Enabling our customers, colleagues and communities to thrive - Bank of Ireland Group plc
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Bank of Ireland Group plc Strategic Report 2018 Enabling our customers, colleagues and communities to thrive
Our Ambition is to be the
National Champion Bank
in Ireland, with UK and selective
international diversification.
Our Purpose is to enable our
customers, colleagues and
communities to thrive.
This Strategic Report provides an Inside this report
overview of the Group’s financial and
non-financial performance in 2018.
2018 key performance highlights 01
It is also included with further detail
as part of the Group’s 2018 Annual Chairman’s review 02
Report. Both the Strategic Report and Chief Executive’s review 04
Annual Report can be accessed on
investorrelations.bankofireland.com Our purpose and values 06
Our ambition 07
Our strategy 08
Responsible and sustainable business 16
Our governance structure 27
Risk review 28
2018 financial results 30
Divisional review 32
Bank of Ireland Strategic Report 2018 01
2018 key performance highlights
Strong financial performance Growth
NIM of 2.20% Net NPEs reduced New lending New Irish Wealth &
impairment by 24% €15.9bn, mortgages; Insurance;
gains of €42m to €5.0bn; increase of Growth of 21% income
€935m NPE ratio
now at 6.3% €1.3bn 13% vs. 2017 17%, stable
market share
of 27%
growth vs.
2017
Underlying profit Net lending
before tax growth
Transformation Capital
3% /
Taking the Foundations Business Organic Dividend
lead in of new core model capital increased to
building a banking initiatives generation 16c per share
€48m great culture platforms to drive of 180bps (€173m) from
13.4%
in the Bank in place efficiencies 11.5c (€124m)
reduction in progressing in 2017
at pace
costs CET 1 ratio
55% 58:42 €4.9m 50% c.€14m
employee male/female appointment total community carbon reduction invested in Learning
engagement score to management and investment in 2018 target by 2030 & Development for
leadership positions agreed colleagues
in 2018
250 6,000+ 1,396 16m
new customer colleagues attended volunteer days interactions on
facing roles Purpose & Values our digital channels
Roadshow in 2018 every month
02 Bank of Ireland Strategic Report 2018
Chairman’s statement
The Group’s financial position is strong and our strategy
is clear. Over the period to 2021, our priorities are to
transform our culture, systems and business model,
serve customers brilliantly and grow sustainable profits.
Customer expectations continue to evolve
rapidly. The financial services sector
must adapt and develop to meet these
expectations and compete efficiently.
While electricity powered the 20th century,
technology will fuel the 21st century. Our
significant technology investment means
the Group is well positioned to face the
many opportunities and challenges on
the horizon. Successful implementation
of our business transformation strategy
will enable us to compete from a position
of strength and ensure we continue to
support our customers and drive economic
activity in our core markets. I am confident
the Group will deliver against its objectives.
I am excited about our new chapter in
becoming Ireland’s National Champion
Patrick Kennedy I am delighted to have been appointed Bank. The Group plays a pivotal role
Chairman as Chairman and Governor. This is an in enabling and supporting growth,
exciting time to be at Bank of Ireland; investment and prosperity in Ireland.
building on very strong foundations, our We are investing in our people, our
next chapter is one of transformation, infrastructure and our businesses to
investment and growth. strengthen the level of support, products
and services we provide to all of our
Strategy Irish consumer, business and corporate
customers.
Our ambition is clear: to be the National
Champion Bank in Ireland, with UK and We are also investing in our UK and
selective international diversification. This international businesses. This investment
is ambitious, but realistic. It is in our hands represents important strategic
to deliver. diversification for shareholders and
attractive opportunities for growth.
At our Investor Day in June 2018 our CEO, Improving returns in our UK business is
Francesca McDonagh, and her executive a priority. We continue to strengthen and
team set out Bank of Ireland’s strategy. We enhance our long standing partnership
will transform the bank, serve customers with the UK Post Office and our more
brilliantly, and grow sustainable profits. recent partnership with the Automobile
This will deliver multi-year growth across Association (AA). While Brexit uncertainties
the Group’s businesses and franchises. remain to the fore, we continue to take
Good progress has already been made appropriate steps to mitigate related risks
against the growth and transformation to the Group and our customers.
strategy with the Group performing strongly
during 2018 across all of our businesses. The Group’s strong operating and financial
performance combined with continued
Bank of Ireland Strategic Report 2018 03
organic capital generation has contributed to thank Archie for his service to Bank of Davida Marston retired from the Board
to a robust capital position in 2018. The Ireland since his appointment in 2012 until in September 2018. I would like to
Group continues to have the capital and his recent retirement. His considerable thank Davida for her contribution and
liquidity available to support our strategic experience and sound judgement were commitment over almost six years of
ambition and commitment to our Irish, UK invaluable to the Group. During his time membership of the Board.
and international customers. as Chairman, Bank of Ireland repaid in
I am delighted that Patrick Haren has
full the support received from the Irish
The strength of the Group’s financial succeeded me in the role of Deputy
State during the financial crisis, exited
performance is evident in our dividend. Chairman and Deputy Governor. He brings
the Eligible Liabilities Guarantee Scheme,
I am pleased to announce a proposed considerable experience and judgement
returned to sustainable profitability, and
dividend in respect of 2018 to shareholders to this role and I look forward to working
recommenced dividend payments. As
of 16 cent per share, an increase on closely with him.
detailed in the Corporate Governance
the 11.5 cent per share in 2017. This
Statement on pages 120 to 129 of the BOIG
demonstrates continued progress against
plc Annual Report, we regularly review the Remuneration
our ambition to increase dividends on a
Board’s composition and diversity. We are After a period of restructuring, the Group
prudent and progressive basis and, over
committed to ensuring we have the right is in a strong financial position. We are
time, build towards a payout ratio of around
balance of skills and experience within seeing a return to normalisation within
50% of sustainable earnings.
the Board, including diversity across all the banking sector in Ireland; however,
its dimensions. The Board has retained challenges remain, including the attraction
Purpose its gender diversity target of 33 per cent and retention of staff at all levels in an
Our purpose is to enable our customers, female directors by the end of 2020, and increasingly competitive labour market.
colleagues and communities to thrive. An has a medium term aspiration to have
broadly equal gender representation. Shareholders were advised in the
appropriate corporate culture embedded
Chairman’s Letter and Notice of the 2018
across the organisation is necessary to Evelyn Bourke and Ian Buchanan Annual General Meeting (AGM) that the
underpin this purpose. There is much to like joined the Board in May 2018. Evelyn Group’s goal is to operate a remuneration
in Bank of Ireland’s existing culture, but we has a strong track record in global policy including variable remuneration
are aiming to sharpen the customer focus, executive management and extensive consistent with European Banking
agility, accountability and collaboration experience in financial services, risk and Authority (EBA) guidelines. To this end,
across the organisation. capital management, and mergers and the Group Remuneration Committee
Customers are deliberately referred to acquisitions. She was appointed CEO of (GRC) engaged with major shareholders
in our purpose and values. We want Bupa Group in July 2016. She is also a during 2018 in regard to the adoption
to develop and maintain long term member of the Bupa Board. of an appropriate executive incentive
sustainable relationships based on trust Ian has extensive technology, digital, scheme and to obtain feedback from major
and confidence. We aim to provide the business transformation and customer shareholders. Any such scheme is subject
right products and services, through the operations experience gained through his to the removal or amendment of the current
right channels, to meet our customers’ work in a number of international retail, remuneration restrictions in Ireland and
preferences. We will enhance customer commercial and investment banks. Ian is a approval by shareholders.
experience through investment across our non-executive director at Openwork, one
multi-channel platforms. of the largest financial advisor networks Outlook
Conducting our business responsibly is in the UK, and a senior operations and In a rapidly changing world, we believe we
an integral part of our interactions with our technology advisor to Cerberus Capital have the right strategy and approach to
customers, colleagues and communities. It Management. transforming our business. I am confident
is positive that our approach to responsible Steve Pateman joined the Board in that the quality of the Group’s businesses
business continues to be recognised September 2018. Prior to joining the Board, and franchises, combined with a clear
externally, including accreditation by the Steve served as CEO of Shawbrook Bank customer focus, strong leadership from
National Standards Authority of Ireland. and held a variety of senior positions at Francesca and her executive team, and
Santander, RBS and NatWest. Steve has the commitment of colleagues across the
Board extensive knowledge of the banking sector, Group, position us well to deliver value for
particularly in corporate and retail banking, our shareholders. We look forward with
Archie Kane stepped down as Chairman
and has considerable lending experience confidence to 2019 and beyond.
and Governor on 31 July 2018. I would like
in the UK.
04 Bank of Ireland Strategic Report 2018
Chief Executive’s review
The Group has made good progress in 2018 and
is already delivering against the strategic targets for
growth and transformation we have set out for 2021.
A strategic focus is to increase returns in
the UK market. We will do this by investing
in the growth of our more profitable
businesses; improving those businesses
that have potential but need to deliver
better returns; and repositioning those
businesses where we have less certainty
about achieving our return expectations.
Execution and delivery of the Group’s
strategic plan will enable us to generate a
return on tangible equity in excess of 10%,
reduce our costs to €1.7 billion in 2021, and
prudently and progressively increase our
dividend per share over time, building to a
payout ratio of around 50% of sustainable
earnings.
Strong performance in 2018
Francesca McDonagh
The Group generated an underlying profit
Group Chief Executive
before tax of €935 million in 2018. All
trading divisions are profitable.
I am pleased to report that good progress Strategic ambition The Irish economy performed strongly
has been made by the Group in 2018. in 2018 and continues to be the fastest
Our strategic priorities are to transform the growing economy in the Eurozone. Despite
We defined our multi-year strategy in bank, serve customers brilliantly and grow Brexit uncertainties, the UK economy
June 2018, setting out clear targets until sustainable profits. Delivering on these expanded, but at a more moderate pace
2021. We have grown our loan book priorities is key to achieving our ambition. in 2018. Job gains continued in both
with net lending of €1.3 billion in 2018 We have accelerated and broadened our economies, with the unemployment rate
as we support our retail and corporate transformation with a particular focus ending 2018 at a 10-year low of 5.7%
customers across all our markets. This on growth in Ireland, and a reshaped UK in Ireland and at a multi-decade low of
inflection point represents growth for the business to generate increased profitability 4.0% in the UK. Brexit-related uncertainty
first time in a number of years and we and returns. is however impacting on sentiment and
are confident of further growth. We have activity levels. In Ireland, some firms have
reduced our operating expenses by 3%, a Expected growth in our Irish business will
put their investment plans on hold and
first step towards fundamentally improving drive expansion in lending volumes and
in the UK there is a clear weakening in
the Group’s efficiency. Our systems fee income, and increase our revenue on
investment by businesses.
transformation has made good progress a sustainable basis. We will enable this
with the testing of our first customers by allocating capital and resources to be Net Lending of €1.3 billion represented
on the new core banking platform. We the leading supporter of home building growth for the first time in a number of
are taking actions to increase returns in and buying in Ireland, and building out years. New lending volumes of €15.9 billion
our UK business. Our non-performing our wealth management and insurance were 13% higher than the same period in
exposures (NPE) continue to reduce. This business. 2017 on a constant currency basis. New
progress underpins our 2018 results, with mortgage lending in Ireland increased by
We are committed to investing in our
the Group delivering an underlying profit 17% compared to 2017 and we maintained
multi-year transformation programme
of €935 million. our market share at 27%. We successfully
including our core technology investment.
re-entered the broker mortgage channel
Our ambition is clear - to be the National This will support our growth ambitions,
in Ireland in late 2018, leveraging off our
Champion bank in Ireland, with UK and improve customer service, and drive
award winning technology platform from
selective international diversification. We efficiency. Transformation will also build a
the UK. The fundamentals in the Irish
have defined the culture we want at Bank truly customer focused organisation which
market remain strong and we continue to
of Ireland while achieving this ambition. I positively impacts the communities we
support home building and buying. In 2018,
believe this cultural transformation is as serve and delivers attractive, sustainable
we funded the construction of 5,400 new
important as the changes we are making returns to our shareholders.
homes on 140 sites as well as 2,750 student
to our technology and business model. beds including 1,400 under development.
Bank of Ireland Strategic Report 2018 05
In the UK, we grew our new lending by 13% Fees and other income of €625 million Fostering an inclusive and diverse
and remain committed to improving returns arise from diversified business activities workforce is critical to ensuring that Bank
in an increasingly competitive market, including wealth, bancassurance, foreign of Ireland is reflective of the modern and
whilst maintaining commercial pricing and exchange (FX) and transactional banking diverse communities we serve, as well as
risk discipline. fees. This includes sustainable business building a better place to work and a better
income of €672 million, an increase from place for our customers to do business.
We are transforming our culture, systems
€662 million in 2017. A key driver of this was We will continue to focus on attracting,
and business model and this is delivering
the growth in our Wealth and Insurance developing and retaining the talent we need
efficiencies across the Group. Operating
business where income grew by c.20% and to deliver our ambition. In 2018, I set out
expenses (excluding levies and regulatory
market share grew by c.2%. a commitment to achieve a 50:50 gender
charges) in 2018 of €1.9 billion decreased
ratio in all new management and leadership
by €48 million or 3% compared to 2017. Our asset quality continues to improve. This
appointments by 2021, and we are making
This included €113 million, or 37%, reflects ongoing improvement in the credit
good progress with females representing
of the €306 million we invested in our quality of our loan portfolios, our actions to
42% of all senior appointments in 2018.
transformation programme during the manage our non-performing loans and the
period. We expect operating expenses positive economic environment and outlook The extensive reach of the Group allows
to further reduce in 2019 and each year particularly in our home market in Ireland. us to engage and support our customers
to 2021. We had net impairment gains of €36 million in their local communities and enterprises.
in 2018. NPEs reduced over the year by In 2018, we hosted over 64 local enterprise
Transformation of our technology remains
€1.5 billion to €5.0 billion, which equates events, reaching 225 communities.
a key enabler to support growth, improve
to an NPE ratio 6.3% of gross customer Our Innovation Programme hosted over
customer experience, and drive efficiencies
loans. NPE reduction strategies continue 550 events across our Workbenches
in our businesses. The investments we are
to be kept under review given the evolving and Startlabs.
making in our core banking platforms will
regulatory framework.
deliver simpler, state of the art technology, Responsible and sustainable business is
and improve our digital channels, services of significant importance to our colleagues
Customers, Colleagues and
and security. A number of key programme across the Group. Our new integrated
milestones have been delivered in 2018. Communities report includes a comprehensive account
The foundations of our core banking Customers are the absolute core of our of our business approach and practice
platforms are now in place. A single businesses. Their expectations and from the perspective of customers,
customer view of over 2 million customers preferences are changing rapidly and we colleagues and communities on pages
has been created and we have commenced have been listening to them, and taking 16 to 25.
the testing of loan and deposit origination action. We have upgraded over 100
on the new Temenos platform. Our new branches to full service branches while Looking forward
mobile banking app will launch during also recruiting 250 frontline staff to drive
2019, delivering an improved customer 2018 has been a year of business growth,
improved service levels. With an average improved efficiency, and progress in the
experience for retail customers. of over 10 million monthly engagements on transformation of our culture, systems and
Our fully loaded CET 1 capital ratio was our mobile app during 2018, up over 25% business model. We are on the right track
13.4% at December 2018. The Group on 2017, our customers are increasingly to achieve our 2021 commitments. We
continues to generate strong organic choosing digital and self-serve channels. are mindful of the risks and uncertainties
capital with organic capital generation Our customer focused strategy is to serve relating to Brexit and the global economy.
of 180 basis points in 2018. We continue customers brilliantly and we continue to However, we are committed to making
to strategically invest and allocate this invest across all our businesses. We will further progress against our strategic
capital supporting ongoing investments do this as we transform our businesses objectives in the year ahead.
in loan book growth, our transformation by providing products and services which
programme, regulatory capital demands meet their financial requirements through We expect our loan book to grow again
and distributions to our shareholders. Our easy, simple and accessible processes in 2019 with our NIM to be c.2.16%. We
capital and dividend guidance remains which align to their digital expectations. expect further reductions in operating
unchanged and the strength of our capital expenses, and asset quality to continue
With our ambition to become the National to improve. Absent a deterioration in the
position is reflected in a proposed dividend Champion Bank we are taking the lead
of 16 cent per share or €173 million. economic environment or outlook, we
in building a great culture in the Bank. continue to expect the net impairment
Our net interest margin (NIM) for the Culture enables long term customer charge to be in the range of up to 20 to
Group was 2.20% in 2018. This reflects relationships, a reduced cost of risk, and 30 basis points per annum during 2019
the positive impact from new lending growth in sustainable revenue and I am to 2021.
margins and our continued strong committed to embedding a new culture
commercial pricing discipline, offset by within the Group. During 2018, over 6,000 I am confident in our ability to execute
the impact of the ongoing low interest colleagues attended purpose and values our strategy and we will continue to
rate environment, NAMA sub debt roadshows and there has been a continual responsibly develop our profitable, long
reclassification and competitive pressures improvement in our staff engagement term franchises, and achieve our ambition
in the UK mortgage market driving lower level scores - improving from 50% to to serve our customers brilliantly in a way
than expected market pricing and shorter 55%. There is still far more to do. We are that delivers attractive, sustainable returns
customer reversion periods. also transforming our ways of working to our shareholders.
for our colleagues as we further invest in
capabilities and agile working practices.
06 Bank of Ireland Strategic Report 2018
Our purpose and values
Bank of Ireland has a clearly articulated
purpose underpinned by our four values
Our purpose Our values
‘Typically, the most
successful companies in
Enabling our customers, Our purpose is supported by four key the world are the most
colleagues and
values. These guide us in everything we
say and do. purposeful. Turning our
communities to thrive purpose into a reality
Customer focused
Bank of Ireland’s purpose is to enable our is a big part of my role
customers, colleagues and communities We understand our customers well. We
to thrive. listen to them to ensure they feel valued. as CEO. We want to
Customers are at the heart of our business
We use our insights to consider how best
to serve their needs. We take appropriate
transform and grow to
and always come first.
actions to deliver solutions to meet become the National
Colleagues keep our organisation working, customer’ changing requirements.
innovating and adapting to meet our Champion Bank in Ireland.
customers’ needs. One Group, one Team But this isn’t just about
Communities are where we live and work
and also include other groups both local
We know we work smarter when we come
together behind our common purpose.
our organisation - the
and global such as our shareholders, We learn from each other and share ideas way we live this purpose
regulators, government and partners. to expand our thinking. We build an open,
trusting and supportive environment, should have a positive
and foster diversity of thought, ideas
and experiences to spark creativity
effect because it will
and innovation. change how we serve
Agile our customers’
We embrace change with an open mind Francesca McDonagh
and a can-do attitude. We respond quickly Group CEO Bank of Ireland
and proactively seek different perspectives.
We challenge ourselves to look for new
and simplified ways to efficiently deliver
the best solutions for our customers.
Accountable
We are empowered to take ownership
and trusted to do the right thing to
support our customers, colleagues and
communities. We lead by example and
challenge ourselves and each other to
do our best work at all times. We learn
from our mistakes and celebrate our
successes together.
Bank of Ireland Strategic Report 2018 07
Our ambition
To become National Champion
Bank in Ireland
Our ambition
To be the National We will be easier to do business with and
to bank with - supporting our customers in
Champion Bank in Ireland the way, at the time and in the place they
want. And, we will be a better place to
Bank of Ireland’s ambition is to be the
work - closer to the customer, with the right
National Champion Bank in Ireland, with UK
culture and our values guiding all we say
and selective international diversification.
and do.
To be a ‘National Champion’, we will have
To achieve our ambition we have set three
strong market shares and be a driver of
strategic priorities. These are to transform
economic growth. We will be focused and
the bank, serve customers brilliantly, and
transparent in how we run our businesses,
grow sustainable profits.
and be recognised as a consumer
champion by our customers. We will Our Group strategy to 2021 is anchored
have a strong brand position, and be in these priorities. We have set out a clear
an employer of choice. strategy for the Group which is focused
on transformation, customer service and
Delivering on this ambition will transform
growth, coupled with clear financial targets.
Bank of Ireland for our customers,
colleagues and communities.
Generate
Strong market
capital & positive
share
potential returns
Focused and
Customer
The attributes transparent
champion
business
of a National
Champion Bank
Driver of
Aspirational
economic
brand
growth
Employer
of choice
08 Bank of Ireland Strategic Report 2018
Our strategy
To transform the bank, to serve
customers brilliantly and to grow
sustainable profits
‘I am confident in our
ability to execute our plan,
materially enhance the
sustainable returns for our
shareholders and deliver
on our shared common
purpose ‘Enabling our
customers, colleagues and
communities to thrive’
Francesca McDonagh
Group CEO Bank of Ireland
‘Investor Day’ - 13 June 2018
In June 2018 we set out our strategy. We capital and investment requirements. This Unlocking growth in our Irish business will
are changing our culture, our systems and evolving framework is a challenge that drive expansion in lending volumes and fee
our business model to support our growth we must navigate carefully and effectively income, while increasing our revenue. We
ambitions, improve customer service and to ensure we meet our customers’, will enable this by reallocating capital and
become a progressive employer of choice. shareholders’ and regulators’ expectations. resources to be the leading supporter of
home building and buying in Ireland and by
In the coming years we will build on our Our growth opportunities are primarily
maximising our wealth management and
strengths, unique history and heritage, in Ireland which is an attractive, modern
insurance business.
and proven capabilities. We have strong and outward-looking market, undergoing
businesses and close relationships with its own transformation. Reflecting the In all this, our customers, colleagues and
our customers. We operate in growing country’s National Development Plan, shareholders have high expectations that
economies in Ireland and the UK. We are ‘Ireland 2040’, we foresee population we must meet and strive to exceed.
Ireland’s leading retail and commercial growth of over one million people, a
By the end of 2021, delivering our strategy
bank, with select and profitable operations one-third increase in job creation and
will see Bank of Ireland as:
in the UK and internationally. And our people living in half a million new homes.
Markets and Treasury business has a We’re investing in our channels including • a trusted brand that has retained
proven track record. maintaining and upgrading our branch customer loyalty and acquired new
network as well as deepening our business;
Our plans for the future are also informed
intermediary relationships. Technology
by our experience of the past decade. • a strong enabler of the success of the
that balances with an engaging personal
The Bank has moved from restructuring fastest growing economy in Europe; and
experience, is an opportunity for our
and risk reduction after the financial crisis
bank. And we’re focused on what matters • having taken some tough calls to be
to greater stability in recent years, and
most to our customers - those big efficient, build a talented team and fulfil
we now see growth and transformation
decisions that punctuate their lives, our potential.
opportunities. The regulatory framework
like buying a home, growing a business,
continues to be demanding, with strong
and protecting their family.Bank of Ireland Strategic Report 2018 09
National
Our ambition Champion
Bank of Ireland;
UK & selective
international
diversification
Enabling our customers,
Our purpose colleagues and communities
to thrive
Customer One Group,
Our values focused One Team
Agile Accountable
Strategic
priorities Transform Serve customers Grow sustainable
the Bank brilliantly profits
Culture Increase revenue
#1 for service
Systems Reduce costs
#1 for brand
Business model Manage risk10 Bank of Ireland Strategic Report 2018
Our strategy
Transform the Bank
We are transforming our culture, systems and business
model to enable our customers, colleagues and
communities to thrive.
Context Target outcomes
We have embarked on a multi-year transformation of our culture. • Best-in-class employee
A healthy internal culture improves staff engagement and engagement.
becomes a magnet for talent. It also creates great customer
• All management and
outcomes, long-term customer relationships, a reduced cost of
leadership appointments will
risk, and growth in sustainable revenue. Changing our culture
represent a 50:50 gender
is central to the bank’s transformation, but it won’t happen
Culture overnight. Throughout 2018, we focused on building awareness
ratio by end 2021.
of our purpose and values and establishing baseline measures
through roadshows and employee engagement research. Next
steps are to embed the changes underway so that colleagues
experience them in their day-to-day working lives.
We are making a significant investment in transforming our • Improved customer
systems as technology is critical to our growth strategy - it experience.
enables our transformation and improves efficiency, but it also • Simplification of products
improves our service to customers, who increasingly expect 24/7 and processes.
banking, or banking on the move and on their phone. We are
• Excellence in digitisation
replacing our core banking systems to improve efficiency and to
and robotics.
enhance customer experience. Almost 80% of our customer base
Systems is digitally active with over 16 million interactions in our digital
channels every month and we will launch a new mobile app in
• Cost base reduced from
€1.9 billion to €1.7 billion.
2019 to improve our digital services. • Digital across all technology
‘layers’ from core to
customer facing channels.
We have reviewed our current business model and how we are • Focused front line
organised and resourced, and identified clear opportunities organisation.
to further reduce costs and improve overall efficiency. We are
• Simplified, delayered
becoming a flatter organisation by reducing the layers between
structure.
the CEO and frontline and by getting closer to our customers.
Technology and automation must blend with personal experience • Effective, sustainable
to support the engaging relationships we want to have with our sourcing arrangement.
Business model customers. Digital services are best combined with a physical
presence, and while we have a clear plan to reduce costs, it won’t • Diversified set of efficient
be at the expense of customer service delivered by the largest portfolios.
branch banking network in Ireland.Bank of Ireland Strategic Report 2018 11
What we’ve achieved in 2018
• Launch of an extensive programme of • In 2018, the ratio of management
cultural transformation. and leadership appointments were
58:42 male / female.
• Colleague engagement has increased
each quarter from 50% (2017) to 53% • The Bank joined the board of the
(Q1: 2018) to 55% (Q2: 2018). 30% Club.
• 76% of Bank of Ireland employees believe • In 2018, the Bank supported the
the strategy being followed is the right establishment of the Irish Banking
one, which is 9% better than the Global Culture Board.
Financial Services (GFS) norm.
• 6,000 colleagues participated in 50
roadshows across the Ireland and the
UK on our purpose and values.
• 2018 infrastructure build of our new • Our state-of-the-art robotics capability,
platform sets a foundation for the recognised as the largest in Ireland
delivery of future planned enhancements is improving outcomes for customers.
including PSD2 compliance. We are now running 100 robots across
120 processes, improving processing
• Single customer record created for over
times and reducing risk of error.
2 million customers.
• The use of robotics to search systems
• The first customer transactions were
for proof of identification has avoided
tested successfully on our new core
the need to contact more than 250,000
banking platform for deposits and loans.
customers to request information.
• Development of new mobile banking
app commenced with launch expected
in 2019; which will represent the first full
scale customer deliverable using new
Temenos technology.
• €34 million / 4% reduction in staff costs • Introduction of flexible working across
with 55% of end-state spans and layers the organisation.
structure completed.
• Creating a leaner, agile organisation
• We have enhanced our customer facing with over half of the end-state
business and are building capability in organisational design now complete
key areas such as IT Change delivery and 8% reduction in senior
and analytics. management roles.
• Consolidation of Dublin footprint
by reducing the number of office
buildings occupied.12 Bank of Ireland Strategic Report 2018
Our strategy
Serve customers brilliantly
We are committed to building a customer-focused organisation
that invests in improving service and digital capabilities, while also
getting the basics right. We listen to customers and respond to
their feedback. We are investing in our brand to help our customers
know what we stand for and how we bring value to their lives.
Context Target outcomes
Customers are the heart of our business. But the way they bank, • Significant improvement in
and the services they expect, are changing and evolving faster customer satisfaction and
than ever. We are committed to improving the financial wellbeing advocacy.
of our various customer segments through a suite of initiatives • Clear listening posts for all
relevant to their life stages. Listening to what our customers customer cohorts.
want, understanding and acting on their reasons for complaining
• Serving customers around
about our service and building segment specific propositions
Embedding voice and strategies that will enable our customers to thrive both now
their key life moments.
and in the future is the core of our customer strategy. • Customer centricity at the
of customer in heart of our culture.
our businesses • Colleagues enabled to serve
customers brilliantly.
We’re investing in our channels including an upgrade to our • Digitally enabled Bank.
branch network and deepening our intermediary relationships.
• Straight through processing;
We have the most extensive owned branch network in Ireland
digital journeys.
with 40% of our frontline staff now enabled to meet our
customers at a time and place that suits them. Transforming the • Build the API foundation for
bank will further deliver on our customers’ appetite for better Open Banking.
digital services. This includes new channels and features that
Investing in are intuitive and offer a full range of services. We’ll make further
progress on redesigning key customer journeys supported by
digital and investment in robotics. This makes everything faster and easier
physical channels for customers and reduces costs.
We have identified our brand purpose and drivers, putting the • #1 Bank brand in Ireland.
customer at the heart of everything we do. We are repositioning
our brand to bring our purpose to life in a way that differentiates
us and offers real value to our customers, colleagues and
communities. This new positioning will bring all constituent parts
of the business together and will be reflected in new advertising
and sponsorship assets. Our creative brand position will sustain
New brand us over the next three to five years.
strategyBank of Ireland Strategic Report 2018 13
What we’ve achieved in 2018
• Established the Group Customer Board • Successfully re-entered to the Irish
to drive improvement in service levels mortgage broker market using award
and customer propositions. winning UK mortgage broker platform
with launch of The Mortgage Store
• Delivered a ‘Brilliant Basics Programme’
in October.
across the organisation gathering ideas
from our colleagues: 3,100+ ideas and • In the youth segment, current accounts
suggestions made, with 50% actioned have increased by 7% over the past
by the end of 2018. 2 years to over 440,000 customers,
and our student market share has
• Trained 3,800+ frontline colleagues
increased from 41% to 43%.
in our ‘Be the Difference’ training
programme - improving our customer • Post Office Money improved its Net
service capability across the Group. Promoter Score for customer loans to
second in the UK market.
• Direct and digital wealth sales increased • We processed c.280 million customer
to 35%. electronic payments, including c.65%
of all credit transfers and c.45% of all
• During 2018, we upgraded 101 branches
direct debits processed in Ireland -
to full cash services and increased
a 5% increase over 2017 volumes.
our focus on call centres, increasing
customer facing roles by c.15%,
resulting in higher service levels and
fewer complaints.
• Creative Brand Platform developed and Highlights include:
due for launch in March 2019. - 1,396 days volunteered in our
• Proud sponsor of all four rugby communities;
provinces in Ireland. - National Enterprise Town Awards with
entries from 83 towns; and
• €4.9 million total community investment
in 2018 which incorporates our - 110,000 financial literacy hours
‘Give Together’ charity investment delivered to students across Ireland.
programme, enterprise programme,
community sponsorships and financial
wellbeing programmes.14 Bank of Ireland Strategic Report 2018
Our strategy
Grow sustainable profits
We are focused on delivering sustainable returns for our shareholders.
This is based on business growth in our key markets to expand
lending, grow fee income and increase revenue sustainability. At the
same time, our costs will reduce each year as the benefits are realised
from multi-year transformation investment. Our UK business is being
reshaped to increase returns and improve margins and efficiency.
Context Target outcomes
Creating growth in our Irish business will expand lending volumes • National Champion Bank
and fee income, and increase our revenue. We’re allocating in Ireland with selective
capital and resources to help us become the leading supporter international diversification.
of home building and buying in Ireland, and to grow our wealth
• Leading supporter of home
management and insurance business. As Ireland’s leading retail
building and buying in Ireland.
and commercial bank and the only bancassurer in the market,
we are building on our strengths, supported by the strong
Business fundamentals - in particular the demand for housing and the
• Building out wealth and
insurance business.
growth supportive demographic changes called out in Ireland 2040,
the national planning framework. • Loan book growth in Retail
Ireland of c.20% by 2021;
Corporate Banking up
€4 billion, c.50% in Ireland.
A broader and accelerated transformation means a deeper • An improvement in our cost
investment in our IT systems to support our growth plans, income ratio from 65%
to better serve our customers and to improve efficiency. today, to c.50% in 2021.
Independent of the investment in our systems, we are also
changing how we are structured as a business. This broadening
and accelerating of our transformation will enable our costs to
reduce every year between now and 2021.
Accelerated
benefits from
transformation
investments
Bank of Ireland is committed to the UK market where our focus • Lower cost of funding,
is on increasing returns. We are investing in profitable parts of acquisition and servicing.
our UK business to support further growth. In other parts of
• New propositions targeting
our UK business we are improving returns by reducing costs of
under-served customer
funding, customer acquisition and servicing. We are repositioning
segments.
business where less certainty exists about meeting hurdle
Reshaping the expectations including our UK credit card portfolio. • Reviewing those portfolios
and products where returns
UK business are below expectations.
• Loan book growth in UK of
c.10% by 2021.Bank of Ireland Strategic Report 2018 15
What we’ve achieved in 2018
• Underlying profit of €935 million with all • Organic capital generation of 180 basis
trading divisions profitable. points enabling investment in loan book
growth and transformation programme.
• #1 Corporate Bank position maintained.
• Improved asset quality with NPEs
• Growth in net new lending volumes in
reduced by 200 basis points to 6.3%
Ireland of €1.3 billion - representing the
of gross loans.
first growth for many years.
• New mortgage lending increased by
17% to €2.3 billion in Ireland.
• Cost reduction across the organisation, • We have rationalised and optimised
in line with improvement in spans our spend with third parties, and have
and layers, and targeted spending embedded cost awareness through
behaviours to reduce professional fees. effective policies and governance, the
results of which are evident though
• Reduction of €48 million in operating
significant third-party cost reduction:
expenses, while continuing to invest in
our Transformation programme, with a - 34% / €32 million reduction in
€113 million charge in 2018. professional fees;
- 18% reduction in travel costs; and
- 65% reduction in Day Rate
Contractors.
• New lending across all portfolios • Deleverage of legacy commercial
increased in 2018 by 13% to lending portfolios ahead of plan.
£5.2 billion, maintaining commercial
• Strong margin management across
and risk management discipline, while
deposits.
launching a number of new products
including those supporting first time • Core operating costs reduced year
mortgage buyers. on year.
• Northridge new business lending
exceeded £1 billion (+30% versus 2017).16 Bank of Ireland Strategic Report 2018
Responsible and sustainable business
Conducting our business in a responsible and sustainable
way is fundamental to achieving our purpose of enabling
our customers, colleagues and communities to thrive.
Having previously published a stand-alone Responsible
Business Report, we now present our non-financial
performance as part of our new Strategic Report.
Combining the Group’s financial and non-financial
performance in one single report provides a
comprehensive picture of the Bank’s activities in 2018.
Growing expectations
Responsible and sustainable business is
an evolving area, and the expectations
of stakeholders for greater transparency,
are continually growing. Adopting the
Sustainable Development Goals at a
national level in Ireland, increases their
relevance to both business and society.
Legislative change is also affecting
this area, with the EU non-financial
reporting directive now including issues
such as diversity and human rights. In
addition, cultural change and business
transformation within the Bank (as outlined
on pages 8 to 15) are creating a context for
increased focus on this area.
Stakeholder engagement
Engaging our stakeholders helps us
address the issues that are important to
them and understand their expectations, so
we can continually evolve our responsible
and sustainable business approach. We
engage with a wide variety of stakeholders,
including customers, colleagues, partners,
Non-Governmental Organisations (NGOs)
and investors, as well as experts in the area
of responsible and sustainable business.
We do this through research, meetings,
media analysis, and participation in expert
forums and other events, and we use what
we learn to inform our planning in this area.
Governance
The Group Nomination and Governance
Committee (GNGC) of the Board has
overall responsibility for Responsible
and Sustainable Business. It receives
regular updates on progress, and reviews
and approves the annual programme.
Responsibility for implementing the
programme as approved by the committee
rests with an expert Responsible and
Sustainable Business Team.Bank of Ireland Strategic Report 2018 17
Future development reaccreditation of the Business Working
Responsibly Mark, and the development
Given growing expectations, stakeholders’ of a community and charity investment
interest and the business transformation strategy fully aligned to our business.
within the Bank, we intend to evolve our
responsible and sustainable business Our performance in 2018 is presented in
approach further in 2019. This will include the following pages through the lens of
publishing a multi-year plan informed customer, colleague and community in line
by a materiality exercise, the successful with our Group Purpose.
Improving our culture At the invitation of our regulators,
Bank of Ireland took part in a number
Our commitment to being a responsible of events to contribute to the debate
and sustainable business includes on cultural change in the sector. In
transforming our culture within the October, our Group CEO Francesca
bank and playing our part in cultural McDonagh participated in a panel
improvement across the wider sector. In discussion as part of a joint Central
2018, we supported the establishment Bank of Ireland (CBI) and Trinity College
of the Irish Banking Culture Board Dublin conference on corporate
(IBCB) - an independent board funded governance, ‘Culture, Diversity and
by five retail banks in Ireland. The IBCB the Way Forward’. In November
has been formed in recognition of the Francesca also addressed the European
fact that public trust in the banking Central Bank (ECB) conference
sector has been damaged and that on ‘Communications ethics and
a determined effort is required to compliance: risk, reputation and returns’
rebuild that trust and support cultural in Frankfurt, on the topic ‘Values and
reform. In late 2018, the IBCB surveyed valuations - why culture in banking
all colleagues within the five retail really matters’.
banks, held a public consultation, and
appointed Mr Justice John Hedigan to
the role of Chairman.
Non-financial information statement
We aim to comply with the new European Union (disclosure of non-financial and diversity information by certain large undertakings and groups)
Regulations 2017. The purpose of this table is to assist stakeholders in understanding our policies and management of key non-financial matters.
Reporting Requirement Policies Risks and Management
Environmental matters Group Environment policy (ISO 14001)1 Environment & Energy (page 24)
Group Energy policy (ISO 50001)1
Social and employee matters Inclusion and Diversity policy Vulnerable customers (page 19)
Group Code of Conduct1 Inclusion and diversity (page 21)
Equal opportunities policy Learning (page 21)
Group Health and Safety policy Wellbeing (page 21)
Employee Data Privacy Employee Representative Bodies (page 21)
Group Vulnerable Customers Policy Communities (page 22)
Group Learning Policy People risk (see full Annual Report)
Respect for human rights Modern slavery and human trafficking statement1 Information security (page 19)
Group procurement policy Operational risk (see full Annual Report)
Group data protection and privacy policy
Bribery and corruption Group Code of Conduct1 Code of conduct (page 25)
Speak Up policy Integrity and honesty (page 25)
Group Anti-Money Laundering Policy (AML) AML (page 25)
Group Anti-bribery and Corruption Policy Conduct risk (see full Annual Report)
Diversity report Board Diversity Policy1 Corporate Governance statement (see full Annual Report)
Business model Divisional Review (page 32)
Policies followed, due diligence and outcome Risk management framework (see full Annual Report)
Description of principal risks and impact of business activity Key risk types (page 29)
Principal risks and uncertainties (see full Annual Report)
Non-financial key performance indicators Key highlights (page 1)
1 These policies are available on the Group’s website. All other policies listed are not published externally.18 Bank of Ireland Strategic Report 2018
Responsible and sustainable business
Enabling customers to thrive
There are many sides to our responsibility to our • Financial Literacy Week to help
secondary students understand basic
customers. Supporting their financial wellbeing is a key financial skills.
part of this responsibility, as well as ensuring that we • TY Academy - a three-day workshop
that helps students develop key skills
are inclusive of our more vulnerable customers. As the and provides practical guidance on
bank with the largest branch network in Ireland, we are
starting their own business was held for
students from 200 schools.
uniquely placed to support the business community. • Financial Literacy Weeks in third-level
colleges, including the ‘Quest Room’
(an escape room with financial literacy
questions).
a responsibility to enable and promote
Tracker Mortgage financial wellbeing among our customers
and our communities. In 2018, we focused
Serving customers brilliantly is one our support in this area on our younger and
of our strategic priorities. In 2018, older customers.
we placed a major focus on making
things right for customers affected by Younger customers
the tracker mortgage issue - ensuring
relevant customers were on the right Within our youth segment, our main
rate and making them an offer of objective is to enable young people to
redress and compensation appropriate thrive, through engaging financial wellbeing
to their circumstances. We continue to programmes for students throughout
engage with our regulator on the issue. Ireland. Our comprehensive youth literacy
We are fully committed to becoming programme focuses on two critical life-
a more customer focused bank, and skill areas, financial skills and enterprise
to rebuilding trust with our customers education. Peter Cooney is one of 29 National
and the wider society we serve. Youth Coordinators supporting our
Specific activities include:
financial wellbeing programmes for
• ‘Talking Cents with Ollie magazine’, students. Based in Wexford and in the
a financial literacy magazine for role since August 2017, Peter enjoys
Financial wellbeing
primary schools. the opportunity to build a community
Financial wellbeing is defined as ‘the and bring the youth programmes to
• BizWorld, a two-day entrepreneurship
extent to which someone is able to life in schools.
programme for 4th and 5th Class
meet all their current commitments and
students with over 10,000 participants
needs comfortably and has the financial
in 2018.
resilience to do so’ (CCPC, 2018). We have Older customers
Supporting our customers at all stages of
110,000
life is essential. We always strive to engage
with our older customers to ensure we
meet their ever-changing financial needs.
literacy hours delivered to
students across Ireland Specific activities include:
• ‘Manage Your Money Safely’ - a
300
training programme with our flagship
charity partner, Age Action, including a
60-minute session focusing on digital,
older people through the card and doorstep security for older
‘Manage your money safely’ people. This has been delivered to 300
participants around the country since its
620MW
launch in November 2018.
• Positive Ageing Week (PAW) 2018 -
of wind energy funded with Age Action. It included 54 Bank of
Ireland events, held nationwide with up
to 1,000 people attending in total.
€800,000 We aim to enhance our services for older
customers, with a new home-improvement
invested in communities across Ireland loan proposition, wealth products, and Age
through our National Enterprise Programme Friendly Ireland reaccreditation, among
other developments.Bank of Ireland Strategic Report 2018 19
Supporting enterprise Financing housing and the
and business green economy
Small and medium-sized enterprises Our fund to support home building will see
(SMEs) are key contributors to the Irish the delivery of c.5,400 new family homes
economy, and we support them through and 2,750 student beds including 1,400
our Enterprise programme, with a range of under development over the next few years
financing options and specialist insights in Ireland. Bank of Ireland is also a leading
across a range of sectors. financier of the renewable energy sector.
We have been involved in the financing of
Enterprise and community over 1GW of energy projects in Ireland,
programme of which approximately 620MW relates
to wind farms. To date, the wind projects
This programme is an important part of we have funded provide the equivalent of
our brand and commercial strategy, and c.450,000 homes with green energy.
helps businesses and communities across
Silver thread Ireland to grow. €800k was invested in 2018
and initiatives included:
Information security
Silver Thread is a company set up As our business becomes increasingly
by two women who believe everyone • Local Enterprise Activity - a range of digital, it is vital we protect ourselves against
has a story to tell that can become local enterprise and community events cybercrime - and help our customers
part of their legacy. We worked with including 40 Enterprise Town events, protect themselves. Our security operations
them on two initiatives in 2018. The sponsorship investment in the National team constantly monitors cyber security
first celebrated the centenary of Start-Up Awards, and 12 workbenches threats, implementing protective measures
Bank of Ireland Charlestown as part and five partner facilities. where needed. During the past year, we
of Positive Ageing Week 2018; the • National Enterprise Week - 23 events introduced a new-look Security Zone on
second, at Bank of Ireland Finglas, around the country under the theme of our website, giving our customers security
captured some of our customers’ ‘Investing for business growth’. guidance, fraud alerts, and information on
Christmas memories. In both, we ran how to report suspicious online activity,
workshops with older people from • National Enterprise Town Awards (NETA) emails or phone calls. We also held
the local communities (customers - 83 entries from towns and villages educational sessions in-branch for older
and non-customers) who brought across the country which culminated in customers, cyber security briefings for
photographs with them relating to the a gala event in November. local businesses, and school visits with tips
Charlestown and Christmas topics. for children on how to connect safely. We
• ThinkBusiness.ie - the number one
Through dialogue and storytelling, the supported Fraud Awareness Week, led by
small business reference site in Ireland,
background of each photo was brought FraudSMART.ie, an initiative of the Banking
which offers entrepreneurs free advice
to life, and Carmel and Cathy of Silver & Payments Federation Ireland (BPFI).
on starting, running and growing
Thread documented the stories in an We will continue to invest in people and
a business.
exclusive book for participants to take technology to protect customer information.
away - and for local schools, libraries
Business support
and Bank of Ireland branches to give
to other members of the community. We offer a range of support to businesses
Silver Thread was a finalist in the as they set up, establish and mature –
ISAX Ingenuity (mature entrepreneur from finance to help them make the most
programme), which we supported. of opportunities, to providing specific
expertise to sectors such as health,
agriculture and manufacturing. Our support
in this area includes:
Vulnerable customers
• Business Start-up package - a two-year
In November 2018, we created a Vulnerable
Customer Segment team, responsible
package for customers who have set up Workbench
a new business in the last three years.
for providing regulatory and professional Bank of Ireland Workbench is a
It includes discounted fees, 24 months’
guidance to the Group, and for removing unique concept which connects
free transactions, and two years’ free
barriers affecting our vulnerable customers. entrepreneurs, branch and community
subscription to Business Online.
Working with colleagues across many by offering free dedicated space for
different disciplines, we helped create and • A range of other options to SMEs co-working, seminars, clinics and
distribute the ‘Safeguarding your money’ who wish to access finance through events to encourage innovation and
guide, which encourages customers collaborations with the Strategic new ideas. Tom McDonald, Niamh
to plan ahead for when they may need Banking Corporation of Ireland (SBCI) Butler and Orla O’Donnell (pictured
assistance in managing and safeguarding and MicroFinance Ireland. above) are all regular users of one of
their finances. We also created a specialist our newest Workbenches in Kilkenny.
• Sector events, providing specialist
Vulnerable Customer phone team. The opening of this and others in 2018
support and guidance to a range
brings our number of Workbenchs
Our focus for 2019 will be on redesigning of sectors, including agriculture,
to 12 across the country. A space
our product and service review process, healthcare, retail convenience and
away from home with a good working
ensuring all new and existing products manufacturing.
environment combined with the
and services are assessed for vulnerable
• Financial literacy - pilot with opportunity to meet and network with
customers with reference to health,
DoLearnFinance (a tool targeted at likeminded people are the main drivers
capability, resilience and life events. We
business owner-managers who lack for these start-ups to use Workbench.
also aim to provide additional translation
knowledge of financial accounts) In 2018, Workbench collected the
services for both our vision and hearing
launched on ThinkBusiness.ie to help Excellence in Marketplace award at
impaired customers.
Irish SMEs with financial literacy. Chambers Ireland CSR Awards.You can also read
