index in the context of flattening house price curves in H1 2016 and expected macro uncertainties created by UK referendum outcome

• If the actual House Prices turnout to be as predicted by Goodbody and if the Group were to maintain the same level of buffer, there is upside of c. €170m (Note 1) over the medium term to 2018

• However, release of future HPI provisions will be driven by:

• Actual house price movement;

• Management’s intended buffer;

• Other regulatory changes such as IFRS 9

Note 1:

a. Sensitivity assumes all other factors remain the same

b. Upside as of 30 June 2016 inclusive of previous guidance

c. Projections modelled on basis of maintaining the current level of buffer

d. HPI assumed to stay flat post 2018

CSO House Price Index

-31.6%

-23.1%

-44.4% -42.8% -50.0%

-40.0%

-30.0%

-20.0%

-10.0%

2016 2017 2018

Goodbody Current Model

Jan 12 May 16


Dec 2015 (€bn) ROI HL ROI BTL UK HL UK BTL CRE Consumer Total Core Non-Core

Gross Loans 15.9 5.6 0.2 3.3 0.4 0.3 25.7 21.6 4.1

Performing Loans 11.5 3.8 0.2 3.2 0.2 0.2 19.1 15.4 3.7

NPLs 4.4 1.8 0.0 0.1 0.2 0.1 6.6 6.2 0.4

Provisions Stock 1.5 1.0 0.0 0.0 0.1 0.1 2.7 2.5 0.2

PCR¹ % 34% 53% 25% 38% 66% 93% 41% 40% 51%

June 2016 (€bn) ROI HL ROI BTL UK HL UK BTL CRE Consumer Total Core Non-Core

Gross Loans 15.6 5.5 0.2 2.9 0.3 0.3 24.8 21.7 3.1

Performing Loans 11.4 3.8 0.2 2.8 0.2 0.2 18.6 15.6 3.0

NPLs 4.2 1.7 0.0 0.1 0.1 0.1 6.2 6.1 0.1

Provisions Stock 1.5 0.9 0.0 0.0 0.1 0.1 2.6 2.5 0.1

PCR¹ % 35% 52% 30% 55% 92% 85% 41% 41% 45%

1. Calculated as Provision Stock as a % of NPLs

Loan Book Profile

36


Asset Quality – Arrears Performance

Home Loan - # Cases 0-90 DPD

0.0%

3.0%

6.0%

Jun-12 Dec-13 Jun-15 Jun-16

PTSB Industry

Home Loan - # Cases >90 DPD

Buy To Let - # Cases 0-90 DPD

Buy To Let - # Cases >90 DPD

0.0%

2.0%

4.0%

6.0%

8.0%


PTSB Industry

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%


PTSB Industry

0.0%

4.0%

8.0%

12.0%

16.0%


PTSB Industry

The above PTSB data is published on the same basis as the industry data. It does not include any shortfall in cases post the sale of properties which have been taken into possession (i.e. unsecured debt) but does include loans where the balances have been charged off i.e. transferred to an off-balance sheet recoveries ledger.


Asset Quality – NPL Definition

PTSB’s NPL Definition NPLs are defined as:

- Loans that are impaired;

- Loans which are greater than 90 days in arrears;

- Loans which the borrower is considered unlikely to repay the total loan balance without realisation of the underlying collateral; and

- Loans which are considered unlikely to pay as defined under regulatory guidelines, including both May 2013 CBI guidelines on impairment provisioning and EBA ITS.


Asset Quality – Forbearance Treatments

47%

5% 13%

30%

4% 1%

ROI Home Loan in Forbearance - NPLs €2.5bn

Split

Trials

Term Extension/CapitalisationPart Capital &InterestShort Term

Interest Only

15%

4%

7%

22%

8%

44%

ROI BTL in Forbearance - NPLs €0.9bn

Split

Trials

Term Extension/CapitalisationPart Capital &InterestShort Term

Interest Only

1%

78%

12%

9%

ROI Home Loan in Forbearance - Performing €0.7bn

Trials

Term Extension/Capitalisation

Part Capital &Interest

Short Term

23%

76%

1%

ROI BTL in Forbearance - Performing €0.4bn

Term Extension/Capitalisation

Part Capital &Interest

Short Term

€4.5bn in Active Forbearance, 76% NPLs & 71% Home Loan


1.3

0.8 0.7

1.1

0.9 1.0


Performing Non-Performing

ROI Home Loans and Buy-To-Let Mortgages

Negative Equity Balances

€1.7bn at June 16, unchanged from Dec 15

€2.4bn

€1.7bn

40

€1.7bn


H1 2016 FY 2015

Asset Type Balance (€bn) Gross

Yield%1 Balance (€bn) Gross

Yield%2

Debt Securities 2.9 1.4 3.8 2.6

Government 2.5 1.4 3.1 3.0

NAMA 0.4 0.9 0.7 1.42

Loans and Advances to Credit Institutions (Cash and Equivalents)

1.7 0.0 1.6 0.1

• o/w Restricted in Securitisation Vehicle Balances

0.4 0.3

Total 4.6 0.9 5.4 1.9

1. Gross income/Average balance for H1 2016 2. Gross income/Average balance for FY 2015 3. NAMA Bonds priced off 6 month Euribor. However, EIR accounting adjustments, including those arising

from redemptions, have given rise to a higher yield

54%

9%

37%

Government

NAMA

Loans and Advances to Credit Institutions

Treasury Portfolio Mix

Treasury Portfolio Overview

41


Government Bonds 33%

NAMA Bonds

8%

Irish RMBS1 56%

Credit Line 4%

Dec 2015 Jun 2016

1. Irish RMBS (Residential Mortgage Backed Securities) refers to Securitisation Programs issued by the Group 2. HQLAs: High Quality Liquid Assets 3. Ratio of the stock of high quality liquid assets to expected net cash outflows over the next 30 days under a stress

scenario.

• Increase in the Liquidity Buffer is driven by the secured funding issuance during the period.

• Total Liquidity Buffer of €5.6bn made up of cash, cash equivalents and unencumbered collateral; HQLA2 of €2.3bn

• Liquidity Coverage Ratio3 of 147% at 30 June 2016

Liquidity Buffer (€bn) Liquidity Portfolio Composition

Liquidity

42

5.6

3.8


RWAs

• RWAs reduced by €0.4bn since the end of last year, around half of which is due to EUR/GBP FX rate on the UK loan book

• RWA Intensity relatively stable at 43%

• Majority of the Lending Exposures are risk weighted using IRB approach

• 35% (Dec 2015: 35%) of the RWAs on Total Lending Exposures are on NPLs

June 16 (All figures are on a Pro-Forma basis)

EAD3

(€bn)

RWAs1

(€bn)

Avg. Risk

Weight %

ROI HLs and BTLs 21.4 8.7 40%

Consumer/SME 1.0 0.5 50%

Non-Core UK 3.1 1.2 39%

Total Lending Exposures 25.6 10.4 41%

Treasury Assets 9.24 0.5 6%

Other Exposures 0.7 0.5 74%

Total Credit Risk 35.5 11.4 32%

Operational Risk 0.5

Total Risk 11.9

11.9 12.3

Jun-16Dec-15

RWAs (€bn) 1 RWA Intensity2

43% 42%

1. On a Fully Loaded basis 2. Calculated as RWAs as % of Total Assets 3. Exposure At Default (EAD) is a regulatory estimate of Credit Risk consisting of both On and Off balance

sheet commitments 4. Treasury Assets include gross exposures to the Irish Government and Central Banks arising from the

Group’s repurchase transactions


30-Jun-16 31-Dec-15

Transitional Fully Loaded Transitional Fully Loaded

€m €m €m €m

RWAs 11,903 11,903 12,210 12,260

Capital Resources:

CET1 Capital 2,130 1,896 2,086 1,837

Additional Tier 1 94 75 105 79

Tier 1 Capital 2,224 1,971 2,191 1,916

Tier 2 Capital 80 67 91 70

Total Capital 2,304 2,038 2,282 1,986

Capital Ratios:

CET1 Capital 17.9% 15.9% 17.1% 15.0%

Tier 1 Capital 18.7% 16.6% 17.9% 15.6%

Total Capital 19.4% 17.1% 18.7% 16.2%

Leverage Ratio1 7.4% 6.6% 6.7% 5.9%

30-Jun-16 31-Dec-15

Transitional Fully Loaded Transitional Fully Loaded

€m €m €m €m

Total Equity 2,483 2,483 2,396 2,396

Less: AT1 Capital (122) (122) (122) (122)

Captive Insurance Equity (10) (10) (10) (10)

Adjusted Capital 2,306 2,306 2,264 2,264

Prudential Filters:

Intangible Assets (27) (27) (36) (36)

Deferred Tax (78) (387) (47) (404)

Cashflow Hedge Reserve 4 4 13 13

AFS Reserve (65) - (94) -

Revaluation Reserve (10) - (14) -

Common Equity Tier 1 2,130 1,896 2,086 1,837

1. Calculated as Tier 1 Capital as % of gross balance sheet exposures (total assets and off-balance sheet loan commitments).

Regulatory Capital (1/2)

44


Regulatory Capital (2/2)

0.40

(0.30)

0.70

December 2015 RWA DTA Deduction Profits for the Period June 2016

Transitional CET1 %

17.9 17.1

0.40 0.10

0.70

(0.30)

December 2015 RWA DTA Deduction Profits for the Period Other Prudential Filters andreserve movements

June 2016

Fully Loaded CET1 %

15.0

15.9

interim results 2016 - investis digitalipm.production.investis.com/~/media/files/i/irish-life... ·...

Documents