Shareholding and Financial Advisory Division (SFAD) - Fact Book: H1 2020
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Shareholding and Financial Advisory Division (SFAD) Fact Book: H1 2020
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
Introduction
Economic Update
State Bank Investments
Shareholding and Financial Advisory Division
NAMA / HBFI
Credit Unions
IBRC
Financial Advisory
SFAD Roles & Responsibilities
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:
Developing and recommending to the Minister strategies for returning the banks to private ownership
Realising value for the taxpayer by executing share disposals
1. Oversight of State Monitoring bank performance and stock market trends through regular interaction with management,
ownership in Irish banks investors and market participants
Protecting and exercising the Minister’s rights while respecting bank Relationship Framework
Agreements
Utilisation of expertise within the Division to provide financial advisory services and input to policy
2. Advisory and policy options across the Department of Finance
development Manage and co-ordinate the Blockchain & Virtual Currencies Working Group
Provide insight and objective analysis on emerging areas of financial services and technology
SFAD
3. Oversight of NAMA and Responsible for the management of the Minister’s shareholding in the National Asset Management
HBFI Agency (NAMA) and Home Building Finance Ireland (HBFI)
4. Oversight of Credit Policy oversight for the Credit Union sector
Union Sector Provide advice to the Minister on developments in the sector
Body Level One Daily two-way interaction with analysts, investors, investor relation teams and investment banks
5. Market Interaction
Body Level Two
Body Level Three
Responsible for representing the Minister’s interests in relation to the liquidation of IBRC
6. Liquidation of IBRC
Body Level Four
Body Level Five
3 An Roinn Airgeadais | Department of FinanceIntroduction
Economic Update
State Bank Investments
A Track Record of Delivery
NAMA / HBFI
Credit Unions
IBRC
Financial Advisory
A number of significant milestones have been achieved:
• 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)
2010 • State disposal of Irish Life for €1.3bn
to • Establishment of NAMA
2014
• Troika programme commitments met and programme exited
• PTSB raised €525m of capital to address stress test shortfall, while the State retained a 75% stake
2015 • 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
2016
• AIB resumed dividend repayment: €250m and 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
2017 • NAMA repaid 100% of its senior debt
• IBRC paid second interim dividend of 25% to all admitted unsecured creditors
• 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
2018 Body Level
• IBRC paid One of 50% to all admitted creditors
final dividend
Body
• AngloLevel
Irish BankTwoassessor appointed pursuant to the Anglo Irish Bank Corporation Act 2009
• Home Building Finance Ireland (HBFI) officially launched in January 2019 to finance housing construction
Body
• Hosted Level
the first Three
Government services blockchain hackathon in the Trinity Innovation Centre in January 2019
2019
Body Level Four plan
• Permanent TSB exited its restructuring
• Ongoing efforts to address the numerous challenges posed by Covid-19 to the Irish banking sector and the wider economy
2020
Body Level Five
• NAMA redeemed final debt and equity obligations and commenced return of surplus to the State - €2bn to transfer in June
• Final report of the Anglo Irish Bank Assessor published in April 2020
4 An Roinn Airgeadais | Department of FinanceSection 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
Introduction
Economic Update
State Bank Investments
Economy
NAMA / HBFI
Credit Unions
The Irish economy experienced robust economic growth prior to
IBRC
Financial Advisory the outbreak of Covid-19; expected to return to growth in 2021
Commentary GDP and GNP (€bn)1 2021 Forecast Real GDP Growth (%)2
Ireland’s Gross €375 8 2020
2019
Domestic Product €350
7.9
€339 6 2021
7.4
7
6.7
6.7
6.5
(GDP) grew by 5.5% in €325
6.3
6.1
6.1
5.9
5.8
5.7
4
5.1
5
5
2019 to €339 billion. €300
4.3
3.7
This compares with €275 2019
2
growth of 3.3% in €250 €258 0
2008
Gross National Product €225 €198 -2
-5.4
(GNP).
-5.5
€200
-5.9
-6.1
-6.3
-4
-6.5
-6.8
-6.8
-7.2
€175
-7.4
-7.7
-7.9
-7
European Commission
-8.2
€150 -6
-9.4
-9.5
2008
-9.7
forecasts suggest that €125 -8
€170
Ireland’s economy will €100 -10
recover in line with the
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
EU
France
Austria
Finland
Greece
Spain
Italy
Euro Area
Denmark
Ireland
Germany
Netherlands
Belgium
Slovenia
Portugal
Luxembourg
Sweden
wider EU in 2021
following a pan- GDP €bn (Seasonally Adjusted)
European recession in GNP €bn (Seasonally Adjusted)
2020
Consumer spending Retail Sales Index: Seasonally Adjusted4
growth (as (2015 base = 100)
represented by the 115
Retail Sales Index) has 111.2
experienced steady
110
growth since 2015.
105
Body Level One April 2015 base
100
Body Level Two
Body95Level Three
Body
90 Level Four
Body Level Five
1. Central Statistics Office (CSO) - GNP at Constant linked to 2017) Market Prices (Seasonally Adjusted) (€ million)
2. European Commission Spring 2020 Economic Forecast 23rd April 2020
3. Personal Consumption Expenditure (PCE) is the market value of all goods and services, including durable products, purchased by
6 An Roinn Airgeadais | Department of Finance households (excluding purchases on dwellings)
4. Source: CSO Retail Sales Index Value Adjusted – (Base 2015=100)Introduction
Economic Update
State Bank Investments
Economy: Covid-19 Impacts
NAMA / HBFI
Credit Unions Ireland’s Purchasing Managers Index declined sharply in Q1 2020,
IBRC
Financial Advisory
but with greater resilience than most Western European peers
Commentary Ireland’s Purchasing Manager’s Index (PMI)1
70
The Covid-19 Composite
lockdown has 60 Feb-20
temporarily brought 56.7
50
the construction and
40 Manufacturing
services sectors
36
largely to a halt in Q1 30
2020. Composite
20 Apr-20
Ireland's 17.3
manufacturing PMI 10
Services
remained more 0 13.9
resilient than in most
other Western Construction
European countries 4.5
resulting in a higher
composite PMI in Composite Manufacturing Services Construction
April-20 (17.3 vs. 13.6
for the wider Composite Purchasing Managers Index – Western European countries1
Eurozone).
56.7
60.0
53.0
52.0
51.8
51.6
50.7
50.7
50.0
40.0
37.3
Body Level One 36.0
35.0
30.0
29.7
28.9
Body Level
20.0 Two
26.7
20.2
Body Level Three
17.4
17.3
10.0
13.8
13.6
11.1
Body Level Four
10.9
9.2
0.0
Body Level Five
Germany Ireland UK EuroZone France Italy Spain
Jan-20 Feb-20 Mar-20 Apr-20
7 An Roinn Airgeadais | Department of Finance 1. Bloomberg / NTMA Investor Presentation April-2020Introduction
Economic Update
State Bank Investments
Covid-19 Fiscal Response
NAMA / HBFI
Credit Unions €6.5 billion of business supports announced since beginning of the
IBRC
Financial Advisory epidemic
Tax 1. Tax repayments and refunds: the Revenue Commissioners have indicated that it will expedite refunds to
Measures1 taxpayers with regard to: VAT, personal services withholding tax, and excess R&D tax credits.
2. Interest suspension: the charging of interest on the late payment of VAT has been suspended by Revenue for
March/April, while interest on PAYE employer liabilities has been suspended for April.
3. Debt Enforcement: All debt enforcement activity by Revenue remain suspended until further notice.
Income 1. Temporary COVID-19 Wage Subsidy Scheme: employers that have lost 25% or more of their revenue as a result
Supports2 of Covid-19 can apply to have 70-85% of their employees’ wages temporarily subsidised by the State.
Increasing A range of measures have been announced to help meet the capital requirements (including working capital, and
the short and long term debt) for small, medium and large businesses:
availability of 1. Credit Guarantee Scheme for COVID-19: in partnership with AIB, Bank of Ireland and Ulster Bank, this scheme
capital to supports loans of up to €1 million to Small to Medium Enterprises (SMEs).
Irish 2. The COVID-19 Business Loan scheme is designed for Microenterprises that wish to access loans of up to €50,000
over 3 years. This is administered by Microfinance Ireland.
businesses3
3. The €450m SBCI COVID-19 Working Capital Scheme is designed for eligible businesses loans from €25,000 up to
€1.5 million with a maximum interest rate of 4%.
4. Level
Body The SBCI
OneFuture Growth Loan Scheme was granted an additional €200 million in supplementary funding to
provide longer-term loans to COVID-19 impacted businesses.
Body Level Two Enterprise Fund is a €180 million scheme aimed at firms with 10 or more employees impacted by
5. The Sustaining
COVID-19
Body LevelthatThree
are vulnerable but viable.
6. The Pandemic Stabilisation and Recovery Fund will make up to €2 billion of capital available to medium and
Body Level Four
large enterprises through a dedicated fund operated by the Irish Strategic Investment Fund (ISIF).
Body Level Five
Sources:
1. More measures can be found on https://www.revenue.ie/en/corporate/press-office/press-releases/2020/pr-020420-revenue-update-advice-to-smes-experiencing-
cashflow-difficulties-arising-from-covid-19.aspx
2. https://www.gov.ie/en/service/578596-covid-19-wage-subsidy/
8 An Roinn Airgeadais | Department of Finance 3. Department of Business Enterprise and InnovationIntroduction
Economic Update
State Bank Investments
Labour Force:
NAMA / HBFI
Credit Unions Prior to Covid-19, Ireland experienced a sharp reduction in
IBRC
Financial Advisory unemployment; increase in reported figures in Q1 2020
Commentary Unemployment Rate1 Wage increases: Average Weekly Earnings2
Seasonally adjusted 18% 16% €800
Hundreds
unemployment rate 16%
stood at 16% in 2012. €780 +12%
14% €784
This fell to 4.8% in Mar-20,
February 2020 before 12% €760
7.4%
rising to 5.4% following 10% €757
€740
the outbreak of Covid- 8%
19. Unemployment 6% €720 €732
figures are expected to
4% €718
rise further in the next Mar-20, €700 €711
statistical release as a 2% €702
5.4%
result of the pandemic. 0% €680
Jan-16
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-17
Jan-18
Jan-19
Jan-20
As of April 2020, 602,170 €660
people were in receipt of Q4 2014 Q4 2015 Q4 2016 Q4 2017 Q4 2018 Q4 2019
the Government’s (est.)
Ireland Euro Area 19
Pandemic
Unemployment Payment Youth employment amongst under 25s as a % Unemployment rate amongst under 25s as a %
(PUP). This is in addition of Active Population (2008 – 2019)3 of Active Population (Q1 2020)3
to the 216,900 citizens
already on the Live 35% 35%
Register. 4
30%
33%
30%
Falling unemployment 25% Mar-20
28%
25%
has helped drive wage
15.8%
growth of c.12% 20% 20%
between 2014Body
and Q4 Level One
20%
20%
20%
2019
18%
15% 15%
Body Level Two
16%
15%
13%
With the exception of 10% 10%
11%
March 2020, youth Body Level Three
9%
Mar-20
8%
unemployment in 5% 5%
6%
6%
13%
Ireland has declined
each year since 2012. It
Body
0% Level Four 0%
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
now stands at 13%,
below the EU19 average Body Level Five
of 16%
Ireland EU 19 1. CSO and Eurostat, Note
2. CSO. Preliminary figures for Q4 2019
9 An Roinn Airgeadais | Department of Finance 3. Eurostat, seasonally adjusted, not calendar adjusted
4. https://www.cso.ie/en/releasesandpublications/er/lr/liveregisterapril2020/ Seasonally adjustedIntroduction
Economic Update
State Bank Investments
State Finances:
NAMA / HBFI
Credit Unions Economic growth has helped drive down borrowing costs however
IBRC
Financial Advisory
Covid-19 will increase the need for additional borrowing in 2020
Commentary Government Net Worth (2014 to 2019)1 (€bn) Government Debt to GDP % (2006 – 2019)2
Levels of government €250
120%
indebtedness remain
120%
119%
€211 €213
high relative to pre- 84%
110%
€150 €177 €182 €184 €191 100%
105%
2007 levels, however,
the sustainability and €50 80%
86%
affordability of this is
77%
73%
reinforced by strong 60%
68%
64%
-€50
62%
economic growth and
59%
-€37 -€33 -€28
-€61 -€52 -€47 40%
low borrowing costs
42%
-€150
Covid-19 will increase -€237 -€234 -€231 -€228 -€244 -€241 20%
24%
24%
the need for -€250
additional 2014 2015 2016 2017 2018 2019 0%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
government
indebtedness. In April Liabilities at market value
Financial & Non-Financial Assets at market value
2020, the NTMA Net worth at market value, excluding pension liabilities Ireland (%) Euro Area 19 (%)
raised €6 billion
through the Government Budget Surplus (Deficit) Q4 2019 (%)3 European 10 Year Bond Yields % (May 2020)4
syndicated sale of a 7-
5% Q4 2019 2.5%
2.1%
year Treasury Bond.
1.8%
0.4%
The funds were raised 0% 2.0%
at a yield of 0.242%.
1.3%
-5% Q4 2019
1.5%
-0.6%
0.8%
0.8%
-10%
0.7%
1.0%
-15%
Body Level One
0.1%
0.5%
0.0%
-20%
Body Level
-25% Two 0.0%
-0.1%
-0.1%
-0.1%
-0.2%
-30%
Body Level Three -0.5%
-0.3%
-0.5%
-35%
Body Level Four -1.0%
Q1 2006
Q3 2006
Q1 2007
Q3 2007
Q1 2008
Q3 2008
Q1 2009
Q3 2009
Q1 2010
Q3 2010
Q1 2011
Q3 2011
Q1 2012
Q3 2012
Q1 2013
Q3 2013
Q1 2014
Q3 2014
Q1 2015
Q3 2015
Q1 2016
Q3 2016
Q1 2017
Q3 2017
Q1 2018
Q3 2018
Q1 2019
Q3 2019
Body Level Five
Ireland (%) Euro Area 19 (%) 1. Central Bank of Ireland and CSO
2. Europa.eu
3. Europa.eu: Government deficit(-) or surplus(+) (as % of GDP)
10 An Roinn Airgeadais | Department of Finance 4. Bloomberg: As of May 2020
5. https://www.ntma.ie/news/ntma-raises-6-billion-from-sale-of-new-7-year-benchmark-bondIntroduction
Economic Update Debt Servicing (1/2): stabilisation leading to better credit ratings
State Bank Investments
NAMA / HBFI
Credit Unions
and falling yields – Irish government continues to secure cheap
IBRC
Financial Advisory
long term funding 1 2
2011 2020
Outlook Date of Outlook In Nov-2019, S&P
Rating Agency Long-term Short-term Long-term Short-term upgraded Ireland’s
/trend update /trend
[xx] long term rating to AA
Dec
BBB+ A-2 Negative Watch AA- A-1+ Stable
2011
Apr
BBB+ F2 Negative Watch A+ F1+ Stable
2011
MOODY’S Ba1 Not Prime Negative
Jul
2011
A2 P-1 Stable
N/a A (high) R-1 (middle) Stable
R&I N/a A a-1 Stable
Improved fundamentals helping reduce Irish Government Bond Yield (Weighted Weighted average maturity of Irish government debt exceed
3 4
Avg. 10 year yield % Jan 2011 – May 2020) : Euro Area peers (years):
16.0%
13% 10.0
10.4
10.3
14.0%
10.1
10.1
Uncertainty as a
12.0% result of Covid-19 8.0
8.0
led to yields turning
7.8
7.8
7.7
10.0%
positive in Q2 2020
6.9
6.0
6.4
8.0% Body Level One
6.0%
Body Level Two 4.0
4.0%
2.0% Body Level Three 0.2%
2.0
0.0% Body Level Four 0.0
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
-2.0%
Body Level Five
Source:
1. Moody (Sept-17), S&P (Nov-19), Fitch (Dec-17)
2. NTMA: https://www.ntma.ie/business-areas/funding-and-debt-management/investor-relations/credit-ratings
11 An Roinn Airgeadais | Department of Finance 3. Bloomberg
4. NTMA April 2020. Data excludes programme loans.Introduction
Economic Update
State Bank Investments
Debt Servicing (2/2):
NAMA / HBFI
Credit Unions Long term sustainability of debt profile helped by Ireland’s proportionally
IBRC
Financial Advisory young population
Commentary Old Age Dependency Ratio (Individuals aged 64+ as a % of those between the ages of 15-64)1
40
Favourable
35
demographics
36
35
30
34
34
reinforce Ireland’s
33
32
32
32
31
31
30
30
30
29
29
25
29
relative debt
28
26
sustainability in the 20
23
21
20
long run, while also
20
15
continuing to make 10
Ireland an attractive 5
destination for
0
Multinational
France
Finland
Cyprus
Austria
Italy
Poland
Spain
Denmark
Ireland
Netherlands
Germany
Greece
Luxembourg
Slovak Republic
Belgium
Czech Republic
Slovenia
Euro area
Estonia
Portugal
Sweden
United Kingdom
Corporations (MNCs).
However, like other
European countries,
Ireland’s ageing
population is
expected to result in
increased age-related Fertility Rate In Ireland (2017)2 Net Inward Migration (Thousands)3
expenditure over
2 150
time.
1.8 105
1.9
1.9
Net migration turned
1.8
1.8
1.6 100
positive in 2016 for 72
1.7
1.7
64
1.6
1.6
the first time since
1.5
1.4
1.5
2009. Continued to 34 34
1.4
50
1.4
1.4
1.4
1.3
1.3
grow in 2019 with 1.2 16 20
2 6
net migration of 1 -9
34,000 versusBody
20,000 Level One 0 -28 -27 -26
-19
0.8
in 2017.
Body Level
0.6 Two
-50
Body
0.4 Level Three
0.2
Body Level Four -100
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Apr-19
0
Denmark
Italy
Finland
Austria
France
Spain
Greece
Poland
Netherlands
Germany
Ireland
Portugal
Luxembourg
Euro area
Belgium
Sweden
Body Level Five
Immigrants Emigrants Net migration ('000)
1. 2018 Worldbank.org.
12 An Roinn Airgeadais | Department of Finance 2. WorldBank.org: Fertility rates relate to the number of children born per family
3. April Central Statistics Office. 2019 figures are preliminary.Introduction
Economic Update
State Bank Investments
Housing (1/2):
NAMA / HBFI
Credit Unions
2008 Financial crisis saw a collapse in the Irish housing market. Covid-19 has
IBRC
Financial Advisory resulted in a halt in construction activity, expected to resume in June 2020
Commentary Estimated New Dwelling Completions (2011 – Market-based Purchases of Introduction of Irish
Central Bank Macro
1Q2020)1 Residential Dwellings2 prudential rules in 2015
Ireland’s housing 25,000 slowed the growth in
market recovered well 50,000
21,138 property sales
following the collapse in 45,000
20,000 17,946
2007 40,000 7,312 8,538 8,650
4,563 5,465
14,358 35,000
Rising level of house 15,000
30,000
4,402
completions with 9,889 25,000
metrics showing 10,000 7,219 2,944
6,994 20,000
increases across 4,911 4,575 5,518 4,986
2,666
34,822 34,309 35,872 35,859 36,489
15,000 4,820 30,855
registrations, 5,000 2,351
commencement 10,000 21,634
18,088
notices, planning 13,113 12,675
5,000
-
permissions and ESB -
connections/New 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Dwelling Completions Existing New
The closure of Residential Property Price Index (Base Jan Central Bank macro-prudential rules increase the
construction sites as a ‘05 = 100)3 resilience of the banking sector
result of Covid-19 will
impact on the number 200 183 First time buyers can borrow up to 90% of the value of
of completions in 2020 180 a home (i.e. 10% minimum deposit). Only 5% of new
160 145 lending to first time buyers will be allowed above the
Nationally, residential
property prices have 140 163
90% Loan to Value (LTV) limit
135
recovered since the 120 For second and subsequent buyers, banks must restrict
financial crisis in 2013, 75 125 lending for primary dwelling purchase above 80% LTV
Body
and remain nearly Level
20% 100 One to no more than 20% of their new lending.
below their 2007 peak. 80
Body Level
60 Two Bank must restrict lending for primary dwelling
purchase above 3.5 times Loan to Income (LTI) to no
40
Body Level Three more than 20% of that aggregate value
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Banks must limit Buy-to-Let loans (BTL) above 70% LTV
Body Level
National Four
- all residential properties to 10% of all BTL loans
Dublin - all residential properties
BodyNational
Level Five
excluding Dublin - all residential properties
1. CSO.ie: The primary data source used for the New Dwellings Completions series is the ESB Networks new domestic connections dataset where
the date that the connection is energised determines the date of completion. It is accepted that the ESB domestic connections dataset is
overestimating new dwellings and the CSO has adjusted for this overcount by using additional information from the ESB and other data sources
13 An Roinn Airgeadais | Department of Finance 2. Central Statistics Office (Market-based Household Purchases of Residential Dwellings)
3. Central Statistics OfficeIntroduction
Economic Update
State Bank Investments
Housing (2/2):
NAMA / HBFI
Credit Unions Residential property will continue to be a large contributor to
IBRC
Financial Advisory volume growth in the Irish banking sector over the medium term
Commentary Government has undertaken a number of steps to increase the supply of housing:
The 2008 financial Open up land supply & low-cost State lands
crisis resulted in a
Government Local Infrastructure Housing Activation Fund - €200m
large decrease in
construction activity, Targets1 NTMA financing of large-scale “on-site” infrastructure
and led to a Deliver 50,000 units of social housing in the period to 2021
reduction in the
number of residential Lay foundations for a more vibrant and responsive private rented sector
properties available
on the market. Covid- Planning Reforms
19 will reduce
construction activity Larger housing proposals (+100 homes) to go directly to An Bord Pleanála (ABP)
throughout 2020 Prioritisation of ABP appeals (18 weeks)
Government has set More Strategic Development Zones (SDZs)
specific targets and Measures Optimal utilisation of existing housing stock
implemented a
Rent-a-room tax relief programme that provides home owners with up to €14,000 of tax free rental
number of measures
to increase the income
volume of new Macro-prudential rules limiting Loan to Value and Loan to Income multiples for home buyers
residential properties Home Building Finance Ireland (HBFI) established to increase the supply of finance for viable
on the market
residential developments
2019 saw for the first
45,000 40,252
time more
apartments than 40,000
houses granted 35,000
Body
planning permission Level One
Planning 29,102
30,000 20,582
Permissions
Body Level Two 25,000 20,776 9,138
granted for new
20,000 15,950
Body Leveland
apartments Three
15,000
13,044 5,336
houses 3,632
Body Level
(number) 2 Four
10,000
7,411
785
2,794
15,440
19,964 19,670
5,000 10,250 12,318
6,626
Body Level Five -
2014 2015 2016 2017 2018 2019
Houses Apartments Total
14 An Roinn Airgeadais | Department of Finance 1. Action Plan for Housing & Homelessness: http://rebuildingireland.ie/Rebuilding%20Ireland_Action%20Plan.pdf
2. Planning permission statistics: execution of planning permission for houses and apartment units. Source: CSOSection 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
Introduction
Economic Update
State Bank Investments
State Bank Investments:
NAMA / HBFI
Credit Unions Core objective is to return banks to private ownership
IBRC
Financial Advisory
How we look at the State’s bank investments:
• Irish State still “owns”: c. 41% of the combined assets of AIB/BOI/PTSB (translates to 35% of assets of five retail banks)
• c. 50% of the combined market value of AIB/BOI/PTSB
1 2 3
Value For Taxpayers Monetise through sales & Rational Investor
income
Government policy is not to hold these Disposals since Summer 2017 hampered by State priority is to engage with the market
investments long term and, subject to numerous factors including poor markets. in a sensible, orderly and professional
market conditions, is willing to exit in a In times of depressed valuations, income manner
manner that generates value for the return in dividends and return of any
taxpayer excess capital becomes very important.
Multiple considerations to take into account:
Government authorisation
State Exit
Investor appetite and market conditions
Body Level One
Valuation
Body Level Two
Irish economy Body Level Three
Global economy
Body Level Four
Body Level Five
Financial performance
16 An Roinn Airgeadais | Department of FinanceIntroduction
Economic Update
State Bank Investments
State bank investments
NAMA / HBFI
Credit Unions Overview – strong financial performance in recent years
IBRC
Financial Advisory pre-Covid-19
Commentary The State holds investments in three Irish banks:
2013 May 2020
The state has
29% 86% 25%
reduced its 85%
99.9%
99.9%
ownership in all 75%
three banks since 71%
2013
Strong capital 15% 14%
generation to
support growth and % State % Privately
payouts while Owned Owned
helping to withstand
regulatory Recent Highlights
headwinds
AIB issued its FY 2019 results in PTSB 2019 FY results saw the BOI announced an
Impact of Covid-19 March 2020. The bank continued to bank record a profit for the underlying profit of €758m
uncertain but strong deliver sustainable underlying third successive year. for FY 2019 with the bank
capital and liquidity profitability while maintaining a continuing to meet its cost
Key financial metrics
positions going into robust capital position. Proposed target. Net lending growth
included a profit before
the crisis. dividend was subsequently was €2bn.
exceptional items of €74m
cancelled on the instruction of the
with NIM of 1.80% (2018: The bank had proposed a
Department as Regulator.
1.78%). New lending of dividend of €189m (+9% on
shareholder keen to Key financial metrics included a pre- €1.7bn increased by 14% y-o- 2018) which was
see any surplus exceptional profit before tax of y with mortgage market subsequently cancelled.
capital returned as €1,091m for the full year. Total new share of 15.5% (2018:
soon as possible lending was up 2% YoY. Irish The fully loaded CET1 ratio of
15.1%). The bank continued
mortgage lending increased 8% also. 13.8% increased 60bps in
to generate capital with fully
Body Level One
AIB continued to demonstrate loaded CET1 increasing by
the year.
Body Level Twosignificant capital generation. The
bank’s fully-loaded CET1 ratio at the
100bps to 15.0%. NPLs reduced by €1.5bn to
€3.5bn with the NPL ratio
On NPLs, the bank showed
Body Levelend of 2019 was 16.4%, substantially
in Three
excess of their regulatory capital
further progress with loan
standing at 4.4% (Dec 2018:
6.3%).
balances down to €1.05bn, a
requirements.
Body Level Four
Impaired loans continued to decline
reduction of c. 37% in the BOI revised a number of its
year. The NPL ratio at year- medium term targets to
Body at2019
pace with a 45% reduction in
Level Five
and down to €3.3bn (a
end was 6.4% (Dec 2018: reflect the lower for longer
10%). interest rate environment
reduction of €27.7bn since the peak and increased capital
in 2013). requirements.
17 An Roinn Airgeadais | Department of FinanceIntroduction
Economic Update
State Bank Investments
State bank investments
NAMA / HBFI
Credit Unions Transformational change in underlying financial metrics of State
IBRC
Financial Advisory bank investments between 2010 and 2019
Commentary State bank investments: change in selected metrics (2010 to 2019)
Transformational
change across all
three State bank AIB BOI PTSB
investments
between 2010 and
2019 Metric €bn/% Year FY 2019 €bn/% Year FY 2019 €bn/% Year FY 2019
Recovery in all
covered metrics Underlying
including: profit/(loss) before (€10.4bn) 2010 €1.1bn (€3.5bn) 2010 €758m (€1bn) 2012 €74m
profitability, capital, tax
new lending
volumes, Loan to NIM 1.03% 2011 2.37% 1.25% 2012 2.14% 0.72% 2013 1.80%
Deposit Ratios, and
non-performing
loans
New lending1 €7bn 2013 €12.3bn €6.6bn 2013 €16.5bn €0.1bn 2012 €1.7bn
EU restructuring
plans exited by all
three banks NPL / €29bn/ €3.3bn/ €18bn/ 2013 €3.5bn/ €8.6bn/ €1.1bn/
2013 2013
NPL Ratio2 35% 5.4% 18% (June) 4.4% 28% 6.4%
Loan to deposit ratio 165% 2010 85% 175% 2010 95% 227% 2011 91%
Monetary authority
€31bn 2011 Nil €33bn 2010 €1.7bn €19.5bn 2011 Nil
funding
Body Level One
Body Level Two
Fully loaded CET1 3
4.0% 2010 16.4% 6.3% 2013 13.8% 11.3% 2013 15.0%
Body Level Three
EU Restructuring
Entered 2011 Exited Entered 2010 Exited Entered 2015 Exited
Body
Plan
Level Four
Body Level Five
1. New lending - BOI & AIB did not disclose pre-2013
2. 2018 values reflect the Non-Performing Exposure (NPE) balance for AIB and BOI, and
the NPL Balance for PTSB
3. AIB 2019 is pro-forma allowing for TRIM. BOI 2013 excludes the preference shares.
18 An Roinn Airgeadais | Department of FinanceIntroduction
Economic Update
State Bank Investments
State bank investments: improved risk profile
NAMA / HBFI
Credit Unions Combined NPE ratio for AIB, BOI and PTSB fell to 4.9% as of
IBRC
Financial Advisory December 2019
Commentary AIB Non-Performing Exposures (NPEs) Bank of Ireland Non-Performing Exposures (NPEs) Drivers
(€bn) (€bn) of Falling
Significant reduction 37% 11% NPEs
€35.0 40% €10.0 12%
in Non-Performing 35%
Exposures across all €30.0 35%
€9.4
€30.7 10%
three State Bank 26% 30% €8.0 8%
Investments. c.90% €25.0
€26.2 22% 8%
reduction in AIB and c. 25% 6%
€20.0 €6.0 Loan
€6.5
87% for PTSB 16% 20% 6% Treatment
€15.0 €18.0 4%
between 2013 and 15% €4.0 €5.0
2019. Bank of Ireland €14.1 10% 4%
€10.0 €3.5
meanwhile reduced 5.3% 10%
€10.2 €2.0
NPEs by c. 63% €5.0 2%
5%
€6.1 €3.3 -63%
between 2016 and €0.0 -90%
0% €0.0 0%
2019. 2013 2014 2015 2016 2017 2018 2019 2016 2017 2018 2019 Portfolio
A combination of AIB (NPEs) NPE Ratio % BOI (NPEs) NPE Ratio % Sales
rising property prices,
a growing economy, Permanent TSB - Non-Performing Loans (NPLs) Combined 3 Banks Non-Performing Exposures
and measures taken (€bn)
(€bn)
by Irish banks to
€35.0 20%
address non- €10.0 27% 30% 17%
26% Improved
performing loans have €9.0
26% 26% 26% €29.3 18%
€30.0 borrower
all contributed to the 25% 16% repayment
decline in balances. €8.0 €8.6 €5.8 14% capabilities
€8.3 €25.0 14%
€7.0 €22.0
20% 12%
€6.0 €6.6 €20.0 €5.3
€9.4
10%
Body Level €5.0 One €5.8 15% €15.0
8%
€5.3 €12.8 8%
€6.5
Body Level €4.0 Two 10%
10% €10.0
€1.7 4.9%
€7.9
6%
Improved
Collateral
€3.0 6.4% €5.0
€1.1 4%
Body
€2.0
Level Three €5.0
€14.1
€10.2 €3.5
5% €6.1 2%
Body
€1.0 Level Four €1.7
€1.1 €0.0
€3.3
0%
-87% 2016 2017 2018 2019
€0.0 0%
NPE = NPL + eligible forborne loans + other
exposures
Body Level
2013 2014 2015Five
2016 2017 2018 2019 -73%
NPL = Impaired + debtors deemed AIB (NPEs) BOI (NPEs)
PTSB (NPL) NPL Ratio (%) PTSB (NPL) NPE Ratio % (Implied)
unlikely to pay
1. Company Accounts / Central Bank
19 An Roinn Airgeadais | Department of Finance of Ireland / DoF Analysis.Introduction
Economic Update
State Bank Investments
State bank investments: capital, liquidity & funding (1/2)
NAMA / HBFI
Credit Unions
IBRC
From too little funding to too much
Financial Advisory
Commentary Falling Loan to Deposit Ratios % (2012 - 2019)1 Household deleveraging (€bn)2
200%
€250 220%
Reduced loan to
191%
deposit ratios (LTDs) €200 200%
across all three State 150%
180%
151%
bank investments as €150
138%
households and 160%
125%
123%
businesses deleverage. 100% €100
115%
114%
111%
110%
108%
140%
106%
104%
100%
100%
100%
Provides capacity for
99%
97%
95%
95%
93%
93%
91%
90%
€50
85%
additional lending 120%
50%
A combination of falling €0 100%
2003 Q1
2004 Q1
2005 Q1
2006 Q1
2007 Q1
2008 Q1
2009 Q1
2010 Q1
2011 Q1
2012 Q1
2013 Q1
2014 Q1
2015 Q1
2016 Q1
2017 Q1
2018 Q1
2019 Q1
household liabilities
and increasing asset
0%
values has led to
2012 2013 2014 2015 2016 2017 2018 2019
aggregate nominal Household Debt (€ billion) Debt to Disposable Income(%)
household net worth AIB BOI PTSB
exceeding pre-crisis Household Deposits
levels Net Stable Funding Ratio % (2015 – 2019)1,3 Liquidity Coverage Ratio % (2015 – 2019)1,4
Quality of funding 140% 180%
remains high,
138%
131%
160%
130%
exceeding the Basel III 120%
129%
170%
127%
166%
125%
165%
123%
122%
160%
120%
120%
net stable funding ratio
119%
157%
Min. 140%
153%
114%
111%
minimum requirements 100%
105%
138%
136%
136%
120%
132%
(100%)
128%
128%
92%
80%
116%
113%
100%
108%
60% 80%
Body Level One
40% 60%
Body Level Two 40%
20%
Body Level Three 20%
0%
Body Level
2015 Four
2016 2017 2018 2019
0%
2015 2016 2017 2018 2019
Body Level
AIB FiveBOI PTSB AIB BOI PTSB
1. Published financial accounts & Pillar III disclosures
2. 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
20 An Roinn Airgeadais | Department of Finance 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 periodIntroduction
Economic Update
State Bank Investments State bank investments: capital, liquidity & funding (2/2)
NAMA / HBFI
Credit Unions
IBRC
Crisis impacted RWAs mean leverage ratios show true capitalisation
Financial Advisory
Commentary Core Equity Tier 1 Capital ratios % (Dec 2019)1,2 Total Regulatory Capital ratios % (Dec 2019)1,2
State bank 25.0%
20.0%
investments now well
20.3%
23.3%
capitalised relative to 20.0%
17.6%
17.3%
20.5%
EU peers on a fully 15.0%
19.1%
18.6%
loaded basis
15.0%
14.6%
17.4%
15.0%
13.8%
16.3%
RWAs partly 10.0%
responsible for the 10.0%
relatively high levels
of capitalisation at 5.0% 5.0%
Irish banks
According to the EBA 0.0% 0.0%
(Dec-2018), risk CET1 (Transitional) CET1 (Fully loaded) Total capital % (Transitional) Total capital % (Fully loaded)
weighted assets for
Irish residential AIB BoI PTSB AIB BoI PTSB
mortgages (based on
IRB models) were
38%. This is 2.5x the
Core Equity Tier 1 Capital Ratios by Country Leverage Ratios by Country
European median of (Fully Loaded: Q4 2019)2,3 (Fully Loaded: Q4 2019)2,3
15%, and the third 20.0% 10.0%
Basel III Leverage Ratio Rule:
highest in Europe Tier 1 Capital
behind Hungary and 18.0% 9.0% ≥ 3%
19.1%
Total Exposure
9.3%
9.3%
Romania4.
17.9%
17.8%
16.0% 8.0%
16.5%
Leverage ratios offer
16.2%
7.0%
15.3%
14.0%
7.4%
14.9%
14.8%
the best look through
14.5%
14.4%
6.8%
6.0%
13.5%
13.5%
view on Irish capital 12.0% One
13.2%
Body Level
6.3%
6.0%
levels
11.9%
5.7%
5.0%
5.6%
5.5%
10.0%
5.3%
5.3%
Body Level Two
4.8%
4.8%
4.7%
4.0%
8.0%
3.0%
Body
6.0% Level Three
2.0%
Body
4.0% Level Four 1.0%
2.0%
0.0%
Body Level Five 0.0%
LU
ES
PT
EU
BE
IT
IE
DK
GR
DE
AT
GB
FR
NL
LU
EU
ES
PT
IE
BE
IT
DK
DE
GB
NL
FR
AT
GR
1. Published annual reports
2. “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.
21 An Roinn Airgeadais | Department of Finance 3. EBA Dashboard (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.pdfIntroduction
Economic Update
State Bank Investments
State bank investments:
NAMA / HBFI
Credit Unions Expected value attributable to taxpayers
IBRC
Financial Advisory
Reduction in bank valuations has impacted on €29.4bn investment (€bn)1,2,3,4: Value of State’s Shareholding (May-2020)
(€bn) €1.8bn
€35.0 €0.2bn
€0.15bn
€31.1
€29.9 €28.8 Total €2.2bn
€30.0 €29.4bn State Investment
€27.2
€25.5 €26.3
€21.4bn market value
€25.0 of State investments +
realised cash
€23.1
(as at May-20)
€10.6 €7.1 €6.0 €21.4 Market value of State
holdings
€20.0 €13.9 €11.6 €1.8 (€2.2bn Un-realised)
€17.7
€13.3
€14.3 €11.6
€15.0
€12.6 €12.6 €12.6 €12.6
€10.0 €9.2
€7.4
€8.0 Cash Realised
€5.0 €5.0
€7.7 (€19.2bn)
€5.0
€0.5
Body€0.5
Level One €6.3 €6.6 €6.6
€5.0 €5.4 €5.7 €6.0 €6.0
€4.2
€2.8Body Level Two
€0.0
Body Level Three
May-20
2009-2011
2012
2013
2014
2015
2016
2017
2018
2019
Body Level Four
Body Level
Fees and Income (accumulated)
Five
Disposals (accumulated) AIB Valuation BOI Valuation PTSB Valuation
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.
22 An Roinn Airgeadais | Department of Finance 3. Bank valuations based on ISE closing prices, May-20.
4. The result of AIB IPO reflected above does not include value of Government owned warrants.Introduction
Economic Update
State Bank Investments State bank investments
NAMA / HBFI
Credit Unions
IBRC
€3.4bn1 IPO of AIB
Financial Advisory
Key Offering Statistics Transaction Highlights
• Largest listing in EMEA and second largest worldwide in 2017. Largest IPO in the UK
Pricing Date 22-Jun-17 since Glencore in 20112
Official List of the Irish Stock Exchange (Primary • Second largest European Bank IPO since 20072
Listing Listing) and London Stock Exchange Main Market • More than 250 investors in the allocated order book
(Premium Listing) • Top 50 allocations accounted for c.75% of the order book
• Quality of allocation: more than 30% of the order book received zero allocation
Offer Price €4.40
Offer Size €3,433.7m (incl. greenshoe) Allocation Sovereign
Allocation Hedge Wealth
by fund type:
by geography: Funds
Residual Shareholding c.71.25% RoW Funds
31% UK 23% 12%
Retail Offer 10% of base offering 35% Long
Ireland Only
Implied Market Cap €11,943m
2% US Funds
Lock-Up 180 days for Minister and AIB France 25% 66%
8%
AIB Valuation & Redemption (€bn)3 AIB State Aid Repayments (€bn)
(€bn) €20.7 (€bn)
€20.75bn
€20.0 €12.0 €10.6
€16.8
€17.7 €17.4
€16.6 €10.1 €10.3 €10.6
€10.0
€13.9 €10.1
€15.0 €4.6 €6.4 €12.4
€12.1 €8.0 €6.4
€2.3
Body€2.0Level One
€10.3
€10.6 €6.0 €4.6
€10.0 €8.1
€7.3
Body Level Two
€1.7 €10.6
€4.0
€2.3
€1.2 €1.7 €2.0
€11.7 €12.3
€5.0 Body Level€11.3
€10 €10.6
Three €7.1
€2.0
€0.2 €0.6
€1.2
€6.1 €6.4 €6.0
€0.0
Body Level Four €1.8
€0.0
Body Level Five
ELG Fees Interest Payments
Valuation Cumulative Repayments State Aid Injected Capital Redemptions Dividends
Cumulative Repayments 1. No valuation ascribed to state warrants
23 An Roinn Airgeadais | Department of Finance 2. Bloomberg
3. Valuation as of May 2020Introduction
Economic Update
State Bank Investments State bank Investments
NAMA / HBFI
Credit Unions
IBRC
Banks trading at a large discount to book value
Financial Advisory
Commentary % Change in Listed Share Prices (Jan 2018 – May 2020)1
Irish bank shares have 120
fallen by c.80% since
100
December 2017. This
compares with a fall of 80
60% for the EuroStoxx
index of European Banks 60
European banks trading
at a heavy discount to 40 40
book value with the
EuroStoxx Bank Index 20 21
trading at 0.3X times
book value as of May 0
Jul-18
Jul-19
Jun-18
Jun-19
Apr-18
May-18
Nov-18
Apr-19
May-19
Nov-19
Jan-18
Aug-18
Dec-18
Aug-19
Dec-19
Apr-20
May-20
Feb-18
Mar-18
Sep-18
Jan-19
Feb-19
Mar-19
Sep-19
Jan-20
Feb-20
Mar-20
Oct-18
Oct-19
2020
Irish banks have suffered
disproportionately more AIB Permanent TSB Bank of Ireland EuroStoxx Banks
due to a variety of factors
including unfavorable
regulatory capital Price to Book Ratios (Jan 2018 – May 2020)2
requirements and an (x)
inquiry relating to tracker 1.2
mortgages that resulted
P/B = 1.0x
in the banks incurring 1.0
related costs.
0.8
Body Level One
0.6
Body Level0.4Two 0.3x
Body 0.2
Level Three 0.2x
0.2x
Body
0.0
Level Four 0.1x
Jul-18
Jul-19
Apr-18
May-18
Jun-18
Nov-18
Apr-19
May-19
Jun-19
Nov-19
Apr-20
May-20
Jan-18
Feb-18
Mar-18
Aug-18
Sep-18
Dec-18
Jan-19
Feb-19
Mar-19
Aug-19
Sep-19
Dec-19
Jan-20
Feb-20
Mar-20
Oct-18
Oct-19
Body Level Five
AIB Permanent TSB Bank of Ireland EuroStoxx Banks
24 An Roinn Airgeadais | Department of Finance 1. Source: Based to 100 as of August 2018. Bloomberg May-2020
2. Bloomberg May 2020. The EuroStoxx Bank Index tracks the share price performance of the European banking sectorIntroduction
Economic Update
State Bank Investments
Irish banking sector overview (1/2):
NAMA / HBFI
Credit Unions
IBRC
Ireland compares favorably against European peers…
Financial Advisory
Commentary % Reduction in NPE ratio: Q1 2016 – Q4 20191 Cost/income ratios Q4 2019 (%)1
IE 73% 90%
According to the EBA,
PT 60% 80%
Ireland was the fastest
84%
AT 57%
country in Europe at 70%
IT 51%
reducing its Non-
71%
DE 48%
68%
68%
Performing Exposure 60%
65%
64%
64%
63%
62%
62%
DK 44%
ratio (NPE) amongst
59%
58%
EU 43% 50%
53%
comparable countries
49%
ES 39% 40%
between March 2016
GB 36%
and December 2019 30%
BE 29%
(-73%)
FR 29% 20%
Ongoing cost NL 17%
GR 7% 10%
management, and
strong net interest -3% LU 0%
margins, helped Irish
ES
LU
PT
EU
BE
IT
DK
IE
GR
DE
NL
GB
AT
FR
-20% 0% 20% 40% 60% 80%
banks reduce cost to
income ratios to below
the European average
Net interest margins Q4 2019 (%)1 CET1 fully loaded Q4 2019 (%)1
3.0% 20.0%
Irish banking sector
18.0%
19.1%
well capitalised relative
2.8%
17.9%
17.8%
to European peers. 2.5%
16.0%
16.5%
16.2%
2.4%
15.3%
14.0%
14.9%
14.8%
14.5%
2.0%
14.4%
13.5%
13.5%
13.2%
12.0%
2.0%
1.9%
Body Level One
11.9%
1.7%
1.5% 10.0%
1.6%
Body Level Two
1.5%
1.5%
1.4%
1.4%
8.0%
1.0%
1.2%
Body Level Three
1.1%
6.0%
0.9%
0.8%
Body Level Four
0.5%
4.0%
2.0%
0.0%
Body Level Five 0.0%
EU
LU
ES
PT
IT
BE
IE
GR
DE
DK
AT
GB
NL
FR
LU
EU
ES
PT
IE
BE
IT
DK
DE
GB
NL
FR
AT
GR
25 An Roinn Airgeadais | Department of Finance Sources:
1. EBA Dashboard (Includes 3 domestic Irish banks plus Ulster Bank, DEPFA & Citibank)Introduction
Economic Update
State Bank Investments
Irish banking sector (2/2):
NAMA / HBFI
Credit Unions
… including high returns on assets1
IBRC
Financial Advisory
Commentary Return on Equity Q4 2019 (%)
Higher net interest 9.0%
8.9%
8.7%
margins need to be
seen in the context of 7.0%
7.7%
the highest equity
7.1%
7.0%
6.5%
requirements in
5.0%
5.8%
5.8%
Western Europe
5.6%
5.5%
5.0%
Hence a more
3.9%
favourable return on 3.0%
assets profile than for
-0.2%
1.0%
return on equity
1.0%
RWAs at Irish banks
very high relative to
European averages. -1.0%
As such, leverage is a AT DK NL BE ES FR LU EU IT IE GB PT GR DE
useful barometer of
the true capital
strength of the banks. Return on Assets Q4 2019 (%)
0.8%
0.8%
0.7%
0.7%
0.6%
0.5%
0.5%
0.5%
Body Level
0.4%One
0.5%
0.5%
0.4%
0.4%
0.4%
0.4%
Body Level
0.3%Two
0.4%
0.3%
0.2%
Body Level Three
0.0%
0.1%
0.1%
Body
0.0%
Level Four
Body Level Five
-0.1%
AT IE BE ES DK NL IT FR EU LU PT GB GR DE
26 An Roinn Airgeadais | Department of Finance Sources:
1. EBA Interactive DashboardIntroduction
Economic Update
State Bank Investments
Irish banking sector 2020 outlook:
NAMA / HBFI
Credit Unions … Banks are well positioned to support the recovery
IBRC
Financial Advisory
The membership of the Banking & Payments Federation Ireland (BPFI) have delivered a range of
measures and supports in response to Covid -19.
Focus is on delivering fair,
practical and sustainable Customers Employees Communities
solutions for Mortgages, SME
and Personal loans…
Payment breaks for mortgage customers Over 7,000 of c. 9,500 staff are working The branch network remains open to serve
approving c. 19k payment breaks, equating remotely using remote, secure controlled the community
to c. €2.6bn or c. 9% of the portfolio services. This has been achieved with
Partnered with Trinity College Dublin by
minimal operational disruption
Payment breaks for SME customers pledging €2.4 million to the dedicated AIB
approving c. 13k payment breaks, equating Implemented multiple-location Treasury COVID-19 Research Laboratories Hub at the
to c. €0.5bn or c. 13% of the portfolio teams as a contingency to ensure the University to accelerate the college's
smooth operation of payments and money immunology project to tackle Covid 19
To protect customer credit profile, as
transmission systems
agreed with the Central Bank of Ireland, Making up to €2 million available to
payment breaks are not adversely community investment partners Food-Cloud
reported on Central Credit Register and Soar, as well as a number of local
charities that provide critical services
For personal customers, payment breaks 70% staff working from home; prior rollout Temporarily closed smaller branches
and flexible arrangements on mortgages of Agile working supported increased reflecting reduced footfall; enabling staff to
and loans put in place totalling 18k/12% of capacity and ways of working be reallocated to services most in demand,
portfolio in ROI & 20K/14% of portfolio in and to support social distancing
Staff supports include mental and physical
the UK
wellbeing app, 24/7 health support line, Donated €1 million in emergency funding for
For business customers in the Republic of and COVID-19 communications hub communities with urgent needs, with 13
Ireland - 11K payment breaks representing projects fast-tracked
Supports in place for staff required to
Body Level One 26% of the portfolio rolled out in addition
provide childcare or family support ‘Cocooning’ support for older customers and
to the emergency working capital, and FX
those in vulnerable situations – to access
Body Level Two products provided
cash
Body Level
Payment breaksThree
for both mortgage and Operationally resilient with over 1,200 All 76 branches remain open to meet
term loan customers; approving c. 10k colleagues working remotely. customer needs
Body
paymentLevel Fourto c. €1.5bn or
breaks, equating
Priority banking in branch and over the
c. 9% of total gross loans
phone for our elderly and vulnerable
Body Level
Redeployment Five
of over one hundred staff customers
to contact centres to support in answering
customer queries.
27 An Roinn Airgeadais | Department of FinanceIntroduction
Economic Update
State Bank Investments
Irish banking sector Q1 2020 trading update:
NAMA / HBFI
Credit Unions … Covid 19 is having a material impact on 2020 results
IBRC
Financial Advisory
Commentary
Q1 Trading Statement
from each of the
banks show a material
turnaround from the
strong financial
A small loss recorded mainly due to a Loss of €235m versus profit of €143m in Income statement broadly flat with
performance of
Covid-related impairment charge of Q1 2019 mainly due to two Covid- stable NII supported by management of
recent years
€210m (136bps annualized). Non- related items – a management cost of funds. Non-interest income in
Common themes interest income -21% from valuation impairment overlay of €250m (133bps line with 2019 other than lower gains
included: moves on customer derivative positions. annualized); and valuation losses of from sale of properties in possession
1. Reductions in all Management reiterated its 2022 cost €155m due to changes in market prices.
Although the bank did not record a
income lines target of €1.5bn NII and business income stable with
Covid-related impairment charge,
expected from costs reducing by a further 3%
Mixed new lending which was 12% management guided to an annualized
lower lending and New lending not impacted in Q1 (+17%)
lower. However, within this, ROI charge of €50m (60bps).
lower general but month of April down 37% y-o-y
mortgage lending was +11%
economic activity Total new lending of €350m up 1% y-o-y
2. Significant Increase in NPEs from €3.3bn to €3.6bn NPEs reduced a further 20bps with ratio with mortgages of €300m up 4%
impairment charges due to a regulatory change in definition of 4.2% at end-March
NPEs broadly in line with end-2019 with
expected of default. Management re-emphasized
Capital and liquidity remain strong with new defaults being offset by cures
3. Continued focus on further reductions in NPES remains a
management guiding to CET1 headroom
NPE reduction key focus CET1 of 17.7% represents a buffer of c.
of c. 510bps to end-2020 (including
strategies and cost 880bps above minimum requirement of
Capital and liquidity remain strong. relief measures announced by the
management 8.9% (after regulatory relief measures)
Including relief measures taken by the regulator)
Body
4. Strong capital and Level One
regulator in response to the crisis,
On outlook, management commented
On outlook, management commented
liquidity positions Transitional CET1 ratio of 18.7% that new lending could reduce 40-50%
Body
entering the crisis. Level Twoa buffer of 770bps over
represents
that new lending could be within a
range of 50-70% of 2019 levels. Income
y-o-y. NIM is expected to reduce from
minimum requirements of 11.0% 180bps to mid-170bps reflecting
Body Level Three is also expected to be significantly
interest rate environment and higher
On outlook, management commented impacted with business income down
liquid assets. Although challenging,
Body Level
that recent Four
guidance issued for 2020 30-40%. In addition, impairment
management confirmed its
was not now applicable. An update will charges are expected to increase over
commitment to deliver cost savings in
Body atLevel
be provided H1 onceFive
there is a better 2020
the medium term.
understanding of how the crisis may
unfold
28 An Roinn Airgeadais | Department of Finance Source:
Bank Trading StatementsSection 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
Introduction
Economic Update
State Bank Investments NAMA Objectives & Section 227 Review
NAMA / HBFI
Credit Unions
IBRC
Financial Advisory
Objective Achievements to date
1 Repay 100% senior debt by year end 2017 Senior debt fully repaid and has redeemed the
and all sub-debt by March 2020 final €1.1bn of sub-debt in March 2020. This NAMA seeks to make
leaves NAMA debt free a positive social and
economic
Facilitate delivery of key Grade A office All of the sites NAMA originally had an interest
2 contribution across
space in the Dublin Docklands Strategic in are either completed, under construction, the broad range of its
Development Zones (SDZ) received planning, or have been sold with activities, subject to
planning permission the primacy of its
commercial mandate
Facilitate delivery of up to 20,000 residential From 2014 to end 2019, NAMA has directly
and often
3
units by end 2020 funded the construction of 11,000 new
complementing it.
residential units in Ireland. In excess of 2,500
homes have been delivered for social housing
use by NAMA
NAMA Section 227 Review 1
In July 2019 Minister published the second report into NAMA under Section 227 of the NAMA Act. The review reflects the exceptional
progress that NAMA has made in achieving its overall objectives since 2014 during which time NAMA has repaid all of its €30.2 billion
senior debt and now expects to be in a position to return €4 billion of a surplus to the Exchequer subject to market conditions.
The review recognised the potential for NAMA to exceed its expectations should it be permitted additional time to work out a small
Body
number of residual Level
loans One
beyond its expected end date of 2021. The loans concerned represent less than 1% of NAMA’s original
portfolio.
Body Level Two
On receipt of DG Comp approval in July 2019, the Minister announced an extension of NAMA to realise this additional value. While
NAMA is permitted to Body
continueLevel Three
until end 2025 at the latest, NAMA has been requested to provide the Minister with a detailed wind
up plan for its ultimate dissolution by the end of 2021.
Body Level Four
As part of the review the Minister has also decided to direct NAMA to retain its social housing vehicle, NARPS, in long term State
Body
ownership. This decision was taken Level Five
in recognition of the important role it makes to the social housing sector.
30 An Roinn Airgeadais | Department of Finance 1. https://www.gov.ie/en/publication/41970e-nama-section-227-review-2014-2018/Introduction
Economic Update
State Bank Investments NAMA’s Phased Disposal Strategies
NAMA / HBFI
Credit Unions
IBRC
Financial Advisory
NAMA: Timeline of Events
2010 - 2013 2014 2015/2016 2017/2018 2019/2020
• Strategic focus on UK • Improving market • In 2015, two-thirds of • Few large portfolio • Publication of Section
disposals during 2010 conditions, increased disposals were in sales remain in 227 Review in 2019
– 2013. UK market had institutional investor Ireland - strong pipeline outlining NAMA’s
remained appetite - NAMA took domestic and wind-down strategy
• End-2017 carrying
comparatively buoyant strategic decision to international investor value of NAMA’s loan • Redemption of €1.1bn
steadily increase the appetite
• 73% UK sales: London portfolio was €3.7bn – remaining sub-debt by
volume of available
assets accounted for • Total NAMA sales down to €2.4bn by end March 2020
supply from 2013
60% of total NAMA proceeds: €8.5bn in of September 2018
onwards • Repayment of private
sales proceeds, rest of 2015 - increase of • Majority of portfolio investors and delivery
Britain - 13% • Step change seen in €0.7bn on 2014 relates to residential of €3.5bn surplus
total NAMA sales
• Irish assets, by • 2016 total NAMA sales delivery and Dublin
proceeds: €7.8bn in • The first €2bn of
contrast, accounted for proceeds of €5.1bn - Docklands SDZ
2014 - increase of expected €4bn surplus
just 16% of total sales 64% or €3.3bn programmes –
€4.1bn on 2013 to be transferred to
proceeds in the same generated from the increased focus from the Exchequer in June
period • Of the €7.8bn, 44% or sale of Irish assets 2017 onwards 2020.
€3.7bn generated from • Cumulative Irish sales
• By end-2012 NAMALevel One
Body • Increased its projected
the sale of Irish
had sold less than at €14.4bn at YE 2016 lifetime surplus to
Body properties
€1bn in Ireland – a Level Two €3.5bn
deliberate action
Body Level Three
Body Level Four
Body Level Five
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