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Meet the Management

Meet the Management

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Meet the Management

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  1. Meet the Management

  2. Meet the Management Donal Forde AIB Bank RoI Eugene Sheehy C.E.O. John O’Donnell Group Financial Director Robbie Henneberry AIB Bank UK Colm Doherty AIB Capital Markets Gerry Byrne AIB Poland Steve Meadows Operations & Technology Rene Jones CFO, M&T

  3. Meet the Management

  4. Donal Forde Managing Director - AIB Bank Republic of Ireland

  5. Forward Looking Statements A number of statements we will be making in our presentation and in the accompanying slides will not be based on historical fact, but will be “forward-looking” statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in the forward looking statements. Factors that could cause actual results to differ materially from those in the forward looking statements include, but are not limited to, global, national and regional economic conditions, levels of market interest rates, credit or other risks of lending and investment activities, competitive and regulatory factors and technology change.Any‘forward-looking statements made by or on behalf of the Group speak only as of the date they are made. visit www.aibgroup.com/investorrelations

  6. 2006 Positive environment + Our prime competitive position On course for strong full year profit performance

  7. 2007 – 2010 Our medium term view

  8. Positive economic environment to continue • Favourable demographics - inward migration driving strong population growth • Housing market supported by strong demand • Strong public finances - potential for increased government spending • Savings ratio remains high - latent investment and consumption potential • Interest rate levels still relatively accommodating • Inflation to fall below 3% by end 2007, 2-3% range thereafter GDP growth of 5 - 6% in 2007, gentle moderation thereafter

  9. Competitive threats are manageable Business Market - Threat from established Players • AIB standing as primary Business Bank • Relationship-based market • Confident of sustaining our leadership position - recent momentum reinforces that confidence Retail Market -Threat from New Players (Den Danske / HBOS / Fortis) • AIB underweight in many Retail product lines • Less “incumbent” mindset - more attacking posture • Focus on Personal Deposits, Consumer Lending, Life & Pensions, General Insurance & Mortgages Market repositioning in 2006 as early execution of this strategy

  10. Upgrading distribution and operations capability • Branch channel • More radical centralisation of support / administration / account maintenance / telephony / credit management • Heavy promotion of self-service / assisted-service banking • Targeting 25% increase in relationship management / sales capacity • Focused on business / premium-personal customers • Internet & telephone channels • Accelerated internet recruitment Centralised telephony • Channel-exclusive product and price propositions & stronger sales focus • Extending our distribution network • Hibernian relationship / AA alliance • Mortgage intermediaries • Significant technology investments • New banking platform • New data centres • New core banking system Driving sales momentum, cost efficiency and service differentiation

  11. Focus on wealth management • High growth potential • Close gap in market share v natural share of client relationships • Actions / initiatives • JV product suite targeted at base / centre of customer pyramid • Revitalised AIB wealth proposition targeted at emerging wealth / top of customer pyramid • Integrated distribution team / substantial investment in technology, training and performance oversight • Q3 performance very encouraging Targeting €100m increase in profit by 2010

  12. 2007 – 2010: what you can expect from us • Irish market loan and deposit growth to be significantly ahead of European peers • AIB targeting above market growth in both loans & deposits • Significant market share gains in investment sales, pensions & general insurance • Product margins • Improving in deposits • Stabilising in business and consumer lending • Mortgages reducing to c. 80 bps • Costs • Current core cost growth is 6 – 7% • Investment to sustain growth will add to this level • New pay structure increases variability • Over-riding discipline is positive jaws target of 3% • Asset quality • Confidence underpinned by economy, demographics and underwriting stance Superior growth / productivity in outperforming market

  13. In summary 2006 • On course for strong performance 2007 - 2010 • “Ireland Inc.” to outperform European peers • AIB - sustaining its no.1 position in business market - attacking underweight retail lines • Investing in improved distribution, upgraded operations and wealth management • Confident that we will continue to outperform Continuing double digit profit growth

  14. Robbie Henneberry Managing Director – AIB Group (UK) p.l.c.

  15. Forward looking statements A number of statements we will be making in our presentation and in the accompanying slides will not be based on historical fact, but will be “forward-looking” statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in the forward looking statements. Factors that could cause actual results to differ materially from those in the forward looking statements include, but are not limited to, global, national and regional economic conditions, levels of market interest rates, credit or other risks of lending and investment activities, competitive and regulatory factors and technology change.Any‘forward-looking’ statements made by or on behalf of the Group speak only as of the date they are made. visit www.aibgroup.com/investorrelations

  16. UK Division - a snapshot • UK regulated & incorporated since 1996 • Trades as: • In GB - business banking • In NI - retail & business banking • 15% of group profits • 3,000 staff, 550,000 customers • £13bn loans, £8bn deposits • Business origination through 4 units: GB, FTB, mid-corporate, wealth management Allied Irish Bank (GB) First Trust Bank (FTB)

  17. Strong track record PBT CAGR 12.1% Loans CAGR 21.0% Deposits CAGR 14.4% Cost / Income ratio Impaired Loans % of Average Loans

  18. AIB (GB) – Great Britain PBT CAGR 15.5% £’m • 32 full service branches & 12 business development offices • Full relationship management service to businesses in selected sectors & connected personal customers • Targeting relatively resilient sectors, avoiding adverse selection • Continued migration from small to higher value mid market business banking • Distinctive customer proposition built on quality of people, customer relationship & speed of decision making

  19. First Trust Bank – Northern Ireland CAGR 8.9% £’m • 56 full service branches providing retail banking services to personal and business customers • Good performance in a lower growth environment (NI GDP 2.2%) notably in business banking and home mortgages • Reinvigorating revenue streams with refreshed proposition – new mortgages, personal loan & deposits launched - new personal current account in progress • Continued focus on efficiency and cost management

  20. Mid-Corporate Banking Regional Teams • Established in London, Birmingham, Manchester, Leeds, Glasgow & Belfast - loans £2.5bn • Focused on healthcare, leisure industry, horse racing, hotels and environmental services • ‘Bank of choice’ in chosen high potential segments Public Sector & Charities • Established reputation and market share in education, social housing, publicly funded healthcare, PFI & structured finance Property Finance Unit • New business initiative - phased build-up since January 2006 • Develop existing relationships to build a high return portfolio of leveraged property transactions for established operators

  21. Wealth management Private Banking • Established presence in London & Belfast, capability now in Birmingham, Manchester & Edinburgh • Full relationship management service to HNW segment connected to business customers • Developing proposition with wider range of investment, protection & pension products/services Regulated Sales • 45 IFAs throughout the branch network in GB and NI • Sales momentum building with increased referrals from the network • Developing lower cost delivery channel for mass market in Northern Ireland with retention of IFAs for HNW segment • Efficiency improvements through a combination of outsourcing & improved use of IT

  22. Investing in the franchise Over the last 12 months: People • Corporate Banking increased by 30% • Wealth Management increased by 25% • 171 staff promotions Property • 6 major refurbishments/relocations IT • New banking platform installed in branch network • Improved online and payments functionality Regulation • Enhanced risk & control framework

  23. Key priorities • Recruitment, integration & retention of best people • Quality rather than quantity bias • Diversification of income streams and delivery channels • Mid-corporate & wealth management • Direct channel • Treasury & cash management • Enhanced focus on deepening relationships • Investing in scope not scale • Increasing share of chosen mid market sectors • Branch reconfiguration • Removal of non-core activities to ‘centres of excellence’ • Simplification and standardisation of operations • Leverage of synergies across the AIB enterprise

  24. UK Division: what to expect 2006-2010 • Recognised by our customers as their bank of choice • Providing a full service value for money proposition • Delivered by top quality people through customer chosen channel • Targeting continuation of • 3% income / cost gap, further driving down cost / income ratio • Strong asset quality; current environment particularly benign • Double digit profit growth

  25. Gerry Byrne Managing Director - AIB Poland Division

  26. Forward looking statements A number of statements we will be making in our presentation and in the accompanying slides will not be based on historical fact, but will be “forward-looking” statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in the forward looking statements. Factors that could cause actual results to differ materially from those in the forward looking statements include, but are not limited to, global, national and regional economic conditions, levels of market interest rates, credit or other risks of lending and investment activities, competitive and regulatory factors and technology change.Any‘forward-looking statements made by or on behalf of the Group speak only as of the date they are made. visit www.aibgroup.com/investorrelations

  27. Why is AIB in Poland ? • Large Market – 39m people with considerable employment potential • GDP per capita is 46% versus EU15 • One of the fastest growing economies, GDP now growing at c. 5% • Total banking assets / GDP at 68% (EU15 203%) • Only 60% of the population have bank accounts • Branch coverage at 50% of EU average • Excellent cultural fit

  28. Banking environment (1995 – 2005)

  29. H1, 2006 571 H1, 2006 Our 5 year performance Bank Zachodni WBK S.A. - 2001 to H1, 2006 PBT CAGR + 50% Loans CAGR 9% / Deposits + Funds CAGR 14.5% PLN m PLN bn 800 690 700 570 600 500 388 400 260 300 200 122 100 0 2001 2002 2003 2004 2005 • People employed  from 10.2k to 7.8k • Cost / income ratio  from 80% to 52% • Impaired loans  from 20% to 6%

  30. Loan Interest Income exceeds Deposit Interest Income Evolution of income & costs – carefully chosen growth

  31. GDANSK SZCZECIN WARSAW POZNAN LODZ WROCLAW KATOWICE KRAKOW Reshaping our business – continuous improvement • Branches • 372 branches, 605 ATMs • 30 new branches planned for 2007 • Expansion in key markets Corporate Business Centres • Large commercial & corporate focus • Warsaw, Poznan, Wroclaw, Krakow, Gdansk • 65% total loans under CBC mgt. • 3 New Locations in 2007 – Katowice / Szczecin / Lodz External Channels • Direct banking • Intermediaries • Mobile sales

  32. Our reshaped business – reaping the rewards Profit & Loss • Total Operating Income + 26% • Operating Expenses + 9% • Provisions - 2% • Profit before Tax + 62% H1 2006 v H1 2005 Balance Sheet / Products • Corporate / SME + 10% • PLN Mortgages + 23% • Personal Loans + 93% • Leasing + 16% • Mutual Funds + 230% • Deposit Volumes + 7% • E Banking/Payments + 13% 2006 profits: expected to be materially greater than 2005

  33. Our reshaped business – developing our market position • Number 1 for asset quality with c. 6% impaired loans • Number 1 for investment performance / number 2 in investment funds • Number 1 in stockbroking • Business loan growth 2x market level • Top 3 ROE performance • Number 2 for % gap between income and cost growth Peer benchmarking in 2006

  34. Positive economic growth indicators

  35. Targeting outperformance in a high growth market 2006 - 2010 • High quality well spread sources of income • Strong momentum in business / retail loans, deposits / investment funds, leasing, brokerage & credit cards • Further efficiency gains enabled by highly scaleable platform • Risk firmly managed by top class people, scoring and decision engines

  36. 5 years to 2010 - what you can expect from us • Maintenance of material income / cost gap • Further % reduction in level of impaired loans • ROIC to continue increasing from the current 25% Primed to continue significant, well balanced growth

  37. Colm Doherty Managing Director - AIB Capital Markets

  38. Forward looking statements A number of statements we will be making in our presentation and in the accompanying slides will not be based on historical fact, but will be “forward-looking” statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in the forward looking statements. Factors that could cause actual results to differ materially from those in the forward looking statements include, but are not limited to, global, national and regional economic conditions, levels of market interest rates, credit or other risks of lending and investment activities, competitive and regulatory factors and technology change.Any‘forward-looking statements made by or on behalf of the Group speak only as of the date they are made. visit www.aibgroup.com/investorrelations

  39. Profit Before Tax 403m Profit Before Tax CAGR 21% 317m 301m 258m 237.8m 200.5m 155.6m 2000 2001 2002 2003 2004 2005 1H 2006* *excludes 25m gain on sale of business Capital Markets comprises 3 business divisions Strong, Recurring, Skills based • Customer oriented 87/13 • Good Earnings Mix • Domestic dominance … but decreasing importance • International expansion around proven sector specialisms • Best in class enablement / risk architecture • Rigorous cost focus - C/I ratio 43% • Solid Returns - ROE 20% Normalised Pre Tax Profit • Corporate Banking 63% • Global Treasury 27% • Investment Banking 10% Interest Income : 52% Fee Income: 35% Trading Income: 13%

  40. Corporate Banking - strong recurring earnings • PBT 2000-2005 : CAGR 27% • Consistent 20% + growth in profit pre provision • Good spread on earnings / volume mix  • 155bps average portfolio margin • Weighted average credit grade of portfolio is constant • RWA: €25 billion • ROE: 21% • Leading domestic Corporate Bank • 40% Corporate Clearing Accounts • International expansion based on sector specialisms • Premium for sector knowledge and ability to manage complexity • Rigid ROE discipline

  41. Corporate Banking - best in class credit risk management • Selective Credit Underwriting • Centralised credit platform / sector specific best practice models • Diversified Portfolio • Advanced portfolio modelling / limit setting framework • Credit grading • Robust methodology, empirically validated, rating agency endorsed. • Credit structuring • Emphasis on repayment sensitivity, covenants, collateral • Pricing • Strong ROE discipline - value not volume. €3bn asset shed from portfolio in 2006 • Dynamic provisioning • All active impaired loans paying current interest • Improving impaired loans trend • Exceptional experience on default v’s model EL

  42. Corporate Banking - growth drivers • Clear Strategy • Regional ‘Relationship Bank’ in Ireland • Specialist lender in chosen niches elsewhere • Structuring complexity yields a better price • Developing debt fund management capability • Geographic expansion - the model travels well • Australasia • Canada • The credit cycle - benign or tough presents opportunity Corporate Banking …….. Diverse…….Highly Profitable ………Sustainable

  43. Global Treasury- strong recurring earnings • PBT 2000-2005: CAGR 24% • Customer income 56% revenues* • 40% share domestic market • Strong Polish franchise • Trading income 44% revenues • short term trading • credit related trading • strategic trading • Consistent profits at all points in interest rate cycle • Average daily VAR €13 million • Best in class enablement / risk architecture • RWA €10 billion (€7 billion excluding liquidity assets) • ROE 27% *pre internal distribution

  44. Global Treasury- growth drivers Treasury Services • Buoyant local economies (Ireland / Poland) underpin demand • Scope for increased product penetration • Leverage UK small company relationships more effectively • Cost efficiencies from technology platform Trading • Capacity to put more risk to work Treasury …Customer Driven……Low Risk Trading …Consistent Earnings

  45. Investment Banking • Substantially Irish based business • Stockbroking; asset management; M&A; structured finance services • Low % of profits, higher volatility: 2000-2005 CAGR 0% (very strong base year) No. 1 in M&A; structured finance services No. 2 in stockbroking No. 3 in asset management • Divested 50% interest in AIB/BNY JV • Sold retail funds to Aviva as part of Ark Life transaction • Growth drivers • Increasing demand for Private Client Wealth Management Services • Demand for M&A services robust • Continued economic buoyancy / positive equity market returns. Will support demand for investment products / services

  46. Conclusion • Resilient high performing business positioned for sustainable growth • Increasing flexibility to diversify income streams • Strong focus on productivity, significant income / cost gap • Sophisticated and resilient risk management framework • Uninterrupted profit growth record will continue