View
22
Download
0
Category
Preview:
Citation preview
Shareholding and Financial Advisory Division (SFAD)
Fact Book: Q1 2019
Section 1: Introduction
Section 2: Economic Update
Section 3: State Bank Investments
Section 4: NAMA / HBFI
Section 5: Credit Unions
Section 6: IBRC
Section 7: Financial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
3 An Roinn Airgeadais | Department of Finance
Shareholding and Financial Advisory Division
SFAD Roles & Responsibilities
SFA
D
Developing and recommending to the Minister strategies for returning the banks to private ownership Realising value for the taxpayer by executing share disposals Monitoring bank performance and stock market trends through regular interaction with management,
investors and market participants Protecting and exercising the Minister’s rights while respecting bank Relationship Framework Agreements
1. Oversight of State ownership in Irish banks
2. Advisory and policy development
3. Oversight of NAMA and HBFI
6. Liquidation of IBRC
4. Oversight of Credit Union Sector
5. Market Interaction
Utilisation of expertise within the Division to provide financial advisory services and input to policy options across the Department of Finance
Manage and co-ordinate the Blockchain & Virtual Currencies working group Provide insight and objective analysis on emerging areas of financial services and technology
Responsible for representing the Minister’s interests in relation to the liquidation of IBRC
The Shareholding and Financial Advisory Division (SFAD) consists of a team of c. 20 professionals with a mix of capital markets, accounting, corporate finance, legal and investment backgrounds. This team has a blend of both private sector expertise and experienced civil servants and has a number of roles and responsibilities:
Responsible for the management of the Minister’s shareholding in the National Asset Management Agency (NAMA) and Home Building Finance Ireland (HBFI)
Represent the Minister’s interests in relation to the oversight of NAMA
Policy oversight for the Credit Union sector Provide advice to the Minister on developments in the sector
Daily two-way interaction with analysts, investors, investor relation teams and investment banks
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
4 An Roinn Airgeadais | Department of Finance
A Track Record of Delivery
A number of significant milestones have been achieved:
2015
2016
2017
• Recapitalisation, restructuring and deleveraging was undertaken across the sector
• Elimination of promissory notes programme, ELA and liquidation of IBRC
• Sale of Bank of Ireland CoCos (€1bn) and Preference Shares (€2bn)
• State disposal of Irish Life for €1.3bn
• Establishment of NAMA
• Troika programme commitments met and programme exited
• PTSB raised €525m of capital to address stress test shortfall, while the State retained a 75% stake
• AIB capital reorganisation returned €1.6bn to the State
• AIB CoCo redemption of €1.6bn
• IBRC paid first interim dividend of 25% to all admitted creditors
• AIB resumed dividend repayment: €250m
• AIB Initial Public Offering (IPO) raised €3.4bn for the State (the second largest IPO globally in 2017)
• Completion of ReBo activity: 82 mergers concluded, involving 156 individual credit unions with total assets in excess of €6.7bn
• NAMA repaid 100% of its senior debt
• IBRC paid second interim dividend of 25% to all admitted unsecured creditors
2010 to
2014
2018
• BOI announced the re-commencement of dividends
• Eligible Liability Guarantee (ELG) eliminated
• PTSB completed the sale of Project Glas and Project Glenbeigh. This saw its NPL ratio reduce to 10%, from 26% at the start of the year
• Launched an intra-Departmental working group on virtual currencies & blockchain technology
• IBRC paid final dividend of 50% to all admitted creditors
• Anglo Irish Bank assessor appointed pursuant to the Anglo Irish Bank Corporation Act 2009
2019
• Home Building Finance Ireland (HBFI) officially launched in January 2019 to finance housing construction
• Hosted the first Government services blockchain hackathon in the Trinity Innovation Centre in January 2019
• Permanent TSB exited its restructuring plan
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Section 1: Introduction
Section 2: Economic Update
Section 3: State Bank Investments
Section 4: NAMA / HBFI
Section 5: Credit Unions
Section 6: IBRC
Section 7: Financial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
6 An Roinn Airgeadais | Department of Finance
Economic Growth: Irish economy continues to strengthen and grow
Commentary 2020 Forecast Economic Growth (%)2
1. Central Statistics Office (CSO)2. IMF World Economic Outlook Database, April 2019 (Constant Prices)
3. Personal Consumption Expenditure (PCE) is the market value of all goods and services, including durable products, purchased by households (excluding purchases on dwellings)
4. Source: CSO Retail Sales Index Value Adjusted – (Base 2015=100)
GDP and GNP (€bn)1
Retail Sales Index: Seasonally Adjusted4
(2015 base = 100)
The Irish economy is now larger than it was pre-crisis, and is expected to be one of the fastest growing countries in the Euro Area in 2019 and 2020
Consumer spending growth has experienced steady growth since 2012.
Personal consumption expenditure (Constant prices, Seasonally Adjusted ) €m 3,4
108.4
108.1
95
97
99
101
103
105
107
109
111
113
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Jan
-16
Ap
r-1
6
Jul-
16
Oct
-16
Jan
-17
Ap
r-1
7
Jul-
17
Oct
-17
Jan
-18
Ap
r-1
8
Jul-
18
Oct
-18
Jan
-19
All retail businesses All retail businesses, excluding motor trades
€188
€312
€159
€246
€0
€25
€50
€75
€100
€125
€150
€175
€200
€225
€250
€275
€300
€325
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
GDP €bn (Seasonally Adjusted) GNP €bn (Seasonally Adjusted)
10%
2%
-11%
-1% -1%1% 1%
3% 4%5%
3%4%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
€0
€20
€40
€60
€80
€100
€120
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Value (€bn) % Change
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
3.4%
1.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
Mal
ta
Slo
vak
Rep
ub
lic
Irel
and
Cyp
rus
Esto
nia
Slo
ven
ia
Luxe
mb
ou
rg
Lith
uan
ia
Gre
ece
Spai
n
Swed
en
Den
mar
k
Fin
lan
d
Net
her
lan
ds
Po
rtu
gal
Euro
are
a
Be
lgiu
m
Ger
man
y
Fran
ce
Ital
y
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
7 An Roinn Airgeadais | Department of Finance
Labour Force: Sharp fall in unemployment helping to drive wage growth
Commentary Unemployment Rate1
Youth employment amongst under 25s as a % of Active Population (2008 – 3Q 2018)3
1. Eurostat2. CSO. Preliminary figures for 2018
3. Eurostat, seasonally adjusted, not calendar adjusted
Wage Inflation: Average Weekly Earnings2
Unemployment rate amongst under 25s as a % of Active Population (3Q 2018)3
Seasonally adjusted unemployment rate stood at 16% in 2012. It has since fallen to 5.4% as of March 2019
Falling unemployment has helped drive wage growth of c.10% between 2013 and 2018
Youth unemployment in Ireland has declined each year since 2012. It now stands at 13.8%, below the EU19 average of 16.8%
€694
€702
€711 €718
€732
€762
€660
€680
€700
€720
€740
€760
€780
2013 2014 2015 2016 2017 2018
+10%
37
.5%
34
.3%
31
.8%
20
.5%
20
.3%
18
.8%
17
.3%
16
.8%
15
.7%
15
.4%
14
.7%
13
.8%
10
.6%
10
.1%
10
.0%
9.2
%
9.0
%
7.5
%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Gre
ece
Spai
n
Ital
y
Fran
ce
Po
rtu
gal
Cyp
rus
Fin
lan
d
EU 1
9
Be
lgiu
m
Esto
nia
Slo
vaki
a
Irel
and
Lith
uan
ia
Latv
ia
Slo
ven
ia
Den
mar
k
Au
stri
a
Net
her
lan
ds
Hu
nd
red
sSep-1813.8%
Sep-1816.8%
0%
5%
10%
15%
20%
25%
30%
35%
20
08
-Q1
20
08
-Q3
20
09
-Q1
20
09
-Q3
20
10
-Q1
20
10
-Q3
20
11
-Q1
20
11
-Q3
20
12
-Q1
20
12
-Q3
20
13
-Q1
20
13
-Q3
20
14
-Q1
20
14
-Q3
20
15
-Q1
20
15
-Q3
20
16
-Q1
20
16
-Q3
20
17
-Q1
20
17
-Q3
20
18
-Q1
20
18
-Q3
Ireland EU 19
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Mar-195.4%
Dec-187.9%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
Jan
-16
Jul-
16
Jan
-17
Jul-
17
Jan
-18
Jul-
18
Jan
-19
Hu
nd
red
s
Ireland Euro Area 19
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
8 An Roinn Airgeadais | Department of Finance
State Finances: Levels of public debt remain high, though state borrowing
costs amongst the lowest in EuropeCommentary Government Debt to GDP % (2006 – Q3 2018)2
Government Budget Deficit Q3 2018 (%)3
1. Central Bank of Ireland 2. Europa.eu
3. Europa.eu: Government deficit(-) or surplus(+) (as % of GDP)4. Bloomberg: As of 20th March 2019
5. https://www.irishtimes.com/business/economy/government-records-first-budget-surplus-since-crash-1.3746842
Government Net Financial Wealth (Q2 2018)1
European 10 Year Bond Yields (March 2019)4
Levels of state borrowing remain high relative to pre-2007 levels, however, the sustainability and affordability of this is reinforced by strong economic growth and low borrowing costs
Government Debt to GDP significantly impacted by 2015 GDP revisions, however clear progress remains. Government committed to a target of 45% by mid 2020s
Government budget deficit fell throughout 2018. In January 2019, Government reported the first budget surplus since 2006.5
(€bn)120%
69%
86%
0%
20%
40%
60%
80%
100%
120%
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
-Q3
Ireland (%) Euro Area 19 (%)
-0.1%
-0.4%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
20
06
-Q1
20
06
-Q3
20
07
-Q1
20
07
-Q3
20
08
-Q1
20
08
-Q3
20
09
-Q1
20
09
-Q3
20
10
-Q1
20
10
-Q3
20
11
-Q1
20
11
-Q3
20
12
-Q1
20
12
-Q3
20
13
-Q1
20
13
-Q3
20
14
-Q1
20
14
-Q3
20
15
-Q1
20
15
-Q3
20
16
-Q1
20
16
-Q3
20
17
-Q1
20
17
-Q3
20
18
-Q1
20
18
-Q3
Ireland (%) Euro Area 19 (%)
3.7%
2.5%
1.3%1.2% 1.2%
0.7%0.5% 0.5%
0.3%0.2% 0.1%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Gre
ece
Ital
y
Po
rtu
gal
UK
Spai
n
Irel
and
Be
lgiu
m
Fran
ce
Fin
lan
d
Net
her
lan
ds
Ger
man
y
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
9 An Roinn Airgeadais | Department of Finance
Debt Servicing (1/2): stabilisation leading to better credit ratings and
falling yields – Irish government continues to secure cheap long term
funding
[xx]
Source:1. Moody, S&P, Fitch
2. NTMA: https://www.ntma.ie/business-areas/funding-and-debt-management/investor-relations/credit-ratings
3. Bloomberg
Rating Agency Long-term Short-termOutlook
/trend
Date of
updateLong-term Short-term
Outlook
/trend
BBB+ A-2 Negative WatchDec
2011A+ A-1
Stable Outlook
BBB+ F2 Negative WatchApr
2011A+ F1+
StableOutlook
MOODY’S Ba1 Not Prime NegativeJul
2011A2 P-1
Stable Outlook
N/a A (high) R-1 (middle) Stable Trend
R&I N/a A a-1Positive Outlook
20111
20182
Improved fundamentals helping reduce Irish Government Bond Yield (Weighted Avg. 10 year yield % Jan 2011 – Mar 2019)3:
18/07/201113.5%
13/03/20190.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Jan
-11
Mar
-11
May
-11
Jul-
11
Sep
-11
No
v-1
1
Jan
-12
Mar
-12
May
-12
Jul-
12
Sep
-12
No
v-1
2
Jan
-13
Mar
-13
May
-13
Jul-
13
Sep
-13
No
v-1
3
Jan
-14
Mar
-14
May
-14
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Mar
-15
May
-15
Jul-
15
Sep
-15
No
v-1
5
Jan
-16
Mar
-16
May
-16
Jul-
16
Sep
-16
No
v-1
6
Jan
-17
Mar
-17
May
-17
Jul-
17
Sep
-17
No
v-1
7
Jan
-18
Mar
-18
May
-18
Jul-
18
Sep
-18
No
v-1
8
Jan
-19
Mar
-19
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
10 An Roinn Airgeadais | Department of Finance
Debt Servicing (2/2): Long term sustainability of debt profile helped by Ireland’s proportionally
young population
Commentary Old Age Dependency Ratio (Individuals aged 64+ as a % of those between the ages of 15-64)1
Fertility Rate In Ireland (2016)2
1. Worldbank.org. 2. Fertility rates relate to the number of children born per family per year
3. Central Statistics Office. 2018 figures are provisional
Favourable demographics reinforce Ireland’s debt sustainability over the longer term, while also continuing to make Ireland an attractive destination for Multinational Corporations (MNCs)
Net migration turned positive in 2016 for the first time since 2009. Continued to grow in 2018 with net immigration of 34,000 versus 20,000 in 2017
Net Inward Migration (Thousands)3
72
105
64
2
-28 -27 -34 -33-21
-123
2034
-150
-100
-50
0
50
100
150
200
-150
-100
-50
0
50
100
150
200
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Immigrants Emigrants Net migration ('000)
1.6
1.7
1.9
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Po
rtu
gal
Po
lan
d
Spai
n
Gre
ece
Cyp
rus
Ital
y
Luxe
mb
ou
rg
Au
stri
a
Ger
man
y
Euro
are
a
Cze
ch R
epu
blic
Slo
ven
ia
Esto
nia
Fin
lan
d
Net
her
lan
ds
Latv
ia
Lith
uan
ia
Be
lgiu
m
Den
mar
k
No
rway
OEC
D m
emb
ers
Un
ited
Kin
gdo
m
Swed
en
Irel
and
Fran
ce
22
26
32
0
5
10
15
20
25
30
35
Cyp
rus
Luxe
mb
ou
rg
Irel
and
Po
lan
d
No
rway
OEC
D m
emb
ers
Lith
uan
ia
Au
stri
a
Be
lgiu
m
Slo
ven
ia
Cze
ch R
epu
blic
Un
ited
Kin
gdo
m
Spai
n
Esto
nia
Latv
ia
Den
mar
k
Gre
ece
Fran
ce
Euro
are
a
Swed
en
Ger
man
y
Po
rtu
gal
Fin
lan
d
Ital
y
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
11 An Roinn Airgeadais | Department of Finance
93,419
19,271
4,569
18,072
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
ESB Connections CSO New Dwelling Completions
Housing (1/2): 2008 Financial crisis saw a collapse in the Irish housing market – steady
recovery since 2011
Commentary Market-based Purchases of Residential Dwellings2
1. Housing.gov.ie: ESB Connections 1990-2017 & Central Statistics Office (New Dwelling Completions) 2011-2018 – Traditionally the ESB Networks (ESBN) domestic connections dataset was used as a proxy indicator for the number of new dwellings built. However, it is now accepted that this dataset overestimated the situation as it included
connections which do not relate to new dwellings. In Q1 2018 the CSO introduced “New Dwelling Completions” as a more reliable metric.2. Central Statistics Office (Market-based Household Purchases of Residential Dwellings)
3. Central Statistics Office
Ireland’s housing market has recovered well since the collapse in 2007
Rising level of house completions with metrics showing increases across registrations, commencement notices, planning permissions and ESB connections/New Dwelling Completions
Residential property prices have recovered since the financial crisis in 2013, and remain c.20% below their 2007 peak.
Nationally, residential property prices increased by 7% between December ’17 and December ’18.
Residential Property Price Index (Base Jan ‘05 = 100)3
Introduction of Irish Central Bank Macro prudential rules in 2015 slowed the growth in property sales
Central Bank macro-prudential rules increase the resilience of the banking sector
First time buyers can borrow up to 90% of the value of a home (i.e. 10% minimum deposit). Only 5% of new lending to first time buyers will be allowed above the 90% Loan to Value (LTV) limit
For second and subsequent buyers, banks must restrict lending for primary dwelling purchase above 80% LTV to no more than 20% of their new lending.
Bank must restrict lending for primary dwelling purchase above 3.5 times Loan to Income (LTI) to no more than 20% of that aggregate value
Banks must limit Buy-to-Let loans (BTL) above 70% LTV to 10% of all BTL loans
Estimated Number of Private Home completions (1990 – 2017)1
Increase in completions
(‘13 – ‘18)Avg. number of home completions (1990 -2017) 37,075
July 2007= 134
May 2013= 59
December 2018= 106
0
20
40
60
80
100
120
140
160
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
National National excl. Dublin Dublin
13,113 12,675 18,088
21,634
30,855 34,822 34,309 35,876 35,561
4,820 2,351
2,666
2,944
4,402
4,563 5,465 7,316 8,479
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2010 2011 2012 2013 2014 2015 2016 2017 2018
Existing New
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
12 An Roinn Airgeadais | Department of Finance
Housing (2/2):Residential property will continue to be a large contributor to
volume growth in the Irish banking sector over the medium termCommentary
Plan to increase residential construction output to 25,000 homes per year by 2020
Open up land supply & low-cost State lands
Local Infrastructure Housing Activation Fund - €200m
NTMA financing of large-scale “on-site” infrastructure
Deliver 50,000 units of social housing in the period to 2021
Lay foundations for a more vibrant and responsive private rented sector
Government Targets1
Measures
Planning Reforms
Larger housing proposals (+100 homes) to go directly to An Bord Pleanála (ABP)
Prioritisation of ABP appeals (18 weeks)
More Strategic Development Zones (SDZs)
Optimal utilisation of existing housing stock
Rent-a-room tax relief programme that provides home owners with up to €14,000 of tax free rental income
Macro-prudential rules limiting Loan to Value and Loan to Income multiples for home buyers
Home Building Finance Ireland (HBFI) established to increase the supply of finance for viable residential developments
1. Action Plan for Housing & Homelessness: http://rebuildingireland.ie/Rebuilding%20Ireland_Action%20Plan.pdf2. Planning permission statistics: execution of planning permission for houses and apartment units. Source: CSO
Planning Permissions granted for new dwelling units (number)2
The financial crisis resulted in a large decrease in construction activity, and led to a reduction in the number of residential properties available on the market
Improving economic conditions are now driving residential property sales, new borrowing and construction activity
Government has set specific targets and implemented a number of measures to increase the volume of new residential properties on the market.
7,411
13,044
16,375
20,776 22,561
-
5,000
10,000
15,000
20,000
25,000
2014 2015 2016 2017 Q3 2018
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Section 1: Introduction
Section 2: Economic Update
Section 3: State Bank Investments
Section 4: NAMA / HBFI
Section 5: Credit Unions
Section 6: IBRC
Section 7: Financial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
14 An Roinn Airgeadais | Department of Finance
Irish banking sector overview (1/3):
Ireland compares favorably against European peers
Commentary % Reduction in NPE ratio: Q1 2016 – Q3 20181
Net interest margins Q3 2018 (%)1
Cost/income ratios Q3 2018 (%)1
CET1 fully loaded Q3 2018 (%)1
According to the EBA, Ireland was the fastest country in Europe at reducing its Non-Performing Exposure ratio (NPE) amongst comparable countries between March 2016 and September 2018 (-52.9%)
Ongoing cost management, and rising net interest margins helped Irish banks reduce cost to income ratios to below the European average
Irish banking sector well capitalised relative to European peers.
Sources: 1. EBA Dashboard Q3 2018 (Includes 3 domestic Irish banks plus Ulster Bank, DEPFA & Citibank)
52
%
53
%
54
% 57
%
57
%
58
% 62
%
62
%
63
%
63
%
63
%
64
%
72
%
81
%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
ES GR PT
DK
LU NL
GB IE AT
EU IT BE
FR DE
24
%
17
%
17
%
17
%
16
%
16
%
15
%
14
%
14
%
13
%
13
%
13
%
12
%
11
%
0%
5%
10%
15%
20%
25%
LU DK IE BE
NL
DE
GB
EU FR AT
PT
GR IT ES
2.9
%
2.4
%
2.0
%
1.9
%
1.7
%
1.6
%
1.5
%
1.4
%
1.4
%
1.3
%
1.2
%
0.9
%
0.9
%
0.9
%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
GR ES IE AT
PT
NL IT EU GB BE
FR DE
LU DK
-4.1%
19.4%
21.3%
25.9%
34.2%
36.1%
39.0%
39.3%
40.3%
40.5%
43.2%
51.8%
52.9%
-10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
GR
LU
NL
FR
ES
DK
GB
BE
DE
PT
IT
AT
IE
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
15 An Roinn Airgeadais | Department of Finance
0
20
40
60
80
100
120
140
160
180
Jan
-07
Ap
r-0
7
Jul-
07
Oct
-07
Jan
-08
Ap
r-0
8
Jul-
08
Oct
-08
Jan
-09
Ap
r-0
9
Jul-
09
Oct
-09
Jan
-10
Ap
r-1
0
Jul-
10
Oct
-10
Jan
-11
Ap
r-1
1
Jul-
11
Oct
-11
Jan
-12
Ap
r-1
2
Jul-
12
Oct
-12
Jan
-13
Ap
r-1
3
Jul-
13
Oct
-13
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Jan
-16
Ap
r-1
6
Jul-
16
Usage of ECB Facilities ELA
Irish banking sector (2/3):Repayment of State and EU support measures complete
Commentary ECB/ELA for covered banks (€bn)1 – virtually eliminated by mid-2016
Government guaranteed liabilities (€bn)1
Source:1. Central Bank of Ireland (ELA: Emergency Liquidity Assistance). Figures include covered banks – AIB, BOI, PTSB, EBS and IL&P. ELA eliminated by 2014.
2. NAMA: https://www.nama.ie/financial/nama-bonds/
(€bn) (€bn)
(€bn)
Government guaranteed NAMA bonds (€bn)2
Between 2011 and 2015 the Irish covered banks materially reduced their exposure to ECB funding, and eliminated their ELA exposure
Similarly, Government guaranteed liabilities fell from €375bn in 2008 to zero in 2017
Government guaranteed NAMA bonds fully redeemed as of October 2017 –three years ahead of schedule.
€30.2
€25.4
€22.7
€13.6
€8.1
€2.6
€0.0€0.0
€5.0
€10.0
€15.0
€20.0
€25.0
€30.0
2011 2012 2013 2014 2015 2016 2017
€375bn
Q3
20
17
Q1
20
16
Q4
20
15
Q3
20
15
Q2
20
15
Q1
20
15
Q4
20
14
Q3
20
14
Q2
20
14
Q1
20
14
Q4
20
13
Q3
20
13
Q2
20
13
Q1
20
13
Q4
20
12
Q3
20
12
Q2
20
12
Q1
20
12
Q4
20
11
Q3
20
11
Q2
20
11
Q1
20
11
Q4
20
10
Q3
20
10
Q2
20
10
Q1
20
10
Q4
20
09
Q3
20
09
Q2
20
09
Q1
20
09
Q4
20
08
Q3
20
08
€0bn
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
16 An Roinn Airgeadais | Department of Finance
10.7%
9.6%9.0% 9.0% 8.7%
8.4%
7.2% 7.1% 7.0% 7.0%
6.1% 6.0%
3.2%
-0.5%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
AT
NL
ES LU DK IE EU FR BE
GB IT PT
DE
GR
Commentary Return on Equity Q3 2018 (%)
Return on Assets Q3 2018 (%)
Profitability in the Irish banking sector compares favourablywith other European countries
Higher net interest margins and lower cost to income ratios both contributing to relatively strong profitability in 2018
High levels of capital retained by Irish banks leading to a more favourable return on assets profile than for return on equity
RWAs at Irish banks very high relative to European averages. As such, leverage is a useful barometer of the true capital strength of the banks.
Sources:1. EBA Interactive Dashboard Q3 2018
CET1 ratios high at Irish Banks• Ireland: 17% (Q3 2018)• EU 29 Avg: 14% (Q3 2018)
Irish banking sector (3/3):…While the sector returns to sustainable profitability1
1.1%
0.9%
0.7% 0.6%
0.6% 0.6%0.5% 0.5% 0.5% 0.5% 0.5% 0.5%
0.2%
-0.1%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
IE AT ES LU NL
PT
BE
EU DK
GB IT FR DE
GR
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
17 An Roinn Airgeadais | Department of Finance
State Exit
State bank investments: strategic focus
Investor appetite and market conditions
Valuation
Irish economy
Global economy
Financial performance
Government policy is not to hold these
investments long term and, subject to
market conditions, is willing to exit in a
manner that generates value for the
taxpayer
How we look at the State’s bank investments:
Value For Taxpayers Strong Progress to Date Rational Investor
State priority is to engage with the
market in a sensible, orderly and
professional manner
The monetisation of all the State’s BOI
debt investments, the sale of Irish Life
and the re-IPO of PTSB and AIB
highlights the progress the State has
made. The State is not under pressure
to exit the remaining investments
1 2 3
Multiple considerations to take into account:
Programme for Partnership Government authorisation
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
18 An Roinn Airgeadais | Department of Finance
State bank investments Overview
PTSB recently fully exited its2015 EU Restructuring Planand eliminated its last use ofSystem Funding.
Key financial metrics includeda marginal drop in NIM(1.78% in FY18 vs 1.80% inFY17). Profit beforeexceptional items and taxincreased 45% to €94m. Fullyear results for 2018 showedstrong lending growth of over40% compared to FY17.Mortgage market shareincreased to 15.1% up from12.6% in FY17.
FY18 saw a 68% reduction inNPLs largely due to thesuccessful execution ofProjects Glas and Glenbeigh.NPLs were down to €1.7bn atend FY18 (from €5.3bn inFY17). The bank’s NPL ratiowas 10% at the end of FY18.
AIB issued its full year 2018 results inMarch 2019. The bank continues todeliver sustainable underlyingprofitability while maintaining arobust capital position and proposedpaying a dividend of €461m for thefull year 2018.
The bank appointed a new CEO (ColinHunt) and CFO (Donal Galvin).
Key financial metrics included a profitbefore tax of €1.25bn. New lendingwas up 15% on 2017 with newmortgage lending being up 16%.
AIB continues to demonstratesignificant capital generationcapabilities. The bank’s fully-loadedCET1 ratio at the end of FY18 was17.5%, substantially in excess of theirregulatory capital requirements.
Impaired loans continue to decline atpace with a 41% reduction in FY18down to €6.1bn (a reduction ofalmost €25bn since the peak in2013).
The bank announced anunderlying profit before taxof €935m for FY18. Newlending grew by 13% inFY18, rising to €15.9bn.New Irish mortgages grewby 17% with a stablemarket share of 27%.
The bank announced aproposed divided of €173mfor FY18.
BOI had a fully loaded CET1ratio of 13.4% at end FY18.
FY18 saw a 24% reductionin NPEs down to €5.0bn.The bank’s NPE ratio was6.3% at end FY18.
Commentary
The state has reduced its ownership in all three banks since 2013
Strong capital generation to support growth and payouts while helping to withstand regulatory headwinds
Steady growth in new lending, with PTSB growing its front book market share in mortgages from 12.6% to 15.1% in FY18.
99.9% 99.9%
2013
29% 86% 25%
71%
14%
75%
March 2019
% State
Owned
% Privately
Owned
The State holds investments in three Irish banks:
Recent Highlights
85%
15%
1. On a constant currency basis
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
19 An Roinn Airgeadais | Department of Finance
State bank investments: Paving the road to growth
Net Interest Margin Impairment (Charge) / Credit (EURbn) Underlying Profit Before Tax (EURbn)
Increased Profitability2,3Improved Risk ProfileEnhanced Revenue Drivers1
1. Net interest margins exclusive of ELG2. PTSB reported losses, after exceptional items, of €226m in 2016 and €434m in 2015. Exceptional
items substantially comprised losses on the deleveraging of non-core loan portfolios. 3. Profit Before Tax and exceptional items
1.5% 1.4%1.2%
1.4%
1.7%2.0%
2.2%
2.6% 2.5%
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
1.5%1.3% 1.3%
1.8%
2.1% 2.2% 2.2% 2.3% 2.2%
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
(1.0)
(0.2)
(2.2)
(0.5)
0.91.2 1.1 1.1 0.9
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
0.9% 0.9%0.7%
0.8% 0.9%
1.1%
1.5%
1.8% 1.8%
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
(0.4)(0.5)
(0.9)(0.7)
0.0 0.00.2
0.1 0.1
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
(12.1)
(5.1)(3.7)
(1.7)
1.32.2 1.5 1.6 1.4
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
(6.0)
(7.9)
(2.4)(1.9)
0.2 0.9 0.3 0.1 0.2
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
(1.9) (1.9)(1.7) (1.7)
(0.5)(0.3) (0.2)
(0.0)
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
(0.4)
(1.4)
(0.9) (0.9)
0.0
(0.0)
0.1
(0.0) (0.0)
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
20 An Roinn Airgeadais | Department of Finance
State Bank InvestmentsTransformational change in underlying financial metrics
of State bank investments between 2010 and 2018Commentary State bank investments: change in selected metrics (2010 to 2018)
Transformational change across all three State bank investments between 2010 and 2018
Recovery in all covered metrics including: profitability, capital reserves, new lending volumes, Loan to Deposit Ratios, and non-performing loans
EU restructuring plans fully exited by all three banks
AIB BOI PTSB
Metric €bn/% Year 2018 €bn/% Year 2018 €bn/% Year 2018
Loan to Deposit Ratio
165% 2010 90% 175% 2010 97% 227% 2011 93%
Central Bank Funding
€31bn 2011 Nil €33bn 2010 €2.7bn €19.5bn 2011 Nil
Total new lending1 €7bn 2013 €12.1bn €6.6bn 2013 €15.9bn €0.1bn 2012 >€1.5bn
Underlying profit/loss
Loss -€10.4
2010Profit
€1.4bnLoss
€3.5bn2010
Profit €935m
Loss €1bn
2012Profit €94m
NIM 1.03% 2011 2.47% 1.25% 2012 2.20% 0.72% 2013 1.78%
NPL / NPL Ratio2
€29bn/35%
2013€6.1bn/
9.6%€18bn/
18%2013(June)
€5bn/6.3%
€8.6bn/28%
2013€1.7bn/
10%
Core Equity Tier 1 Capital3 4.0% 2010 17.5% 6.30% 2013 13.4% 11.30% 2013 12.2%
EU Restructuring Plan
Entered 2011 Exited Entered 2010 Exited Entered 2015 Exited
1. Total new lending - BOI & AIB did not disclose pre-20132. 2018 values reflect the Non-Performing Exposure (NPE) balance for AIB and BOI, and the NPL Balance for PTSB
3. CET1 Fully loaded used for 2018 values. BOI 2013 excludes the preference shares. PTSB’s pro-forma CET1 increases to 14% when the capital benefit from Projects Glas and Glenbeigh is included
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
21 An Roinn Airgeadais | Department of Finance
€2.8€4.2 €5.0 €5.4 €5.7 €6.0 €6.0 €6.3 €6.6€0.5
€0.5
€5.0 €5.0
€7.4
€9.2
€12.6 €12.6 €12.6
€7.7
€8.0
€11.6
€13.3
€13.9€11.6
€10.6 €7.1 €7.3
€14.3
€17.7
€23.1
€25.5
€29.9
€28.8
€31.1
€27.2€27.7
€0.0
€5.0
€10.0
€15.0
€20.0
€25.0
€30.0
€35.0
€0.0
€5.0
€10.0
€15.0
€20.0
€25.0
€30.0
€35.0
2009-2011 2012 2013 2014 2015 2016 2017 2018 March-19
Fees and Income (accumulated) Disposals (accumulated) AIB Valuation BOI Valuation PTSB Valuation
State bank investments:Expected value attributable to taxpayers
Value of State’s Shareholding (Mar-2019)
€7.3bn
€0.8bn
€0.4bn
Total €8.5bn
€29.4bn investment expected to be recovered (€bn)1,2,3,4:
€29.4bn State Investment
(€bn)
1. Disposals comprise sale/redemption of debt instruments, AIB and PTSB IPOs, and the sale of Irish Life. 2. Fees and income comprise interest coupons, recap fees, and CIFS/ELG fees.
3. Bank valuations based on ISE closing prices, March 2019.4. The result of AIB IPO reflected above does not include value of Government owned warrants.
Cash Realised (€19.2bn)
Market value of State holdings
(€8.5bn Un-realised)
€27.7bn market value of State investments + realised cash(as at March 2019)
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
22 An Roinn Airgeadais | Department of Finance
€6.1 €6.4
€10€11.7 €12.3 €11.3 €10.6
€7.1 €7.3
€1.2€1.7
€2.0
€2.3
€4.6 €6.4€10.1
€10.3 €10.6
State Aid Injection €20.75bn
€7.3€8.1
€12.1
€13.9
€16.8€17.7
€20.7
€17.4€17.9
€0.0
€5.0
€10.0
€15.0
€20.0
2011 2012 2013 2014 2015 2016 2017 2018 Mar-19
Valuation Cumulative Repayments State Aid Injected
€0.2€0.6
€1.2€1.7
€2.0 €2.3
€4.6
€6.4
€10.1 €10.3 €10.6
€0.0
€2.0
€4.0
€6.0
€8.0
€10.0
€12.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Mar-19
ELG Fees Interest Payments Capital Redemptions
Dividends Cumulative Repayments
Long Only Funds 66%
Hedge Funds23%
Sovereign Wealth Funds
12%
State bank investments
€3.4bn1 IPO of AIB
1. No valuation ascribed to state warrants2. Bloomberg
3. Valuation as of March 2019
Pricing Date 22-Jun-17
ListingOfficial List of the Irish Stock Exchange (Primary Listing) and London Stock Exchange Main Market (Premium Listing)
Offer Price €4.40
Offer Size €3,433.7m (incl. greenshoe)
Residual Shareholding
c.71.25%
Retail Offer 10% of base offering
Implied Market Cap €11,943m
Lock-Up 180 days for Minister and AIB
• Largest listing in EMEA and second largest worldwide in 2017. Largest IPO in the UK since Glencore in 20112
• Second largest European Bank IPO since 20072
• More than 250 investors in the allocated order book
• Top 50 allocations accounted for c.75% of the order book
• Quality of allocation: more than 30% of the order book received zero allocation
Allocationby geography:
Allocationby fund type:
UK35%
US25%France
8%
Ireland2%
RoW31%
(€bn) (€bn)
AIB State Aid Repayments (€bn)AIB Valuation & Redemption (€bn)3
Key Offering Statistics Transaction Highlights
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
23 An Roinn Airgeadais | Department of Finance
0.6x 0.7x 0.6x 0.3x0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
EuroStoxx Bank Index AIB Bank of Ireland Permanent TSB
State Bank Investments Banks trading at a discount to book value
Commentary % Change in Listed Share Prices1
Price to Book Ratios (25th March 2019)2
In line with the wider European banking sector, share prices for all three State bank investments have declined since January 2018
European banks trading at a discount to book value with the EuroStoxxBank Index trading at 0.6 times book value as of March 2019
1. Source: Bloomberg March 20th March 20192. Bloomberg 25th March 2019. The EuroStoxx Bank Index tracks the share price performance of the European banking sector
EuroStoxx Bank Index
0%
-25%
-43%
-21%
-25%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19
AIB PTSB BOI EuroStoxx Bank Index
Irish State Bank Investments
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
24 An Roinn Airgeadais | Department of Finance
Enhanced profitability drivers (1/4) Margin recovery
Commentary Net Interest Margin trajectory (%)2
Falling Cost of Funds (Excluding ELG%)2,3
Margin recovery led by declines in deposit interest rates, wholesale funding costs and increasing weighting of front book pricing on asset side
Front book pricing remains high relative to European averages. This is partially driven by the high default rates experienced by State bank investments during the financial crisis
On a constant currency basis, asset bases starting to stabilise after years of mandated and voluntary deleveraging
The improvements come despite significant mortgage tracker portfolios weighing on asset margins, and the low interest rate environment
New household fixed term deposit interest rates have decreased from c.2.4% in 1Q 2012 to c.0.6% in 1Q 2019.1
1. Central Bank of Ireland: Retail Interest rates on new business and agreed term of 2 years or more 2. Published financial statements
3. ELG: provides for a State guarantee for certain eligible liabilities (including deposits) of up to 5 years in maturity by participating institutions from the date they joined the scheme until the closure of the scheme. Guarantee linked liabilities ceased in March 2018
1.6%
1.3%
1.0%
0.6%0.5%
1.1%
0.9%
0.6%
0.4% 0.4%
1.6%
1.1%
0.7%
0.5%0.4%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
2014 2015 2016 2017 2018
AIB BOI PTSB
1.2%1.4%
1.7%
2.0%
2.2%
2.6%2.5%
1.3%
1.8%
2.1%2.2% 2.2%
2.3%2.2%
0.7%0.8%
0.9%
1.1%
1.5%
1.8% 1.8%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
2012 2013 2014 2015 2016 2017 2018
AIB BOI PTSB
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
25 An Roinn Airgeadais | Department of Finance
Commentary Gross Credit Extended to SMEs by Sector 2011 – Q4 2018 (€bn)1
Mortgage Drawdowns by Mortgage Type 2011–2018 (€bn)2
Upward trajectory in gross new lending to SMEs since 1H 2013
The value of annual mortgage drawdowns has increased by nearly 3.5 times between 2013 and 2018.
Source:1. Central Bank of Ireland: Trends In Business Credit and Deposits 3Q 2018. Excludes financial institutions. SMEs are defined as
enterprises with fewer than 250 employees and whose annual turnover does not exceed €50 million2. Banking and Payments Federation of Ireland: only data relating to BPFI members included in dataset
Enhanced profitability drivers (2/4)Gross new lending healthy & growing
€1.1 €1.4 €1.2€1.9 €2.3 €2.6
€3.6€4.2
€0.9€1.0 €1.1
€1.7€2.0
€2.2
€2.7
€2.8
€0.2
€1.2
€0.2
€2.5 €2.6 €2.5
€3.9
€4.9
€5.7
€7.3
€8.7
€0.0
€1.0
€2.0
€3.0
€4.0
€5.0
€6.0
€7.0
€8.0
€9.0
€10.0
€0.0
€1.0
€2.0
€3.0
€4.0
€5.0
€6.0
€7.0
€8.0
€9.0
€10.0
2011 2012 2013 2014 2015 2016 2017 2018
First Time Buyer Mover Purchase Residential Investment Re-mortgage Top-up Total
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
€3.1
€2.6€2.2
€2.7
€3.5
€4.6€4.9
€5.3
€0.0
€1.0
€2.0
€3.0
€4.0
€5.0
€6.0
€0.0
€1.0
€2.0
€3.0
€4.0
€5.0
€6.0
2011 2012 2013 2014 2015 2016 2017 2018
Wholesale/Retail Trade & Repairs Real Estate Activities Primary Industries Other
Hotels and Restaurants Manufacturing Business and Administrative Services
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
26 An Roinn Airgeadais | Department of Finance
96
%
12
3%
76
%
55
%
48
%
52
%
49
%
53
%
78
% 88
%
60
%
54
%
53
%
57
% 62
%
65
%
11
1%
14
5%
11
9%
12
6%
74
%
65
%
64
%
64
%
0%
20%
40%
60%
80%
100%
120%
140%
160%
2011 2012 2013 2014 2015 2016 2017 2018
AIB BOI PTSB
Enhanced profitability drivers (3/4)Cost to income ratios falling and below European averages
Commentary
Continued focus on both income enhancement and cost reduction is driving improved sustainability
Increased levels of investment in IT infrastructure and digital platforms across all three banks
Reduction in costs partially driven by a fall in headcount
Aggregate Cost to Income ratio of Irish banks stood at 62% in Q3 2018. Compares with 63% at a European level.
State Bank Investments Cost to Income Ratios (2011 – 2018)1
BOI in process of delivering €1.4bn investment programme. Average of €275m investment p.a. between 2016 and 2021
AIB completed a 3 year €870m strategic investment programme in Dec-17
1. Report metrics from published financial accounts. Excludes bank levies, regulatory fees and exceptional items2. EBA Dashboard Q3 2018 (Includes 3 domestic Irish banks plus Ulster Bank, DEPFA & Citibank)
3. Staff numbers based on average for the period (shown on a year end basis for AIB 2008). Decline attributable to a combination of voluntary redundancies, headcount reductions and business disposals
Global Staff Numbers 2008 – 20183 Average CTI Ratio by Country Q3 2018 (%)2:
52% 53% 54%57% 57% 58%
62% 62% 63% 63% 63% 64%
72%
81%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
ES GR PT
DK
LU NL
GB IE AT
EU IT BE
FR DE
25,919
16,026
5,053
9,801 10,595
2,418
-
5,000
10,000
15,000
20,000
25,000
30,000
AIB BOI PTSB
2008 2018
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
27 An Roinn Airgeadais | Department of Finance
34
28 2724
23 22 22 22 21
0
5
10
15
20
25
30
35
40
2009 2010 2011 2012 2013 2014 2015 2016 2017
Ireland
Enhanced profitability drivers (4/4)Reduced branch footprint driving down costs at Irish banks
Commentary
1. World Bank Data. Commercial bank branches are retail locations of resident commercial banks and other resident banks that function as commercial banks that provide financial services to customers
and are physically separated from the main office but not organized as legally separated subsidiaries.2. 8th out of 17 countries. Source: Indecon Report on Benchmarking of Ireland’s Payments Industry, 2019
Irish commercial bank branches per 100,000 adults1
c.40% reduction in the number of bank branches (per 100,000 adults) in Ireland between 2009 and 2017 following large branch closure programmes and departure of foreign and domestic players (e.g. Danske Bank, HBOS, Irish Nationwide)
The number of bank branches in Ireland per 100,000 adults now amongst the lowest in Europe
Ireland has experienced a shift towards card based payments with the number of credit and debit card transactions increasing from roughly 50 transactions per person per annum in 2012 to nearly 80 in 2017. Ireland now ranks 8th in Europe for card usage as a means of payment3
EU Commercial bank branches per 100,000 adults (2017)1
c.40% reduction
71
59
51 50
45
36
30 29
23 22 21 21 2116 16
13 12 106
0
10
20
30
40
50
60
70
80
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
28 An Roinn Airgeadais | Department of Finance
Drivers of Falling
NPEs
State bank investments: improved risk profile (1/2)Combined NPE ratio for AIB, BOI and PTSB fell to 8% as of
December 2018
Commentary AIB Non-Performing Exposures (NPEs)
Significant reduction in Non-Performing Exposures across all three State Bank Investments. 80% reduction in AIB and PTSB between 2013 and 2018. While Bank of Ireland reduced NPEs by 47% between 2016 and 2018
A combination of rising property prices, a growing economy, and measures taken by Irish banks to address non-performing loans have all contributed to the decline in balances.
Improved Collateral
Improved borrower
repayment capabilities
Portfolio Sales
Loan Treatment
1. Company Accounts / Central Bank of Ireland / DoF Analysis.
NPE = NPL + eligible forborne loans + other exposures
NPL = Impaired + debtors deemed unlikely to pay
Permanent TSB - Non-Performing Loans (NPLs)
Bank of Ireland Non-Performing Exposures (NPEs)
Combined 3 Banks Non-Performing Exposures
€30.7
€26.2
€18.0
€14.1
€10.2
€6.1
37%35%
26%
22%
16%
10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
€0.0
€5.0
€10.0
€15.0
€20.0
€25.0
€30.0
€35.0
2013 2014 2015 2016 2017 2018
AIB (NPEs) NPE Ratio %
€8.6€8.3
€6.6
€5.8€5.3
€1.7
26% 26% 26%27%
26%
10%
0%
5%
10%
15%
20%
25%
30%
€0.0
€1.0
€2.0
€3.0
€4.0
€5.0
€6.0
€7.0
€8.0
€9.0
€10.0
2013 2014 2015 2016 2017 2018
PTSB (NPL) NPL Ratio
€9.4
€6.5
€5.0
11%
8%
6%
0%
2%
4%
6%
8%
10%
12%
€0.0
€1.0
€2.0
€3.0
€4.0
€5.0
€6.0
€7.0
€8.0
€9.0
€10.0
2016 2017 2018
BOI (NPEs) NPE Ratio %
-80%
-80%
-47%
€14.1
€10.2
€6.1
€9.4
€6.5
€5.0
€5.8
€5.3
€1.7
€29.3
€22.0
€12.8
17%
14%
8%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
€0.0
€5.0
€10.0
€15.0
€20.0
€25.0
€30.0
€35.0
2016 2017 2018
AIB (NPEs) BOI (NPEs)PTSB (NPL) Total
(€bn)
(€bn) (€bn)
(€bn)
-56%
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
29 An Roinn Airgeadais | Department of Finance
Commentary NPE Ratio % By Country (EBA Data: March 2016 to September 2018)
% Reduction in NPE Ratio (March 2016 to September 2018)
Relative to other EU countries, Ireland’s banks have relatively high, but falling Non-Performing Exposures (NPEs)1
The Irish banking system has reduced its NPE ratio faster than all other comparable European countries. According to the EBA, it fell by 52.9% between March 2016 and September 2018.
State bank investments: improved risk profile (2/2)NPE reduction ahead of European peers
1. NPE = Impaired loans + debtors deemed unlikely to pay + eligible forborne loans + other2. EBA Dashboard Sept-18
37
.7%
16
.3%
13
.6%
12
.0%
5.3
%
5.4
%
3.5
%
3.2
%
2.4
%
2.8
%
2.4
%
2.0
%
0.9
%
39
.2%
9.7
%
7.7
%
5.6
%
3.5
%
2.6
%
2.6
%
2.1
%
1.9
%
1.7
%
1.4
%
1.2
%
0.7
%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
GR PT IT IE ES AT FR DK NL BE DE GB LU
Mar-16 Sep-18
-4.1%
19.4%
21.3%
25.9%
34.2%
36.1%
39.0%
39.3%
40.3%
40.5%
43.2%
51.8%
52.9%
-10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
GR
LU
NL
FR
ES
DK
GB
BE
DE
PT
IT
AT
IE
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
30 An Roinn Airgeadais | Department of Finance
11
6% 1
28
%
13
2%
12
8%
10
8%
11
3%
13
6%
13
6%
15
3% 1
66
%
16
5%
16
0%
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
2015 2016 2017 2018
AIB BOI PTSB
State bank investments: capital, liquidity & funding (1/2)
Stable, high quality funding profile
Commentary Falling Loan to Deposit Ratios % (2012 to 2018)1
Net Stable Funding Ratio % (2015 to 2018)1,3
Household deleveraging (€bn)2
Reduced loan to deposit ratios (LTDs) across all three State bank investments as households and businesses deleverage. Provides capacity for additional lending
A combination of falling household liabilities and increasing asset values has led to aggregate nominal household net worth exceeding pre-crisis levels
Quality of funding remains high, exceeding the Basel III net stable funding ratio minimum requirements
Similarly, liquidity levels exceed January 2019 Basel III requirements.
1. Published financial accounts & Pillar III disclosures2. Central Bank of Ireland: Quarterly Financial Accounts
3. Net Stable Funding Ratio (NSFR) seeks to calculate the proportion of long-term assets which are funded by long-term, stable funding. The NSFR limits overreliance on short-term wholesale funding. Soruce: Annual accounts & Pillar 3 Disclosures
4. The LCR is calculated by dividing a bank's stock of high-quality liquid assets by its total net cash outflows over a 30-day stress period
Household Deposits
Liquidity Coverage Ratio % (2015 to 2018)1,4
Jan ’19 Min-
Requirement
(100%)
11
5%
10
0%
99
%
10
0%
95
%
93
%
90
%
12
3%
11
4%
11
0%
10
6%
10
4%
10
0%
97
%
19
1%
15
1%
13
8%
12
5%
11
1%
10
8%
93
%
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
2012 2013 2014 2015 2016 2017 2018
AIB BOI PTSB
11
1% 1
19
%
12
3%
12
5%
12
0%
12
2%
12
7%
13
0%
92
% 10
5% 11
4% 12
1%
0%
20%
40%
60%
80%
100%
120%
140%
2015 2016 2017 2018AIB BOI PTSB
Min- Requirement
(100%)
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
31 An Roinn Airgeadais | Department of Finance
State bank investments: capital, liquidity & funding (2/2) Strong capital base
Commentary Core Equity Tier 1 Capital ratios % (FY 2018)1,2
Core Equity Tier 1 Capital Ratios by Country (Fully Loaded: Q3 2018)2,3
Total Regulatory Capital ratios % (FY 2018)1,2
Leverage Ratios by Country (Fully Loaded: Q3 2018)2,3
State bank investments now well capitalised relative to EU peers on a fully loaded basis
BOI, AIB and PTSB have all returned to profitability and are capital accretive
RWAs partly responsible for the relatively high levels of capitalisation at Irish banks. According to the EBA Transparency data (Dec-2018), risk weighted assets for Irish residential mortgages (based on IRB models) were 38%. This is 2.5x the European median of 15%, and the third highest in Europe behind Hungary and Romania.4
1. Published annual reports2. “Transitional” refers to the transitional Basel III required for CET1 ratios which came into effect Jan-14. “Fully loaded” refers to the actual Basel III basis for CET1 ratios.
3. EBA Dashboard Q3 2018 (Includes 3 domestic Irish banks plus Ulster Bank, DEPFA & Citibank)4. “Risk Weighted Assets in Ireland” Department of Finance: https://assets.gov.ie/6836/664f5174ebd34f7e938aea654bed6757.pdf
Basel III Leverage Ratio Rule:
Tier 1 Capital ≥ 3%
Total Exposure
24%
17% 17%17%
16%16% 15%
14% 14%13%
13% 13%12%
11%
0%
5%
10%
15%
20%
25%
LU DK IE BE
NL
DE
GB
EU FR AT
PT
GR IT ES
9%9%
7% 7%
6%6%
5%5% 5% 5%
5% 5% 5%4%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
IE GR PT
LU AT
BE ES GB
EU IT FR DE
DK
NL
21.1%
17.5%
15.0%
13.4%14.7%
12.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
CET1 (Transitional) CET1 (Fully loaded)
AIB BoI PTSB
22.4%
19.1%18.8%
17.2%16.0%
13.5%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Total capital % (Transitional) Total capital % (Fully loaded)
AIB BoI PTSB
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
32 An Roinn Airgeadais | Department of Finance
Ongoing ConsiderationsBrexit: State bank investments’ exposure to UK market1
Commentary
Permanent TSB disposed of its ‘non-core’ UK assets during 2015 and 2016
Irish banks have already included in their stress tests many of the potential impacts Brexit might have on their balance sheets
Overall, the UK remains an important trading partner to the Irish economy. However, Ireland’s reliance on the UK market has reduced over time, falling from over 50% of Irish exports in the early 1970’s to just 17% in 2015.4
1. Figures sourced from published financial statements 2. Retail UK business only. Operating profit includes joint ventures.
3. PTSB sold remaining UK assets in H2 2016. 4. Garcia-Rodriguez, A., McInerney, N., Morgenroth, E., and D. Smith. (2016). “Modelling the
Medium to Long Term Potential Economic Impact of Brexit on Ireland”.
UK Exposure FY2016 FY2017 FY2018% of Group
Total (FY18)
Total income (£m) £489 £515 £546 19%
Loans & Advances - net (£bn) £25.6 £24.8 £24.4 32%
Operating profit (£m)2 £153 £157 £194 23%
Impairment Write Back (Charge) (£m)2 -£82 -£100 -£66 NM
UK Exposure FY2016 FY2017 FY2018% of Group
Total (FY18)
Total income (£m) £237 £267 £269 10%
Loans & Advances - net (£bn) £7.5 £7.3 £7.4 12%
Operating profit (£m) £122 £151 £161 12%
Impairment Write Back (Charge) (£m) £30 -£13 -£18 NM
UK Exposure3 FY2016 FY2017 FY2018% of Group
Total (FY18)
Total income (£m) - - - -
Credit outstanding (£bn) - - - -
Operating profit (£m) - - - -
Impairment write back (Charge) (£m) - - - -
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Section 1: Introduction
Section 2: Economic Update
Section 3: State Bank Investments
Section 4: NAMA / HBFI
Section 5: Credit Unions
Section 6: IBRC
Section 7: Financial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
34 An Roinn Airgeadais | Department of Finance
NAMA Background and Performance
€0.0
€1.3
€3.5€2.8
€9.1
€5.5 €5.5
€2.6
€30.2 €29.0
€25.4€22.7
€13.6
€8.1
€2.6€0.0
€0
€2
€4
€6
€8
€10
€0
€5
€10
€15
€20
€25
€30
2010 2011 2012 2013 2014 2015 2016 2017
Bonds Redeemed (€bn) Bonds Outstanding (€bn)
Performance: 100% of €30.2bn senior debt redeemed 3 years ahead of schedule
Purpose: Established in 2009 to remove uncertainty around land and development loans from participating banks’ balance sheets, the value of which had fallen steeply following the financial crisis1
Nominal value of loans transferred:
Acquired gross loans with outstanding principal balances of €74.2bn from Irish banks
Price paid for loans acquired:
In total €31.8bn paid (57% discount on par debt) in the form of:1
€30.2bn ECB eligible Government guaranteed senior bonds €1.6bn unguaranteed subordinated bonds.
State Aid: Consideration included an uplift to reflect the long term economic value. Market value of the loans at the reference valuation date (30th Nov 2009) was €26.2bn, difference of €5.2bn notified as State Aid
Progress to date: Through phased disposals, asset/debtor management and complimentary value maximizing strategies, NAMA has now generated in excess of €40.7bn cash and redeemed 100% of its €30.2bn senior debt2
Profitability: Generated profit of €1.5bn in 2016, €481m in 2017, and expects to generate a profit for its 8th consecutive year in 20182
Redemption of debt Redeemed all of its €30.2bn senior debt as of October 2017 and over €500m of its subordinated debt as of April 2018. Expects to redeem the remaining €1.1bn of its subordinated debt in 2020 and generate a surplus of €3.5bn
Background:
(€bn)
1. Participating banks include: AIB, Anglo Irish Bank, Bank of Ireland, Irish Nationwide Building Society and EBS Building Society.Further detail on valuation and discounts applied can be found here - https://www.nama.ie/financial/
2. Surplus can only be returned to State once senior, subordinated debt and equity investors are repaid as per Section 60 of the NAMA Act 2009. Source: 2017 Annual Report
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
35 An Roinn Airgeadais | Department of Finance
NAMA Has Three Commercial Objectives
NAMA seeks to make a positive social and economic contribution across the broad range of its activities, subject to the primacy of its commercial mandate and often complementing it.
Repay 100% senior debt by year end 2017 and all sub-debt by March 2020
100% of senior debt repaid as of October 2017. Redeemed over €500m of its subordinated debt since April 2018 and on track to redeem the remaining €1.1bn sub-debt by March 2020
Facilitate delivery of key Grade A office space in the Dublin Docklands Strategic Development Zones (SDZ)
All of the sites NAMA originally had an interest in are either completed, under construction, received planning, or had been sold with planning permission
Facilitate delivery of up to 20,000 residential units by end 2020
From 2014 to February 2019, NAMA has directly funded the construction of 9,700 new residential units in Ireland and facilitated an additional 3,400 new units indirectly.
1
2
3
Objective Achievements to date
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
36 An Roinn Airgeadais | Department of Finance
2010 - 2013
• Strategic focus on UK disposals during 2010 –2013. UK market had remained comparatively buoyant
• 73% UK sales: London assets accounted for 60% of total NAMA sales proceeds, rest of Britain - 13%
• Irish assets, by contrast, accounted for just 16% of total sales proceeds in the same period
• By end-2012 NAMA had sold less than €1bn in Ireland – a deliberate action
2014
• Improving market conditions, increased institutional investor appetite - NAMA took strategic decision to steadily increase the volume of available supply from 2013 onwards
• Step change seen in total NAMA sales proceeds: €7.8bn in 2014 - increase of €4.1bn on 2013
• Of the €7.8bn, 44% or €3.7bn generated from the sale of Irish properties
2015/2016
• In 2015, two-thirds of disposals were in Ireland - strong domestic and international investor appetite
• Total NAMA sales proceeds: €8.5bn in 2015 - increase of €0.7bn on 2014
• 2016 total NAMA sales proceeds of €5.1bn -64% or €3.3bn generated from the sale of Irish assets
• Cumulative Irish sales at €14.4bn at YE 2016
2017/2018
• Few large portfolio sales remain in pipeline
• End-2017 carrying value of NAMA’s loan portfolio was €3.7bn –down to €2.4bn by end of September 2018
• Majority of portfolio relates to residential delivery and Dublin Docklands SDZ programmes –increased focus from 2017 onwards
• Increased its projected lifetime surplus to €3.5bn
2019+
• Publication of Section 227 Review in 2019 outlining NAMA’s wind-down strategy
• Redemption of €1.1bn remaining sub-debt by March 2020
• Repayment of private investors and delivery of €3.5bn surplus
NAMA’s Phased Disposal Strategies
NAMA: Timeline of Events
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
37 An Roinn Airgeadais | Department of Finance
NAMA: Balances Outstanding
The majority of NAMA’s remaining portfolio relates to the residential delivery and Dublin Docklands (SDZ) programmes,with the remainder relating to a large volume of low-value assets, many of which will require meticulous workout if theirvalue is to be optimized
The final phase of NAMA’s deleveraging will be a relatively slow process, with few major sales and the focus to 2020 will beon the Dublin Docklands SDZ and residential delivery programmes.
Geographic mix of remaining assets mainly Dublin centric. Potential Brexit impacts mitigated following disposal of bulk ofUK book
Original Acquisition vs NAMA Carrying Value (€bn)1Remaining Asset Portfolio: Geographic breakdown based on value of underling collateral February 2019
Commentary:
(€bn)
Dublin 73%
Rest of ROI 23%
UK1%
Rest of World 1%
Non-Real Estate Assets (€0.1bn)
2%
€71 €73 €71
€67
€56
€41
€28 €26
€24
€29 €26
€23 €20
€13
€8 €4 €4 €2
€0
€10
€20
€30
€40
€50
€60
€70
€80
2010 2011 2012 2013 2014 2015 2016 2017 Sep-18
Par Value (€bn) Carrying Value (bn)
1. Change in value between Dec-17 and Sept-18 carrying value partly impacted by change in accounting policy from IAS 39 to IFRS 9. Carrying value for Jan-18 increased from €3.0bn (IAS39) to €3.1bn (IFRS9) as a result of the change. Source: NAMA Q1 2018 accounts
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
38 An Roinn Airgeadais | Department of Finance
€8.1
€0.0
€0.3
€8.1
€0.2
€0.5
€2.3
€0.1
€1.6
€1.1
€1.6
€3.9
€0.1
€0.1
€0.0
€2.0
€4.0
€6.0
€8.0
€10.0
€12.0
2015 Senior BondRedemption
Decrease inother liabilities
Decrease in Sub -Debt
Increase inRetainedEarnings
Sep-18
Government Guaranteed Senior Bonds Other Liabilities
Subordinated Bonds Retained Earnings
Non-Controlling Interests
NAMA: Funding Structure & Distribution
NAMA Funding Structure 2016 – September 2018 (€bn)1,2:
Source:1. NAMA Q3 Report 2018
2. As the subordinated notes contain no contractual obligation to make payments, it has been classified as equity in the statement of financial position, with any coupon payments classified as dividend payments
Taking into account €1.1bn of subordinatedbonds (due in March 2020) NAMA held justunder €3.9bn of retained earnings attributableto shareholders at end of September 2018.
Final €500m of senior bonds redeemed inOctober 2017 meaning that NAMA has nowfully repaid its senior debt
NAMA’s equity ownerships consists of:
Private investors: 51%
State shareholding: 49%
The return to the private investors is cappedand linked to the Irish Government Bond yieldwith the potential of an additional 10% of thecontributed capital sum (€51m) at dissolution
Surplus is only available for distribution once allsenior and subordinated debt is redeemed infull and private investors are repaid
(€bn)
Commentary
c.€3.9bn of retained earnings
attributable to shareholder
€11.6
€5.1
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
39 An Roinn Airgeadais | Department of Finance
Home Building Finance Ireland (‘HBFI’)
Home Building Finance Ireland (“HBFI”) was announced as part of Budget 2018 to increase the availability of debt funding to commercially viable residential development projects in the State.
HBFI has been established to provide senior debt funding on a commercial basis to small and medium size residential development projects (circa €2m to €35m) throughout the Irish State.
The Home Building Finance Ireland Act was commenced on 5 December 2018 and HBFI was formally launched in January 2019. HBFI has an independent board and is wholly owned by the Minister for Finance.
Further information in relation to HBFI and its application process can be found at https://www.hbfi.ie
HBFI Funding
HBFI Indicative Lending Criteria
Overview
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Section 1: Introduction
Section 2: Economic Update
Section 3: State Bank Investments
Section 4: NAMA / HBFI
Section 5: Credit Unions
Section 6: IBRC
Section 7: Financial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
41 An Roinn Airgeadais | Department of Finance
Minister For Finance
Credit Union stakeholders
Average New Loan Average Savings
€3,900€3,400
252 registered credit unions in the Republic of Ireland serve the needs of 3.1 million
members 1
The role of Minister for Finance is to ensure that the legal framework for credit
unions is appropriate.
The Registrar of Credit Unions at the Central Bank of Ireland is the independent
regulator for credit unions in Ireland.
The main representative bodies are:
ILCU (creditunion.ie) - 339 credit union's affiliated to League in the Republic
of Ireland and Northern Ireland.
CUDA (cuda.ie) – represents 14 credit unions and also provides affinity
membership for a number of additional credit unions.
CUMA (cuma.ie) – represents credit union managers in Ireland.
NSF (nsf.ie) - supports board oversight committees in the Republic of
Ireland and supervisory committees in Northern Ireland.
CUAC is a statutory body providing advice to the Minister for Finance on credit union
matters.
The Minister for Finance set up an Implementation Group to oversee the delivery of
recommendations that emerged from a CUAC review of a Commission on Credit
Unions report. The Implementation Group published its Final Report in January
2019.
The Credit Union Restructuring Board (ReBo) facilitated and supported credit union
amalgamations. ReBo’s restructuring activities ceased on the 31st of March 2017.
82 mergers concluded, involving 156 individual credit unions with total assets in
excess of €6.7bn.
Members Credit Unions
Registrar of Credit Unions
CUACCREDIT UNION ADVISORY
COMMITTEE
ILCUIrish League of Credit Unions
Key Stakeholders Sector Overview1
Source: 1. As of September 2018
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
42 An Roinn Airgeadais | Department of Finance
Credit Unions: background
Number of Credit Unions in Ireland (by Total Assets)1 Total Savings & Loans (€bn) 1
Savings with credit unions remained resilient through the financial
crisis and are now above pre-crisis levels
Loan balances have been increasing since 2015, rising from €3.95bn in
Sep-2015 to €4.8bn in Sep-2018
Loan To Asset (LTA) ratio has risen steadily since 2016 to 28% as of
Sept-2018
The declining trend of the number of credit unions in Ireland
continues. Between December 2011 and December 2018 the
number of credit unions fell by 154 (406 to 252)
This reduction was largely driven by voluntary consolidation and a
limited number of resolution cases. This led to an increase in the
number credit unions with assets greater than €100m
(€bn)%
€13 €13 €12 €13 €12
€12 €12 €12
€12
€13
€13
€14 €15
€7 €7
€7 €7
€6
€6
€5
€4 €4.0 €3.9
€4.1€4.5
€4.8
17%
6%
28%
0%
10%
20%
30%
40%
50%
60%
€0
€2
€4
€6
€8
€10
€12
€14
€16
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Sep-18
Savings (€bn) Loans (€bn) Reg Cap (%) Arrears (%) Loans to Total Assets (%)
223 225 219 215 213 205 196 181
148
97 73
58
168 165 168 165 163 167 169
168
157
147
141
140
29 28 28 29 30 27
28 31
37
48
54
54
420 418 415 409 406 399
393 380
342
292
268
252
-
50
100
150
200
250
300
350
400
450
-
50
100
150
200
250
300
350
400
450
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Sep-18
Less than €20m €20-100m Greater than €100m Total
Source: 1. Department of Finance
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Section 1: Introduction
Section 2: Economic Update
Section 3: State Bank Investments
Section 4: NAMA / HBFI
Section 5: Credit Unions
Section 6: IBRC
Section 7: Financial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
44 An Roinn Airgeadais | Department of Finance
IBRC: Overview
IBRC: Timeline of Events
Established: • July 2011 following the merger of Anglo Irish Bank and Irish Nationwide Building Society
Purpose: • To manage the orderly wind down of the merged entity
Government Support: • Total invested in IBRC (Dec-2010): €34.7bn
Progress to date: • IBRC was placed in special liquidation in February 2013• Loans with a par value of €21.7bn have been prepared, brought to the market and sold• Liquidation generated €17bn of cash inflows to date• All admitted unsecured creditors will be paid 100% of the principal that was owed to them at the date of liquidation.
Overview
2009
• Following consultation with Central Bank and Department of Finance, the ‘Anglo Irish Bank Corporation Act 2009’ was passed to take Anglo Irish Bank into public ownership
• €4bn in ordinary shares invested in Anglo Irish Bank and €100m in Irish Nationwide (INBS)
2010
• €30.6bn additional capital injections in the form of promissory notes
• Brings total invested to €34.7bn across Anglo and INBS
2011
• Majority of deposits held in Anglo Irish Bank and INBS are merged to form Irish Bank Resolution Corporation (IBRC)
2013
• Following discussions between Irish Authorities and the ECB, the IBRC promissory notes are exchanged for long-term government bond
• Improves Ireland’s debt profile and decreases near team borrowing requirements
• IBRC placed into liquidation
2014/2015
• Liquidation generated €16.5bn of cash inflows to date
• Allows for payment of €14.7bn to IBRC’s creditors, including full repayment of €12.9bn of debt owed to NAMA
2016/2017/2018
• In December 2018, the Special Liquidators commenced payment of the final dividend of 50% to all admitted unsecured creditors of IBRC which represents the final instalment of the principal owed to this class of creditors as at the date of the liquidation of IBRC.
• Assessor appointed pursuant to the Anglo Irish Bank Corporation Act 2009
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
45 An Roinn Airgeadais | Department of Finance
IBRC Progress Update Report
Sales process by numbers
€21,700,000,000
64 15,900
>130,000 355
755,000
3,500 241 100%
174
OF LOANS PREPARED AND BROUGHT TO MARKET
LOAN SALES PROCESSES CONDUCTED
LOANS CONSISTED OF OVER
LETTERS ISSUED TO BORROWERS
AND GUARANTORS
INTERESTED PARTIES
ACROSS 13 COUNTRIES
DOCUMENTS WERE REVIEWED AND
UPLOADED TO VIRTUAL DATA ROOMS (“VDRS”)
PROPERTY VALUATIONS
WERE OBTAINED
INDIVIDUAL BIDS WERE RECEIVED
ACROSS 6 PORTFOLIOS
OF THE LOAN BOOK
TRANSACTED
NON DISCLOSURE AGREEMENTS (“NDAS”)
SIGNED WITH INTERESTED PARTIES
DIFFERENT BORROWER GROUPS
22
• The IBRC loan portfolio was supported by collateral based in 22 different jurisdictions worldwide
• Strong interest from a variety of financial and strategic buyers and funders, with US private equity houses and hedge funds being key participants across each of the portfolios.
Project PebbleUS CRE, UK hotels and UK
& Ireland Shopping Centres
■ Ireland/UK (84%)
■ US (15%)
■ World: other (1%)
Project Sand/PearlIrish originated Residential
Mortgages
■ Ireland (100%)
Project Evergreen Irish originated Corporate
Loans
■ Ireland (93%)
■ UK (7%)
Project SaltUK originated CRE Loans
■ Germany (60%)
■ UK (30%)
■ Poland (7%)
■ Europe: other (3%)
Project RockUK originated Commercial
Real Estate (“CRE”) Loans
■ UK (89%)
■ US (7%)
■ Germany (3%)
■ Europe: Other (1%)
Project StoneIrish originated CRE Loans
■ Ireland (46%)
■ United Kingdom (33%)
■ Continental Europe (18%)
■ Other (3%)Project Quartz
Irish originated CRE loans
■ Ireland (97%)
■ UK (1%)
■ Other (2%)
Project Amber / Amethyst
Corporate and CRE loans
■ UK (78%)
■ Ireland (22%)
Source: 1. IBRC Progress Update Report
Collateral was based
in 22 different jurisdictions
Sales Processes
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
46 An Roinn Airgeadais | Department of Finance
IBRC Liquidation Update
The most recent special liquidation progress update report was published in May 2018 giving a comprehensive overview of the work completed to date. It is available on the Department of Finance website www.finance.gov.ie. A further progress update report is expected in H1 2019
Asset realisation workstream largely complete. At this stage, loans with a par value of €21.7bn have been prepared, brought to the market and sold
As at the 31st December 2018, the Special Liquidators had a net cash balance of c. €1.26bn which will ultimately be available for distribution to creditors
In December 2018, the Special Liquidators commenced payment of the final dividend of 50% to all admitted unsecured creditors of IBRC. This payment represents the final instalment of the principal owed to this class of creditors, which includes the State, as at the date of the liquidation of IBRC in February 2013
An assessor was recently appointed pursuant to the Anglo Irish Bank Corporation Act 2009 to determine the fair and reasonable aggregate value of the transferred shares and extinguished rights and the consequent amount of compensation (if any) that may be payable to the previous shareholders
On 2nd April 2019 the Special Liquidators announced the successful agreement of the largest remaining piece of litigation impacting the liquidation of IBRC. This agreement should accelerate the finalisation of the liquidation in due course.
Recent Developments
Ongoing
Tasks
Liquidation update
Continued management of c. 119 legal cases
Completion of the creditor adjudication process
Expectation that that there will be further funds recoverable to the State following repayment of other creditors, including subordinated bondholders (dependent on a number of assumptions)
Management of the remaining loan book of c. €3.4bn
Realisation of all remaining assets
Assessor process expected to be completed by Q2/Q3 2019
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
Section 1: Introduction
Section 2: Economic Update
Section 3: State Bank Investments
Section 4: NAMA / HBFI
Section 5: Credit Unions
Section 6: IBRC
Section 7: Financial Advisory
Body Level One
Body Level Two
Body Level Three
Body Level Four
Body Level Five
48 An Roinn Airgeadais | Department of Finance
Financial AdvisoryAnalysis, insight and building connections
Insight Objective Analysis
Building Connections
Financial Advisory
Key objectives
The Financial Advisory team provides insight and analysis into emerging technologies and financial services, while helping to build connections between academia, public bodies, and private institutions
Blockchain & Virtual Currencies
Analysis & Insight
Conduct research into new developments in the financial services sector and nascent technologies. Research areas include: crowdfunding, seed & venture capital funding, blockchain and fintech
Co-hosted a conference with the European Investment Bank (EIB) that focused on improving access to finance for Irish companies (December 2018)
About
Coordinate and manage the Department’s Blockchain & Virtual Currencies Working Group
Regular engagement with academia, Enterprise Ireland, the IDA and private sector via the ‘Blockchain Ireland’ initiative
Authors of the Department’s discussion paper on blockchain & virtual currencies Co-founded the BlockW initiative (women in blockchain forum) Provide input at an EU and OECD level. In particular, at the EU Blockchain
Observatory & Forum and the EU Blockchain Partnership Hosted Ireland’s first Government Blockchain Hackathon (Blockathon Ireland) in
January 2019
IntroductionEconomic Update
State Bank InvestmentsNAMA / HBFICredit Unions
IBRCFinancial Advisory
49 An Roinn Airgeadais | Department of Finance
Contacts
Head of Shareholding and Financial Advisory Division
Shareholding and Financial Advisory Division Contacts
Department of Finance Press Office
Des CarvilleEmail: des.carville@finance.gov.iePhone: +353 1 604 5326
Aidan MurphyEmail: pressoffice@finance.gov.iePhone: +353 1 604 5531
AIB, BOI & PTSB Credit Unions Scott Rankin(Deputy Head) Brian CorrEmail: scott.rankin@finance.gov.ie Email: brian.corr@finance.gov.iePhone: +353 1 604 5469 Phone: +353 1 604 5064
Financial Advisory NAMA, IBRC & HBFIMai Santamaria Gary HyndsEmail: mai.santamaria@finance.gov.ie Email: gary.hynds@finance.gov.iePhone: +353 761007728 Phone: +35316045308
Recommended