#1Bank of Ireland Credit Presentation February 2017 Bank of Ireland Group#2Empty#3Bank of Ireland Overview#4Bank of Ireland Franchises Benefitting from Irish growth with International diversification 54% Customer Loans¹ €44.6bn ⚫ €1.8bn €6.8bn 40% €33.4bn €2bn €11.7bn €3.4bn €4.1bn €24.3bn €23.9bn ROI Consumer UK 6% €4.4bn International Businesses ■Non-property SME & Corporate Property and Construction Residential Mortgages 1Gross loans and advances to customers at 31 Dec 2016 of €82.4bn ROI UK Bank of Ireland Group Continue to be the largest lender to the Irish economy #1 or #2 market positions across all principal product lines Strong commercial discipline on lending and deposit margins Continuing to benefit from and support economic growth in Ireland Attractive partnerships including the Post Office and AA Commission based business model provides flexibility to adapt quickly to market developments Focussed predominantly on consumer sector BOI (UK) plc is a separately regulated, capitalised and self funded business International Business - Acquisition finance business Mid market US/European business Strong 20+ year track record Good geographic and sectoral diversification Generates attractive margins and fee income within disciplined risk appetite 2#5Bank of Ireland Overview 2016 Underlying PBT of €1,071m 2015 2016 Total Income €3,272m €3,015m Net Interest Margin (NIM) 2.19% 2.19% Operating expenses (€1,746m) (€1,747m) Core Banking Platforms investment (€41m) Levies and regulatory charges (€75m) (€109m) Impairment charges (€296m) (€178m) Underlying profit before tax €1,201m €1,071m Robust balance sheet metrics Customer loans (net) Non-performing loans 2015 €84.7bn €12.0bn 2016 €78.5bn €7.9bn Bank of Ireland Group Continued organic capital generation Fully loaded CET1 up 100bps to 12.3% Transitional CET1 up 90bps to14.2% Underlying profit of €1,071m in 2016 NIM of 2.19% (H1 2016 - 2.11%, H2 2016 - 2.27%) Strong discipline on pricing and risk - priority is to protect and generate capital New lending of €13.0bn increased 1% YoY Continue to be largest lender to the Irish economy in 2016 Growth in core loan book of €1.7bn NPLs reduced by €4.1bn (34%) in 2016 to €7.9bn; All asset categories reduced Defaulted loans of €6.9bn now c.8% of customer loans; down >60% from reported peak in June 2013 CET1 ratios: Transitional 12.9%1 14.2% Fully Loaded 11.3% 12.3% Transitional Total 17.5%¹ 18.5% Capital Ratio Liquidity metrics: NSFR Net impairment charge of 21bps in 2016 vs 32bps in 2015 120% 122% LCR 108% 113% LDR 106% 104% Transitional CET1 ratio of 12.9% and Total capital ratio of 17.5% are the pro-forma ratios as at 1 Jan 2016 allowing for the impact of CRD IV phasing in 2016 3#6Economic Overview#7Supportive economic backdrop Continued growth expected in Irish and UK economies 4.5% Irish and UK Economies are growing 1.8% 3.2% 1.6% 3.1% 1.5% 2016e 2017f 2018f UK GDP ROI GDP (annual real growth) Unemployment rate falling in Ireland, remains low in UK 9.4% 7.9% 6.8% 6.2% 5.5% 5.4% 5.2% 4.9% 2015 Bank of Ireland Group And creating jobs 32.0m 31.9m 31.7m 31.3m 2.10m 2.07m 2.02m 1.96m 2015 2016 2017f 2018f ■ROI number employed UK number employed (annual average) Demand driven increases in house prices with constrained supply 17.1% 8.1% 7.2% 4.6% 4.5% 4.5% 2016 2017f 2018f ROI unemployment rate UK unemployment rate (annual average) 2014 2015 2016 ■ROI residential property prices national (change, Dec on Dec) UK residential property prices national (change, Dec on Dec) Sources: Bank of Ireland Economic Research Unit, Central Statistics Office, Office for National Statistics, Nationwide 5#8Bank of Ireland Group Support for housing market % 30- House prices increasing, faster outside of Dublin than in the capital Completions up 17.9% in 2016 to 14,932, but remain below estimated demand of c.30,000 per annum Residential transactions slightly lower in 2016 vs 2015 Mortgage lending in 2016 up 5.2% (c.29,500 loans) and 12.3% (c.€5.7bn) y-o-y in volume and value terms New Government 'Help to Buy' scheme and loosening of Central Bank's LTV rules for first time buyers will support demand Property Prices and Rents Public finances improving Budget 2017 package injects €1.3bn into economy ▶ Solid tax revenue growth and spending control means deficit target of 0.9% of GDP in 2016 to be met ▶ Debt to GDP ratio estimated at 76% of GDP at end 2016, Government has pledged to reduce to 45% of GDP by mid 2020s ▶ Ireland is fully engaged in debt markets, sovereign yields at low levels. The NTMA has already raised c. 50% of its funding target for 2017 % 0 General Government Deficit 20 10- 0 -10- -20- -30- 2010 2011 2012 2013 2014 -0.5- -1- 2015 2016 2017 -1.5. Rents National National Ex Dublin Dublin Graph shows year-on-year change in residential prices and private rents Commercial Source: CSO Capital Growth Rental Growth 8.00% 7.40% Graph shows year-on-year change Q4 2016 Source: IPD 2016e 2017(f) Ireland Euro Area Graph shows General Government deficit as a % of GDP Source: Department of Finance, EU Commission 2018(f) 6#9Operating Performance#10Net interest income NIM benefitting from new lending and lower funding costs 2.21% Net interest margin drivers 2.17% 2.11% 2.27% 277 bps 269 bps 269 bps 264 bps 27 bps 34 bps 22 bps 9 bps H1 2015 H2 2015 H1 2016 H2 2016 NIM Loan Asset Spread' Liquid Asset Spread¹ Average interest earning assets €108.8bn €108.0bn €105.1bn €99.4bn €24.3bn €22.4bn €22.5bn €20.5bn €84.6bn €85.6bn €82.6bn €78.9bn Net interest income - €2,283m NIM Bank of Ireland Group Net interest income lower than 2015 due primarily to FX translation impact of c.€90m, the impact of the low interest rate environment and lower liquid asset income ► 2016 NIM of 2.19% (H1 2016: 2.11%, H2 2016: 2.27%) reflects; Positive impact from new lending and strong commercial discipline on pricing Maturity of expensive CoCo (€1bn; 10% fixed coupon) at end July 2016 Lower cost of deposit funding, offset by; Continued impact of low interest rate environment Expect NIM to grow modestly from H2 2016 level through 2017 Average interest earning assets ► Reduced to €99.4bn in H2 2016. Reduction primarily due to FX translation impact H1 2015 H2 2015 Average Loans & Advances H1 2016 H2 2016 Average Liquid Assets Spread = Loan asset yield or Liquid asset yield less Group's average cost of funds 8#11Loans and advances to customers Continued growth in core loan books €84.7bn Group loan book movement in 2016 €1.7bn Dec 15 Loan Volumes Core loan book growth¹ €2.6bn €5.4bn Redemptions on Defaulted Loans, ROI trackers, GB non-core FX / Other Net Lending Growth³ €0.9bn GB non-core business banking² €0.4bn Defaulted loans €1.1bn €78.5bn Dec 16 Loan Volumes Irish businesses €0.8bn UK businesses Acquisition Finance Bank of Ireland Group Core loan books¹ grew by €1.7bn in 2016 Customer loans decreased by c.€6.2bn to €78.5bn; primarily due to FX translation impact of €5.4bn and redemptions of defaulted loans, ROI tracker mortgages and GB non-core business banking loan books² (€2.6bn) ▶ New loan volumes of €13.0bn and acquisitions of €0.2bn in 2016. New lending³ on a constant currency basis increased 1% vs. 2015; Retail Ireland new lending up €0.4bn (9%) Retail UK new lending of £4.1bn broadly flat vs. 2015. New mortgage volumes decreased reflecting our discipline in pricing and risk in H2 2016. Growth in consumer book reflects new partnership with AA Corporate new lending up €0.3bn (18%) vs. 2015. Acquisition Finance new lending down €0.4bn with book remaining flat Redemptions of €14.1bn broadly in line with 2015 We will maintain appropriate focus on risk and pricing ROI trackers €1.1bn ¹Core loan book growth excludes cash from defaulted loans, redemptions of low yielding ROI tracker mortgages and redemptions of GB non-core business banking loans 2GB business and corporate loan books, which BOI is required to run down under its EU approved Restructuring Plan (2015 - £1.3bn; 2016 - £0.9bn) Excludes portfolio acquisitions (2015 - €0.6bn; 2016 - €0.2bn) 9#12Non-performing loans and impairment charges Significant reduction of €4.1bn (34%) in non-performing loans in 2016 €15.8bn €1.5bn Non-performing loans 50% Reduction €12.0bn €1.4bn €14.3bn €7.9bn €1.0bn €10.6bn €6.9bn Dec 14 Dec 15 Dec 16 Defaulted Loans Probationary Mortgages Impairment charge on customer loans 47% 49% 65% Reduction 49% Non-performing loans - €7.9bn Bank of Ireland Group ▶ €4.1bn reduction during 2016; 50% reduction in NPLs over last two years Reductions in all asset classes Defaulted loans component of €6.9bn; down >60% from reported peak in June 2013 ▶ The reduction in NPLs reflects the Group's ongoing progress with resolution strategies and the positive economic environment Expect further reductions in 2017 and beyond; pace will be influenced by a range of factors Impairment charge on customer loans Net impairment charge of 21bps for 2016 NPL coverage ratio of 49% Net impairment charge for 2017 expected to be broadly similar to 2016 charge 59bps 2014 32bps 2015 21bps 2016 Coverage ratio, being impairment provisions divided by non-performing loans Annual impairment charges on customer loans as a % of average gross loans for the period Note: Non-performing loans includes defaulted loans plus probationary mortgages 10#13Non-performing loans by portfolio Reducing across all asset classes ROI Mortgages €3.9bn €0.7bn 44% Reduction Bank of Ireland Group UK Mortgages 35% Reduction €3.0bn €0.7bn €2.2bn €0.5bn €3.2bn €1.3bn €1.2bn €2.3bn €1.7bn €0.8bn €0.8bn €0.7bn €0.5bn €0.5bn €0.5bn €0.3bn Dec 14 Dec 15 Dec 16 Dec 14 Dec 15 Dec 16 Defaulted Loans Probationary Mortgages Defaulted Loans Probationary Mortgages Non property SME and Corporate 42% Reduction €3.3bn €2.7bn €2.0bn Dec 14 Dec 15 Non-performing Loans. Dec 16 €7.1bn Property and Construction 60% Reduction €4.9bn €2.8bn Dec 14 Dec 15 Non-performing Loans Dec 16 Note: Non-performing loans includes defaulted loans plus probationary mortgages 11#14Capital & Funding#15Capital Strong organic capital generation Transitional CET1 ratio¹ movement 1.5% 0.1% (0.15%) 0.05% 0.4% 12.9% (0.2%) 14.4% 14.2% Dec 15 CET1 Organic² capital generation IAS 19 pension deficit movement CRT/3 FX/Other ROI Mort. Dec 16 CET1 model Core Banking Platforms change Investment 11.3% 1.3% Impact of CRD IV phasing at 1 Jan 2016 Fully loaded CET1 ratio movement 0.3% (0.2%) (0.2%) (0.2%) Bank of Ireland Group Dec 16 CET1 Strong organic capital generation in 2016; Robust capital ratios; Transitional CET1 ratio of 14.2% Fully loaded CET1 ratio of 12.3% Transitional Total Capital ratio of 18.5% Transitional leverage ratio of 7.3%; Fully loaded leverage ratio of 6.4% IAS19 accounting standard defined benefit pension deficit of €0.45bn (Dec 15: €0.74bn)5 Core Banking Platforms investment; Investment in 2016 of c.€105m (CET1 ratio impact of 20bps) of which €41m charged to income statement ▷ Expect investment with a CET1 ratio impact of c.35-45bps p.a. over the next 4 years with c.50% charged to income statement and c.50% capitalised ► Regulators have confirmed their preferred resolution strategy requires the establishment of a holding company; Will be subject to shareholder approval 12.5% 12.3% Dec 15 Organic² IAS 19 CET1 capital pension generation deficit movement CRT/3 ROI Mort. model change FX/Other Dec 16 CET1 Core Banking Dec 16 CET1 Platforms Investment Further updates in due course 'The pro-forma CET1 ratio at 1 January 2017 is estimated at 14.0%, reflecting the phasing in of CRD IV deductions for 2017 2Organic capital generation consists of attributable profit, AFS reserve movements, the reduction in the DTA deduction (DTAs that rely on future profitability), movements in the Expected Loss deduction and RWA book size and quality movements. Transitional organic capital generation is 20bps higher due to the phasing impacts on AFS reserves and the DTA/Expected Loss deductions 3In December 2016, the Group executed a credit risk transfer (CRT) transaction while also revising its calculation of capital requirements under the IRB approach for its ROI mortgage non-defaulted loan portfolio in advance of the ECB's targeted review of internal models (TRIM) "Relates primarily to FX and other regulatory deductions. Transitional CET1 also includes the positive impact from the removal of the sovereign filter 5Note that deficit clearing contributions of €0.1bn during 2016 do not impact fully loaded ratios 13#16Regulatory Capital Requirements Supervisory Review and Evaluation Process (SREP¹) requirement 14.2% Bank of Ireland Group Capital Conservation Buffer (CCB) of 2.5% phased in over 4 years from 2016 1.5% O-SII¹ Buffer phased in over 3 years from July 2019 OSII +0.5% +P2G 2.5% CCB 1.875% 1.25% CCB Transitional 2.25% P2R CET1 Ratio Dec 2016 4.5% Min CET1 Requirement SREP¹ 2017 +1.0% 2.5% SREP requirement from 2018 onwards not known at this point Requirement to be reviewed annually 2018 2019 +1.5% 2.5% 2020 2021 Minimum Regulatory Capital Requirement ►Pillar 2 requirements (P2R) Required to maintain a minimum CET1 ratio of 8% on a transitional basis from 1 January 2017 Includes a Pillar 1 requirement of 4.5%, a P2R of 2.25% and a capital conservation buffer for 2017 of 1.25% The CBI (ROI) and FPC (UK) have set the countercyclical buffer (CCуB)² at 0% ► Pillar 2 guidance (P2G) is not disclosed in accordance with regulatory preference Capital Guidance ► Expect to maintain a CET1 ratio in excess of 12% on a transitional basis and on a fully loaded basis by the end of the phase-in period Includes meeting applicable regulatory capital requirements plus an appropriate management buffer ¹SREP and O-SII requirement are subject to annual review by the Single Supervisory Mechanism (SSM) and the Central Bank of Ireland (CBI) respectively 2CCyB is subject to quarterly review by Central Bank of Ireland (ROI) and Financial Policy Committee (UK) 14#17Regulatory Requirements MREL "Informative Target" 27.25% MREL Informative Bank of Ireland Group -1.25% 2.75% Loss absorption amount Recapitalisation + + amount Market Confidence Charge 1.5% OSII² 2.5% CCB 2.25% P2R Target 1.5% OSII 2.5% CCB1 2.25% P2R1 Own Funds 8% Pillar 1 Requirement Own Funds 8% Pillar 1 Requirement 10.25% 14.25% SRB published methodology³ for calculation of informative MREL target MREL Target is expressed as a percentage of Total RWA SRB confirm that "MREL target does not consider bank specific analysis" Regulatory guidance expected during 2017 on: ►MREL requirements Phase-in period Internal MREL requirements / Downstreaming 'Capital Conservation Buffer (CCB) and Pillar 2 Requirement (P2R) 2SREP and O-SII requirement are subject to annual review by the Single Supervisory Mechanism (SSM) and the Central Bank of Ireland (CBI) respectively 3Source: https://srb.europa.eu/en/node/176 15#18Funding Update Dec 15 (€m) Dec 16 (€m) Customer Loans 85 78 Liquid Assets 24 21 Customer Deposits 80 75 Retail Ireland 39 41 Retail UK 29 23 Corporate 12 11 Wholesale Funding 14 14 Private Markets 13 11 Monetary Authority 1 3 Bank of Ireland Group Customer deposits - €75.2bn Customer deposits funding >95% of customer loans Predominantly sourced through retail distribution channels Ongoing shift from term deposits to current accounts due to the low interest rate environment Wholesale funding - €14.4bn Strong liquidity position facilitated buyback of €0.9bn of expensive debt in 2016 Monetary Authority borrowings of €3.4bn reflecting Group's usage of cost efficient long term funding facilities Strong liquidity ratios Net Stable Funding Ratio - 122% Liquidity Coverage Ratio - 113% Liquidity Metrics NSFR 120% 122% LCR 108% 113% LDR 106% 104% Loan to Deposit Ratio - 104% 16#19BOI Credit Ratings STANDARD & POOR'S Senior Unsecured BBB (Stable) MOODY'S Baa2 (Positive) Bank of Ireland Group Fitch Ratings BBB- (Positive) Issuer Specific Rating Progress on BOI Credit Ratings Key Rating Drivers Upside could develop from: Stand Alone Credit Profile (SACP): bbb Aug 2016: BBB-rating affirmed by S&P (Positive outlook); 1 notch SACP rating upgrade from bbb- to bbb Jan 2017: 1 notch senior unsecured upgrade from BBB- to BBB (outlook revised to Stable) Reduction in non-performing loans Additional loss-absorbing capacity (ALAC) uplift Baseline Credit Assessment (BCA): ba1 Sep 2016: 1 notch baseline credit assessment upgrade from ba2 to ba1 Improvements in capital metrics, while maintaining stable profitability, funding and liquidity metrics Reduction in non- performing loans Viability Rating: bbb- Dec 2016: BBB- (Positive outlook) affirmed by Fitch Reduction in non- performing loans Strong internal capital generation and strengthening capital ratios 17#20Covered Bond Overview#21Overview of Irish Mortgage Market €bn 160 140- 120- 100- 80- 60- 40- 20 0 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Mortgage debt Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 €bn 45+ 40- 35- Volume Outstanding Source: CBI Mortgage drawdowns Dec-15 Dec-16 Bank of Ireland Group +6 -5 €bn Structure of Irish Mortgage Market Size of Irish mortgage market reduced c.28% from 2009 peak (c.€107bn Dec 2016) Predominantly principal and interest structured market New lending ► Total new mortgage lending of c.€5.7bn in 2016, 12.3% increase vs 2015 Increase largely driven by FTB and Mover Purchaser Macro prudential rules Nov 2016 CBI amended rules; PDH for first time buyers: Limit increased to 90% PDH for movers: 80% limit remains BTL 70% limit remains 5% of new lending to FTB, 20% to movers, 10% to BTL allowed above limits LTI at 3.5 times loan to gross income remains. 20% of new lending can be above this cap Help to buy The Government has introduced a help to buy scheme to the end of 2019 for FTBS; tax rebate of 5% of purchase price (up to a maximum rebate of €20,000) 30- 25- 20- 15- 10- 5. 0 2006 2012 2013 2014 2015 2016 Top up Remortgage BTL Movers FTB Source: BPFI 19#22ROI Mortgages: €24.3bn ROI Mortgages (gross) Market share Bank of Ireland Group €25.6bn €2.3bn €25.0bn €3.9bn €24.3bn 2015 2016 €5.3bn €8.9bn €8.1bn €7.2bn €14.4bn €12.9bn New Lending Volumes¹ Market share €1.4bn €1.4bn 29% 25% €11.8bn Dec 14 Dec 15 Tracker Variable Rates Fixed Rates Dec 16 Trackers reduced by €1.2bn since Dec 15; €2.6bn since Dec 14 €11.0bn or 93% of trackers at Dec 16 are on a capital and interest repayment basis ► 76% of trackers are owner occupier mortgages; 24% of trackers are Buy to Let mortgages ▶ Loan asset spread on ECB tracker mortgages was c.48bps2 in 2016, compared to Group net interest margin (including ECB trackers) of 219bps in 2016 Average LTV of 72% on existing stock at Dec 2016 (Dec 15: 80%) ► Average LTV of 67%³ on new mortgages in 2016 (Dec 15: 67%)³ We have a fixed rate led mortgage pricing strategy which provides value, certainty and stability to our customers and to the Group Fixed rate products accounted for c.75% of our new lending in 2016, up from c.30% in 2014 BOI does not sell through broker channel in ROI c.70% of ROI customers who take out a new mortgage take out a life assurance policy through BOI Group c.50% of ROI customers who take out a new mortgage take out a general insurance policy through BOI Group with insurance partners Excludes mortgage portfolio acquisitions (2015 - €0.2bn; 2016 - €0.2bn) 2Average customer pay rate of 109bps less Group average cost of funds in 2016 of 61bps Note that the LTV on new business includes the impact of the acquired portfolios 20#23Mortgage Underwriting Process Centralised Underwriting in-place, no delegated discretions Bank of Ireland Group 1 Customer Application 2 Customer Credit Analysis 3 Credit Decision 4 Loan Administration Step 1 Step 2 Customer makes application through Branch or Direct channels (Internet / Phone / Mobile Mortgage Manager) Anti Money Laundering checks completed Interview completed (face to face if branch or Mobile Mortgage Manager, via telecall if Phone or follow up call if Internet) Standard application contains assessment of; Borrower financial strength (income vs. expenditure, assets vs. liabilities) plus assessment of transaction including structure (LTV, tenor), security property, overall financial risk etc Auto calls made to Credit Bureau and Risk Models Underwriting receives online application with Bureau and Risk model output plus supporting creditworthiness documents Assessment against Credit Policy and Regulatory requirements Credit Decision is made Step 3 Step 4 Typical Max LTV 80% for Owner Occupier and Buy to Let 70% (CBol Macro-Prudential limits - some limited exceptions permitted to max. 90% LTV) Appeals process in place for declined applications Mortgage Approval Formal letter to offer issued detailing T&Cs 21#24Strengths of Irish ACS Legislation Key Legislative Features of Irish ACS Robust collateral restrictions Mark to market cover pool Strong overcollateralisation (OC) Robust external monitoring Strict ALM requirements Clarity in event of bankruptcy Preferential claims Bank of Ireland Group Qualified deposits and EEA mortgages (BOIMB uses only Irish residential mortgages) LTV limits of 75% for liquidity purposes National CSO Residential Property Price Index updated monthly Requirement to incorporate changes quarterly, monitored externally Minimum contractual OC of 5% and minimum legislative OC of 3% Both legislative and contractual commitments on a prudent market value basis Cover-Assets Monitor (CAM) responsible for monitoring the cover pool and the ACS issuer's compliance with specific provisions of the ACS Acts Appointment of CAM approved by CBI Duration, interest and currency matching Interest rate risk control NTMA pre-defined manager of cover pool as a last resort ACS holders are preferred creditors in relation to the cover assets (ranking after the CAM and the NTMA and equally with the ACS hedge counterparties) 22 22#25Bank of Ireland Mortgage Bank ACS Key Features Table 1 Cover Pool Summary Dec-13 Dec-14 Dec-15 Dec-16 Total property valuation (bn) €20.0 €21.9 €22.3 €21.3 Aggregate balances of the mortgages (bn) €13.3 €12.3 €11.2 Weighted average indexed LTV 96.1% 82.0% 73.7% €10.2 70.7% % of accounts in arrears (≥ 3 months) 0.04% 0.03% 0.01% 0.04% Table 2 Bond Summary Dec-13 Dec-14 Dec-15 Dec-16 Value of bonds (bn) €10.0 €9.0 €7.4 €7.9 Nominal overcollateralisation 49% 54% 68% 44% Prudent market value of mortgages (bn) €10.4 €10.5 €10.1 €9.3 Qualified substitution assets (bn) €1.5 €1.3 €1.1 €1.2 Prudent market value of cover pool (bn) €11.9 €12.0 €11.2 €10.5 Legislative overcollateralisation 19% 32% 52% 32% Bank of Ireland Group 100% Irish Residential mortgages Cover pool marked to market at intervals not exceeding 3 months using Central Statistics Office (CSO) residential Property Price Index Strong overcollateralisation (OC) - significantly above min contractual OC of 5% and min legislative OC of 3% (both on a prudent market value basis) BOIMB policy to remove non-performing assets (payment due ≥ 3 months) from the pool on a quarterly basis Compliance with cover pool obligations monitored by independently regulated Cover Assets Monitor Pre-defined process in event of insolvency Covered Bond Ratings Strong covered bond credit ratings; Moody's Aa1, DBRS AA (high) 23#26Additional Information#27Additional Information Bank of Ireland Group Slide No. BOI Overview Summary Income Statement Summary Balance Sheet New Lending Volumes Income Statement Net interest income analysis Other income analysis (net) Non-core Items ROI mortgage loan book UK mortgage loan book UK customer loans Asset Quality Profile of customer loans at Dec 16 (gross) Non-performing loans by portfolio Available for Sale Financial Assets Capital CET1 ratios Risk weighted assets Ordinary stockholders' equity and TNAV Defined Benefit Pension Schemes Reimbursing and rewarding taxpayers support Contact Details 26 27 28 222 223 29 30 31 33 34 35 36 37 38 39 40 41 43 44 25#28BOI Overview Income Statement¹ Bank of Ireland Group y/e Dec 12 (€m) y/e Dec 13 (€m) y/e Dec 14 (€m) y/e Dec 15 (€m) y/e Dec 16 (€m) Total income Net interest income 1,862 2,646 2,974 3,272 3,105 1,755 2,133 2,358 2,454 2,283 Other income 495 642 653 828 842 ELG fees (388) (129) (37) (10) (20) Operating expenses (1,589) (1,545) (1,601) (1,746) (1,747) Core Banking Platforms investment (41) Levies and regulatory charges¹ (49) (31) (72) (75) (109) Operating profit pre-impairment 224 1,070 1,301 1,451 1,208 Net impairment charges Customer loans (1,769) (1,665) (472) (296) (178) (1,724) (1,665) (542) (296) (176) AFS (45) 70 (2) Share of associates / JVS 46 31 92 46 41 Underlying (loss) / profit before tax (1,499) (564) 921 1,201 1,071 Non core items (679) 44 (1) 31 (39) Statutory (loss) / profit before tax (2,178) (520) 920 1,232 1,032 NIM 1.25% 1.84% 2.11% 2.19% 2.19% Cost income ratio 85% 58% 54% 53% 58% *Figures as reported, with the exception of y/e Dec 13 which includes a €5m reduction in Operating expenses relating to IFRIC 21 adjustments 26#29BOI Overview Summary Balance Sheet Bank of Ireland Group Dec 12 (€bn) Dec 13 (€bn) Dec 14 (€bn) Dec 15 (€bn) Dec 16 (€bn) Customer loans¹ 93 85 82 85 78 Liquid assets 33 27 25 24 21 BOI Life assets 13 14 16 16 17 Other assets 9 6 7 6 7 Total assets 148 132 130 131 123 Customer deposits 75 74 75 80 75 25 Wholesale funding 39 27 20 14 14 Private Sources 24 19 16 13 11 Monetary Authority/TLTRO 15 8 4 1 3 BOI Life liabilities 13 14 16 16 17 Subordinated liabilities 2 2 2 2 1 Additional Tier 1 instruments 1 1 Other liabilities 10 7 8 10 со Stockholders' equity 9 8 9 8 9 Total liabilities & Stockholders' equity 148 132 130 131 123 CET1 Core Tier 1 Ratio² 11.1% 10.0% 12.3% 13.3% 14.2% Total capital ratio² 12.1% 11.3% 15.8% 18.0% 18.5% Loan to deposit ratio 123% 114% 110% 106% 104% "Loans and advances to customers is stated after impairment provisions 2CET1/Core Tier 1 and Total Capital ratios are stated under Basel II rules as amended for PCAR requirements for 2012 and under Basel III transitional rules for 2013-2016, all excluding 2009 Prefs 27#30Loans and Advances to Customers New business volumes Corporate & Treasury Retail UK Bank of Ireland Group Retail Ireland €4.8bn €4.4bn €0.4bn £4.2bn £4.1bn €0.3bn £0.8bn €3.3bn £1.0bn €3.2bn £0.2bn €1.0bn €1.4bn €2.2bn €1.9bn 2015 2016 £0.2bn €3.0bn €2.7bn £3.3bn £2.8bn 2015 2016 €1.4bn €1.4bn 2015 2016 Corporate Acquisition Finance Mortgages Business Banking Consumer 28#31Income Statement Net interest income analysis Bank of Ireland Group H1 2015 H2 2015 H1 2016 H2 2016 Average Gross Gross Volumes Interest Rate (€bn) (€m) (%) Average Gross Gross Volumes Interest Rate (€bn) (Єm) (%) Average Gross Volumes Interest (€bn) (€m) Gross Rate (%) Average Gross Gross Volumes Interest Rate (€bn) (€m) (%) Ireland Loans 37.1 593 3.22% 36.8 589 3.17% 36.5 552 3.04% 36.0 554 3.07% UK Loans 35.6 656 3.71% 36.4 661 3.60% 33.5 580 3.48% 30.2 475 3.13% C&T Loans 11.9 253 4.31% 12.4 252 4.04% 12.6 253 4.05% 12.7 264 4.13% Total Loans & Advances to 84.6 1,503 3.58% 85.6 1,502 3.49% 82.6 1,385 3.37% 78.9 1,293 3.26% Customers Liquid Assets. 24.3 1481 1.23% 22.4 1151 1.02% 22.5 921 0.82% 20.5 781 0.76% Total Interest Earning Assets 108.8 1,651 3.06% 108.0 1,617 2.97% 105.1 1,477 2.83% 99.4 1,371 2.74% Ireland Deposits 21.9 (48) (0.44%) 22.0 (33) (0.30%) 22.1 (26) (0.24%) 21.9 (17) (0.15%) Credit Balances² 20.8 (1) (0.01%) 22.4 (1) (0.01%) 23.8 (1) (0.01%) 25.3 (1) (0.01%) UK Deposits C&T Deposits 25.9 (158) (1.23%) 25.6 (161) (1.25%) 8.8 (33) (0.76%) 8.3 (27) Total Deposits 77.5 (240) (0.62%) 78.4 (223) Wholesale Funding 18.1 (101) (1.13%) 14.3 Subordinated Liabilities 2.5 (91) (7.34%) 2.4 (0.65%) (0.56%) (72) (1.00%) (88) (7.32%) Total Interest Bearing Liabilities 98.1 (432) (0.89%) 95.1 (383) (0.80%) 94.2 (342) 24.6 (154) 7.7 (21) (0.55%) 78.2 (202) (0.52%) 13.6 (49) (0.71%) 13.4 2.4 (91) (7.72%) (0.73%) (1.26%) 20.7 (111) (1.07%) (14) 6.8 74.7 (143) (0.38%) (0.41%) (32) (0.47%) 1.5 (48) (6.13%) 89.6 (223) (0.49%) IFRS Income Classification (29) (54) (33) (13) Net Interest Margin 108.8 1,190 2.21% 108.0 1,180 2.17% 105.1 1,102 2.11% 99.4 1,135 2.27% Average ECB Base rate in the period Average 3 month Euribor in the period Average BOE Base rate in the period 0.05% 0.05% 0.02% 0.00% 0.02% (0.06%) (0.22%) (0.31%) 0.50% 0.50% 0.50% 0.30% 0.57% 0.58% 0.59% 0.41% Average 3 month LIBOR in the period Excludes any additional gains from portfolio re-configuration during the period 2Credit balances in H2 2016: ROI €18.7bn, UK €3.1bn and C&T €3.5bn 29#32Income Statement Other income analysis (net) Bank of Ireland Group Retail Ireland Bank of Ireland Life Retail UK Corporate and Treasury Group Centre and Other Business Income Other gains VISA Europe share disposal Liquid asset portfolio rebalancing Sale of investment properties / other assets 2015 2016 (€m) (€m) 331 319 154 151 9 2 153 157 (21) (8) 626 621 95 173 63 64 13 Other Valuation items Financial instrument valuation adjustments (CVA, DVA, FVA) and other 50 59 Economic assumptions - Bank of Ireland Life 4 35 Investment variance - Bank of Ireland Life 11 + 86 Fair value movement on Convertible Contingent Capital Note (CCCN) embedded derivative IFRS income classification (17) (3) (83) (45) Other Income 828 842 30#33Income Statement Non-core items Bank of Ireland Group 2015 (€m) 2016 (€m) 11 15 11 5 Gross-up for policyholder tax in the Life business Gain arising on the movement in the Group's credit spreads Investment return on treasury stock for policyholders Impact of Group's pensions reviews (2010 and 2013) Payments in respect of Career and Reward framework Gain/(loss) on disposal / liquidation of business activities Loss on liability management exercises Cost of restructuring programme 1 4 25 51 Total non-core items 2 E (1) (19) (43) (35) 31 (39) 31#34ROI Mortgages: €24.3bn Bank of Ireland Group Owner Occupied Non-performing loans 32% 34% €1.6bn €0.4bn €1.2bn €0.3bn €1.2bn €0.9bn Dec 15 Dec 16 Defaulted Loans Probationary Mortgages Coverage Ratio Buy to Let Non-performing loans 48% €1.4bn €0.3bn €1.1bn Dec 15 Defaulted Loans Probationary Mortgages 50% €1.0bn €0.3bn €0.7bn Dec 16 Coverage Ratio Portfolio Performance Reduced NPLs' by €0.8bn to €2.2bn in 2016 Defaulted loans component of €1.7bn; down 57% since reported June 2013 peak ► Continued trend of probationary mortgages returning to performing status €22.6bn or 93% of mortgages at Dec 16 are on a capital and interest repayment basis (Dec 15: 91%) Impairment credit of €141m in 2016 reflects ongoing improvement in portfolio performance Coverage ratio of 41% (Dec 15: 39%) 94% of mortgage accounts are in the up to date book; 9 out of 10 accounts in forbearance are meeting the terms of their arrangement Industry Comparison ► BOI OO arrears (3.07%) at 34% of industry level² (Dec 15: 43%); BOI BTL arrears (7.65%) at 41% of industry level³ (Dec 15: 56%) ► BOI OO arrears >720 days reducing and at 31% of industry level (Dec 15: 37%); BOI BTL arrears >720 days reducing and at 32% of industry level 5 (Dec 15: 43%) Non-performing loans includes defaulted loans plus probationary mortgages (i.e. primarily mortgages that were previously defaulted but which are no longer defaulted at the reporting date; the mortgages are awaiting the successful completion of a 12 month probation period) 2At September 2016, BOI owner occupier arrears level (based on number of accounts >90 days in arrears) was 3.07% compared to 8.90% for industry excl BOI 3At September 2016, BOI buy to let arrears level (based on number of accounts >90 days in arrears) was 7.65% compared to 18.65% for industry excl BOI 4At September 2016, BOI owner occupier arrears (based on number of accounts >720 days in arrears) was 1.70% compared to 5.51% for industry excl BOI 5At September 2016, BOI buy to let arrears (based on number of accounts >720 days in arrears) was 4.16% compared to 12.93% for industry excl BOI 32#35UK Residential mortgages: £20.4bn/€23.9bn Bank of Ireland Group UK Residential Mortgages (gross) UK Residential Mortgages (gross) £20.5bn £20.5bn £20.4bn £20.4bn £19.8bn £19.8bn £2.6bn £2.2bn £2.9bn £4.2bn £6.9bn £8.5bn £7.6bn £7.4bn £7.8bn £6.1bn £4.9bn £4.0bn £10.4bn £10.8bn £9.5bn £8.7bn £9.1bn £7.9bn Dec 14 Dec 15 Dec 16 Dec 14 Tracker Variable Rates Fixed Rates UK Residential Mortgages ► Average LTV of 62% on existing stock at 2016 (Dec 15: 63%) ► Average LTV of 71% on new UK mortgages in 2016 (Dec 15: 69%) Dec 15 Standard Buy to let Self certified Dec 16 33#36UK Customer Loans £28.6bn (€33.4bn) Bank of Ireland Group UK Mortgages - £20.4bn Scotland, £0.9bn Northern Ireland,, £0.9bn Rest of England,. £8.7bn 53% Wales, £0.8bn Greater London, £4.3bn Outer Metropolitan, £2.7bn South East, £2.1bn Other UK Customer Loans - £8.2bn 102% 49% 66% 144% £1.7bn £0.01bn £2.8bn £1.9bn £0.00bn £0.5bn £1.6bn £0.2bn £2.3bn £1.9bn £1.4bn £0.2bn £1.7bn 20.1bn £0.1bn Land & Development Coverage ratio Consumer SME Corporate Investment Property Performing Loans Defaulted Loans UK Mortgages Analysis Total UK mortgages of £20.4bn; (NPLs1 - 3%; Defaulted loans - 1%) Average LTV of 62% on total book ► Average LTV of 71% on new mortgages UK mortgage book continues to perform in line with industry averages² 87% of mortgages originated since 2010 are standard owner occupier mortgages BTL book is well seasoned with 84% of these mortgages originated pre 2009 Average balance of Greater London mortgages is c.£196k. 89% of these mortgages have an average LTV <70% Other UK Customer Loans Analysis Other UK loans exposure of £8.2bn; Defaulted loans of £0.8bn with strong coverage ratios. Investment Property defaulted loans have decreased by 65% in the last 2 years Performing loans of £7.4bn; SME: broad sectoral diversification with low concentration risk Corporate: specialist lending teams in Acquisition Finance, Project Finance, and Corporate lending through a focussed sector strategy Investment Property: Retail (53%), Office (12%), Residential (16%) Other (19%) ► Consumer: largest segment is asset backed motor financing of £1.0bn (56%). Book also includes Post Office / AA branded credit cards and personal loans 'Non-performing loans includes defaulted loans plus probationary mortgages (i.e. primarily mortgages that were previously defaulted but which are no longer defaulted at the reporting date; the mortgages are awaiting the successful completion of a 12 month probation period) 2Data published by the Council Mortgage Lenders (CML) for September 2016 indicates that the proportion (1%) of the UK mortgage book in default remains aligned to the UK industry average of 1% 34#37Asset Quality Profile of customer loans' at Dec 16 (gross) Bank of Ireland Group Composition (Dec 16) Mortgages ROI UK ROW Total Total (€bn) (€bn) (€bn) (€bn) (%) 24.3 23.9 48.2 59% Non-property SME and corporate 11.7 4.12 4.2 20.0 24% SME 8.8 1.9 0.0 10.7 13% Corporate 2.9 2.2 4.2 9.3 11% Property and construction Investment property Land and development 6.8 3.4 0.2 10.4 12% 6.0 3.2 0.2 9.4 11% 0.8 0.2 0.0 1.0 1% Consumer 1.8 2.0 3.8 5% Customer loans (gross) 44.6 33.4 4.4 82.4 100% Geographic (%) 54% 40% 6% 100% 'Based on geographic location of customer 2Includes £0.9bn relating to GB business and corporate loan books, which BOI is required to run down under its EU approved Restructuring Plan (2015: £1.3bn) 35#38Non-performing loans by portfolio Non-performing loans reducing across all portfolios Composition (Dec 16) Bank of Ireland Group Advances Non-performing Non-performing Defaulted (€bn) loans (€bn) loans as % of loans Defaulted loans as % of Impairment provisions advances (€bn) advances (€bn) Impairment provisions as % of non-performing Impairment provisions as % of defaulted loans loans Residential Mortgages 48.2 3.0 6.3% 2.0 4.2% 1.0 33% 49% Republic of Ireland 24.3 2.2 9.1% 1.7 6.9% 0.9 41% 54% - UK 23.9 0.8 3.5% 0.3 1.4% 0.1 9% 23% Non-property SME and Corporate 20.0 2.0 9.8% 2.0 9.8% 1.1 55% 55% - Republic of Ireland SME 8.8 - UK SME 1.9 Corporate 9.3 8 63 1.5 17.0% 1.5 151 17.0% 0.8 54% 54% 0.2 7.6% 0.2 7.6% 0.1 53% 53% 0.3 3.5% 0.3 3.5% 0.2 63% 63% Property and construction 10.4 2.8 27.3% 2.8 27.3% 1.7 61% 61% - Investment property 9.4 2.1 22.7% 2.1 22.7% 1.2 57% 57% - Land and development 1.0 0.7 69.6% 0.7 69.6% 0.5 73% 73% Consumer 3.8 0.1 2.7% 0.1 2.7% 0.1 94% 94% Total loans and advances to customers 82.4 7.9 9.6% 6.9 8.4% 3.9 49% 56% Composition (Dec 15) Advances Non-performing Non-performing Defaulted Defaulted (€bn) loans (€bn) loans as % of advances loans loans as % of Impairment provisions Impairment Impairment (€bn) advances (€bn) provisions as % of non-performing provisions as % of defaulted loans loans Residential Mortgages 52.9 4.2 7.9% 2.8 5.2% 1.3 31% 47% - Republic of Ireland 25.0 3.0 12.2% 2.3 9.3% 1.2 39% 52% - UK 27.9 1.2. 4.1% 0.5 1.6% 0.1 9% 22% Non-property SME and Corporate 21.0 2.7 13.0% 2.7 13.0% 1.4 53% 53% Republic of Ireland SME 9.3 2.0 21.9% 2.0 21.9% 1.1 52% 52% - UK SME 2.4 0.3 11.1% 0.3 11.1% 0.1 51% 51% Corporate 9.3 0.4 4.6% 0.4 4.6% 0.3 59% 59% Property and construction 13.4 4.9 36.8% 4.9 36.8% 3.0 61% 61% - Investment property 11.4 3.2 28.5% 3.2 28.5% 1.7 53% 53% - Land and development 2.0 1.7 84.8% 1.7 84.8% 1.3 76% 76% Consumer 3.3 0.2 4.1% 0.2 4.1% 0.1 105% 105% Total loans and advances to 90.6 12.0 13.2% 10.6 11.6% 5.9 49% 56% customers 36#39Asset Quality Available for Sale Financial Assets Bank of Ireland Group ROI UK France Other Dec 16 Dec 15 Carrying Value €bn €bn €bn €bn €bn €bn Sovereign bonds 2.3 0.6 0.7 1.6 5.2 5.7 Senior debt 0.2 1.5 1.7 1.5 Covered bonds 0.3 0.7 0.6 1.9 3.5 2.2 Subordinated debt 0.3 0.3 0.3 Asset backed securities 0.1 0.1 0.4 Total 2.9 1.4 1.5 5.0 10.8 10.1 AFS Reserve 0.4 0.4 0.5 Portfolio ► The Group held €10.8bn of AFS financial assets at Dec 2016; the Group also held an additional €1.9bn of Irish Government bonds in a HTM portfolio ► AFS Reserve - €0.4bn (HTM: €0.1bn). AFS reserve reduced by €0.1bn in 2016, primarily due to bond sales during the period In the AFS portfolio the Group holds NAMA subordinated bond - €0.3bn nominal value, valued at 98% (Dec 15 - 96%). Separately, BOI holds €0.5bn of NAMA senior bonds (Dec 15: €1.4bn) Weighted average credit rating of the AFS portfolio is A+ to AA-; weighted average credit rating of the HTM portfolio is A ► Of the total bond portfolio, <3% is sub investment grade and 91% is rated BBB+ or higher Other exposures ► Supra-national - €1.3bn Belgium - €0.7bn Spain - €0.6bn Sweden - €0.5bn Netherlands - €0.4bn Canada €0.3bn Italy - €0.3bn Norway - €0.3bn Other - €0.6bn (all less than €0.15bn) 37#40Capital CET1 ratios Total equity Less Additional Tier 1 Deferred tax¹ Pension deficit Available for sale reserve² National filters Intangible assets and goodwill Other items³ Common Equity Tier 1 Capital Credit RWA Operational RWA Market, CVA and other RWA4 Total RWA Common Equity Tier 1 ratio CRD-IV phasing impacts Bank of Ireland Group Transitional ratio (€bn) 9.4 Fully loaded ratio (€bn) (0.8) (0.2) 9.4 (0.8) (1.2) 0.2 (0.1) (0.1) (0.6) (0.6) (0.6) (0.6) 7.2 6.2 42.5 42.5 4.6 4.6 3.7 3.6 50.8 50.7 14.2% 12.3% Deferred tax asset - certain DTAs are deducted at a rate of 20% for 2016, increasing annually at a rate of 10% thereafter Pension deficit - addback is phased out at 60% in 2016, increasing by 20% per annum thereafter Available for sale reserve - unrealised losses and gains are phased in at 60% in 2016, increasing by 20% per annum thereafter The pro-forma CET1 ratio at 1 January 2017 is estimated at 14.0%, reflecting the phasing in of CRD IV deductions for 2017 'Deferred tax assets due to temporary differences are included in other RWA with a 250% risk weighting applied 2The Group previously opted to maintain its filter on both unrealised gains or losses on exposures to central governments classified in the 'available for sale' category. In accordance with ECB regulation 2016/445 on the exercise of options and discretions, this filter was removed from 1 October 2016. The reserve is recognised in capital under fully loaded CRD IV rules Other items - the principle items being the cash flow hedge reserve, expected loss deduction, securitisation deduction and 10% / 15% threshold deduction 4Other RWA includes RWA relating to non-credit obligations / other assets and RWA arising from the 10/15% threshold deduction 38#41Risk weighted assets (RWA) RWA Density¹ Bank of Ireland Group Customer lending Avg. Credit Risk Weights 2/3 (Based on regulatory exposure class) EAD4 RWA (€bn) (€bn) Avg. Risk Weight ROI mortgages 24.8 8.4 34% UK mortgages 23.2 4.6 20% SME 18.0 13.1 73% Corporate 11.2 11.7 105% Other Retail 4.6 2.9 63% 47% Total customer lending 81.8 40.7 50% 46% 41% 41% Dec 15 Dec 16 Total RWA / Total Assets (Incl BOI Life Assets) ■Total RWA / Total Assets (Excl BOI Life Assets) Average risk weight on ROI mortgage portfolio increased to 34% (Dec 15: 27%) following IRB model approach changes in December 2016 Average risk weight on SME increased to 73% (Dec 15: 70%) and Corporate increased to 105% (Dec 15: 101%). This reflects the impact of the credit risk transfer of €2.9bn of SME / Corporate loans in December 2016 at below average risk weights³ IRB approach accounts for: 77% of credit EAD (Dec 2015: 75%) 82% of credit RWA (Dec 2015: 81%) ¹RWA density calculated as Total RWA / Total balance sheet assets 2Sourced from the Group's Pillar III disclosures. EAD and RWA include both IRB and Standardised approaches and comprises both non-defaulted and defaulted loans. Some Standardised exposure classes per the Pillar III have been reclassified to align with the categories outlined in the table 3Securitised exposures which include the credit risk transfer transaction executed in December 2016 are excluded from the above table "Exposure at default (EAD) is a regulatory estimate of credit risk consisting of both on balance exposures and off balance sheet commitments 39#42Ordinary stockholders' equity and TNAV Movement in ordinary stockholders' equity Ordinary stockholders' equity at beginning of period Movements: Bank of Ireland Group 2015 (Єm) 2016 (Єm) 7,392 8,308 Profit attributable to stockholders 940 793 Distribution on other equity instruments - additional tier 1 coupon (73) Dividends on preference stock (257) (8) Available for sale (AFS) reserve movements (81) (169) Remeasurement of the net defined benefit pension liability 91 167 Foreign exchange movements 255 (419) Cash flow hedge reserve movement Other movements Ordinary stockholders' equity at end of period Tangible net asset value Ordinary stockholders' equity at end of period Adjustments: Intangible assets and goodwill (45) (4) 13 2 8,308 8,597 Dec 15 (€m) Dec 16 (€m) 8,308 8,597 Own stock held for benefit of life assurance policyholders Tangible net asset value (TNAV) Number of ordinary shares in issue at the end of the period TNAV per share (€ cent) (509) (625) 11 11 7,983 7,810 32,363 24.1 c 32,363 24.7c 40#43Defined Benefit Pension Schemes Group IAS19 DB Pension Deficit Bank of Ireland Group 3.65% 2.20% 2.30% 2.20% 1.60% €1.19bn €0.99bn €0.84bn €0.74bn Dec 13 Dec 14 Dec 15 €0.45bn €0.15bn Jun 16 Dec 16 Dec 16 EUR Discount Rate IAS19 DB Pension Deficit Pro-forma Group IAS19 DB pension deficit following c.€0.3bn expected cash or other suitable assets contribution' BSPF Surplus/ Deficit under Relevant Bases Dec 16 Minimum funding standard² Actuarial / on-going basis (€388m) (€138m) IAS19 (€138m) €213m €463m €112m Estimated surplus/ (deficit) at Dec 16 Pro-forma position following €250m expected cash or other suitable assets contribution to BSPF IAS19 requires that the rate used to discount DB pension liabilities be selected by reference to market yields on high quality corporate bonds with a corresponding duration. However, only a small number of such AA Euro corporate bonds exist at the c.21 year duration and those bonds tend to be relatively illiquid Group IAS19 DB pension deficit of €0.45bn at Dec 16 (€0.74bn at Dec 15) Primary drivers of the movement in deficit were; Positive asset returns. The BSPF3 assets returned +7.7% c.€100m of additional deficit reducing contributions Long term ROI inflation rate expectation decreasing from 1.6% to 1.55%, offset by Euro and UK AA discount rates decreased from 2.3% to 2.2% and 3.8% to 2.55% respectively Long term UK RPI inflation rate expectation increasing from 3.3% to 3.4% The Pension Review programmes of 2010 and 2013 resulted in significant restructurings of scheme benefits, which were accepted by staff and unions through individual member consent; In return for the liability reduction achieved through these programmes, the Group agreed to increase its support for the schemes by making matching contributions There remains a further c.€300m of asset contributions expected to be made between 2017 and 2020, these contributions have no impact on Fully Loaded CET1 Allowing for the remaining asset contributions, the overall Group IAS 19 deficit would have been c.€0.15bn at Dec 16 In addition to the IAS19 accounting valuation, the funding position of the main BSPF scheme is also shown under the Minimum Funding Standard basis and the Actuarial / on-going basis Does not impact Fully Loaded CET1 ratios 2The MFS surplus includes the new 2016 Pension Authority requirement to hold additional Risk Reserves 3BSPF (Bank Staff Pensions Fund) represents approx. 75% of the overall Group DB liabilities 41#44Defined Benefit Pension Schemes Bank of Ireland Group The Group has developed a framework for pension funding and investment decision-making as part of its long-term plan Management of the Group's sponsored DB pensions position involves a multi-year programme, categorised into 3 broad areas. Activity in these areas includes: Reduce Liabilities ► 2007 DB Pension Schemes closed to new members and hybrid scheme introduced Pensions Review 2010 and 2013 - shared solutions with DB members - successfully executed and extended to smaller schemes in 2014 and 2015 A Defined Contribution ('DC') scheme was introduced in 2014 for new hires and the existing hybrid scheme closed to new members An enhanced transfer value exercise completed for BSPF scheme in H2 2016 which will result in a reduction in liabilities of c.€92m and a reduction in the IAS19 deficit of c.€4m 2 Increase Assets >€850m of asset contributions made since 2010; further c.€300m expected to be made across Group DB schemes between 2017 and 2020 BSPF asset returns of c.9.6% p.a. were achieved over 3 years to end Dec 16 despite market volatility 3 Improve correlation between assets and liabilities ► Group has continued to support Trustees in diversifying asset portfolios away from listed equity into other return-seeking but potentially less volatile asset classes e.g. increased allocation to private equity, infrastructure and commercial real estate Group supported the trustees of BSPF scheme in their decision to extend the level of euro and sterling interest rate and inflation hedging to 60% of assets (completed in Q3 2016) and supported a further proposal to increase euro interest rate and inflation hedging to 75% in Dec 16 (completed in Feb 17) Group has also supported the Trustees of the BOI Group UK scheme in their decision to extend the level of interest rate and inflation hedging to 60% (completed during 2016) Continuing programme to further match asset allocation with the evolving nature and duration of liabilities Mix of BSPF DB Pension Scheme Assets (%)¹ 45% 44% 57% 62% 11% 19% 22% 24% 16% Dec 15 Dec 16 Dec 12 Listed equities Diversified² Credit / LDI / Hedging Estimated Group Asset, Liability & Deficit Sensitivities³ (post implementation of increased interest rate and inflation hedging in Feb 17) Dec 15 Feb 17 Sensitivity of Group deficit (net assets and liabilities) to a 0.25% decrease in interest rates €281m €132m Sensitivity of IAS19 liabilities to a 0.10% decrease in long term inflation Sensitivity of assets to a 5% fall in global equity markets with allowance for other correlated diversified asset classes (€100m) (€100m) (€124m) 2Diversified category includes infrastructure, private equity, hedge funds and property The table only shows the estimated impact of individual assumption changes. 42 (€128m) 'Graphs shows BSPF asset allocation#45Reimbursing and rewarding taxpayers support Jan 09 Dec 16 Bank of Ireland Group c.14% Shareholding From 2009 - 2011, c. €4.8bn cash invested by the State Cumulative c.€6bn cash returned to the State State continues to hold valuable c.14% equity shareholding State Aid completely repaid in 2013 Irish State's risk exposure to Group liabilities covered under the Eligible Liabilities Guarantee eliminated In 2016, the Group paid taxes of €263m to the Irish State and collected taxes of €858m on behalf of the Irish State c.€6.0bn c.€4.8bn Cash invested by the State Cash returned to date 43#46Contact details For further information please contact: Group Chief Financial Officer Andrew Keating tel: +353 76 623 5141 Investor Relations Alan Hartley Niall Murphy tel: +353 76 623 4850 tel: +353 76 624 1385 Group Treasurer Sean Crowe tel: +353 76 623 4720 Capital Management Brian Kealy Alan McNamara tel: +353 76 623 4719 tel: +353 76 624 8725 [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] Wholesale Funding Darach O'Leary Redmond O'Leary Joanne Guerin tel: +353 76 624 4224 tel: +353 76 62 44198 tel: +353 76 62 44219 Investor Relations website www.bankofireland.com/investor [email protected] [email protected] [email protected] Bank of Ireland Group 44#47Forward-Looking statement Bank of Ireland Group This document contains certain forward-looking statements with respect to certain of the Bank of Ireland Group's (the 'Group') plans and its current goals and expectations relating to its future financial condition and performance, the markets in which it operates, and its future capital requirements. These forward-looking statements often can be identified by the fact that they do not relate only to historical or current facts. Generally, but not always, words such as 'may,' 'could,' 'should,' 'will," "expect," "intend,' 'estimate,' 'anticipate,' 'assume,' 'believe,' 'plan,' 'seek,' 'continue,' 'target,' 'goal,' 'would,' or their negative variations or similar expressions identify forward-looking statements, but their absence does not mean that a statement is not forward-looking. Examples of forward-looking statements include among others, statements regarding the Group's near term and longer term future capital requirements and ratios, level of ownership by the Irish Government, loan to deposit ratios, expected impairment charges, the level of the Group's assets, the Group's financial position, future income, business strategy, projected costs, margins, future payment of dividends, the implementation of changes in respect of certain of the Group's pension schemes, estimates of capital expenditures, discussions with Irish, United Kingdom, European and other regulators and plans and objectives for future operations. Such forward-looking statements are inherently subject to risks and uncertainties, and hence actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following: ▶ geopolitical risks which could potentially adversely impact the markets in which the Group operates; ‣ uncertainty following the UK vote to exit the EU as to the nature, timing and impact of a UK exit, could impact the markets in which the Group operates including pricing, partner appetite, customer confidence and demand, and customers' ability to meet their financial obligations and consequently the Group's financial performance, balance sheet, capital and dividend capacity; ▶ concerns on sovereign debt and financial uncertainties in the EU and the potential effects of those uncertainties on the financial services industry and on the Group; ▶ general and sector specific economic conditions in Ireland, the United Kingdom and the other markets in which the Group operates; ▶ the ability of the Group to generate additional liquidity and capital as required; ‣ property market conditions in Ireland and the United Kingdom; ▶ the potential exposure of the Group to credit risk and to various types of market risks, such as interest rate risk and foreign exchange rate risk; ▶ the impact on lending and other activity arising from the emerging macro prudential policies; ▶the performance and volatility of international capital markets; ▶ the Group's ability to address weaknesses or failures in its internal processes and procedures including information technology issues, cyber-crime risk, equipment failures and other operational risk; ▶ the effects of the Irish Government's stockholding in the Group (through the Ireland Strategic Investment Fund) and possible changes in the level of such stockholding; ▶ changes in applicable laws, regulations and taxes in jurisdictions in which the Group operates particularly banking regulation by the Irish and United Kingdom Governments together with the operation of the Single Supervisory Mechanism and the Single Resolution Mechanism; ▶ the impact of the continuing implementation of significant regulatory and accounting developments such as Basel III, Capital Requirements Directive (CRD) IV, Solvency II, the Recovery and Resolution Directive and IFRS 9; ▶ the potential impact of certain ECB initiatives including its thematic review of internal models termed Targeted Review of Internal Models (TRIM); ▶ the exercise by regulators of powers of regulation and oversight in Ireland and the United Kingdom; ▶ the exposure of the Group to conduct risk such as staff members conducting business in an inappropriate or negligent manner; ▶ the introduction of new government policies or the amendment of existing policies in Ireland or the United Kingdom; ▶ the outcome of any legal claims brought against the Group by third parties or legal or regulatory proceedings more generally, that may have implications for the Group; ▶ the development and implementation of the Group's strategy, including the Group's ability to achieve its targets and ambitions on net interest margins and total operating expenses; ▶ the inherent risk within the Group's life assurance business involving claims, as well as market conditions generally; ▶ potential further contributions to the Group sponsored pension schemes if the value of pension fund assets is not sufficient to cover potential obligations; ▶ the Group's ability to meet customers' expectations in mobile, social, analytics and cloud technologies which have enabled a new breed of 'digital first' propositions, business models and competitors; ► failure to establish availability of future taxable profits, or a legislative change in quantum of deferred tax assets currently recognised; and ▶ difficulties in recruiting and retaining appropriate numbers and calibre of staff. Nothing in this document should be considered to be a forecast of future profitability or financial position and none of the information in this document is or is intended to be a profit forecast or profit estimate. Any forward- looking statement speaks only as at the date it is made. The Group does not undertake to release publicly any revision to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date hereof. 45#48Empty#49Empty#50Empty#51Empty#52Empty