Permanent TSB Group Holdings plc

Good morning and welcome to our 2023 interim results presentation. I'm going to give a short presentation on the significant progress that the bank has made to date in 2023. And then our CFO, Nicola O'Brien, will provide a more detailed review of our financial performance. And then at the end, Nicola and I will be happy to take questions. So if we just turn to slide four. We've reached the conclusion of our transformational acquisition of approximately 6.75 billion of the Ulster Bank retail, SME and asset finance business. and I'm proud of what the bank has achieved and how we've transformed to greater scale and business model diversification with an increased branch network and a growing customer base. We've achieved 1.4 billion of new lending in the first half of the year, and that's an increase of 36% versus last year, and 1.3 of this related to our mortgage products. Our mortgage market share has grown by just under 7% to 23.1% as of June 23 and mortgages are a core product to our business and I'm pleased to say that we continue to play a significant role in helping customers attain a new house and indeed we've financed one in four mortgages in the Irish economy in the first half of the year. So fantastic result in that respect. We continue to welcome new customers to our community with a loyal customer base now of over 1.2 million customers as of June 23, and that's 6% higher versus last year. The successful migration of what is now to be known as permanent TSB asset finance is a really exciting opportunity for us to enter into a new market and to provide our customers with a more diversified product offering. of asset finance and higher purchase. The bank achieved an underlying profit of 86 million, and that's an increase of 88 million year on year. And this is showing significant momentum in our business as we return to sustainable profitability. Our return on equity at the half year is 7%. And again, that is a significant number for us, given where we've come from over the last number of years. Net interest income of 298 million has increased by 92% year-on-year and that's benefited primarily from the change interest rate environment and the migration of the Ulster Bank book. The net interest margin is 2.29% and that's 88 basis points higher year-on-year and indeed 75 basis points higher than the exit NIM at the end of 2022. Our increased customer base and strong transactional activity has also supported a 21% increase in fee and commissions versus last year. The bank maintains tight cost discipline and has achieved a cost-income ratio of 63%, which is 29 points lower than June of 22. Underlying operating expenses, excluding regulatory charges and exceptional items, are 24% higher year-on-year as we accelerate our investment in customer services, product offerings, and indeed take on additional new business. Our performing loan book has grown by 7% to 20.4 billion. And through strong lending performance and the Ulster Bank migrations, we've also increased that book significantly. We've grown our customer deposits by 4% since December 22, and 71% of these deposits are insured under the deposit guarantee scheme. The bank successfully issued two senior MREL debt bonds, totaling 1.15 billion in the first half of the year, marking the completion of our full-year issuance plan. And both transactions were significantly oversubscribed. A real important point is that in June 2023, both the Irish government and NatWest sold a combined share of 10% of the bank's outstanding stock. And that was oversubscribed and indeed represents a positive catalyst for equity investors as we move forward. All capital ratios remain above the management and regulatory minima, with a strong common core equity tier one ratio of 14.4%. And that is despite a $0.9 billion or $900 million increase to risk-weight assets year-to-date, which is driven by strong new lending and indeed the Ulster Bank migrations. Our leverage ratio was 7% which is 1.4% higher than the average of European banks. If we look at the macro outlook on slide 5 we'll see that house prices are stabilizing but it was a slight reduction or expect a slight reduction in Dublin prices. So we can see a better 1% move or expecting a 1% downward shift in 2023. and then modest growth as in 2024. But really what I would say, there's a stabilization of house prices. Interest rate rises are beginning to have an impact on the pace of growth of consumer prices globally. And this is also feeding into Irish inflation, which is expected to decrease to 5% this year and indeed expected to go lower next year, forecasted 3%. And we believe that ECB rates should peak in the second half of 2023. The Irish labour market remains very strong and the country is effectively at full employment. Employment growth at 3% is continually supported by net immigration into the labour market and the underlying strength of the economy. If we look at the mortgage market, we've seen that the switcher segment of the market has reduced significantly and that's after a surge in 2022. when homeowners locked into fixed rates amidst a rising interest rate environment. We expect the switcher segment to remain volatile in the market, which will otherwise grow. Mortgage approvals remain strong for the purchaser non-switcher mortgage market, with declines concentrated in the switcher area. And overall, we see year-on-year growth in the non-switcher market. So I'd suggest it... The movement in switchers has reduced and that's a positive for us because we have customers who are availing of existing rates that we're offering and indeed staying with the bank given our competitive position. I'll just move on to the market transactions. I mentioned this already, but we had two significant market transactions in the second quarter of this year. The reduction of the sale of 10% of the bank by NatWest and the government. That has led to a 50 percent increase in the free float from 21 percent to 31 percent. And that's driven nearly a 100 percent increase in the average daily liquidity in the stock. So we can see that that increase in free float is going to drive liquidity volumes over time. The 10 percent sale was oversubscribed with lots of interest and indeed has brought a number of new equity investors to the bank which again is welcome in that respect. Second point to mention is in April we issued 650 million of emerald debt. That was three point five times oversubscribed. And in June we issued another 500 million which was 2.8 times oversubscribed. So we can see plenty of demand on the equity side with equity investors and indeed with debt investors which is a real sign that we're doing the right thing and the bank is moving in the right direction and indeed has a bright future in that regard. But just move on to our strategy. We have a purpose led strategy which we set out our ambition three years ago which was around working hard to build trust with our customers. We see trust as being the core part of what a banking relationship be between ourselves and customers indeed our wider stakeholders and the wider society in that regard. We mean it when we say we work hard to achieve that trust and indeed build that bond with our customers. And I believe the numbers are speaking to that as we speak. We want to be seen as being Ireland's best personal and small business bank. Best doesn't mean the biggest. It doesn't mean the most profitable. But what it does mean is that customers advocate to other potential customers to say, go do business with Permanent TSB. They're a good bank to deal with and they will treat you fairly in that respect. The second line, or the blue line there, which is just down from our ambition and purpose, is really important because what we're doing is we're building a business model that is bringing the best of our people together with improving and the best of technology. So combining those in a way that customers can choose to use different channels in a way that makes sense to them. And that, in a sense, builds what we see will be a sustainable bank for the future. Our four strategic priorities which we laid out at the last results are around having a connected customer experience with customers at the heart of our decision making, having a cultural evolution which is setting a new cultural and reputational standard for the banking sector and indeed celebrating diversity, equity and inclusion in that respect. And indeed we are making significant strides in that area which I'll touch on later on. to have secure and resilient foundations by investing and maintaining a robust and resilient operating environment which protects our customers and indeed our colleagues in that respect and have a sustainable business model which is not only sustainably from a profit point of view but also sustainable by way of how we can play our part in the transition to a green economy and that's around how we utilize data and analytics as well as external partnerships to enhance our propositions and indeed strengthen our relationships in that regard. I'll just move to the next slide, which just mentions around the Ulster Bank transaction. We've mentioned this for the last two years, really, because it's been a two-year program. The reality is, as a bank, we've delivered what we said we would. And indeed, we've landed the Ulster Bank acquisition based on the numbers in exactly where we expected them to land without any surprises in that regard. What have we got from it? Well, we've got greater scale and diversification, which will really help us compete and grow, particularly in business banking and business lending, where now we have an extended product line, which I've referred to already. We've also increased our branch footprint with greater geographical spread by adding 25 new branches. to our existing base. We believe, again, that's important in local communities that we're visible, we're seen, we're present, and we're available to customers. Even if they want to go through a digital channel, they could also have the option to engage with our branch staff in that respect. We've also acquired over 330 new colleagues, experienced colleagues from Ulster Bank, primarily front-facing by way of what they do, what I mean customer-facing in that respect. So they will be generating business and indeed the interaction and the incorporation of our new 330 colleagues has been seamless in that respect and very, very positive in that respect. It's also brought us 170 million of additional interest income. It's also most importantly from a stakeholder point of view. We've increased the value of the bank by nearly 600 million since we announced the MOU. So that's good for for our shareholders. And indeed I must remind everyone we didn't ask our shareholders for any additional capital in order to do this transaction. Yet we've got the 600 million increase in value and indeed that value will continue to grow as we grow our business going forward. And lastly We've got a larger and more active customer base. And I'll touch on activity later on in the slides in that respect. So overall, a very, very positive transaction for us. I think a win-win-win in that respect. So a win for us. I think NatWest and Ulster Bank are happy in that it was managed successfully and professionally, and indeed a win for the Ulster Bank customers and staff who joined us, who otherwise would have maybe had to look for a different provider in that respect. So overall, very, very, very happy with this transaction. And it's worked well. So if we just move on to commercial performance, we can see that our total new lending was 1.4 billion in the first half. That compares to 1 billion last year, so a 36% increase. On mortgage lending, we've moved from 16.3%. in the first half of last year to 23%. Really, really important in that respect by way of our positioning in that market. 28% of our lending was in the green space, so to green mortgages. Again, we see that as a growing segment and a growing part of our book. SME lending, we lent 60 million in SME lending. And while that's lower than the 70 million we lent last year, it's actually at the end of July that's 80 million. So we had a very successful July by way of advances and indeed the pipeline of approved transactions is double what it was last year and the engagement with customers around potential loans again is double what it was last year. So our pipeline is very strong. We are competing in this market and the addition of the asset finance business will really drive it on because we can now offer higher purchase and leasing to smaller customers in that respect. And lastly on this slide, personal lending was 60 million. That's an increase of 20% versus last year. It is performing very well. And you may have heard our campaign, our radio campaign in this respect. So again, it's performing well. 80% of that is through our digital channel. And indeed, we're seeing significant momentum in personal term lending by utilizing our direct channel in a much more efficient and proactive way. So if we just move to the next slide, which is around a customer base. The bit I like on the slide is actually the bottom left. So last year we had 1.1 million customers. By the end of this year we'll have 1.3 million customers. We are acquiring more customers now than we would have on a weekly basis than we would have had before COVID, so pre-COVID in that respect. So again, that's showing a ramp up in activity. And if I move to the top of the slide, you can see that we also have a much more active base. So our active digital customers are up 10% year-on-year. Our digital activity is up 20%. year-on-year, and that's after a 20% increase last year, the year before, and the year before that. So a lot more activity, a lot more engagement with ourselves and our brand, and that can only be positive for how we think about the financial performance, but also how we support our customers. And indeed, our MPS is up to 33, so that's a three-point increase or a 10% increase in that respect. We also have recognition from a number of external parties. So bankers Ireland sorry bankers that IE have named us to have the best current account in the market and indeed the best current best mortgage for first time buyers. And that's over a number of years. It's not as if it's just last year. We've actually won that for a couple of years against a lot of competition in that respect. We also won the Irish loyalty and CX awards. They've awarded us a having the best financial services loyalty program or initiative for the year, again, very important for us. And our customer experience award received from the Marketing Institute is also very precious to us as well. If I think about our bank, we are going to... not only nurture the existing relationships we have, we're going to grow them over the coming years around having strategic partnerships. If I take CreditLogic, which is our digital mortgage application process, which is really, really going down well with our customers and with our colleagues by way of simplifying the whole mortgage journey, there was 130 million of drawdowns using the CreditLogic application in the first half of the year. The number of applications at this moment is a multiple of that because we're ramping up usage of that through our branch network and indeed through our direct channel. But it's proving extremely popular and very, very good in that respect. And the proof is in that number. If we go back to last year, that would have been over 3%. So now it's 10% and we'll see momentum there. And that's cutting out the friction that customers would experience in the more manual process. Indeed, from a green point of view, it's cutting out a lot of pages and making that engagement much easier. We've also a very important relationship with the Strategic Banking Corporation of Ireland. around the future growth and Brexit impact schemes, where there was a total of 78 million of drawdowns. And also a growing part of the supply of housing and need support for first-time buyers is the first home scheme, which was launched in 2022. And we've had 10 million of approvals, of which 55 million have been drawn at this stage. And I'll lastly mention at the very bottom of the page, in the bottom right, we are partnering with the SBCI around a 100 million fund to support customers who want to retrofit their home. And this will allow customers to bring their homes to a B2 energy rating or above. So again, these are all positive moves as we think about the transition. This is a fairly busy slide because we have been busy and that's the reality. So we look at about our four strategic priorities. We've increased host roles and branches again. It's been very welcomed by customers. It's helped us attract new business and indeed it has helped our NPS in that respect. We've introduced web chat. which is getting busier and busier again. This will be a channel we will use more extensively. We also have a new banking app which we only released in the last two weeks. It is a new platform, a finical platform which we've developed with emphasis. It will allow us grow a significant amount more journeys through our digital front end to our digital digital app and again help customers self-serve as they need to with regard to day-to-day support and indeed interact not only through the app but also with our branches for any more enhanced sales support that they need So a lot of work going on in this area around customer experience, including the fact that we have a dedicated and enhanced customer experience team who are getting feedback with regard to areas of friction and indeed then going and fixing those from a customer point of view. By way of cultural evolution, 69% of roles are now hybrid. It's working very well for us and indeed very welcome amongst our staff. we have launched a diversity equity and inclusion strategy i'll touch on aspects of that later on and indeed we provided some support for our colleagues around the cost of living support and we will continue to do that as we move forward given the challenges that of the cost of living and that cost of living and indeed cost increase they're having for the wider public by way of secure and resilient foundations and you know we have a multi-year Cyber investment, which is at an advanced stage, that will continue with regard to ensuring that we're investing in that space. And indeed, we get it externally benchmarked with regard to where we are. And indeed, our fraud journey has also been invested and improved. The new app will help some of those aspects as well, where we will add some additional functionality around how our customers manage cards and indeed report any issues that they have. And then lastly, around building a sustainable business, Ulster Bank I talked about, we now have a sustainable profitability by way of where the bank is, its scale, size and its positioning. Our green mortgage product will continue to grow and it has grown. It was 20% of a buck last year of our new issuance. It's now 30%. And as I say, I expect it to grow. And indeed, most importantly, from our point of view, we can clearly see the generation of organic capital as we move forward. So our priorities will continue to be in these four areas. I believe they're very challenging, but they also help us focus in a very clear manner in where we're delivering and where the things we need to do. If I just finish on this slide before I hand over to Nicola, it's around where we are on our ESG agenda. I mentioned the green mortgage. We also have a reduction in our scope one and two carbon emissions. by 83%. We are committed to setting science-based targets in 2024, so you'll hear more of that as we move into next year. We also have a sustainable supplier charter, which we put in place. And indeed, we have 1.1 million customers have now availed of e-statements, which is saving 11 million pages in that respect. So again, all of these small initiatives are helping. On the social side, a very important year coming up for us is around our sponsorship of the Irish Olympic and Paralympic team for Paris 2024. We are the first sponsor to support both the Irish Olympic team and Paralympic teams and we're very proud of that fact. And indeed the Olympic team and the Olympic spirit really connects with who we are and how we want to turn up for our customers and indeed wider society. for something we're very proud of is our cultural index score is at 80%. That's just a number, but when you look at it, it's 10% above what the target would be and even ahead of where the wider sector would be by way of our cultural score and how we operate internally, how we work together, and indeed how we face off, most importantly, to our customers in that respect. Our board gender composition is 55% female, 45% male. And indeed, when we look at our senior management, where we have more to do in this respect, 38% of our senior leadership are filled by females. Our gender pay cap is 16.5%. But we will be coming with a new updated report in the not too distant future. And by way of governance, We have a sustainability strategy. We've increased our objectives and indeed our outlook when it comes to the execution of that strategy through an enhanced internal sustainability committee, which you'll see in our wider papers if you want to have a look at those. At a CDP level, we're at a rating of C. And indeed, we've also got an ESG rating of low through Sustainalytics. And that's in line with our peers in that respect. So we are committed to this agenda. We're committed to making progress. And indeed, we're committed to being accountable to making progress as we move forward. So with that in mind, I'll switch over to Nicola. And I'll be back just at the end for a couple of slides. Thank you.

Thank you, Eamonn, and good morning, everyone. I'm delighted to present the bank's 2023 interim financial results. The bank's performance in the first half of the year shows that there is significant momentum in our business as we return to sustainable profitability. Our reported profit before tax of 26 million is 62 million higher than the same period last year, largely driven by the earnings from the Ulster Bank assets and the rising interest rate environment. As Eamon mentioned earlier a key achievement for the bank in the first half of 23 has been the successful migration of the remaining Ulster Bank assets including in round numbers 160 million of micro SME loans transferred in February 900 million of the remaining mortgages in May and most recently in July the migration of the 500 million asset finance business. Our underlying profit has increased by £88 million to £86 million as a result of the higher total operating income partially offset by higher operating expenses. Total operating income has increased by 81% to £323 million. This increase is supported by a growing loan book through acquisitions and new business and the rising interest rate environment. We remain encouraged by the extent of the opportunity that we see in the Irish banking market. Total operating expenses have increased by 21% or 39 million as we serve a growing customer base, operate new businesses and continue to invest in customer service and product offerings. We've recorded an expected credit loss of 9 million reflecting the latest macroeconomic projections where we've seen a slight reduction in the house price index. Exceptional items show a cost of 60 million 26 million higher than the prior year driven by the costs associated with the ultra bank transaction and the day one expected credit loss that the bank has taken associated with the acquired assets. Looking at operating income, our net interest income of 298 million increased by 92% year on year. The increase was driven by 43 million related to the higher interest earning assets linked to the ECB rate, 58 million related to the interest income on the migrated assets from Ulster Bank, 28 million related to the net organic growth in the performing loan book, and 58 million related to higher interest earning assets from Treasury and cash. Partially offset by 40 million in funding costs. The exit net interest margin of 229 increased 88 basis points from 141 in the prior year. And I think about a 194 quarter four last year net interest margin. So growing consistently. Total yield on assets is 268 basis points, 117 basis points higher year on year. This increase in total asset yield is due to a higher yield on both the loan book and treasury assets in a higher interest rate environment. The bank remains leveraged to the interest rate environment. At 30 June, assuming a starting ECB refinance rate of 4.25% and a deposit rate of 3.75%, a 50 basis point increase would result in higher net interest income of 20 million and a 50 basis points decrease would result in lower net interest income of circa 25 million. These sensitivities should not be considered as a forecast for future performance but they do give an indication of how the bank interest income remains leveraged to the interest rate environment. We're also really pleased to report the positive performance in net fees and commissions which has grown by 21 percent year on year as growing customer numbers increase transactional banking income. Our larger and more active customer base will ensure this momentum continues as we look forward over the medium term. Total gross loans of 21.1 billion at June 23 are 7% higher compared to December 22, driven by a 6% growth in the mortgage book as additional performing assets migrated from Ulster Bank, plus strong new lending where a new business outpaced repayments and redemptions. a 67% growth in the SME book as the micro SME book migrated from Ulster Bank and the bank continues to grow through new lending. Excluding the impact of the Ulster Bank acquisition, the gross loan book grew by 300 million or 2% in 2023 as new lending volumes outpaced repayments and redemptions. Looking at the total performing home loan mortgage book this has grown by 55 percent or 68 billion year on year. Tracker mortgages now make up 3 billion of our total book. That's a reduction of 26 percent year on year down from 4.1 billion and now make up 16 percent of the bank's home loan book at 19 percent. That was 19 percent of December 22 and 33 percent at June 2022. so a decrease there. Variable rate mortgages, the smallest cohort of the performing home loan mortgage book, has reduced by 3% year-on-year as customers considered the rising interest rate environment and moved towards fixed rates for future rate certainty. Fixed rate mortgages have increased by 110% year on year, from 6.6 billion to 14 billion, the bank's largest cohort of mortgages, accounting for 73% of the total performing home loan book. At June 23, 75% of this fixed rate book does not roll over until 2025 or later. And 64% of the bank's performing home loan book has been written since 2015 under the new macroprudential rules. In the last 12 months the ECB has increased the refinance rate by 425 basis points. The bank has increased mortgage interest rates by an average of 215 basis points across its fixed rate products with variable rate products increasing between 5 and 40 basis points. The average yield on new mortgages has increased by 63 basis points year on year to 3.29 percent. Aided by the automatic pass-through of ECB rises to tracker mortgages, together with the inclusion of the Ulster Bank assets, the yield on the performing home loan book has increased by 72 basis points to 3.22%. The weighted average loan to value on the home loan mortgage book is at 53%, with the new mortgage weighted average loan to value at 71%. Looking at our SME portfolio the SME performing book has increased by 179 million to 482 million at June 2023. Comprised of the acquisition of circa 160 million micro SME book from Ulster Bank plus the net organic growth. Most recently in July we successfully completed the 500 million Lombard asset finance migration marking the final migration in this transformative transaction. Of this 500 million, 57% relate to the business and commercial sector, 35% are in the motor finance sector and 8% is in unit stocking. The Lombard Asset Finance business brings 18,000 new customers to the bank and will allow us to serve communities around the country in a new way. These migrations, along with our new lending ambitions, should see the bank's SME loan book grow to in excess of one billion this year as we deliver on our ambition to provide a meaningful alternative for business customers. Looking at operating expenses, total operating expenses of £228 million have increased by £39 million or 21% year-on-year. The bank has maintained good cost discipline as we complete the planned acquisitions and invest in the business. The underlying cost-income ratio when you exclude regulatory costs has reduced to 63%, 29 percentage points lower year-on-year. as increases in total operating income offset a higher cost base. We can see from the cost walk that the underlying operating expenses have increased from £164 million a year ago to £204 million in the first six months of 2023. This increase relates to higher average staff numbers of 355, of which 145 relates to our own business growth and 210 relate to colleagues who transferred from Ulster Bank. The bank also employed temporary staff to assist in customer servicing while the new business migrations happened in order to maintain good service levels for customers. Therefore, higher staff numbers in the business, coupled with higher pay, has resulted in a 13 million increase in staff costs year on year. Point in time staff numbers at 30th of June 23 were 2,939, an increase of 545 staff, 23% compared to the prior year. The bank also supported staff with the cost of living special interim payment in June 23 in the form of a 2% payment, which increased costs by 3 million. And we've committed to a further support for our colleagues with an additional once-off payment in the form of a voucher payable in quarter four 23. Total depreciation has increased by 8 million, 5 million of which is coming through from prior year investments, an additional 3 million from the investment required in the acquisition of new businesses. We continue our focus on strategic investment and this combined with the cost of operating our larger bank has resulted in a 16 million increase year on year. These strategic investments include further rollouts in our digital banking programme, maintaining our operational and cyber resilience and allowing us to enhance servicing of the existing and new customer everyday banking needs in a more direct and efficient way. The 2023 outlook for the bank's cost income ratio is for it to remain less than 65 percentage points as total operating income grows and the bank maintains good cost discipline. The bank has recognised an expected credit loss of £9 million for the half year, reflecting the latest macroeconomic projections, namely the slight reduction in the house price index observed during the first half of the year. Underlying asset quality remains good with customers demonstrating resilience despite the high inflation and rising interest rate environment. Subject to the prevailing macroeconomic environment the bank expects a cost of risk of not more than 10 basis points in full year 23. Provision stock increased by 37 million since year end 22 with closing provision stock of 558 million. This includes an appropriate 118 million post-model adjustment which will ensure the bank is adequately provided in the event of any deterioration in asset quality. The bank's gross performing loans, stage 1 and 2, have increased to £21.1 billion, growth of 6% from £20.4 billion at December 2022, while non-performing loans, stage 3, remain low at £700 million. The NPL ratio at 3.3% remains in line with December 2022 and is 1.9% lower than the prior year. Provision coverage remains appropriate, with a 1.6 PCR on performing loans, which is consistent with prior year, and a 34% PCR on non-performing loans, which is an increase of 0.2 percentage points year-on-year. Overall, the bank has an ECL provision of £558 million on 21.1 billion of assets, keeping the overall PCR at 2.6%. Deposits and funding are both in very strong positions. At June 23, total funding reached 25.8 billion, 17% growth year on year, 10% growth since December 22. Total customer deposits grew 13% year on year, and 4% in the first half of 2023, while wholesale funding grew through the MRL issuances of 1.1 billion in the first half of this year. 88% of total funding comes from customer deposits. 71% of total customer deposits are covered by the Irish State Guarantee Scheme. The deposit franchise is performing really well with current account balances increasing by 0.5 billion or 6% since December 22 and retail deposits excluding current accounts increased by 0.4 billion or 3% since December 22. The bank's loan to deposit ratio has increased by 2 percentage points to 92%. Wholesale funding at 3.2 billion is 78% higher than prior year and double the balance at December 22. As mentioned earlier, the bank successfully completed the two benchmark issuances in the first half of 23 with 650 million MTN issuance in April and a further 500 million in June. This completes the bank's issuance plan for 2023. These issuances contributed to the bank's 2.1 billion MREL eligible funding at June 23, representing 8% of total funding. The bank's MRL ratio of 36.6% at June 23 is above both management and regulatory requirements. The MRL target for 1 January 2024 has been set for the bank at 28.15%. It's our intention to become an annual issuer of MRL-eligible senior debt, given the projected risk-weighted asset growth from the enlarged balance sheet. Liquidity coverage ratio has increased to 186% since year end with net stable funding at 159% broadly in line with December 22. The bank's key liquidity and funding ratios remain favourable to European bank averages. Our regulatory capital ratios remain comfortably above the regulatory minimum requirements. The CET1 ratio on a fully loaded basis is 14.4%, a reduction of 80 basis points from December 22. This movement is primarily driven by the migration of the Ulster Bank mortgage and SME assets, which utilised 80 basis points, net loan book growth, which utilised 40 basis points, Payment of the AT1 coupon at 20 basis points and is partially offset by operating profits, which generated an additional 90 basis points of CET1. On a pro forma basis, when we include the 500 million asset finance risk-weighted assets which transferred in July of this year, together with day one ECL, the CET1 ratio on a pro forma fully loaded basis is 13.8%. This equates to a decrease of 140 basis points since year end and utilizes 60 basis points of CET1. The bank continues to operate in excess of regulatory requirements, which are 9.44% CET1 transitional and 14.45% total capital, both having increased by 50 basis points as the counter-cyclical buffer phases back in. Management's ET1 target on a fully loaded basis remains to be greater than 14%. To summarise, the bank has had a strong start to the year which results showing a robust business and financial performance with a positive outlook. Underlying profit before tax of 86 million shows the positive uplift from the acquired mortgage and SME businesses and the interest rate environment. total new lending of 1.4 billion, 36% higher year on year, with the mortgage market share of 23%, up 7% year on year. Net interest income grew 92%, resulting in a net interest margin of 2.29%, showing the momentum building in net interest income while the bank remains positively exposed to rising interest rates. The bank has continued strength in its deposit base with new current and deposit account balances having increased by almost a billion in 2023 to date as we grow our loyal customer base and strengthen the franchise. Underlying cost income ratio reduced to 63% as the operating income grows and the bank maintains cost discipline while continuing to invest. The bank has completed a lot of work to assure the balance sheet over the last number of years, resulting in an NPL ratio of 3.3%, which remains in line with December 22. The capital position remains strong, with the CET1 on a fully loaded basis of 14.4%, ahead of management's target of 14%. We actively manage our capital position and having assessed a range of scenarios, the CET1 ratio will remain well above the bank's minimum regulatory requirement. Looking forward, the bank's medium-term targets represent higher and more sustainable returns. I'll hand you back to Eamon now to talk you through in more detail the outlook for 2023 and the medium term. Thank you.

Now, thank you, Nicholas. So we're nearly there. Another couple of slides and we can get into the Q&A. So if we just move to slide 24. So we are upgrading our full year 23 guidance to reflect a more positive operating environment. But as we look ahead to the rest of the year, we're mindful of there is the challenging environment in which we operate. And that's not least the challenges posed by to our customers by way of cost of living increases, which are ongoing and indeed an environment of higher interest rates. And these challenges are not to be dismissed lightly. However, we want to reassure our customers that we will be there for them and we will constructively work with them in the event they fall into any difficulties. But I'm also confident that the strong momentum that exists in the bank, which has been spurred on by the benefits that the Ulster Bank acquisition has brought, will continue to drive the bank forward and make it an even greater competitive force. And, you know, in that sense, the bank is in an excellent position to drive and benefit for the benefit of our customers, competition and the wider Irish economy and indeed for our shareholders in that regard. If you look at net interest income, it will continue to grow due to loan book growth. and interest rate repricing on mortgages, and also from not having to carry excess liquidity at negative yields. So we see the number coming in around 680 million, which is an upgrade of 5% on what we said previously. Our cost-income ratio is expected to prove to around 65%. We previously guided 70% for the full year. And despite higher costs and from completing the Ulster Bank transaction and indeed the transfer of employees and higher depreciation, we are maintaining cost discipline and indeed we're also generating additional income in that respect as well. As the quality remains robust, We're not seeing any material deterioration in our book at this moment. And we're keeping, naturally, a close eye on it. And we don't expect the chart to be more than 10 basis points. And indeed, that's what we guided previously. We're guiding an underlying profit of around 180 million, which in itself equates to a return on equity of around 8%, which, as I say, for us is a significant move forward from where we were over the last number of years by way of returning capital. And as Nicola has mentioned, our capital ratios are strong and we continue to be well in excess of the minimum requirement in that regard. And indeed, as we move forward into future years, start to generate capital in that respect by way of organic generation. If we look at our medium term targets, we're showing 2025 here. At the year end, we will obviously look at these targets again and provide a more medium-term target. But I think 2025 is a good year to be looking at, given where we are at this moment. A 2.5% net interest margin. Total income in excess of 800 million, in fact 825. Cost income ratio 55%. Operating profit in excess of 300 million. And indeed a cost of risk at 30 basis points. You might argue that that's conservative, but we need to see how the interest rate changes. are reflected in the market over the next number of years if there's any particular stress. You know we'd have to say that when you look at the economic position indeed when you look at the average loan to value on our book and the position of also Nicola mentioned that nearly two thirds of our book is now originated under the macro potential rules which in themselves included and interest rate stress on borrowers, I think we'll see how that cost of risk ends up. That's what we're projecting at this moment. And in 2025, we're saying that that will deliver a return on equity of 11% or an EPS of 40 cents a share in that respect. So again, positive trajectory and a real indication of sustainable profit generation as we move along. And then lastly, why would anyone want to buy our shares? Well, I bought the shares. I'm a shareholder. So I've done it already. But really, it's about us now having a strong market position, which is improving in that respect. We're one of three banks in the market. We are now on customers list by way of engaging with us, particularly I see growth in the business banking space due to the imposition, as I mentioned, the addition of the Ulster Bank asset finance business, which we have great hopes for. We also have a larger and more active customer base. And indeed, we're attracting more customers now and multiple or more customers than we would have, say, pre-COVID in this environment. So again, that's very positive in that regard. We also have a strong capital and funding position and indeed a low risk profile, whether it's by way of LTVs in our books. As I mentioned already, two thirds of the book have been originated post 2015, which again reduces the pre-crisis risk that would have been in the book a number of years ago. And also our lower NPL position, which is with very good coverage. the capital position will have organic capital generation. All this leads to attractive medium term targets of 11 percent as I mentioned EPS. And lastly what you have is a management team that delivers and has delivered over the last number of years And we'll continue to deliver in that respect, not only for our customers, not only for our shareholders, but indeed for our wider stakeholders in that respect. And that's something we're committed to. And we can only say that on the basis of delivery. We have delivered, we have executed, and the numbers have landed as they should. And indeed, the future looks bright in that respect. So thank you, and we'll take your questions at this stage. So thanks very much.

Okay, good morning. It's Dermot Sheridan from Davie. Thank you for taking my questions. A couple, if I may. Firstly, maybe just touching on new business momentum and trajectory. If we could talk about, particularly maybe on the micro SME and the asset finance portfolio now that they're on board. In terms of the ambition, you talked about one billion by the end of this year, but how should we think about that going forward? And maybe just the overall size of the lending balance sheet into 24, 25. Yeah. And maybe secondly, just around the cost line and the growth that you're seeing into the second half of the year. Maybe if you could just tease out some of the areas where you're seeing that growth coming through and how we should think about that into the couple of years beyond that. And then maybe just finally for the moment, around risk-weighted asset growth or efficiencies maybe, I guess, in the next couple of years. You've obviously a very, very high risk-weighted density, one of the highest in Europe for mortgages. I suppose, how should we think about how that can play out? And, you know, maybe perspective time, if there is initiatives that can... be put into action here.

Thank you. Thanks very much. I'll take the first and I'll touch on the third question and Nicola will also touch on that and also Nicola pick up on costs if that's all right. So on the business book, let me put it in perspective. If you take the asset finance book, when we started off the engagement to Ulster Bank, that book was about 400 million. It's now 500 million. We acquired a book of 500 million. So there's been, even though you could argue Ulster Bank itself was in a closure mode, the asset finance business continued to go from strength to strength. And what we've acquired is the systems, all the connections, and all the staff that have been driving that business. And they have obviously traveled to us with that business. New activity in the asset finance business was about 120 million, 120 to 140 million in the first six months. So there's lots of momentum in the business and we'd expect to see it to continue to grow. But most importantly, And Nicola mentioned the 18,000 customers we've taken on. We will be able to cross-sell and support those customers by way of other activities that they want to engage in. If I take the existing SME book, we did lend 60 million in the first six months. If we were cutting our numbers today, that would be 80 million. in that we advanced 20 million in July alone. Our approved pipeline is double what it was last year, and then the applications are double that again. So we would expect... ongoing growth in that book as we move forward. We expect this year to be larger than last year and then momentum into next year to be even greater again. Why? Because our name is getting out there. We are supporting customers. We are winning business as well in that regard. Primarily by way of our delivery we can give you a quicker yes and a quicker no than others. and business customers like that. And so service delivery is very important in that regard. And we've great ambition in that respect. So I'd expect what we're saying a billion at the end of the year we could be in excess of that. That's the way I would say it. And then we will continue to grow that book over time. But mortgages will continue to be to dominate naturally given as we build that business, but also giving our own position in that. On orderly ways, we still, I suppose you could argue, maybe this isn't the right word, but let me say it, suffer from the fact that we're carrying still the loss experience that came out of the crisis. That's primarily driven by the fact that we were the first Irish bank to complete trim. And we completed trim in 2018. And indeed, a lot of our risk rates are based on the information that was provided at that stage. And the information that drove that was 08 to 13 by way of loss experience. And we know that 2013 now in history was the worst year for collateral valuation. So we still carry a risk weight that's associated with that period. And it's now about us gathering information on our model performance and indeed our book performance and accumulating that. and submitting them to the regulator for them to adjudicate on. But I don't see movement in that over the next 12 months. I think it's something more in the 25 period that we may see some movement on. And then it's all about the history of impact. And indeed, ensuring that from a regulatory point of view, we're meeting the requirements to reset our needs. But lastly on that, I'd just say we're at peak RWA concentration in that regard. Which, again, over the medium term, we should expect some relief with regard to RWA concentration. But it's a slow burn, unfortunately, in that regard. Nicola, do you want to pick up as well?

Yeah. So we'll be doing that piece of work on the risk-weighted assets. We've kicked off that piece of work already, as Eamonn has mentioned. So we're on that and actively working and engaging with the central bank on that. Just on the operating cost question, the growth into the first half and then following through into the second half, I suppose the areas that we would actually look at that in, you know, the ultra bank business that we're running now, which is our business, you know, dictates that we actually have a higher cost base. And, you know, that's actually in the round. We've always mentioned that that was a 50 million cost in a full year whereby we'd have staff costs, we'd have servicing costs and we'd have depreciation within that 50 million. And indeed the bank used to run our own business with an average staff base of about 2400. And our staff base now would be about a 3000 FTE bank. And we've we've taken in 334 colleagues from Ulster Bank and that is part of that you know 3000 people bank that we that we are now. So we factor that into the second half of the year. We've just brought in the asset finance people and we still have to recruit some roles. We're already at the 2,960, I think, FTE at the end of June or into July. So we're progressing there. Depreciation, I mean, we have spent a lot. We've invested a lot over the last number of years. We are coming to the end of, I suppose, that three-year digital banking program that we were on. and which started I think in 2019 we were spending 150 million and on that program of work. We're almost there with that. I mean we still have more to do with regards to operational resilience and cyber security not to mention other elements that we need to invest in. But depreciation is is probably going to be you know slightly ahead of 60 million this year and it will actually grow as we look forward. And because we have made that investment. And then in terms of inflation, some inflation has impacted us. When we think about some of our third-party suppliers, when we think about our technology costs, they are rising due to natural inflation. So really, the first half is a good indicative number in relation to where our costs are going, being conscious that we will pay for higher FTE.

That's great.

Thank you.

Good morning. Ronan Dunphy from Goodbody. Thanks for taking my questions this morning. Firstly, on the raised income guidance for the full year, the 680 million, can I ask what assumptions are embedded within that number, whether I guess you want to disclose a deposit beta assumption or more qualitatively given, I suppose, the enhanced deposit pricing that you've introduced in recent times? how you expect deposit funding costs to evolve from here, but also recognising that all of the deposit growth in the first half was in current accounts and in demand deposits rather than term deposits, so maybe how that shift might or might not take place in the second half. Another one on cost of risk, so low impairment charges in the first half and low guidance reiterated for the full year, that's up to 10 basis points charge. But the 2025 target, I guess, is still the circa 30 basis points. Is the implication that that's a conservative target or are there some factors that are, I guess, behind that step up from 10 to 30 basis points over the next couple of years? Thanks.

Thanks, Ronan. Just on the income guidance, you know, we look at the moment, our forecast is based on a 425 ECB refinance rate and a 375 deposit rate. Deposits are really important to us. Having said that, we also have additional MRL costs that we'll actually bring in, so funding costs do go up. But if I look at it in terms of NIM, and as Eamonn mentioned, we're at almost 230 today. We actually see that probably rising to about the 235, or just a little bit north of 235 maybe this year. and to grow for that going forward, as we've mentioned previously. In total operating income, we'll have growth in our fees and commissions equally, so that will actually help that overall operating income base. From the deposits perspective, at the moment, like other banks, we're probably in that single-digit deposit pass-through. We haven't behaviourally seen any move really yet, from customers out of current cancer demand into term. But you know with a 2 percent rate that's out there in the marketplace and with the ECB probably becoming a little bit more slower to pass on rates or maybe a peak then actually I think you should expect to see some customers taking the opportunity to go in for for an element of term. And for us at the moment, with regards to that pricing, we are happy to price and give our customers a return for fixed. And if customers want to come in and actually give their money into those fixed term accounts, we're very happy to take those. And that's overall, we would see our funding cost will increase, but it will be certainly good in relation to driving that 235 net interest margin. On the cost of risk, yeah, low guidance at 10 basis points this year, that's primarily... you know where we are today with regards to growing the asset finance business when we're actually taking on our SME businesses as Eamon mentioned and cost of risk on mortgages is still low. And when we overall look at the 30 basis points looking at 2025 we do anticipate growing that business banking business. So the SME business would would drive some of that. I would say that it's conservative conservative as we know that there's still uncertainty out in the marketplace. There still is uncertainty out there for our mortgage customers as if inflation stays high. And you know there's some pinch that come with with the cost of living. So we'll we'll see how that works. But actually overall we have one hundred and eighteen million of a post management adjustment there to to compensate for some of that uncertainty.

We'll move to questions in the phone line now, please.

Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone cable. Our first question comes from Portia Ramirez from Citigroup. Portia, your line is now open. Please proceed.

Hello, good morning. Thank you for taking my questions. I have two quick questions. The first is on the NIM guidance for 2023 and also the 2025. I would like to ask if you could provide some additional details on the deposit beta. And also, if you expect this to increase in a gradual way over the next years. what you expect the customer behavior. And my second question is, if you could kindly provide details regarding your mortgage customers, what is the affordability rate for the floating rate and track rate mortgages?

Thank you. Could you take the first one?

Yeah. So, you know, we're not I suppose today we're not actually going to talk about deposit basis. And like we as I mentioned earlier, we are actually we are probably the best in the market in relation to our fixed deposits at 2 percent today. That's a really attractive rate for customers if they want to come in for fixed deposits. On our NIM guidance, as we go forward, as mentioned, we're at a 425 ECB refinance rate, a 375 deposit rate. And actually over time, we see that actually coming back to an average of about 330. And I think if you look at the marketplace today, even five-year money would actually be in that realm of 310 to 330. So I think the market actually expects that those base rates to come down to there. So you know we'll price accordingly from that for the future. And that helps us as we mentioned to grow our net interest margin to 2.5 percent. And like we we are very very interested in our deposit customers. There's no doubt about that for a deposit led bank. And so therefore we will actually look at deposit pricing. We keep it under review all of the time. And we will actually assess that towards the end of this year and next year. But at the moment, I wouldn't be talking about a deposit beta.

And just a question on affordability for Tracker and I think it was for fixed customers, was it?

It would be if we could provide the affordability ratio for Tracker mortgage customers and also for... floating rate customers, please. It's a 2%, is it?

Yeah, I'm not sure. I don't have an affordability ratio for you. Naturally, if I just take them in their two groups, so our variable rate customers, we've increased the rate by 35 basis points. That's a customer base that's quite mature. And variable rate products have not been really taken up by customers over recent years. So it's a relatively small population, as I say, quite mature. I suppose the tracker customers have seen a significant increase in the cost of their mortgages because they are directly related and connected to the ECB rate. What we've seen is some customers have opted to go for a fixed rate product instead. And you know that's something we offer to customers in that regard and we see we've seen some movement there. And I think if you think about the history of the bank over recent years we would have had an exposure to interest only tracker mortgages but would reduce that exposure over time. So it is not a feature of our current exposure. So overall we keep an eye on the performance of the tracker book. The variable rate book as I say hasn't experienced a significant increase. And then lastly the vast vast majority of customers have gone for fixed rates It's in the region of 95% plus in recent years. And as Nicola mentioned, only 25% of that base is moving on to a higher fixed rate in the next year and a half. And maybe or maybe not, we'll see where the ECB go. But, you know, we would expect over the next one, two, three years. as inflation rates start to return to a normalized level for interest rates, ECB interest rates to come down. So again that shows significant protection in our mortgage book and we believe it's something that's quite manageable in that regard. So that's the way I would answer it.

I might just add there also that if you mean by affordability ratio for our tracker or variable rate customers, when they're underwritten, when the bank credit assesses them, there is a 2% stress level for those customers. And that's based on the highest the highest rate that they would be applying for or 2 percent above the highest rate that the bank has. So previously we would have stressed our customers off probably almost a 6 percent rate. And so you know the customers aren't necessarily there yet. And so we're not seeing any stress coming through from our assets quality at this stage.

Thank you.

Our next question comes from Andrew Simpson from Stackful. Andrew, your line is not open. Please proceed.

Good morning, everyone. Thanks for taking my questions. I've got one on rate sensitivity and then a second one on capital, please. Firstly, on rate sensitivity, slide 15 shows that the rate sensitivity has reduced very slightly this half, it looks like. Is that a sensitivity you're happy with, or would you look to lock in the higher rates and hedge more of that exposure going forward, especially if the deposits continue to grow? I guess the The larger fixed rate book is locking in a certain level of that rate already, but interested how you're thinking about that as we kind of get towards peak rates, please. And then secondly, on capital, just a small housekeeping one on whether there's any further one-off items to expect in the second half other than the 70 basis points for asset finance or the other years into the future. And And then a proper question on capital, if I may. I appreciate it may take a while for the supervisors to give approval for lowering the risk rates and internal models and things. But is there anything else you're exploring to reduce the risk weightings in the meantime, whether through some risk transfer trades or anything like that, please? Thank you very much.

Okay, I'll take them backwards if you don't mind. So the risk transfers for us are challenging because primarily we have a mortgage book and under accounting rules, your risk transfer has to be for the life of the mortgage. It can't be for two years. It has to be, say, if you have 10 years remaining. So it does become relatively expensive. approach to manage capital for us at this moment. And given that we're an organic capital generation, we let that kind of work away itself. As we build a business book, we'll have more flexibility in that space. But with a predominantly mortgage book, we have less. By way of the There's no expected one-off capital impacts. In fact, it's capital positive because our profit for the second half of the year will be reflected at year end. So we're generating profits through the next number of months, and then that's reflected when we report. So we'd expect it to be positive to the capital number, it's fair to say, Nicola. And do you want to take the first one on hedging?

Yeah, on hedging, at the moment, we take out some swaps. But we actually are naturally hedged really and we're in control of our liabilities with regards to that pricing. So we keep it under close watch regular basis day to day but we actually don't feel that we actually need to take out additional hedging in that regard. We did this year take out some swaps in relation to our fixed MTNs. one of our older ones, and one of the new MRAL issuances that we did earlier this year. But actually, at the moment, our IRRBB position is very good, and we manage it appropriately. We don't see the need to take out any macro-style hedging.

Okay. That's very helpful. Thank you.

Thank you.

Our next question comes from John Cronin from Bonnie. John, your line's not open. Please proceed.

Thanks for taking my questions, guys. Just a follow-up, really, to Dermot's earlier one on the risk weight. It's a key point in terms of why some people want to own the stock. I mean, we've done a lot of work on this, and you look at the PDs, particularly the probability of default relative to the other Irish banks, and you're more than twice what they have to carry. Yes, you know, look, you talk about 64% of your book now being written under macroprudential rules. And certainly I haven't, unless I'm missing something, picked up anything greatly different in terms of underwriting practices across the three post-GFC. So, I mean, like, in terms of trying to size this in terms of prospective benefits down the line, appreciate, look, Eamon, more 25 than 24 if something comes through, and there's never any certainty with these things. But, you know, would it be a kind of a gradual trickle-down model by model over time, potentially, as a best case? Or could it be a wholesale change affected across the entire mortgage book in one fell swoop that could possibly bring your risk weight down on the mortgage book closer to peer levels?

Well, if you look at our book today, the Ulster Bank book is unstandardized at this moment, so that's how we've acquired it and we reflect it. It is a fully performing book, so I think that's in itself reasonable. So unfortunately, I don't have a crystal ball in that sense. We can't deny the past with regard to what happened through the crisis and origination at that stage, even if we are in macroprudential rules. And indeed, as we think of our capital positioning, it is a 1 in 20, and we take into account a 1 in 20 impact. So I would suggest there's two aspects to it. One is, in an Irish context, the way in which And the risk weight is calculated for all banks. There's a particular discount factor where an added an extra 5 percent is added on to this counting and cash flows arising from a loan is foreborn. I think there's an argument that that should be removed. And I know the BP are working to try and get that removed under Basel three. So that's one aspect. In general, or in theory, that could equate to 5% of risk rates. But I think all banks would benefit from that, not just us. And then I think with regard to the remainder, it's really based on the evidence, John. But the evidence, as you've rightly said, is very positive. Our pre-crisis book is continuing. to reduce, as Nicolas indicated, has actually moved on at a pace now, particularly with the addition of Ulster Bank. And we'll just wait and see. I think in general, we can't deny our past. So therefore, we're likely to have you know, maybe a slightly higher race than others or equivalent to the top end of that. But it'll be better. It should be better than where we are today, which in fairness is quite draconian and requires us to put away in what should be a level playing field against competitors, significantly more capital on a new originated loan. So I don't have a crystal ball in that regard. And we're going to be working hard to try and achieve it. But naturally, it takes two to tango. And we need the regulator's approval of such submission. And that's what we're focused on at this moment.

Thank you. We currently have no further questions. Great.

Well, thanks very much, everyone.

Take care. Thank you very much. Thank you.