TIDMBIRG
RNS Number : 1899V
Bank of Ireland Group PLC
05 August 2020
Bank of Ireland Group plc (the "Group")
Publishes Interim Results for the 6 months to 30(th) June
2020
5 August 2020
CEO Comment: Francesca McDonagh, Bank of Ireland Group CEO:
"Our priority in the pandemic has been to proactively support
our customers, colleagues and communities, and to stay focussed on
delivering our strategy. We put in place a wide range of supports
for customers, including more than 100,000 payment breaks in
Ireland and the UK, and we transformed how we operate.
Notwithstanding the challenges, we've increased our market share in
Irish mortgages, reduced costs, and continued to improve our
products and services especially through digital.
"The severe impact of COVID-19 - on our customers, the economy,
and our business - is seen in our first half 2020 results. COVID-19
has had a material impact on the Group's financial performance and
outlook. We have taken an impairment charge of EUR937 million,
resulting in a loss before tax of EUR669 million for the first six
months of 2020.
"Our capital remains strong and resilient, with a fully loaded
CET1 ratio of 13.6% and a regulatory CET1 ratio of 14.9%. Our
outlook is cautiously more optimistic than our quarter one trading
update, resulting in revised guidance for the rest of 2020 in terms
of new lending and business income. We remain committed to
continuing to support our customers, and helping reboot the
economy, in the time ahead."
H1 2020 Financials:
-- Strong capital position; fully loaded CET1 capital ratio
13.6%, regulatory CET1 capital ratio 14.9%
-- Underlying loss of EUR669 million
-- Total income 13% lower; net interest income stable; NIM of 2.02%
-- Strong cost discipline; net reduction 3% / EUR31 million
-- IFRS 9 impairment charge EUR937 million; a prudent and comprehensive approach
-- Net lending growth of EUR0.2 billion including EUR1.3 billion of revolving credit facilities
-- Pre-impairment organic capital generation of 45 basis points
Income Statement
Net interest income (NII) of EUR1.1 billion was broadly in line
with the first half of 2019. Net interest margin was 2.02%, in line
with our expectations. The Group's NII reflects the benefit from
loan book growth since 2017 and reduced liability costs offsetting
lower structural hedge income and UK competitive pressures.
Fees and other income arise from diversified business activities
including wealth, bancassurance, foreign exchange and transactional
banking fees. This includes business income of EUR266 million which
is 14% lower than the same period in 2019 due to the disruption
caused by COVID-19. Wealth and Insurance income decreased 16%
versus the same period in 2019 from lower new business sales and
reduced income on existing business. While Retail Ireland income
decreased 20% from reduced current account and FX income and lower
levels of card transactions as a result of the economic
lockdown.
A loss of EUR109 million on valuations and other items was
reported in the first six months. This reflected falling equity
markets and widening credit spreads related to unit linked assets
and bond portfolio valuations in Wealth and Insurance of EUR90
million, and financial instrument valuation adjustments and other
items of EUR19 million.
Delivery on transforming our culture, systems and business model
continues to drive efficiencies across the Group. Operating
expenses (excluding levies and regulatory charges and impairment of
goodwill) reduced by 3% compared to the first half of 2019 and
includes COVID-19 related expenses. Expenses reduced by 5%
excluding COVID-19 related expenses.
A net credit impairment charge of EUR937 million in the first
six months of 2020 compared to EUR79 million in the same period of
2019. This charge, largely taken on Stage 1 and Stage 2 performing
loans, includes EUR432 million from the impact on IFRS 9 models
from the Group's latest macro-economic outlook, a EUR184 million
management adjustment related to payment breaks, and EUR321 million
from actual loan loss experience in the period. The Group's
impairment coverage increased to 2.7% from 1.6% at December 2019
resulting in an impairment loss allowance of EUR2.1 billion on
balance sheet at June 2020.
Non-core charges of EUR153 million include EUR136 million
impairment relating to intangible software assets. This charge was
incurred following a review of the recoverability of assets.
Balance Sheet
The Group's loan book decreased by EUR2.8 billion during the
first six months of 2020 (EUR0.5 billion on a constant currency
basis). Net lending growth of EUR0.2 billion includes EUR1.3
billion of revolving credit facility (RCF) drawdowns, with mortgage
market share in Ireland increasing to 25%. Foreign exchange and
other movements of EUR2.1 billion and impairment charges more than
offset net lending. Total new lending volumes, excluding RCF
activity, of EUR5.8 billion were 19% lower than the first half of
2019, reflecting reduced activity in our core markets as a
consequence of COVID-19.
Our non-performing exposures (NPE) increased by EUR1.1 billion
to EUR4.6 billion, equating to an NPE ratio of 5.8% of gross
customer loans. This increase primarily reflects credit migration
in our corporate and property and construction portfolios, and the
implementation of the new Definition of Default regulatory
framework.
Capital
Our fully loaded CET1 capital ratio of 13.6% at June 2020
remains strong, with a 10 basis point improvement since quarter one
2020. Pre-impairment organic capital generation and the reversal of
the dividend declared in respect of 2019 was offset by the impact
of credit deterioration, loan book growth, transformation
investment and regulatory capital demand. Minimum regulatory
capital requirements have been reduced by 218 basis points to 9.27%
in 2020 and the Group's regulatory CET1 capital ratio of 14.9% at
June provides headroom of c.560 basis points. No dividend deduction
has been assumed for 2020.
Outlook
-- 2020 gross new lending volumes are expected to be c.70% of 2019 volumes
-- Net interest income in 2020 to be c.5% lower than 2019
-- 2020 business income to be 20%-30% lower than 2019
-- Costs will continue to reduce; 2020 costs to be lower than
2019, and 2021 costs to be below previous guidance of EUR1.65
billion
-- While we expect economic recovery commencing in H2 2020,
COVID-19 and Brexit are ongoing uncertainties, subject to no
further deterioration in the economic environment or outlook, 2020
impairment charge expected to be in a range of c.EUR1.1 billion to
EUR1.3 billion
-- 2020 regulatory CET1 ratio to remain above 13.5%, no dividend deduction assumed for 2020
-- The longer term impacts of COVID-19 on the economy and the
Group's financial performance remain uncertain; our medium-term
targets should therefore no longer be considered current in these
circumstances
Ends
http://www.rns-pdf.londonstockexchange.com/rns/1899V_1-2020-8-5.pdf
For further information log on to www.bankofireland.com/investor or contact:
Bank of Ireland
Myles O'Grady, Group Chief Financial Officer +353 (0)766 24
3291
Darach O'Leary, Head of Group Investor Relations +353 (0)766 24
4711
Damien Garvey, Head of Group External Communications and Public
Affairs +353 (0)766 24 6716
Forward-Looking Statement
This announcement contains forward-looking statements with
respect to certain of Bank of Ireland Group plc ('BOIG plc') and
its subsidiaries' (collectively the 'Group') plans and its current
goals and expectations relating to its future financial condition
and performance, the markets in which it operates and its future
capital requirements. These forward-looking statements often can be
identified by the fact that they do not relate only to historical
or current facts. Generally, but not always, words such as 'may,'
'could,' 'should,' 'will,' 'expect,' 'intend,' 'estimate,'
'anticipate,' 'assume,' 'believe,' 'plan,' 'seek,' 'continue,'
'target,' 'goal,' 'would,' or their negative variations or similar
expressions identify forward-looking statements, but their absence
does not mean that a statement is not forward-looking.
Examples of forward-looking statements include, among others:
statements regarding the Group's near term and longer term future
capital requirements and ratios, level of ownership by the Irish
Government, loan to deposit ratios, expected impairment charges,
the level of the Group's assets, the Group's financial position,
future income, business strategy, projected costs, margins, future
payment of dividends, the implementation of changes in respect of
certain of the Group's pension schemes, estimates of capital
expenditures, discussions with Irish, United Kingdom, European and
other regulators and plans and objectives for future operations.
Such forward-looking statements are inherently subject to risks and
uncertainties, and hence actual results may differ materially from
those expressed or implied by such forward-looking statements.
Nothing in this announcement should be considered to be a
forecast of future profitability, dividends or financial position
of the Group and none of the information in this announcement is or
is intended to be a profit forecast, dividend forecast or profit
estimate. Any forward-looking statement speaks only as at the date
it is made. The Group does not undertake to release publicly any
revision to these forward-looking statements to reflect events,
circumstances or unanticipated events occurring after the date
hereof.
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END
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