TIDMBIRG
RNS Number : 6551Q
Bank of Ireland Group PLC
01 March 2021
Bank of Ireland Group plc (the "Group")
Publishes Annual Results for the 12 months to 31(st) December
2020
1 March 2021
Comment: Francesca McDonagh, Bank of Ireland Group CEO:
"Through an exceptionally challenging year, our focus was on
supporting our customers through every stage of the COVID-19 crisis
while continuing to deliver our strategy. When COVID-19 hit, we
radically changed how we operate so that we could provide the
services our customers needed, including payment breaks for
mortgages and business loans. Our speed of response was made
possible by the investments we have made in transforming our
culture, systems and business model.
At the same time, we continued to deliver our strategy -
launching new digital services, reducing customer complaints, and
improving our Net Promoter Score (NPS) significantly. We also grew
our market share in Irish mortgages and SME lending, made good
progress in the reshaping of our UK business, and further reduced
costs. Today, we are setting out our plans to go further, with a
new cost target for 2023.
For many years, the trend to digital banking has been evident,
with customers using branches less and less. COVID-19 has
accelerated this changing behaviour, and we've seen a seismic shift
towards digital banking over the past 12 months. We've now reached
a tipping point in customer preferences between online and offline
banking. That's why we've also announced changes to our branch
network in Ireland and Northern Ireland today, while protecting
access to local banking services though a new arrangement with An
Post."
Financials:
-- Strong CET1 capital ratios; regulatory ratio 14.9% and
c.510bps headroom to minimum regulatory requirements, fully loaded
ratio 13.4%
-- Underlying loss before tax EUR374 million; return to
profitability in the second half of the year of EUR295 million
-- Total income 8% lower year on year
-- Costs reduced by 4%; c.EUR1.7 billion cost target achieved one year early
-- New EUR1.5 billion cost target for 2023
-- Irish mortgage market share improved 2% to 25.5% in 2020
-- IFRS 9 impairment charge EUR1.1 billion; at the lower end of guidance range
-- Pre-impairment organic capital generation of 125 basis points
Income
Net interest income of EUR2.1 billion is 2% lower than 2019 due
to lower new lending volumes and the on-going impact of lower
interest rates. Surplus liquidity continues to weigh on interest
income with lower yielding liquid assets, as a proportion of
average interest earning assets, increasing in the year.
Management actions, including the impact of applying negative
interest rates to certain deposits, has supported interest income.
In addition, improved margins on UK mortgage lending has been
positive. The Group continues to maintain strong commercial pricing
discipline with loan asset spreads remaining stable.
The second half of 2020 demonstrated good momentum and an
improvement in economic activity, with business income, including
share of associates and JVs, 12% higher than the first six months
of 2020. Notwithstanding this improvement, business income was down
21% in 2020 when compared to 2019.
Costs and non-core costs
The Group continues to maintain tight control over its cost base
while investing in transformation and the impact of wage inflation.
Operating expenses (excluding levies and regulatory charges and
impairment of intangible assets and goodwill) are 4% lower in 2020
compared to 2019. The net reduction of 4% includes EUR25 million of
COVID-19 related costs incurred during 2020. The Group has
successfully achieved our 2018 Investor Day target of c.EUR1.7
billion of costs one year early, with costs reduced by 10% since
2017.
The voluntary redundancy scheme, concluded during 2020, will
deliver a c.EUR114 million reduction in annual staff costs when
fully completed. The restructuring charge of EUR189 million is
captured within the Group's non-core costs of EUR386 million in
2020. In addition to the voluntary redundancy restructuring charge,
non-core costs include further restructuring costs of EUR56
million, the EUR136 million charge taken in the first half of 2020
on the impairment of intangible software assets, and customer
redress costs of EUR39 million.
Balance Sheet
Customer loan volumes were EUR76.6 billion at the end of
December 2020, a decrease of EUR2.9 billion since December 2019
(EUR0.8 billion reduction on a constant currency basis). New
lending of EUR13.3 billion, excluding RCFs of EUR0.7 billion,
declined 19% compared to 2019 while loan redemptions were EUR14
billion.
The Group's market share of new mortgage lending in Ireland
averaged 25.5% in 2020 representing a 2% increase in market share
in the year while continuing to maintain risk and pricing
discipline .
The Group's liquid assets of EUR30.7 billion have increased by
EUR3.6 billion since December 2019 reflecting lower loan volumes
and surplus liquidity, with customer deposits increasing by EUR4.6
billion since the start of the year.
The Group successfully issued EUR975 million of AT1 securities
in 2020, filling the Group's Pillar 1 and P2R requirements for
AT1.
Asset Quality
A net credit impairment charge of EUR1,133 million on financial
instruments in 2020 compared to EUR215 million in 2019. This
charge, c.60% of which was taken on performing loans, reflects the
impact on IFRS 9 from the Group's latest macro-economic outlook, a
management adjustment related to the risk that longer term credit
supports may be required for customers affected by COVID-19 and
actual loan loss experience in the period.
Actual loan losses in the period of EUR437 million, primarily in
corporate and property portfolios, include EUR253 million on legacy
property exposures. The Group's impairment coverage increased to
2.9% from 1.6% at December 2019.
Our non-performing exposures (NPE) increased by EUR1 billion to
EUR4.5 billion, equating to an NPE ratio of 5.7% of gross customer
loans. This increase, all of which occurred in the first six months
of 2020, primarily reflects credit migration in our property and
construction portfolios, and the implementation of the new
Definition of Default regulatory framework.
Capital Position
The Group's regulatory CET1 capital ratio of 14.9% and fully
loaded CET1 capital ratio of 13.4% at December 2020 remain strong
despite elevated levels of impairment charges in the period.
Pre-provision
organic capital generation and the reversal of the dividend
declared in respect of 2019 was more than offset by the impact of
credit deterioration, transformation investment and other
movements. Minimum regulatory capital requirements were reduced by
c.188 basis points in 2020 with the Group's 2021 requirement set at
9.77%. The Group's 14.9% regulatory CET1 capital ratio at December
2020 provides headroom of c.510 basis points to our 2021
requirements.
2021 Outlook
The outlook continues to be impacted by COVID-19. 2021 total
income is expected to be broadly in line with 2020 reflecting lower
net interest income, higher business income supported by our Wealth
and Insurance business and a lower charge for valuation items.
Costs will continue to reduce with 2021 costs to be less than
EUR1.65 billion and a new 2023 cost target of EUR1.5 billion. On
asset quality, subject to no further deterioration in the economic
conditions or outlook, the majority of the credit impairment risk
associated with COVID-19 has been captured and we expect the 2021
impairment charge to be materially lower than 2020.
On capital, 2021 CET1 ratios are expected to remain broadly in
line with December 2020 levels with distributions to recommence on
a prudent and progressive basis based on performance and capital
position.
Additional Information
Total payment breaks granted and remaining outstanding as at
12 February 2021 - Ireland
Ireland Total Total Payment Payment % returned % of payment % with
payment payment breaks breaks to pre-COVID-19 breaks approved
breaks breaks active exposure terms active additional
granted exposure active measures
--------- ---------- -------- ---------- ----------------- ------------- ------------
Mortgages 20k EUR3.0bn 0.4k EUR70m 95% 2% 3%
--------- ---------- -------- ---------- ----------------- ------------- ------------
Consumer 7k EUR0.1bn 0.0k EUR0m 95% 0% 5%
--------- ---------- -------- ---------- ----------------- ------------- ------------
SME 12k EUR2.9bn 0.1k EUR67m 88% 1% 11%
--------- ---------- -------- ---------- ----------------- ------------- ------------
Total 39k EUR6.0bn 0.5k EUR137m 93% 1% 6%
--------- ---------- -------- ---------- ----------------- ------------- ------------
Total payment breaks granted and remaining outstanding as at
12 February 2021 - UK
UK Total Total Payment Payment % returned % of payment % with
payment payment breaks breaks to pre-COVID-19 breaks approved
breaks breaks active exposure terms active additional
granted exposure active measures
--------- ---------- -------- ---------- ----------------- ------------- ------------
Mortgages 22k EUR3.4bn 1.3k EUR212m 94% 6% 0%
--------- ---------- -------- ---------- ----------------- ------------- ------------
Consumer 32k EUR0.4bn 3.6k EUR41m 87% 11% 2%
--------- ---------- -------- ---------- ----------------- ------------- ------------
SME 6k EUR0.3bn 0.1k EUR15m 97% 1% 2%
--------- ---------- -------- ---------- ----------------- ------------- ------------
Total 60k EUR4.1bn 5.0k EUR268m 90% 8% 2%
--------- ---------- -------- ---------- ----------------- ------------- ------------
Ends
http://www.rns-pdf.londonstockexchange.com/rns/6551Q_1-2021-3-1.pdf
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)87
9480650
Damien Garvey, Head of Group External Communications and Public
Affairs +353 (0)86 8314435
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, business model, projected costs,
margins, future payment of dividends, 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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