TIDMBIRG
RNS Number : 4498D
Bank of Ireland Group PLC
28 October 2020
Bank of Ireland Group plc (the "Group")
Interim Management Statement - Q3 2020 update
28 October 2020
Comment: Francesca McDonagh, Bank of Ireland Group CEO:
"As we navigate COVID-19 we continue to support our customers at
each stage of the pandemic, playing our part in the reboot of the
economy, and staying focused on our strategic objectives.
We are delivering good progress on transformation, customer
delivery, and operating cost. Examples include the roll-out of our
new Mobile App to iOS customers which follows the successful launch
to Android users in May. Our cloud-based personal current account
journey is now the largest channel for customers opening a current
account, and we launched a fully digitised mortgage application
process for first time buyers in July. We also completed a
bank-wide voluntary redundancy scheme, which will deliver a
step-change reduction to the bank's cost base.
The third quarter saw generally better trading conditions
compared to quarter two. Business volumes and activity in Ireland
improved including a c.30% increase in our Irish mortgage drawdowns
compared to the second quarter of 2020 and we also experienced
improved business activity in our UK business, including Bespoke
mortgages where drawdowns doubled quarter on quarter. While there
has been improvement in the third quarter, recently announced
COVID-19 restrictions by the Irish and UK governments combined with
Brexit present continued uncertainty. Against this backdrop, our
capital position remains strong."
Key highlights:
-- Strong capital position; fully loaded CET1 capital ratio
13.5%, regulatory CET1 capital ratio 14.8%
-- Higher activity levels in Q3 compared to prior quarter; new
lending up 59% and business income (including share of
associates/JVs) up 25%
-- Net interest income (NII) 2% lower in the 9 months to September vs prior year; NIM of 2.00%
-- New lending of EUR9 billion to September; 25% lower compared to prior year
-- Business income (including share of associates/JVs); 19%
lower in the 9 months to September vs prior year
-- Continued strong cost discipline; net reduction of 4% in the
9 months to September vs prior year
-- Restructuring charge of EUR169 million taken in September
reflecting the results of the Group's voluntary redundancy scheme
and supporting a step-change reduction in costs
-- No material increase in actual Stage 3 loan losses in the 3 months to September 2020
Income
NII is 2% lower in the 9 months to September 2020, when compared
to the same period in 2019. This reflects lower new lending volumes
and the on-going impact of lower interest rates. Lower funding
costs, including the impact of applying negative interest rates to
certain deposits, has supported interest income. In addition,
higher mortgage and revolving credit facilities (RCFs) activity has
been positive. The Group continues to maintain strong commercial
pricing discipline with loan asset spreads remaining stable.
While the third quarter has seen an improvement, business
income, including share of associates and JVs, is 19% lower in the
9 months to September 2020, when compared to the same period in
2019.
Costs and voluntary redundancy
The Group continues to maintain tight control over the cost base
while investing in transformation and absorbing cost inflation.
Operating expenses (excluding levies and regulatory charges) are 4%
lower in the first 9 months of 2020 compared to the same period in
2019. The net reduction of 4% includes on-going COVID-19 related
costs incurred during 2020.
The voluntary redundancy scheme, which concluded in the third
quarter, will result in c.1450 FTE exits commencing in 2020 and
continuing over the course of 2021. When completed the financial
impact is a c.EUR114 million reduction in annual staff costs,
equivalent to 14% of September 2020 annualised staff costs. The
restructuring charge of EUR169 million is captured within the
Group's broader EUR1.4 billion investment programme to 2021 and
will further help to achieve our target cost base of less than
EUR1.65 billion by 2021, and lower again beyond 2021.
Balance Sheet
Customer loan volumes were EUR76.3 billion at the end of
September 2020, a decrease of EUR3.2 billion since December 2019
(EUR0.8 billion reduction on a constant currency basis). New
lending of EUR9 billion, excluding RCFs of EUR0.9 billion, declined
25% compared to prior year while loan redemptions were EUR10.1
billion.
The Group's market share of new mortgage lending in Ireland
averaged c.25% in the first 9 months of 2020 capturing increased
customer activity in the third quarter .
The Group's liquid assets of EUR30.8 billion have increased by
EUR3.6 billion since December 2019 reflecting lower loan volumes
and increased customer deposits of EUR3.2 billion since the start
of the year.
Customer deposits were EUR87.2 billion (EUR88.1 billion on a
constant currency basis) and wholesale funding was EUR9.7 billion
at the end of September 2020. The Group successfully issued EUR300
million of AT1 securities in August and has now issued AT1
securities of EUR975 million in 2020, filling the Group's Pillar 1
and P2R requirements for AT1.
Asset Quality
The Group has not experienced a material increase in loan losses
since June 2020, in line with expectations. Macroeconomic scenarios
impacting credit impairment will be refreshed to reflect updated
market forecasts and captured as part of the Group's year-end
credit impairment process.
The Group continues to support our personal and business
customers in Ireland and the UK through Payment Breaks. The number
of customers availing of a Payment Break continues to reduce as
Payment Breaks expire. The Group approved c.106,000 initial 3-month
Payment Breaks in Ireland and the UK, with c.27,000 availing of a
further 3-month extension. As at 16 October 2020 there are a total
of c.20k outstanding Payment Breaks. The table below provides
details by geography and portfolio.
Payment Breaks - total balances outstanding as at 16 October 2020
Ireland Mortgages Consumer SME Total
------------- ----------- ----------- -----------
No. of accounts 6.4k 1.9k 2.8k 11.1k
------------- ----------- ----------- -----------
Exposure EUR1.1bn EUR28m EUR0.8bn EUR1.9bn
------------- ----------- ----------- -----------
% of accounts 4% 1% 2% 2%
------------- ----------- ----------- -----------
% of portfolio 5% 2% 9% 5%
------------- ----------- ----------- -----------
UK Mortgages Consumer SME Total
------------- ----------- ----------- -----------
No. of accounts 4.3k 3.9k 0.7k 8.9k
------------- ----------- ----------- -----------
Exposure EUR0.7bn EUR44m EUR19m EUR0.8bn
------------- ----------- ----------- -----------
% of accounts 3% 1% 1% 2%
------------- ----------- ----------- -----------
% of portfolio 3% 1% 1% 3%
------------- ----------- ----------- -----------
For those customers that have come off Payment Breaks, the
significant majority have resumed principal and interest
repayments. The number of customers requiring additional support is
in-line with our expectations. Non-performing exposures (NPEs) have
remained broadly stable since the end of June 2020, EUR4.5 billion
at the end of September 2020, equivalent to an NPE ratio of 5.8%.
The Group has a strong track record of credit risk management and
working with customers to implement sustainable solutions.
Capital Position
The Group's fully loaded CET1 ratio decreased by a net 10bps
from 13.6% at June 2020 to 13.5% at the end of September 2020. The
Group's organic capital generation was more than offset by
investments in our transformation programme, including c.30bps from
voluntary redundancy restructuring costs, and other movements.
The Group's regulatory CET1 ratio was 14.8% compared to current
regulatory requirements of 9.27%. The Group's regulatory Total
Capital ratio was 19.2% at the end of September 2020.
2020 Outlook
Third quarter trading was positive relative to expectations.
Taking into account this positive trading, the potential impact of
increased restrictions to control the pandemic and on-going
uncertainties in relation to Brexit, our overall expectation for
2020 performance is unchanged. The Group continues to maintain
strong capital with large capital buffers above regulatory minimum
requirements.
Ends
For further information please contact:
Bank of Ireland
Myles O'Grady, Group Chief Financial Officer +353 (0)766 23
4714
Darach O'Leary, Head of Group Investor Relations +353 (0)766 24
4224
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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