REG - Bank of Ireland Grp - Interim Management Statement - Q3 2024

Bank of IrelandAnnouncement

30/10/2024 07:00

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RNS Number : 1987K  Bank of Ireland Group PLC  30 October 2024

Bank of Ireland Group plc (the "Group")

Interim Management Statement - Q3 2024 update

 

30 October 2024

 

Comment: Myles O'Grady, Bank of Ireland Group CEO:

 

"The successful execution of the Group's strategy continues to deliver very
strong levels of business performance, profitability, and capital generation.

 

"The loan book increased by 4% while Wealth Assets Under Management grew by
15%.  We continue to invest for our customers, including simpler ways of
banking and enhanced fraud prevention and detection.

 

"The Group's high level of organic capital generation supports loan book
growth and technology investment including resilience and digital
acceleration. It also supports the Group's distribution strategy of a
progressive dividend per share and the return of surplus capital. We recently
completed a €520m share buyback programme and the interim ordinary dividend
of 35 cents per share will be paid on 7 November.

 

"As we approach the end of the second year of our three-year strategic cycle,
our highly capital generative and differentiated business model, operating in
structurally attractive and growing markets, positions us well to continue to
support our customers, invest in our business and deliver attractive returns
for our shareholders."

 

Key highlights

·   Robust capital position and generation; fully loaded CET1 ratio of
15.6% supported by net organic capital generation of 250 basis points in the
first 9 months of 2024

·    Guidance for FY24, provided with Interim Results, is unchanged

·  Supportive Irish macroeconomic conditions characterised by continued
robust fiscal and labour market conditions combined with growth in customer
activity and house prices

·    Net interest income and business income performing in-line with
expectations YTD

·    Net lending €2.8 billion higher vs end-December 2023 supported by
€2.1 billion growth in Ireland

·    Strong Wealth and Insurance performance; AuM growth of €6.7 billion
to €52.8 billion YTD

·    Operating expenses performing in-line with expectations

·   Improved asset quality with the economic environment and lower interest
rates supportive; non-performing exposures (NPE) ratio of 2.7% versus 3.1%
end-December 2023

·   28% increase in Sustainable Finance lending y/y to c.€13.5 billion;
on track to deliver c.€15 billion target by 2025

 

Macroeconomic developments

Favourable domestic economic conditions and outlook are supportive of our
Irish franchises. The number of people at work is at a record high of 2.7
million and is growing, and the unemployment rate of 4.3% in September has
fallen by 20 basis points since the beginning of the year. The Irish
Sovereign's robust fiscal position is also a positive factor, permitting an
expansionary budget earlier this month. Inflation has cooled sharply in
Ireland, with the Consumer Price Index increasing at an annual rate of 0.7% in
September, its slowest pace of growth since March 2021. Trends in the Irish
housing market remain constructive, with positive house price dynamics and
demand well underpinned by demographics. On the supply side, completions are
projected to improve to a 16 year high of c.33k this year, supporting credit
formation. Market expectations for interest rates have evolved in the third
quarter given trends in Eurozone inflation, with average 2025 Eurozone
interest rates currently expected to be lower than 2024 levels, although
expectations remain volatile(1).

 

Income

Net interest income was 3% lower in the nine months to end-September and 1%
lower on a like-for-like basis(2), with performance in-line with our
expectations. This performance reflects the evolving interest rate
environment, growth in lending income particularly in Ireland, higher funding
costs (market and customer) and continued commercial pricing discipline. Net
interest income guidance for FY24 of c.€3.55 billion is unchanged
notwithstanding modestly lower interest rate expectations(3).

 

Business income, including share of associates and JVs, is performing in-line
with our expectations.  Positive momentum in our Wealth and Insurance
businesses, which accounts for close to 50% of total Group business income, is
the key driver of this, with Davy in particular performing strongly. In the
third quarter, our wealth businesses delivered continued strong levels of
growth with total AuM of €52.8 billion at end-September, resulting in growth
in the quarter of 4% (+€1.9 billion). This third quarter performance was
supported by net inflows of €0.7 billion, the majority of which was via
Davy. This brings annualised net inflows(4) in the nine months to
end-September to 8% across our Wealth and Insurance businesses. Business
income guidance, of mid-single digit percent growth vs FY23, is unchanged.

 

Costs

Operating expenses have progressed in-line with expectations (6% higher in the
9 months to end-September) and our FY24 guidance is unchanged. Cost to income
ratio was 45% in the first nine months of 2024. The Group continues to
maintain tight control over its cost base while absorbing inflation and
continuing to invest in strategic growth and simplification opportunities.

 

Balance Sheet

Customer loan balances were €82.5 billion at end-September 2024 vs €79.7
billion at end-December 2023. On a constant currency basis, the loan book
increased by €2 billion, supported by growth in the Group's go-forward
lending portfolios of €2.5 billion equivalent to annualised growth of c.4%,
partially offset by €0.5 billion reduction in portfolios we are exiting. Of
the €2 billion increase, €2.1 billion was in Irish lending portfolios with
a €0.1 billion reduction in international lending portfolios.

 

By division, trends in organic net lending in the year to date were as
follows:

·    Retail Ireland net lending increased by €1.4 billion, supported by
continued growth in mortgage lending. Our market share of new lending was 41%
for the first nine months of the year. We continue to support the transition
to a more sustainable economy with A and B rated BER properties accounting for
c.50% of new mortgage lending in the first nine months of 2024.

·   Corporate and Commercial net lending increased by €0.4 billion
primarily reflecting growth in business banking and corporate lending in
Ireland of €0.5 billion.

·    Retail UK net lending was €0.1 billion higher, primarily reflecting
growth in mortgage lending largely offset by a €0.4 billion  reduction in
our UK Personal Loans portfolio which the Group had previously guided it was
exiting. In October 2024, we agreed the sale of our performing UK Personal
Loans portfolio of c.€0.8 billion (RWAs of c.€0.6 billion). The Group
notes the recent Court of Appeal ruling in respect of historic motor finance
lending undertaken by certain lenders in the UK and the intention of those
lenders to appeal the decisions to the Supreme Court. The Group will continue
to closely monitor developments. The Group's UK motor finance business has a
c.2% market share of new lending, with a loan book of c.€3bn at end Q3.

 

 2024 YTD net lending (by division)  Sept-24         June-24

                                     (EUR billion)   (EUR billion)
 Retail Ireland                      1.4             0.7
 Retail UK                           0.1             0.1
 (of which UK Personal Loans)        (0.4)           (0.3)
 Corporate & Commercial              0.4             0.2
 (of which GB Corporate)             (0.1)           -

 

 

Our liquidity profile remains strong, supported by our retail franchise in
Ireland. Customer deposits were €100.7 billion at end-September 2024, flat
on end-June 2024 and €0.5 billion higher than end-2023. This increase in
2024 reflects growth in Retail Ireland and Retail UK, partially offset by
lower Corporate and Commercial volumes. Migration by customers into term/other
products in Ireland was €1.3 billion in Q3 2024.

 

 

 Deposit trends                  Sept-24         June-24         Dec-23

                                 (EUR billion)   (EUR billion)   (EUR billion)
 Total customer balances         100.7           100.8           100.2
 Everyday Banking                80.2            79.7            80.1
 (of which term/other)           7.8             6.5             5.2
 UK deposits (EUR)               14.7            14.6            13.6
 UK deposits (Stg£ equivalent)   12.3            12.3            11.8
 Corporate deposits              5.7             6.5             6.5

 

 

The Group's liquid assets of €43.7 billion and wholesale funding of €12
billion are largely unchanged since end-December 2023. On subordinated
liabilities, the Group also successfully issued €0.5 billion Tier 2 and
refinanced €0.6bn of AT1 securities in 2024, the latter during Q3.

 

At end-September 2024, the Group's liquidity coverage ratio was 203%
(end-December 2023: 196%), loan to deposit ratio was 81% (end-December 2023:
80%), and net stable funding ratio 153% (end-December 2023: 157%).

 

Asset Quality

The Group's asset quality further improved in Q3 2024 and remains strong,
helped by the supportive Irish backdrop. The Group's NPE ratio was 2.7% of
gross customer loans at September 2024 (end-June 2024 2.9%, end-December 2023
NPE ratio: 3.1%). The Group continues to focus on achieving further asset
quality improvements through a combination of organic and inorganic activity.
Macroeconomic scenarios impacting credit impairment will, as usual, be
refreshed to reflect updated market forecasts and captured as part of the
Group's full-year credit impairment process.

 

Capital Position

The Group's fully loaded CET1 ratio at end-September 2024 was 15.6% (15.4%
end-June 2024). The Group's capital performance in Q3 reflects strong net
organic capital generation of 80 basis points, partially offset by a 40%
ordinary dividend accrual and investment in RWA.

 

The Group's regulatory CET1 and total capital ratios were 15.6% and 20.7%
respectively.

 

RWAs at end-September 2024 of €53.6 billion (€52.2 billion end-June 2024)
primarily reflect the increase in lending.

 

Sustainable Company

Q3 highlights include:

Environmental

·  Sustainable lending was €13.5 billion at end September, a 28% increase
year on year, with this €3bn yoy improvement driven by a €2.4 billion
increase in green mortgages and €0.6 billion increase in other sustainable
lending.

·   A and B rated BER properties account for c.50% of new Irish mortgage
lending year to date. This is supported by our new innovative 'EcoSaver
Mortgage' product launched in April, incentivising improvements in the energy
efficiency of our customers' homes.

 

 

Social

·   At end-September, our housebuilding teams are funding the development
of c.21,000 homes (including 9,000 social and affordable homes), with €500m
of new funding advanced in the year to date to support the development of an
estimated 3,500 new homes.

·  Bank of Ireland continues to be the #1 bank recognised for Financial
Wellbeing among Irish consumers and continues to advocate for better fraud
protections for consumers and businesses. To the end of 2025, Bank of Ireland
will spend €50 million to protect our customers from fraud.

 

Governance

·   Appointment of Akshaya Bhargava as Chair and Governor, following an
international search process. Akshaya will take up the position on 1 January
2025.

·  45% female senior appointments to management and leadership positions
year to date with an ongoing commitment to achieve a 50:50 ratio.

·   Improved or maintained ESG ratings in 2024 across S&P and MSCI.

 

2024 guidance unchanged

NII is expected to be c.€3.55 billion. Business income (including share of
associates and JVs) is expected to be mid-single digit percent higher in 2024
versus 2023.

 

Operating expenses are expected to be 5-6% higher than 2023. Levies and
regulatory charges are expected to be €125-130 million and non-core items to
be similar to 2023 levels.

 

Subject to no material change in economic conditions or outlook, we expect the
impairment charge to be c.20 basis points.

 

We expect 2024 RoTE to be ahead of the 2023 level of 17.3%.

 

We expect strong capital generation, with 310 to 320 basis points of net
organic capital generation for the full year. The Group expects distributions
to comprise a combination of ordinary dividends, with a progressive dividend
per share on earnings, and share buybacks with an objective to distribute to
our CET1 guidance of >14% (subject to necessary approvals). We expect Basel
IV implementation in 2025 to reduce RWAs by up to 5%.

 

(1) Average 2025 Eurozone interest rates currently expected to be c.150 basis
points lower than 2024 levels.

(2) Excluding UK Personal Loans, which were moved to non-core in H2 2023.

(3) Based on market expectations for interest rates at end-2024: ECB deposit
rate of 3.00%, BOE base rate of 4.50%, Fed Funds rate of 4.5%. These
expectations compare to the following at our Interim Results announcement: ECB
deposit rate of 3.25%, BOE base rate of 4.75%, Fed Funds rate of 5.00%.

(4) Net inflows in the first nine months of the year annualised over opening
AuM.

 

 

Ends

 

For further information please contact:

 

Bank of Ireland

 

 Mark Spain, Group Chief Financial Officer                                +353 1 2508900 ext 43291
 Eamonn Hughes, Chief Sustainability & Investor Relations Officer         +353 (0)87 2026325
 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 the Bank of Ireland Group plc (the 'Company' or 'BOIG plc') and its
subsidiaries' (collectively the 'Group' or 'BOIG plc 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, 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,  future
share buybacks, 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, plans and objectives for
future operations, and the continued impact of Russia's invasion of Ukraine
and the Israeli-Palestinian conflict particularly on certain of the above
issues and generally on the global and domestic economies. 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.

 

Such risks and uncertainties include, but are not limited to, those as set out
in the 'Principal Risks and Uncertainties' section on page 26 of the Group's
2024 Interim Report and also the discussion of risk in the Risk Management
Report in the Group's Annual Report for the year ended 31 December 2023.

 

Nothing in this announcement should be considered to be a forecast of future
profitability, dividend forecast 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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