TIDMBIRG
RNS Number : 1994X
Bank of Ireland Group PLC
30 April 2021
Bank of Ireland Group plc (the "Group")
Interim Management Statement - Q1 2021 update
30 April 2021
Comment: Francesca McDonagh, Bank of Ireland Group CEO:
"Throughout the first quarter of 2021, we have continued to
support our customers through COVID-19. At the same time, we have
maintained our focus on strategy delivery, taking actions to
respond to the accelerated changes we have seen in customer banking
preference, and further reducing our costs.
We have also continued to transform the Bank including planning
for how we will operate in a post-COVID-19 world. This has been
underpinned by the investment we have made in improving our
culture, systems and business model in recent years.
The operating environment for European banks, including in
Ireland, is clearly dynamic and changing. We will consider
opportunities that are a good fit for customers, complement our
strategy to grow our business in Ireland, and support the
investments we are making in the Bank. Looking to the months ahead,
especially in our home market of Ireland, our clear ambition is to
proactively support economic recovery through accessible,
responsible and sustainable lending."
Key highlights:
-- Strong capital position; fully loaded CET1 capital ratio
13.5%, regulatory CET1 capital ratio 14.7%
-- Net interest income stronger than expectations with
performance stable in the 3 months to end-March vs prior year; NIM
of 2.00%, stable vs 2020
-- Stable net lending in the 3 months to end-March; new lending
of EUR3.9 billion offset by EUR3.9 billion of redemptions
-- Business income (including share of associates/JVs) in-line
with expectations, supported by growth in Wealth and Insurance
income
-- Positive contribution from valuation and other items
-- Continued strong cost discipline; net reduction of 7% in the
3 months to end-March vs prior year
-- Asset quality remains strong with minimal loan losses in the 3 months to end-March 2021
-- Memorandum of Understanding (MoU) entered into with KBC Bank
Ireland to acquire substantially all performing loans and
deposits
Income
Net interest income in Q1 2021 is stable when compared to the
same period in 2020. This reflects higher corporate lending
volumes, higher UK mortgage margins and the increased application
of negative interest rates on certain deposits. The low interest
rate environment continues to negatively impact income on liquid
assets and structural hedges. The Group continues to maintain
strong commercial pricing discipline with higher loan asset spreads
in Q1 2021 compared to the same period in 2020.
Notwithstanding the impacts of continued COVID-19 restrictions
on economic activity, business income, including share of
associates and JVs, is in line with expectations and, in the 3
months to end-March, is broadly in-line with the same period in
2020.
Valuation and other items has provided a positive contribution
in the 3 months to end-March.
Costs
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 7%
lower in the first 3 months of 2021 compared to the same period in
2020. The net reduction of 7% is supported by lower FTEs following
completion of the Group's voluntary redundancy scheme in 2020. We
continue to expect 2021 costs to be less than EUR1.65 billion.
Balance Sheet
Customer loan volumes were EUR78.5 billion at the end of March
2021, an increase of EUR1.9 billion since December 2020 (stable on
a constant currency basis at EUR76.7 billion). Modest reductions in
net lending in Retail Ireland and Retail UK have been offset by
growth in Corporate lending. N ew mortgage lending in Ireland of
EUR0.5 billion in the 3 months to end-March remained robust
notwithstanding on-going COVID-19 restrictions on normal housing
market activities and continued competitive dynamics in the
mortgage market.
The Group's liquid assets of EUR42.6 billion increased by
EUR11.9 billion since December 2020 primarily reflecting the
Group's EUR10.8 billion successful participation in the ECB's TLTRO
in March. TLTRO participation is expected to modestly enhance
interest income while mechanically reducing 2021 NIM by c.12 basis
points primarily from higher average interest earning assets.
Customer deposits were EUR89.9 billion (EUR88.7 billion on a
constant currency basis and broadly unchanged compared to the 2020
year end position of EUR88.6 billion). Wholesale funding was
EUR20.1 billion at the end of March 2021.
Asset Quality
The Group experienced no notable change in loan losses since
December 2020. Macroeconomic scenarios impacting credit impairment
will be refreshed to reflect updated market forecasts and captured
as part of the Group's half-year 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. Of the c.100,000 initial 3-month payment
breaks in Ireland and the UK; 96% have concluded and 4% remained
outstanding at end-March. 96% of the concluded payment breaks have
returned to pre-COVID-19 terms and c.4% have had further
forbearance measures approved.
Although restrictions to control the impacts of COVID-19 have
remained in place longer than expected, there was limited evidence
of adverse impacts on non-performing exposures (NPEs) in the first
3 months of 2021. The Group's NPE ratio of 5.7% at the end of March
2021 is unchanged since December 2020 while NPEs were EUR4.6
billion at the end of March 2021. 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 of 13.5% at the end of March
2021 has increased by a net 10 basis points from 13.4% at December
2020. The movement reflects the benefits from organic capital
generation, partially offset by on-going investment in
transformation and risk weighted assets associated with new
lending.
The Group's regulatory CET1 ratio was 14.7% at end of March,
c.490 basis points over end-2021 regulatory requirements of 9.77%
(excluding P2G). This strong capital position provides the Group
with sufficient capital headroom to complete the recently announced
MoU with KBC Bank Ireland. The Group also has a proven track record
of executing balance sheet optimisation initiatives which could
generate further capital if required in the future.
The Group's regulatory Total Capital ratio was 18.9% at the end
of March 2021.
Other
On 16 April 2021, the Group entered into a MoU with KBC Bank
Ireland to explore a route that could potentially lead to a
transaction whereby Bank of Ireland commits to acquire
substantially all of KBC Bank Ireland's performing loan assets and
liabilities. The transaction remains subject to customary due
diligence, further negotiation and agreement of final terms and
binding documentation, as well as obtaining all appropriate
internal and external regulatory approvals.
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)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's') 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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