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Allied Irish Banks, p.l.c.

Allied Irish Banks, p.l.c. Introduction to AIB Mortgage Bank (AIBMB) Covered Bond Programme Aaa / AAA / AAA Benchmark Transaction December 2006. Contents. Overview of Allied Irish Banks p.l.c. The Irish Economy and the Irish Housing Market AIB’s Funding Profile

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Allied Irish Banks, p.l.c.

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  1. Allied Irish Banks, p.l.c. Introduction to AIB Mortgage Bank (AIBMB) Covered Bond Programme Aaa / AAA / AAA Benchmark Transaction December 2006

  2. Contents • Overview of Allied Irish Banks p.l.c. • The Irish Economy and the Irish Housing Market • AIB’s Funding Profile • AIB Mortgage Bank’s ACS Issuance

  3. Allied Irish Banks, p.l.c. • Ireland’s largest publicly quoted company • Retail & commercial bank with strong franchises in all geographies • # 1 bank in Ireland with leading market shares in core banking products • By market capitalisation  €18.6bn (November 2006) >17% of Irish Stock Market Index • Y/E 2005 - total assets € 133bn, PBT € 1.7bn • 1H 2006 - total assets € 144bn, PBT €1.2bn • Senior debt ratings Moody’s ‘Aa3’ (stable outlook) S&P ‘A+’ (stable outlook) Fitch IBCA ‘AA-’ (stable outlook)

  4. Geographic profile- June ‘06 AIB Bank, ROI Division UK Division PBT 37% RWA’s 41% 5yr Av.GDP 5.1% PBT 15% RWA’s 18% 5yr Av.GDP 2.3% Capital Markets Division PBT 27% RWA’s 37% M&T Bank Poland Division Shareholding of 24% in M&T Bank Contribution to PBT 7% 5yr Av.GDP 2.6% PBT 10% RWA’s 4% 5yr Av.GDP 3.0%

  5. Divisional Performance • 2005 2006 (H1) • AIB Bank Republic of Ireland €779m 24%€453m 19% • AIB GB & NI €322m 18%€184m 18% • Capital Markets €403m27%€300m 45% • Poland €132m13%€114m 62% • M&T * €148m 16%€80m 11% Profit before tax *after tax figure

  6. Strong asset quality and robust capital 2004 2005 2006(H1) 1.3% Impaired loans (ILs) 1.0% 0.8% 5.8% Criticised loans / total loans 5.1% 5.1% 0.7% Gross new ILs 0.4% 0.4% 73% Total provisions / ILs 78 % 81% 20bpts Bad debt charge 15 bps 3bpts Tier 1 7.2% 8.0% Total Capital 10.7% 11.1%

  7. Confident we will continue to achieve balanced and well managed growth Key performance features • Double digit growth in all principal franchises • Cost / income ratio  2.7% and down in all divisions • Investing in our people to underpin rates of retention & recruitment • Operating profit  24% • Strong asset quality, impaired loans  to 0.8% and down / stable in all divisions • Intense focus on single enterprise operations • Robust capital and funding positions

  8. The Irish Economy and Housing Market

  9. Republic of Ireland Economic Trends

  10. The Irish Labour Market Has Been Transformed The Irish Labour Market Has been Transformed (‘000s) (%) Total Employment ’00S (LHS) Unemployment Rate % (RHS)

  11. Population Growth Population Age Profile Estimates (m) Source: DOE and ESRI

  12. Robust Public Finances • Government budget • Surpluses average 1.5% of GDP since 1997 • Budget close to balance in coming years • Large current budget surpluses • Significant capital expenditure/borrowing • Gen Gov Debt/GDP ratio • 27.4% at end 2005(e) and declining • Down from 90% of GDP during the 1990’s • Compares very favourably to eurozone average Debt/GDB of 71% • Relatively Low Tax Economy • Corporation Tax @ 12 ½% ; well below eurozone average • Personal Tax & Insurance Rates are LOW, no property taxes

  13. Many Factors Underpin Strong Housing Demand • Continued strong inward migration • Favourable demographic trends • Untapped demand – Rising Headship rates • Demand for second homes • Strong growth in economy and employment • Maturity of Government savings scheme (SSIA’s) in 2006/7 • Home ownership is seen as an attractive tax efficient savings scheme, there are no personal or municipal taxes on residential property

  14. Functional Demand for House Completions (Year to April)

  15. Summary: A Sound Economy • Public finances to remain close to balance • Very low national debt. Declining debt/GDP ratio • Low tax economy attracting FDI and workers • Virtual full employment despite high immigration • Favourable demographics supporting growth • Inflation back close to Eurozone average

  16. Allied Irish Banks, p.l.c Funding Profile

  17. AIB’s Publicly Traded Securities • Short Term Instruments • Certificates of Deposit , €, STG, US$, Can$, A$ • US $ 10 bn Commercial Paper Programme • US $ 10 bn Yankee CD Programme • € 5b French Certificate of Deposit Programme* • Can $3b Maple Commercial Paper Programme* • Long Term Instruments • AIB plc ( Aa3 / A+ / AA-) • € 30 b EMTN programme • AIB Mortgage Bank (Aaa / AAA / AAA) • € 15b covered bond EMTN programme

  18. Source of funds % 10% 10% 4% 6% 3% 10% 7% 24% 25% 49% 52%

  19. Debt funding – well distributed and diversified Debt Distribution October 2006 € (m) Euro 82% STG 14% US$ 4% Step-up issues – adjustedto earliest step-up date

  20. AIB Mortgage Bank’s ACS Issuance

  21. Overview of AIB Mortgage Bank • Registered as a Designated Mortgage Credit Institution • License granted by Regulator – Feb 2006 • Non-guaranteed, Public Unlimited Company - wholly owned by AIB plc • Shareholders investment exceeds €650m • 9 Directors, including 4 non-executive directors • Major activities outsourced to AIB (ROI) Division, subject to terms of the Service Level Agreement • €13.6bn residential mortgage loans transferred to AIB MB from AIB (ROI) • Prudent Discount Factor - 15 % • Pool Overcollateralisation set @ > 5%

  22. ACS Act (2001) - Irish Legislation • Restricts asset classes – currently Public Sector and Residential Mortgages • Specialist bank principle - AIB Mortgage Bank • Conservative valuation methodology – haircut applied to increases in value (Prudent Market Value) • Prudent Market Value of Pool must be > ACS principal outstanding • Interest Receivable from pool must be > interest payable on the ACS for any 12 month period • Weighted Average maturity of the pool must be > ACS maturity • B/S interest rate sensitivity subject to limits • In the event of default - NTMA (Govt. Agency) appointed - Pool exempt from bankruptcy proceedings - Bond holders prioritised • Mandatory disclosure requirements • Covered Asset Monitor – independent external monitoring • Legislative changes planned for 2007

  23. ACS - Mortgage Origination • Irish mortgage market drawn balances exceed €100bn, AIB has a market share of 16%+ • AIB has a presence in all major towns and cities, by a network of 188 branches and 87 sub-offices • 35% - 40% of the Banked Public have a primary account relationship with AIB • 90%+ of our branched sourced mortgages come from existing bank account holders • AIBMB currently does not book mortgages introduced through intermediaries

  24. ACS - Credit Policy • Max Loan amount determined by DSR ( Debt Service Ratio ) = the Proportion of Net Income that is prudent to allow for purposes of Mortgage Repayments • DSR is stress tested to allow for increases in interest rates of 2% • Max LTV = 92% • Lenders have no sanctioning Targets/Quotas • Loan to be repaid by scheduled retirement date • Exceptions are approved by Senior Mortgage Lenders subject to the customers ability to repay • Regular reporting to Regulator • Arrears as % of total advances at end June - 0.4%

  25. House mortgages - Republic of Ireland • Primary focus on debt service ratio (repayment capacity) New Business Consistent LTVs(% no’s of drawdowns) Dec 02 Dec 04 Jun 06 < 75% 66 67 65 > 75% < 90% 26 24 21 > 90% 8 9 14 Total 100 100 100 Strong arrears profileDec 02 Dec 04 Jun 06 % total mortgage advances 0.8% 0.5% 0.4%

  26. ACS - AIBMB Collateral Pool at November 2006 • Minimum Contractual Overcollateralisation 5% • Actual Overcollateralisation >10% • Pool Size by PMV €7.8 bn • Aggregate Prudent LTV 38% • WA indexed LTV 54% • Dublin/Non-Dublin 31/69 • No. of Properties 50,400 • BTL/Owner Occupier 23/77 • Fixed Rate 16% • Interest only 22%* • Prudent Market Discount 15% • WA Seasoning c. 25 mths • Currently no commercial mortgages • Arrears > 3 months removed from pool • Minimal interest rate risk * Life of interest normally <5 years then reverts to annuity

  27. ACS – AIB’s Issuance Strategy • €15 billion EMTN Programme established (Aaa/AAA/AAA) • Very high quality Covered Asset Pool • Successful Inaugural Dual Tranche Issue - €2.5bn 3 year, €1.0bn 7 year - strong secondary market performance • One issuing document to be updated annually • Ongoing commitment to investor relations - Regular marketing initiatives - Establishment of web-access - Rating Reports posted on website • Regular benchmark issuance across the curve • Participation in Euro Private Placements • To be recognised by investors as a consistent and responsible Issuer

  28. Contacts AIB Web Site : www.aib.ie / investor relations Provides a comprehensive library of AIB & AIB Mortgage Bank programmes, listing particulars and presentations AIB Economic Research :www.aibeconomicresearch.com/research.asp?2 Provides comprehensive analysis of the Irish economy and housing market AIB Group Investor Relationswww.aibgroup.com/investorrelations Exec., GM Group Finance : Alan Kelly T: + 353-1-641-4191 Manager : Maurice Tracey AIB Global Treasurybond.issues@aib.ie Chief Dealer, Debt Issuance : Sean Cremen T: + 353-1-641-7803

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