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A number of statements we make in our presentation, and in the accompanying slides, will not be based on historical fact but will be “forward‐looking” statements within the meaning of the US Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in the forward looking statements. Factors that could cause actual results to differ materially from those in the forward looking statements include, but are not limited to, global, national and regional economic conditions, levels of market interest rates, credit or other risks of lending and investment activities, competitive and regulatory factors and technology change.
permanent tsb Group Holdings plc undertakes no obligation to update the forward‐looking statements contained in this presentation. Forward‐looking statements made in this presentation relate only to events as at the date on which they are made.
Forward Looking Statements
2
2
2
Agenda
Jeremy Masding, Group CEO – H1 2014 Highlights
Glen Lucken, Group CFO – Financial Performance
Shane O’Sullivan, Managing Director of AMU
Jeremy Masding, Group CEO – Recap and Priorities
Questions & Answers
3
3
3
permanent tsb in H1 2014
IMPROVED PERFORMANCE
MARKET RELEVANCE INDEPENDENCE
BETTER Bottom LineBETTER Arrears Management ACHIEVING Funding StabilityGROWING Market Share
4
4
4
333 437 430
149
1,107
454 500
0
200
400
600
800
1,000
1,200
2011 2012 2013 2014
Impairment Charge (€m)
H2
H1
Sharply Improving Performance (1)
Sharply Improving Bottom Line Underlying performance improved €278m
on H1 13
Sharply Improving Impairment Profile Impairments fell by €281m
Sharply Improving Arrears Profile Early and late arrears in ROI mortgages
decreasing Total number of cases in arrears down 14%
in H1 14
359 457 449 171
1,109
523 528
0
200
400
600
800
1,000
1,200
1,400
1,600
2011 2012 2013 2014
Losses (€m)
H2
H1
977980
930891
1,468
1,440
5
5
5
Re-establishing market position; a competitive third retail banking force
Well positioned as economic outlook continues to improve and foreign owned banks retrench
Growing customer base driven by expanding customer proposition
Focused OME launch planned for H2
Sharply Improving Performance (2)
ImprovedPerformance
… Meaning on-plan to
deliver sustainable profitability
Economic environment continues to support business
Arrears have peaked in 2013 and are falling
Impairments are reducing significantly
Non-Core deleveraging planned in H2
6
6
6
…Building a Best in Class Retail Bank in IrelandAttracting New Customers and Deposits
Deposit balances have increased to €14.5bn (incl. Current Accounts)
Market share of 13% Current Account balances have increased by
c.€250m 15,524 new payroll accounts in H1
Increasing New Lending
Mortgage drawdowns have increased to €180m, an increase of 362% from H1 2013
Market share of approvals of 13% from a low of 3% in Q4 2012
Term Lending payouts up 14% yoy to €21m
Broadening Customer Proposition Insurance Sales up 70% yoy in H1 OME launch in H2
13.5 13.513.7
14.0
14.5
12.3% 12.3%12.5%
12.7%
13.0%
11.8%
12.0%
12.2%
12.4%
12.6%
12.8%
13.0%
13.2%
12.8
13.2
13.6
14.0
14.4
14.8
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014
Deposit Volumes (€bn) and Market Share (%)
Deposit Volumes Market Share
39 42 39
170 180
38 29
69
221
264
3%4%
5%
9%
13%
0%
2%
4%
6%
8%
10%
12%
14%
0
50
100
150
200
250
300
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014
Mortgages Approvals/Drawdowns (€m) and Market Share (%)
PTSB Drawdowns (€m) PTSB Approvals (€m) Share of Market Approvals (%)
7
7
7
Group: Key Financial HighlightsImproving Operating Performance
Operating Loss reduced by 61.9% NIM improved by 6bps; ptsb SBU NIM at
140bps Impairment Charges reduced by 65.3% ptsb SBU records Operating Profit of €3m
Strengthening the Balance Sheet
Arrears over 90 days fallen by 14% since Dec 13
Customer Deposits increased to 60% of mix
ECB Funding reduced further by 15.9%; halved from peak levels in 2011
Loans to Deposit ratio down 10ppts to 141%
Capital position remains strong at 12.7%
Key Metrics
Income Statement H1 ‘14 H1 ‘13 Change
Operating Loss Before Exceptional Items (171) (449) 61.9%
NIM (Before ELG Fees) 88bps 82bps 6bps
Impairment Charges (149) (430) 65.3%
Balance Sheet Jun ’14 Dec ’13 Change
System Funding €5.8bn €6.9bn 15.9%
Loans to Deposit Ratio 141% 151% 10ppts
CET 1 Ratio 12.7% 13.4% 0.7ppts
Customer Accounts 20,545 19,511 5.3%
ROI Arrears > 90 Days (#) 22,559 26,357 14.4%
8
8
8
Agenda
Jeremy Masding, Group CEO – H1 2014 Highlights
Glen Lucken, Group CFO – Financial Performance
Shane O’Sullivan, Managing Director of AMU
Jeremy Masding, Group CEO – Recap and Priorities
Questions & Answers
9
9
9
H1 2014€m
H1 2013 €m
Change€m
Change%
Net Interest Income 158 156 2 1.3%
Other Income 33 26 7 26.9%
ELG Fees (32) (63) 31 49.2%
Total Operating Income 159 119 40 33.6%
Operating Expenses (181) (138) (43) (31.2%)
Operating LossPre‐Impairment (22) (19) (3) (15.7%)
Impairment Charges (149) (430) 281 65.3%
Loss Before Exceptional Items (171) (449) 278 61.9%
Exceptional Items (Net) ‐ 318 (318) (100.0%)
Loss Before Tax (171) (131) (40) (30.5%)
Avg. Int. Earning Assets 36,079 38,049 (1,970) (5.2%)
Net Interest Margin 88bps 82bps 6bps 7.3%
Group Income Statement
Net Interest Income increased marginally by 1.3%, despite a 5.2% reduction in Interest Earning Assets
Steady NIM improvement of 6bps in falling rate environment driven by lower cost of funds
Other Income increase of 26.9% mainly driven by one‐off gains
ELG Fees reduced by 49.2% as result of reduction in covered liabilities
Operating Expenses increased by 31.2% as a result of increased regulatory costs and one‐off legacy legal and compliance costs
Impairment Charges reduced by 65.3% mainly driven by reduced new default flow and provision releases as restructured loans are labelled as ‘cured’
Underlying Loss improvement of 61.9% Excluding one‐off items in Income and
Expenses, the Group recorded a Pre‐Provision Profit
10
10
10
Income Statement (€m) Core BankNon‐Core Group*
PTSB AMU
H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013
Underlying Operating Profit/(Loss) Before Impairments and Non‐Recurring Items
62 (26) (49) (22) (18) 6 4 (33)
Non‐Recurring Items ‐ 14 (25) ‐ (1) ‐ (26) 14
Impairment Charges (59) (27) (42) (307) (48) (96) (149) (430)
Profit/(Loss) 3 (39) (116) (329) (67) (90) (171) (449)
Balance Sheet (€bn) Jun 14 Dec 13 Jun 14 Dec 13 Jun 14 Dec 13 Jun 14 Dec 13
Total Assets 20.8 21.8 6.5 6.4 9.2 9.3 36.9 37.6
Gross Loans 14.1 14.6 8.8 8.7 10.2 10.1 33.1 33.5
*Group includes unallocated adjustments which have not been attributed to the segments
Group: Segmental Performance
11
11
11
Group: Net Interest Income and NIM
0.88%0.82%
0.19%
0.20%
0.12%
0.07%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
NIM June 2013 Asset Pricing DepositFunding Costs
ECB FundingCosts
WholesaleFunding
NIM June 2014
Components of NIM
Cost of Funds decreasing at a faster rate than Asset Yields
NII and NIM Group NIM shows a steady
improvement of 6bps ptsb SBU NIM is at 140bps Driven mainly by reduction in overall
cost of funds Continuous ECB rate cuts over the last
few years driving lower asset yieldsFuture NIM expansion will primarily reflect: Decreasing Cost of Funds Increasing new lending with higher
margins Refinancing the back book in
improving economic environment Maturity of CoCo (in June 2016)
76bp
88bp
72bp82bp 82bp
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014
Cost of FundsAsset Yields
12
12
12
Staff Costs
Staff Costs reduced by €3m or 4% compared to June 2013 due to changes in pension entitlements and other staff benefits, and savings achieved from VSS
Other Costs
Other Costs increased due higher cost of regulation and one‐off provisions relating to legacy legal and compliance liabilities
Bank Levy
c€30m due for recognition and payment in H2 2014
Group: Operating Expenses
€69m €66m
€69m
€115m
€0m
€40m
€80m
€120m
€160m
€200m
H1 2013 H1 2014
Group Operating Expenses
Staff Costs Other Costs
13
13
13
Impairment Charges
434 449 429
498
148
0
100
200
300
400
500
600
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014
Impairment Charges (€m) Group Impairments
Impairment Charges decreased by €281m (65.3%) since H1 2013, driven by the fall in both early and late arrears across all portfolios
ROI HL charge reduced by 45.8% from H1 2013, mainly due to low levels of new defaults
ROI BTL recorded a write‐back of provisions of €14m as restructured loans are cured
Consumer Finance book recorded a write‐back of provisions of €3m due to enhanced collections performance
65%
14
14
14
Deleveraging
36,402
35,042
33,995 33,769
33,089
680
30,000
31,000
32,000
33,000
34,000
35,000
36,000
37,000
H2 2011 H2 2012 H2 2013 H1 2014 Post HFS Sale
Deleveraging* (€m)
Assets reduced by €2.6bn since 2011
Deleveraging
Continued natural net reduction of loan assets
Gross Loans have reduced by over €2.6bn since 2011
Small tranche of CRE sold in H1
€680m of loans are formally ‘Held for Sale’ (Springboard and a small tranche of CHL loans), with further asset sales planned over time (CRE)
Held for Sale
Note: * Gross Loans at constant exchange rate
15
15
15
Funding
227% 157% 151% 141%
LDR%
Continuing focus on optimising the funding mix: System Funding reduced by €1.1bn or
16%; reduced to 17% of mix and more than two thirds down from peak
€1bn growth in deposits across Retail and Corporate channels at an improved rate (60% of mix)
Reliance on Short‐Term Debt remains static at 6%
Fastnet 9 launched in December 2013 with a yield of Euribor + 165bps%, which has since fallen to Euribor + 110bps%
€0.8bn repaid under the LTRO programme in 2014
LDR improved due to a combination of deposit growth and loan book run‐down
Continuing reduction in Cost of Funds into 2014
14.419.2 19.5 20.5
14.07.8 6.9 5.8
8.77.8 7.9 7.5
1.89%1.76%
1.65%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
2.00%
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
H2 2011 H1 2013 H2 2013 H1 2014
Group Funding Mix
Customer Deposits System FundingWholesale Funding Cost of Funds
€bn
16
16
16
13.4% 12.7%
0.0%
4.0%
8.0%
12.0%
16.0%
Dec‐13 Jun‐14
CET1 Ratio %
Common Equity Tier 1 ratio under Basel III transitional basis is 12.7%; well above the regulatory minimum of 8%
RWA – down €0.9bn due both to reduction in loans and advances, and improvement in default probabilities as the economy recovers
Capital
16,953
16,070
15,600
16,000
16,400
16,800
17,200
Dec‐13 Jun‐14
RWA Level€m
17
17
17
€3.9bn€17.7bn
53%
19%
6%
21%
1%
Gross Loans
ROI HL
ROI BTL
CRE
CHL
Consumer
55%25%
16%
3% 1%
NPLs
ROI HL
ROI BTL
CRE
CHL
Consumer
Group: Asset Quality
ROI HL ROI BTL CRE CHL Consumer Total
Gross Loans €bn 17.1 6.4 2.1 7.0 0.3 32.9
Performing % 69% 65% 29% 95% 67% 71%
NPLs* % 27% 33% 69% 3% 24% 26%
Provisions €bn 1.7 1.3 0.9 0.1 0.1 4.1
PCR % 38% 60% 65% 36% 97% 48%
*Non‐Performing Loans are defined as loans which are greater than 90 days in arrears or impaired
18
18
18
Group: Asset Quality ‐ ROI Home Loans
ROI HL: €17.1bn* H1 2014 H2 2013 Change
Early Arrears (<90 days) 6,041 7,063 14.4%
Late Arrears (90+ days) 19,009 22,452 15.3%
Late Arrears % of Total Cases 13.7% 15.8% 2.1 ppts
NPLs (€m) 4,681 4,526 3.4%
Provision Stock (€m) 1,758 1,661 5.8%
Coverage Ratio 38% 37% 1 ppt
130 154
236 201
128
0
50
100
150
200
250
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014
Impairment Charges (€m)
ROI HL
Portfolio
73% of ROI residential mortgages are HLs
57% are Trackers
Economic Environment
CSO property price index shows a nationwide increase in residential property prices of 12.5% in the year to 30 June 2014. Overall the national index is 43% lower than the peak in 2007. Provisioning assumptions continue to be conservative at 55% PTT
Unemployment levels continue to decline
Performance
Early and Late arrears continue to reduce significantly
PCR has increased to 37.6% and remains robust
NPLs increased due to treatments trial periods; if assume all trials convert, NPLs/>90 Days Cases reduced by 15.3%
Impairment Charges reduced by 36.3% since H2 2013
*Gross Loans before Impairments
19
19
19
Group: Asset Quality ‐ ROI Buy‐To‐LetsROI BTL: €6.4bn* H1 2014 H2
2013Change
Early Arrears (<90 days) 981 1,013 3.2%
Late Arrears (90+ days) 3,550 3,905 9.1%
Late Arrears % of Total Cases 15.5% 16.9% 1.4ppts
NPLs (€m) 2,094 2,229 6.1%
Provision Stock (€m) 1,255 1,289 2.6%
Coverage Ratio 60% 58% 2 ppts
124 100 102
188
‐14
‐50
0
50
100
150
200
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014
Impairment Charges (€m)
ROI BTL
Portfolio
27% of ROI residential mortgages are BTLs
85% are Trackers
Economic Environment
CSO property price index shows a nationwide increase in residential property prices of 12.5% in the year to 30 June 2014. Overall the national index is 43% lower than the peak in 2007. Provisioning assumptions continue to be conservative at 55% PTT
Unemployment levels continue to decline
Private rental market continued to grow in 2014
Performance
Early and Late arrears continue to reduce significantly
PCR has increased to 59.9% and remains robust
Post‐Trials NPLs/>90 Days Cases reduced by 9.1%
Write Back of €14m in H1 2014
*Gross Loans before Impairments
20
20
20
Agenda
Jeremy Masding, Group CEO – H1 2014 Highlights
Glen Lucken, Group CFO – Financial Performance
Shane O’Sullivan, Managing Director of AMU
Jeremy Masding, Group CEO – Recap and Priorities
Questions & Answers
21
21
21
The Asset Management Unit
Reduce the flow of new arrears cases
focus on early engagement and cash collection
Engage with customers in late arrears
agree a treatment (repayment plan) that is sustainable and affordable
Manage the legal, property management and recoveries process
use if no affordable and sustainable solution can be found
AMU Role
22
22
22
The Asset Management Unit
Key Achievements
1. Engagement delivering real benefits
> 80% of customers engaging
88% of Home Loan customers who engage are offered sustainable and affordable treatments to retain ownership
2. Dramatic increase in restructuring deals offered
24,000 restructure offers made by the end of June (cumulative across HL and BTL)
3. Exceeded all Central Bank MART targets
Offering sustainable solutions to customers in late arrears
4. Significant progress in reducing arrears levels
Number of arrears cases down 14% during H1 2014; 17% down from the peak
23
23
23
Engagement Delivers Real Benefits
Stage 1
Engagement Through SFS
Stage 2
Objective SFS Assessment
Stage 3
Realistic Mortgage Restructure Options
Stage 4
Post-Restructure Payment
•26,000 SFSs completed
•On average we agree a sustainable solution with customers within 10 working days
•For 88% of Home Loan accounts the Bank identifies a payment arrangement that can see the customer retaining ownership
•The equivalent figure for BTL accounts is 79%
•Where customers work with the Bank, the vast majority receive affordable and sustainable solutions; 80% of customers accept their restructure offer
•92% of stage 3 customers successfully meeting their new mortgage payment
The Group’s focus on sustainable and affordable treatments has resulted in industry leading Arrears Management Metrics
24
24
24
Sustainable Solutions
Short TermTreatments
Other Options
• Term Extension
• Arrears Repayment Plan
• Part Capital and Interest with Bullet
• Split Mortgage with Bullet
• Voluntary Sale (with upfront agreement on shortfall)
• Voluntary Surrender
• Mortgage To Rent
• Insolvency
• Interest Only
• > Interest Only
Long Term Treatments
Repossessions are considered only after alternative treatments have been considered/offered or where the Borrower refuses to engage with the Bank. The
Bank will continue to explore treatments that may result in a customer being removed from the Legal process.
25
25
25
Source: PTSB Internal Data, CBI DataNote: *rounded to the nearest hundred
Delivering Arrears Management Performance (1)PTSB Buy To Let: Trend significantly outperforming industry
Early Arrears down to 4.2% from 6.4% in June 2012, Late Arrears down to 15.1% from 21% at peak
Jun‐12 Dec‐12 Jun‐13 Dec‐13 Jun‐14Industry 6.6% 6.5% 6.8% 6.2%
PTSB 6.4% 5.2% 4.6% 4.3% 4.2%
2%
3%
4%
5%
6%
7%
8%
% of A
ccou
nts in 1‐90
Days in Arrears
Early Arrears – BTL
Jun‐12 Dec‐12 Jun‐13 Dec‐13 Jun‐14Industry 16.1% 18.5% 20.7% 22.0%
PTSB 19.3% 21.0% 18.8% 16.5% 15.1%
0%
5%
10%
15%
20%
25%
% of A
ccou
nts in >90 da
ys in
Arrears
Late Arrears – BTL
26
26
26
PTSB Home Loan: Trend outperforming industryEarly Arrears down to 4.1% from 6.2% in June 2012, Late Arrears down to 12.5% from 15.1% at peak
Delivering Arrears Management Performance (2)
Jun‐12 Dec‐12 Jun‐13 Dec‐13 Jun‐14Industry 6.2% 6.2% 6.0% 5.3%
PTSB 6.2% 5.4% 5.0% 4.8% 4.1%
2%
3%
4%
5%
6%
7%
% of A
ccou
nts in 1‐90
Days in Arrears
Early Arrears – Home Loan
Jun‐12 Dec‐12 Jun‐13 Dec‐13 Jun‐14Industry 10.1% 11.5% 11.1% 11.0%
PTSB 12.4% 13.7% 15.1% 14.9% 12.5%
4%
6%
8%
10%
12%
14%
16%
% of A
ccou
nts in >90 da
ys in
Arrears
Late Arrears – Home Loan
Source: PTSB Internal Data, CBI DataNote: *rounded to the nearest hundred
27
27
27
• More than 60% of “Non-Performing” HL customers pay more than 50% of their mortgage each month
• More than 50% of “Non-Performing” BTL customers pay more than 50% of their mortgage each month
Customers are continuing to pay what they can …
… and balances in negative equity have fallen by 8% since December 2013
Improving Economics
2.5 2.3
1.51.4
‐
1
2
3
4
5
Dec 13 Jun 14
Balances in Negative Equity
BTL
HL
€4.0bn€3.7bn
€bn
8%
28
28
28
Agenda
Jeremy Masding, Group CEO – H1 2014 Highlights
Glen Lucken, Group CFO – Financial Performance
Shane O’Sullivan, Managing Director of AMU
Jeremy Masding, Group CEO – Recap and Priorities
Questions & Answers
29
29
29
On the Road to Profitability…
437 454 430499
149
0
100
200
300
400
500
600
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014
Impairment Charges (€m)
6.5 7.0 7.5 8.6 8.5
14.1%
15.6%16.1% 15.9%
13.9%
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
‐
2.0
4.0
6.0
8.0
10.0
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014
Total NPLs (€bn) and ROI Residential Mortgages in Arrears > 90 days (% of total cases)
Total NPLs ROI residential mortgages in arrears > 90days
‐457‐520
‐449‐528
‐171
‐600
‐500
‐400
‐300
‐200
‐100
0
Underlying losses before exceptional items (€m)
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014
0.76%0.72%
0.82% 0.82%
0.88%
0.50%
0.55%
0.60%
0.65%
0.70%
0.75%
0.80%
0.85%
0.90%
H1 12 H2 12 H1 13 H2 13 H1 14
Net Interest Margin Trajectory %
NIM
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014
30
30
30
…Whilst Recognising and Managing the Constraints
Performance and outlook have improved dramatically;
however, we are balanced about the challenges ahead…
Returning to Sustainable Economic Profitability
ManagingLegacy Issues
Demonstrating ‘Focus’ is a form of Sustainable Advantage
31
31
31
Re-establish market position as competitive third retail banking force
Increase market share in lending and deposits
Expand customer proposition and launch into SME
Return to sustainable economic profitability
Continue to deliver
Summary
Recap
Priorities
Losses abating for the first time since 2008
Impairment charges reducing; arrears have peaked and are now falling
Strong funding position; deposit base expanding and cost of funds falling
Higher new lending volumes
32
32
32
Agenda
Jeremy Masding, Group CEO – H1 2014 Highlights
Glen Lucken, Group CFO – Financial Performance
Shane O’Sullivan, Managing Director of AMU
Jeremy Masding, Group CEO – Recap and Priorities
Questions & Answers
33
33
33
Appendix
34
34
34
1 70
617 523
225 270
203 141
1,177 1,084
‐
500
1,000
1,500
2,000
2,500
Dec 13 Jun 14
Buy‐to‐Let NPLs
>90 Days Arrears/Legal ClosuresTechnically Held Long Term TreatedSplits (Treated But Impaired)
153
1,005979
809219
224501
437
2,344
1,880
‐
1,000
2,000
3,000
4,000
5,000
Dec 13 Jun 14
Home Loans NPLs
>90 Days Arrears/Legal ClosuresTechnically Held Long Term TreatedSplits (Treated But Impaired)
NPL Analysis
• >90 Day arrears are falling….• …but Treated Assets are making up an increasing proportion of total NPL stock which will
cause NPL stock to remain elevated.
€4,231m €4,355m €2,234m€2,088m
€m €m
€2,880m
€1,351m
€2,317m
€2,038m
€1,391m
€843m
€1,224m
€863m
Note: • “Technically Held” relate to assets which have not breached the standard delinquency triggers, but are classified as default, typically, through association with other defaulted assets. • Numbers do not include Springboard Portfolio