Bank of Ireland Group plc

Good morning, everyone. I hope you're all very well, and you're very welcome to our H1 results presentation. When we spoke last, we set out Bank of Ireland's three-year strategy, centred on stronger relationships, simpler business and sustainable company. We're now six months into this strategy, and today I'm very pleased to announce a strong set of results demonstrating our progress and delivering for customers, colleagues, shareholders and society. Our performance has been supported by three important factors. Strategic management actions and business model development, a resilient Irish economy and the impact of the interest rate environment. In the first half of 23, we delivered a profit before tax of one billion with all business lines performing strongly. Net interest income increased by 68% and business income rose 23%. We tightly managed costs with like-for-like costs broadly flat and our asset quality remained resilient. We also made a number of structural changes to support our commercial delivery. In May, we migrated our high network customers from Bank of Ireland Private to Davie. This will enhance the service our customers receive while helping us unlock revenue and value from that acquisition. And we brought our corporate and business banking operations into one structure, helping us better serve businesses of all sizes and stages of their development. Over the first six months, we've worked hard at delivering a better service to our customers. And we've made tangible progress on our broader ESG strategy. All of this contributes to the delivery of our financial targets. with a ROTI of 18.5% in H1 and cost-income ratio of 42%, translating into capital generation of 180 basis points, helping our CET1 finish the half at 14.8%. We expect this to grow in H2 and look forward to a distribution decision at year-end. we fully appreciate that capital return and its timing is central to our franchise value, an investment case for shareholders. Turning now to slide six. After many years of negative interest rates, the change in the interest rate environment has been a tailwind, one of the components supporting sustainable profitability. We're also vigilant to the risk associated with higher rates in relation to customer affordability, asset quality and inflation. And as this slide shows, on the whole, the economic environment remains supportive. Both Ireland and the UK have essentially full employment, and in headline terms, Ireland is set to be the EU's fastest growing economy for a fourth successive year, with inflation moderating. Our geographical footprint in Ireland and internationally are complementary, but overall asset quality resilient. Slide 7 sets out the performance of our main business lines for the first six months of the year. As you can see from this slide, in line with our strategy and reflecting market consolidation, we grew Irish mortgage market share to 41%, with our net lending growing at an annualised rate of 6%. We continue to maintain pricing discipline, taking a holistic approach to mortgage and deposit customers, while ensuring we secure sustainable economic returns. We have grown our deposits by 2.5 billion a year to date, driven by our strong Irish retail franchise. Our wealth and insurance business delivered net customer inflows of 1.2 billion despite market volatility. And we've also grown our corporate and business books in Ireland, albeit credit appetite is relatively muted. As we guided back in March, we've adopted a cautious stance towards international lending and CRE, given the uncertain outlook. And in the UK, we successfully continued our value over volume strategy. Digitalisation and simplifying our business is a top priority. Slide eight shows what this is delivering. Customer satisfaction is up. Complaints are down. Customers are taking more of our products, and we are simplifying our business model. All of this is core to our strategy, and I'd like to take the opportunity to remind everyone of our recent appointment of Áine McCleary as Chief Customer Officer, a new role to truly embed a customer-first value. Onya's appointment is in addition to a number of other high-caliber appointments we've made to our executive committee this year, including Gavin Kelly, a CEO of Corporate and Markets, and Susan Russell, a CEO of Retail Ireland. Slide 9 sets out the ESG progress we've made in the first half of the year. We've grown our sustainability-related finance by 18% to £9.7 billion. You've heard me talk before about the importance of practical interventions that make a difference. We remain Ireland's leading lender of green mortgages. Today, I'm pleased to announce we are increasing our available funding for home building from 1 billion to 1.75 billion. And we've also recently announced more than 100 million in funding for wind energy and recycling initiatives in Ireland and Scotland. Given the current backdrop, our focus on financial well-being has never been more important. Whether that is ensuring the affordability of our products or our financial literacy programmes, which close to half a million students have participated in. And for colleagues, engagement is ahead of the industry average. Through progressive hiring policies, we increasingly have a bank that better reflects the societies we operate in. with female leaders accounting for 41% of our senior appointments in H1, we have more to do to achieve our gender targets and we are working hard on this. We also continue to consider more broadly our role in society and the positive impact our organisation and our colleagues can have. Before passing over to Mark, I'd like to reiterate what I see as Bank of Ireland's unique position as the national champion bank. We have the opportunity and the capability to serve our customers' diverse financial needs at every stage of their lives. Through Bank of Ireland, Davie and New Ireland, we offer banking, wealth and insurance propositions, all from within the group. And we operate in an attractive economy with supportive demographics. Our UK and international businesses are important and complementary. All of this has allowed us to deliver strongly against our medium-term financial targets, which apply to every year of our strategic plan. And as Mark will set out, our plan is performing particularly well this year. As I mentioned at the start, we're now six months into the three-year strategy. Our strong results show the progress we are making and our delivery for customers, colleagues, shareholders and society. I'll now pass over to Mark to talk you through the financial performance.

Thank you, Miles, and good morning, everyone. We delivered a strong financial performance in the first half. This performance reflects our strategic decisions in recent years and commercial delivery across our business lines, supported by higher interest rates. Key highlights include further organic net lending in Ireland and operating leverage reflected in the cost-income ratio of 42%. Our statutory PBT was 1 billion euros, three times last year's amount, which is reflected in our strong organic capital generation of 180 basis points. We've also upgraded our NII guidance for the year, reflecting our commercial performance and updated interest rate expectations. This slide summarises our key financial metrics. There are two items I want to draw out. Firstly, our ROTI of 18.5%, which is our key financial metric and which all of our capital allocation decisions are based on. And secondly, the 7% year-to-date growth in our TNAV to $0.924, reflecting our earnings strength in the period. On slide 15, we look at our NII in detail. The growth we are reporting today is driven by higher liquid asset income, reflecting higher rates and our growing deposit franchise in Ireland, and higher lending income, reflecting rates, our commercial actions and the KBCI transaction. These positive effects were partially offset by higher wholesale funding costs and deposit costs, and these will continue to evolve in a higher rate environment. We continue to maintain our commercial discipline, with loan asset spreads up 27 basis points from the same period last year. Looking ahead, we expect H2 NII to be modestly higher than H1, reflecting positive rate impacts and business momentum, partially offset by higher funding costs. And as I mentioned earlier, this is a material upgrade on our prior guidance. The next slide sets out our NII sensitivity, which has reduced since the start of the year. As you can see, it also provides some further detail on our structural hedge, where our decisions have protected our NII. You can see a significant increase in the structural hedge gross income, which is driven by higher swap rates and volumes. The average gross yield of 134 basis points is double the H2 2022 level and will continue to pick up as the hedge rolls over. Slide 17 shows how we've grown our loan book by more than a tenth since the start of the year. The single largest driver of this is the closing of the KBCI acquisition in Q1. But we've also delivered strong organic growth in Ireland, with the book growing by 0.8 billion euros in H1, which is the same level as delivered in 2022 as a whole. Within this, we've delivered a particularly strong performance in mortgages while maintaining commercial discipline. In the UK, we've seen modest leveraging, materially lower than last year. And as Miles mentioned, we've maintained our cautious approach to international and commercial property lending. Looking ahead, we expect our loan book to grow in H2, driven primarily by Irish mortgages. Total business income was up 23% in H1, primarily reflecting a full period contribution from Davey following its June 2022 acquisition and underlying business momentum. We've restated our retail Ireland and corporate and markets figures to reflect the transfer of business banking. The wealth and insurance figures are presented in the IFRS 17 basis with the comparatives restated. I spoke about two key drivers of our business income back in March, and you see those evidenced here. Retail Ireland continuing to grow, reflecting higher current account fees and activity, and wealth and insurance growing once the day of the acquisition is adjusted for. Our expectation for business income in H2 is for the performance to be broadly in line with the H1 outturn. Slide 19 covers our operating expenses, and the key message here is that they are performing in line with prior guidance. On a like-for-like basis, operating expenses are flat year-on-year, with efficiencies and lower pension costs balanced against inflationary pressures and investment. Our reported operating expenses reflect the impact of acquisitions and allowance for variable pay and additional investment to drive future efficiencies. For the full year, our expectation is for operating expenses to be about €1.85 billion. The H1 impairment charge is €158 million and reflects a cautious approach to provisioning, notwithstanding the resilience of our customer base. This caution can be seen in our updated IFRS 9 macroeconomic assumptions, where we increase the weightings for the downside scenarios by five points to 45%. And in the 16 million euro management overlay we've taken to provide a further buffer for affordability risks on mortgage and consumer portfolios. The charge also reflects a 17 million euro day one adjustment for the KBCI acquisition. For the full year, subject to no material change in economic conditions and outlook, we continue to expect the impairment charge to be in the mid-30s basis points. As you can see in slide 21, Bank of Ireland has the benefit of a diversified loan book, both by geography and product. We take a disciplined approach to customer lending across all of our portfolios. Our loan book is strongly collateralised. Our mortgage book in Ireland is a weighted average LTV of 53%. Three-fifths of this book have been originated under the macro prudential mortgage rules. Our UK mortgage book has a weighted average LTV of 56%. The property and construction portfolio accounts for one tenth of gross loans, and we've reduced our exposure during the period. Some 90% of this book relates to investment property, with circa 70% of this in Ireland. The weighted average LTV on the entire investment book is 59%. This slide also highlights the prudent coverage levels across the books, 1.7% at the end of June. Our NPE ratio is stable in H1, following a very material reduction last year. We will continue to drive this lower through organic and inorganic activity. Slide 22 illustrates the group's strong liquidity and funding. Our deposit volumes have grown by €2.5 billion since the start of the year, supported by elevated household savings in Ireland and the strength of our deposit franchise. We have seen modest migration to term accounts and regular savings products to date, with this expected to increase as we go forwards. Groups liquidity metrics continue to be very strong, and our liquid assets are held either at central banks or invested in highly rated bonds. Slide 23 shows the walk in the fully loaded CET1 ratio since the start of 2023. Our closing CET1 ratio of 14.8% is comfortably above our capital target. A highlight is our strong net organic capital generation of 180 basis points, three times the 50 basis points delivered in H1 last year. The increase in RWAs is driven by MIX and KBCI. We've taken a foreseeable dividend deduction of one third of H1 2023 profit, consistent with our distribution policy. In terms of the outlook, we expect H2 net organic capital generation to be broadly similar to H1. As is customary, we will decide on the quantum of ordinary dividend and the level of share buybacks at year end. I also want to briefly comment on the EVA stress test results released after the market closed on Friday. We were very pleased with our results. They show a significant improvement since the last stress test, the direct result of actions we have taken. These results underline the strength, resilience and sustainability of our business model. Slide 24 recaps on our principal guidance for the year. All of this leads to our expectation for 2023 ROTI to be similar to H1. I'll now pass back to Miles for closing remarks.

Thank you, Mark. Let me conclude by saying that we have a winning strategy because of the trust of our customers, the support of our shareholders, both of which are never taken for granted. And let me conclude also with a special thanks to my colleagues across the organisation for their remarkable commitment. We'll now open the line for questions. Thank you.