#12017 Results Announcement 31 December 2017 Bank of Ireland Group#2Empty#3Group CEO Francesca McDonagh Bank of Ireland Group#4Introduction 2017 Highlights Early Assessment Ambition, Purpose and Values Strategic Priorities Bank of Ireland Group 2#5Business Highlights Strong Financial Performance Ireland's Leading Bank International Diversification Underlying profit before tax of €1,078m; NIM of 2.29% Further significant improvement in asset quality; NPE ratio now at 8.3% Strong capital position; dividends re-commencing Largest lender to Irish economy Growing market share in residential mortgages and largest market share in business banking Ireland's only bancassurer Growth in UK residential mortgages new lending, supported by strategic partnerships Leading position in mid-market US and European Acquisition Finance business Transformation Transforming our culture, technology and business models Investments will drive long term sustainability, competiveness and efficiencies Outlook Bank of Ireland Group Strong economic growth projected in Ireland; UK also expected to expand Expect net loan book growth in 2018 with NIM expected to be modestly lower than 2017 Strategic priorities set; Investor Day in June 2018 3#6Financial Highlights Profitability €1.1bn €14.1bn New Lending 11% increase vs 2016 Underlying profit before tax of €1,078m; increased NIM to 2.29% Tracker charge of €170m classified as non-core • New Irish mortgages; growth of 41% and market share increased to 27% Strong commercial pricing discipline maintained Asset Quality 8.3% NPES reduced by 31% to 8.3% of customer loans Capital 13.8% Strong CET1 ratios 11.5c per share Dividend €124m NPEs reduced by €2.9bn to €6.5bn; Impaired loans reduced by 35% Reversals reduced the impairment charge to €15m (2bps) Organic capital generation of 140bps Pension volatility materially reduced Modest IFRS 9 transition impact of c.20bps Dividends will increase on a prudent and progressive basis Over time, will build towards a payout ratio of around 50% of sustainable earnings Bank of Ireland Group 4#7Early Assessment Bank of Ireland is rich in history and heritage... • One of the largest financial services groups in Ireland; 235 years old • New Ireland business established 100 years ago UK business established over 40 years ago ...with strong foundations for growth Proven customer franchises with diversified income streams Driven and loyal employees Operating in growing economies with strong fundamentals While there are challenges ahead... Need to transform systems Cost discipline and increased efficiency Brexit ...I am excited about our future growth prospects; • Transforming our culture, systems and business model National Champion Bank in Ireland with UK and selective international diversification Bank of Ireland Group 5#8Strong businesses in attractive markets Retail Ireland Retail UK Corporate and International • . NEW IRELAND Bank of Ireland ASSURANCE Ireland's leading retail and commercial bank; largest lender to the Irish economy; #1 or #2 market positions across all principal product lines Growing market share in residential mortgages; re-entering mortgage broker market Largest market share in business lending; provided over 50% of new lending to the agricultural sector in Ireland • Ireland's only bancassurer; employment growth and demographics supportive of future market growth POST OFFICE Money AA Long standing partnerships with Post Office and strategic intermediaries; recent partnership with AA continues to develop Focussed predominantly on consumer sector Commission based business model provides flexibility to adapt to market developments Northern Ireland - full service retail and commercial bank • Northridge Finance performing well; acquired complementary car leasing and fleet management business, Marshall Leasing • • • Bank of Ireland Corporate Banking Ireland's #1 Corporate Bank Supporting 2 out of every 3 Foreign Direct Investment projects into Ireland New lending of €3.6bn in 2017 Mid market US / European Acquisition Finance business; 10% of Group income, strong 20+ year track record Generates attractive margins and fee income within disciplined risk appetite Bank of Ireland Group 6#9Supportive economic backdrop Strong growth in Ireland; steady expansion in the UK 7.0% 5.1% 2016 1.9% 1.7% 4.7% 2017e 2018f ROI GDP UK GDP Unemployment rate falling in Ireland; at a multi-decade low in the UK 8.4% 6.8% 5.8% 1.7% 4.9% 4.4% 4.3% (annual real growth) Supply-demand mismatch driving Irish house prices; modest growth in the UK 7.1% 4.5% 2015 9.0% 2016 12.3% Annual % Change 0 -2 4.5% 2.6% -6 2017 ROI residential property prices national (change, Dec on Dec) UK residential property prices national (change, Dec on Dec) Bank of Ireland Group 2016 2017e 2018f ROI unemployment rate: UK unemployment rate (annual average) Credit growth in Ireland is now turning positive -4 -8 2012 2013 2014 www 2016 2017 2015 Stock of lending to households¹ Stock of lending to businesses (non-financial corporations) Sources: Bank of Ireland Economic Research Unit, Central Statistics Office, Office for National Statistics, Nationwide, Central Bank of Ireland 'Banks balance sheet basis, excludes loan sales and securitisations 7#10My first 100 days • Introduced new Purpose and Values Set out our 3 Strategic Priorities Engaged extensively with our businesses, colleagues, customers and wider stakeholders Made it a clear priority to resolve the Tracker Mortgage issue Committed to successful implementation of technology investments to replace Core Banking Platforms • Committed to reducing costs in 2018 and to further improve efficiency Strengthening our leadership capabilities Planning re-entry into Irish mortgage broker market Q • Strategy update underway with Investor Day scheduled for 13 June 2018 Bank of Ireland Group 8#11Ambition, Purpose and Values Ambition National Champion Bank in Ireland; UK and selective international diversification Purpose Enabling our customers, colleagues and communities to thrive " Core Values Customer Focussed Bank of Ireland Group One Group, One Team Agile Accountable 9#123 Strategic Priorities Transform the Bank Bank of Ireland Group Serve Customers Brilliantly Grow Sustainable Profits no.1 10#13• • 1. Transform the Bank 0% Culture Embedding our Values Customer focussed; One Group One Team; Agile; Accountable Reinforcing the positive behaviours that enable a work environment where colleagues feel closer to our customers Positively impacting the communities we serve • Systems Investing in Technology Replacing Core Banking Platforms to drive increased efficiency and revenue growth Delivering a digital bank to meet evolving customer preferences and expectations Making step changes in customer experience and organisation efficiency • • • Business Model Simplifying our Organisation Branches transforming into Business Development Hubs driving local commerce A streamlined organisation that is closer to our customers and empowers our colleagues Diversifying existing sources of income and developing new revenue streams • Enabling brilliant customer experiences Bank of Ireland Group 11#142. Serve Customers Brilliantly no.1 . Multi-channel distribution Putting customer needs at the heart of propositions. Customers choose how, when and where to interact • Branch, call, brokers, on-line, mobile • • Supporting our customers in their local communities and enterprises Digital Delivering digital capability to meet changing customer behaviours and preferences Real-time updates and processing of customer transactions • • Simplification New ways of working, and rapid delivery of enhancements and new offerings to meet dynamic and evolving customer expectations Simplified, frictionless, user experiences available 24/7 Personalised, interactive propositions supported by real-time analytics and customer insights • Brilliant customer experiences driving NPS and sales growth We are transforming the way we serve our customers to deliver a brilliant experience to all our customers by; • Evolving from being product focussed to a Customer focussed business Providing products, services and processes that are easy, simple and accessible Bank of Ireland Group 12#153. Grow Sustainable Profits Responsible growth and development of our franchises to deliver attractive sustainable returns to our shareholders Revenue Growth Commercial Pricing with Diversified and Disciplined Income Streams Risk Appetite Drive Efficiencies to Transform our Cost Base Strategic Allocation of Capital Bank of Ireland Group Updated financial targets at Investor Day on 13 June 2018 13#16Group CFO Andrew Keating Bank of Ireland Group#17Strong financial performance in 2017 Net interest margin Impairment charge on customer loans 2.29% 2.19% 2.20% 32bps 21bps 2bps 2015 20161 2017 2015 2016 2017 Non-performing exposures Fully loaded CET1 ratio €9.4bn 13.8% €8.1bn 12.3% 11.3% €6.5bn Dec 16 Jun 17 Dec 17 Dec 15 Dec 16 Dec 17 Bank of Ireland Group 'Comparative figures for 2016 have been restated to reflect the impact of the reclassification of the charges relating to the Central Bank of Ireland's Tracker Mortgage Examination Review as non-core 15#18Underlying profit before tax of €1,078m • FY 2016¹ (€m) FY 2017 (€m) Total income 3,126 3,049 - Net interest income 2,298 2,248 - Other income (net)* 848 801 - ELG fees (20) • Total costs (1,891) (1,999) - Operating expenses (1,741) (1,789) • Core Banking Platforms investment (41) (111) - Levies and Regulatory charges (109) (99) Impairment charges (net) (178) (15) Share of associates / JVS 41 43 Underlying profit before tax 1,098 1,078 Non-core items (63) (226) Profit before tax 1,035 852 *Of which additional gains 171 74 Average EUR/GBP FX rates 0.82 0.88 Bank of Ireland Group Net interest income of €2,248m, reduction of €50m vs. 2016 primarily due to FX translation impacts Other income of €801m primarily reflecting: Sustainable and diversified business income of €662m; c.8% increase on 2016 Valuation and other adjustments on financial instruments - net benefit of €65m (2016: €62m) Additional gains of €74m (2016: €171m) Operating expenses of €1,789m including FX benefit of c. €24m Core Banking Platforms investment in 2017 of €195m (CET1 ratio impact of c.40bps); €111m expensed to income statement Impairment charges (net) of €15m; reflects reversals on Irish mortgages, actions taken to improve asset quality and higher collateral values Non-core items include charge of €170m for Tracker Mortgage Examination and other restructuring charges ¹Comparative figures for 2016 have been restated to reflect the impact of the reclassification of the charges relating to the Central Bank of Ireland's Tracker Mortgage Examination Review as non-core and the impact of the voluntary change in the Group's accounting policy for Life assurance operations 16#19Maintaining strong commercial discipline Net interest margin 2.29% 2.19% 2.20% 2015 269bps 20161 Net interest margin drivers 272bps 2017 Net interest income¹ • NIM . Net interest income of €2,248m, reduction of €50m vs. 2016 primarily due to FX translation impacts Average interest earning assets for 2017 were €98.2bn, down 4% on 2016 primarily due to the impact of a weaker sterling 2017 NIM of 2.29%. Increase of 9bps from 2016, primarily reflecting: • Strong commercial discipline on pricing 284bps • • Maturity of expensive CoCo in mid 2016 • Lower cost of deposits, primarily in the UK Exit NIM in December 2017 of 2.24%, down from H1 2017 NIM of 2.32%, reflecting: Cost of complying with MREL with Tier 2 issuance in Sept 17 (2bps) 28bps 18bps 19bps • CRT transaction in Nov 17 in advance of TRIM (2bps) Impact of excess liquidity (2bps) • 2015 2016 2017 Loan Asset Spread² Liquid Asset Spread² Bond sales in H2 2017 to protect capital in advance of IFRS 9 (1bp) • NIM in 2018 is expected to be broadly in line with the exit NIM of 2.24% Bank of Ireland Group 'Comparative figures for 2016 have been restated to reflect the impact of the reclassification of the charges relating to the Central Bank of Ireland's Tracker Mortgage Examination Review as non-core 2Spread = Loan asset yield or Liquid asset yield less Group's average cost of funds 17#20Continued growth in new lending Growth of 11% in new lending Retail Ireland Retail UK Corporate & Treasury • €5.3bn €4.8bn £4.6bn £4.1bn €3.6bn €3.2bn 2016 2017 €78.5bn 2016 2017 2016 2017 Group loan book movement in 2017 €14.1bn €13.8bn Dec 16 Loan Volumes Net Lending €1.2bn €1.5bn Total €15.0bn Customer Redemptions Redemptions on impaired loans, GB non-core Bank of Ireland Group €76.1bn • . New lending of €14.1bn¹ in 2017, increase of 11% on a constant currency basis vs. 2016 Retail Ireland new lending increased by 9%; • ROI mortgage new lending up 41% ROI mortgage new lending market share grew to 27% (2016: 25%) with a strong Q4 market share of 29% Expect to re-enter ROI mortgage broker market later in 2018; maintaining an appropriate focus on risk and pricing Retail UK new lending increased by 12%, primarily driven by UK mortgages Corporate new lending increased by 13% Group loan book decreased by c.€2.4bn to €76.1bn reflecting; • New lending of €14.1bn • Customer redemptions of €13.8bn Redemptions of impaired loans and GB non-core business banking loan book² of €1.2bn FX Dec 17 • Loan Volumes FX translation impact of €1.5bn 'Excluding portfolio acquisitions (2016 - €0.2bn; 2017 - €0.1bn) 2GB business and corporate loan books, which BOI was required to run down under its EU approved Restructuring Plan (Remaining stock: 2016 - £0.9bn; 2017 - £0.6bn) 18#21Growing diversified business income Growth of 8% in business income to €662m in 2017 (2016: €615m); Bank of Ireland Life - strong growth in pension sales contributed to growth in BOI Life business income Corporate & Treasury - 11% increase driven by equity distributions and income from supporting customers with their interest rate and FX risk hedging requirements Additional gains of €74m in 2017; Bond sales of €45m; includes €0.8bn of sales executed in 2017 (to protect capital ahead of IFRS 9 transition) which crystallised a gain of €43m and will adversely impact NIM in 2018 by c.1bp Sale of investment properties / other assets (€29m) Valuation and other adjustments on financial instruments - net benefit of €65m in 2017 (2016: €62m) FY 20161 FY 2017 (€m) (€m) Retail Ireland Bank of Ireland Life Retail UK 319 317 • 145 177 Corporate & Treasury Group Centre and Other Business Income Additional gains - VISA Europe gain - Bond Sales 22N 1 157 175 (8) (8) 615 662 171 74 95 63 45 - Sales of investment properties / other assets 13 29 Other valuation items 62 65 - CVA, DVA, FVA, other 59 37 - Economic assumptions - BOI Life 41 22 - Investment variance - BOI Life 10 9 -IFRS adjustment² (45) (3) FV move on CoCo Other Income (3) 848 801 Bank of Ireland Group ¹Comparative figures have been restated to reflect the impact of the voluntary change in the Group's accounting policy for Life assurance operations 2IFRS adjustment is fully offset in net interest income 19#22Operating expenses Operating expenses - €1,789m • Total staff costs of €900m includes 2017 impact of Career and Reward framework (c.2.5%) and higher pension costs • Other costs of €724m reflect investments in our businesses, products, processes and people FX translation benefit of c.€24m in 2017 Core Banking Platforms investment - €111m Total investment in 2017 of €195m (CET1 ratio impact of c.40bps); €111m expensed to income statement Levies and Regulatory charges - €99m Expect levies and regulatory charges to total €100m-€105m in 2018 Outlook • Taking actions to simplify our organisation, improve efficiency and achieve <50% cost income ratio target in medium term Expect Operating Expenses to reduce in 2018 FY 2016 FY 2017 (€m) (€m) Total staff costs 877 900 - Staff costs 742 752 • - Pension costs 135 148 • Other costs 732 724 Depreciation 132 165 Operating Expenses 1,741 1,789 • Core Banking Platforms investment 41 111 Levies and Regulatory charges 109 99 Total Operating Expenses 1,891 1,999 Bank of Ireland Group 20 20#23Business Transformation Investments in technology are transforming our businesses, our channels and customer experience • Implemented in 2017 • Leading centre of excellence in robotics reducing completion times by up to 80% Payments infrastructure investment programme to support business growth and transformation Digitised and optimised 250 customer experience touchpoints Investment in channels - webchat, video, screen-share Group-wide Enterprise Data Warehouse (EDW) realising business value • Delivering the Digital Bank 79% of customers are digitally active, up 15% vs. 2016 98% of all interactions are handled via self-service/Direct channels (including LATMs) 75% of new product sales are now opened through direct and digital channels; 50% completing straight through c.1m digital customers across Personal and Small Business segments and 720k active mobile users . • Coming in 2018 Creation of single customer view for Retail Ireland as part of first release of Core Banking Platforms Extending our award winning UK intermediary mortgage platform into Ireland Delivering an API platform to enable Open Banking propositions Delivery of first set of live products on new Core Banking Platforms for testing Money messaging app for students with fintech partnership Core Banking Platforms investment will drive sustainable cost efficiencies and growth Bank of Ireland Group 21#24Asset quality - further substantial improvement Non-performing exposures €2.9bn reduction €9.4bn Dec 16 €8.1bn Jun 17 €6.5bn Dec 17 Impairment charge on customer loans 32bps €296m 2015 21bps €176m 2016 2bps €15m 2017 Annual impairment charges on customer loans as a % of average gross loans for the period Customer loan impairment charge Asset Quality continues to improve • • • Non-performing exposures (NPEs) of €6.5bn, 31% / €2.9bn reduction during 2017 Impaired loans of €4.0bn, 35% / €2.2bn reduction during 2017; down 73% from reported peak in June 2013 Reductions reflect successful resolution strategies and the positive economic environment Expect further reductions in 2018 and beyond; pace will be influenced by a range of factors Impairment charge on customer loans reduced Net impairment charge of 2bps (€15m) for 2017 benefiting from reversals on the Irish mortgage book Expect the impairment charge for 2018 to be up to c.20 bps, reflecting the transition to IFRS 9 and a slower pace of impairment reversals with a consequent trend towards more normalised levels Impaired loan coverage ratio of 49%; provision coverage reducing as legacy impaired loans are resolved IFRS 9 • Estimated net quantitative impact on initial adoption of IFRS 9 on 1st January 2018 is c.€120m post tax, primarily driven by an increase in impairment loss allowances No change in quantum of NPES on transition to IFRS 9 Bank of Ireland Group 22 22#25Capital and liquidity available to support growth Strong liquidity ratios Net Stable Funding Ratio - 127% Liquidity Coverage Ratio - 136% Loan to Deposit Ratio - 100% Customer deposits - €75.9bn • Customer deposits funding 100% of customer loans Predominantly sourced through retail distribution channels • Negative interest rates being applied to certain customer cohorts Dec 2016 Dec 2017 (€bn) (€bn) • • Customer loans 78 76 • Liquid assets 21 24 BOI Life assets 17 17 Other assets 7 6 • Total assets 123 123 Customer deposits 75 76 Wholesale funding 14 13 BOI Life liabilities 17 17 Other liabilities 7 7 • Shareholders' equity 9 9 Additional Tier 1 security & other 1 1 Total liabilities 123 123 TNAV per share €7.40 €7.52 Closing EUR/GBP FX rates 0.86 0.89 Wholesale funding - €12.7bn Monetary Authority borrowings of €5.0bn¹ reflecting Group's usage of cost efficient term funding facilities "Holdco" structure established in July 2017 Tier 2 issuance of £300m and $500m in September 2017 Future senior and junior debt issuance for MREL purposes expected to be issued from "Holdco"; modest new MREL issuance expected Bank of Ireland Group 1€3.3bn of ECB TLTRO funding and €1.7bn of BOE funding through TFS (c.€1.3bn) and ILTR (c. €0.4bn) 23#26Strong capital generation; dividend payments recommencing 12.3% Fully loaded CET1 ratio movement 0.25% 1.40% (0.40%) 0.50% (0.25%) Dec 16 Organic CET1 Care Capital Banking Generation Platforms Capital position • • Investment 0.20% 13.8% 13.6% Dividend Credit Risk RWA Transfer Methodology Transaction Changes Dec 17 CET1 1 Jan 2018 (post IFRS 9 impact) CET1 Strong organic capital generation of 140bps in 2017; • Regulatory CET1 ratio of 15.8% • Fully loaded CET1 ratio of 13.8% • Regulatory Total Capital ratio of 20.2% Extent of capital volatility arising from interest rate and inflation risks in the pension schemes materially reduced following increased hedging; IAS19 pension scheme deficit of €0.48bn2 (Dec 16: €0.45bn) • Investments in Core Banking Platforms of c.40bps / €195m Capital returns / dividends • Dividend of 11.5c per share proposed and deducted from the capital ratios in line with regulatory guidance (€124m) Expect that dividends will increase on a prudent and progressive basis and, over time, will build towards a payout ratio of around 50% of sustainable earnings Capital guidance • IFRS 9 transition adjustments reduce the fully loaded capital ratios by c.20bps on 1 Jan 2018 Capital benefit of CRT transaction (50bps) could be absorbed, in full or in part, following the outcome of the TRIM process expected during 2018 • RWA methodology changes include a revised regulatory treatment relating to the maturity of certain corporate loans and a reclassification of forborne collateral realisation loans to align with EBA classifications • The Group expects to maintain a CET1 ratio in excess of 13% on a regulatory basis and on a fully loaded basis by the end of the O-SII phase-in period³. This includes meeting applicable regulatory capital requirements plus an appropriate management buffer Bank of Ireland Group 1Organic capital generation primarily consists of attributable profit, RWA book size and quality movements and movements in regulatory deductions 2Deficit reducing contributions of c.€100m during 2017 have limited impact on regulatory ratios and do not impact fully loaded capital ratios while the schemes are in deficit ³The Other-Systemically Important Institution (O-SII) buffer will be introduced at 0.5% in July 2019, phasing in at 0.5% per annum to 1.5% in July 2021 24#27Summary Strong 2017 Performance Looking Forward • Underlying profit before tax of €1,078m 11% growth in new lending to €14.1bn NPES reduced by 31% to 8.3% of customer loans CET1 ratio of 13.8%; Dividends re-commencing M Strong economic growth projected in Ireland; UK also expected to expand Expect net loan book growth in 2018 with NIM modestly lower than 2017 Expect costs to reduce in 2018; impairment charge for 2018 to be up to c.20bps Committed to successful implementation of investments to replace Core Banking Platforms Strategic Priorities Transform the Bank Serve our customers brilliantly Grow sustainable profits Bank of Ireland Group Investor Day in June 2018 to expand further on strategic priorities and growth ambitions for the Group 25#28Appendix Bank of Ireland Group#29Appendix • BOI Overview Business profile Historic financial results Profile of customer loans at Dec 17 (gross) Loans and advances to customers - new business volumes ROI mortgage loan book • UK mortgage loan book ° Income Statement Divisional performance Net interest income analysis Interest Rate Sensitivity Non-core Items Asset Quality 0 Non-performing exposures by portfolio Non-performing exposures ROI mortgages UK Customer Loans Available for Sale Financial Assets Capital Capital Guidance and Distribution Policy Regulatory Capital Requirements CET1 ratios Risk weighted assets IFRS 9 Impairment loss allowance Defined Benefit Pension Schemes Ordinary shareholders' equity and TNAV Contact details Bank of Ireland Group Slide No. 28 30 33 34 35 36 37 38 39 42 43 23 E 44FLEK 40 44 45 46 48 49 50 52 53 27#30BOI Overview: Business profile Ireland: Leading bank in a growing economy with a well structured market Comprehensive multi-channel ATM distribution platform c.250 branches c.1,650 Self-service devices Consumer Banking Market leading positions 27% of new mortgages in 2017 79% of consumers are now digitally active ***** 60% of transactions via mobile or tablet ર 685k service calls monthly/24 x 7 Wealth Management incl. New Ireland Life Assurance c.20% APE market share Business Banking #1 Business Bank Corporate Banking #1 Corporate Bank Strong relationships c.1.7m Customers c.500k Customers c.200k SME Customers with customers Bank of Ireland Group Supporting 2 out of every 3 FDI projects into Ireland 28#31BOI Overview: Business profile Attractive UK and International franchises provide diversification and further opportunities for growth within a disciplined risk appetite Partnership based consumer banking franchise in UK Savings c.940k Customers Focus on enhancing customer propositions and experience, pricing agility Trusted brand and established customer base Mortgages Improved processing capability, service resilience with focus on enhancing customer propositions Retail FX Market leader with c.24% share Multi-Currency Card launched in 2017 with sales of >300k cards; highly successful app accounting for c.70% of top-ups More branches than other retail banks combined POST OFFICE Money Consumer Lending Up front eligibility check, E-sign and document upload now available Acquisition Finance Well recognised lead arranger/ underwriter European/US Business • • Focussed on mid-market transactions Expertise developed over c.20 years Profitable with strong asset quality III ATM c.11,500 Post Office branches c.2,400 Post Office Online Mobile Telephone / BOI ATMs Strategic intermediaries AA Stamford AA partnership continues to develop Focussed on a customer offering that combines our proven product development capability with the strength of the AA brand and its extensive and attractive membership base Full service bank in Northern Ireland Northridge: Vehicle asset finance business Corporate lending - focussed sector strategy Bank of Ireland Group London ●Frankfurt Paris 29#32BOI Overview Income Statement¹ FY 2013 FY 2014 FY 2015 FY 2016² FY 2017 (€m) (€m) (€m) (€m) (€m) Total income 2,646 2,974 3,272 3,126 3,049 - Net interest income 2,133 2,358 2,454 2,298 2,248 - Other income (net) before additional gains 549 448 591 677 727 - Additional gains 93 205 237 171 74 - ELG fees (129) (37) (10) (20) Operating expenses¹ (1,545) (1,601) (1,746) (1,741) (1,789) Core Banking Platforms investment (41) (111) Levies and regulatory charges Operating profit pre-impairment (31) (72) (75) (109) (99) 1,070 1,301 1,451 1,235 1,050 Net impairment charges (1,665) (472) (296) (178) (15) Share of associates / JVs Underlying (loss) / profit before tax 31 92 46 41 43 (564) 921 1,201 1,098 1,078 Non core items 44 (1) 31 (63) (226) Statutory (loss)/profit before tax (520) 920 1,232 1,035 852 Net interest margin 1.84% 2.11% 2.19% 2.20% 2.29% Cost income ratio³ 58% 54% 53% 57% 62% Cost income ratio (excluding Core Banking Platforms Investment) Dividend per share (proposed) 58% 54% 53% 56% 59% 11.50 Bank of Ireland Group ¹Figures as reported, with the exception of y/e Dec 13 which includes a €5m reduction in Operating expenses relating to IFRIC 21 adjustments 2Comparative figures for 2016 have been restated to reflect the impact of the reclassification of the charges relating to the Central Bank of Ireland's Tracker Mortgage Examination Review as non-core and the impact of the voluntary change in the Group's accounting policy for Life assurance operations 3Cost/income ratio is calculated as operating expenses (excluding levies and regulatory charges) divided by total income 30#33BOI Overview Summary Balance Sheet Customer loans¹ Liquid assets BOI Life assets Other assets Total assets Customer deposits Wholesale funding Private Sources Monetary Authority/TLTRO BOI Life liabilities Subordinated liabilities and AT1 Other liabilities Shareholders' equity 9 9 Total liabilities & Shareholders' equity 132 130 131 123 123 Fully loaded CET1 ratio 6.3% 9.3% 11.3% 12.3% 13.8% Loan to deposit ratio 114% 110% 106% 104% 100% ནྤྱིཊྛིཾ ཨཽ སིསྐ oསྐྱིཎྜ8ཊྛིæཚོས༤༠ Dec 13 (€bn) Dec 14 Dec 15 (€bn) (€bn) 85 27 14 6 132 74 27 19 27326462∞ ∞ 82 85 78 Dec 16 (€bn) Dec 17 (€bn) 76 25 24 21 24 16 16 17 17 6 7 130 131 123 75 80 20 14 16 14 16 2 7 8 10 17737269 612-638 75 14 11 276263857350 17 13 Bank of Ireland Group 'Loans and advances to customers is stated after impairment provisions 31#34BOI Overview Profile of customer loans¹ at Dec17 (gross) Composition (Dec 17) Mortgages ROI UK RoW Total Total (€bn) (€bn) (€bn) (€bn) (%) 24.1 22.6 0.0 46.7 60% Non-property SME and corporate 11.2 4.02 3.5 18.7 24% SME 8.2 1.7 0.0 9.9 13% Corporate 3.0 2.3 3.5 8.8 11% Property and construction Investment property Land and development 6.0 2.7 0.1 8.8 11% 5.7 2.5 0.1 8.3 10% 0.3 0.2 0.0 0.5 1% Consumer 2.0 2.3 0.0 4.3 5% Customer loans (gross) 43.3 31.6 3.6 78.5 100% Geographic (%) 55% 40% 5% 100% Bank of Ireland Group 'Based on geographic location of customer Includes £0.6bn relating to GB business and corporate loan books, which BOI was required to run down under its EU approved Restructuring Plan (2016: £0.9bn) 32#35Loans and advances to customers New business volumes €4.8bn Retail Ireland €5.3bn €2.0bn £4.1bn €1.4bn €3.0bn €2.9bn Retail UK £4.6bn £3.2bn £2.8bn £0.2bn £0.2bn Corporate & Treasury (incl. Ireland) €3.2bn €3.6bn €2.5bn €2.2bn £1.1bn £1.0bn €1.0bn €1.1bn €0.4bn €0.4bn 2016 2017 2016 2017 2016 2017 Bank of Ireland Group Mortgages Business Banking Consumer Corporate Acquisition Finance 33#36ROI Mortgages: €24.1bn ROI Mortgages (gross) 27% 24% 26% €25.0bn 28% €3.9bn €8.1bn €1.2bn €0.8bn €0.8bn €12.9bn ROI Mortgages (gross) €24.3bn €24.1bn €5.3bn €7.3bn €7.2bn €5.8bn €11.8bn €10.9bn €0.6bn H1 2016 Pricing Strategy • H2 2016 New Lending Volumes¹ H1 2017 Market Share H2 2017 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.89% of our new lending in 2017, up from c.30% in 2014 Wider proposition • 7 in 10 ROI customers who take out a new mortgage purchase a life assurance policy through BOI Group • 3 in 10 ROI customers who take out a new mortgage take out a general insurance policy through BOI Group with insurance partners Market Share • Market share grew in each quarter in 2017 from 26% in Q1 2017 to 29% in Q4 2017 • Expect to re-enter the Irish mortgage broker market in 2018 Dec 15 Dec 16 Tracker Variable Rates Fixed Rates Dec 17 LTV profile Average LTV of 63% on existing mortgage stock at Dec 2017 (Dec 16: 72%, Dec 15: 80%) • Average LTV2 of 69% on new mortgages in 2017 (Dec 16: 67%, Dec 15: 67%) Tracker mortgages • €10.3bn or 94% of trackers at Dec 17 are on a capital and interest repayment basis • 78% of trackers are Owner Occupier mortgages; 22% of trackers are Buy to Let mortgages • Loan asset spread on ECB tracker mortgages was c.66bps³ • in 2017, compared to Group net interest margin (including ECB trackers) of 229bps in 2017 Trackers reduced by €0.9bn since Dec 16; this includes an impact of €0.4bn of mortgages that are now on a tracker rate following the adjustments made as part of the Tracker Mortgage Examination Review in H2 2017 Bank of Ireland Group Excluding portfolio acquisitions (H1 2016 - €0.1bn; H2 2016 - €0.1bn; H1 2017 - Nil; H2 2017 - €0.1bn) 2Note that the LTV on new business includes the impact of the acquired portfolios ³Average customer pay rate of 108bps less Group average cost of funds in 2017 of 42bps 34#37UK Mortgages: £20.0bn/€22.6bn £20.5bn UK Mortgages (gross) £20.4bn £20.5bn £20.0bn £2.6bn UK Mortgages (gross) £20.4bn £2.2bn £20.0bn £2.0bn £6.9bn £8.5bn £9.6bn £7.4bn £7.5bn £7.6bn £4.9bn £4.0bn £3.3bn £10.4bn £10.8bn £10.6bn £8.7bn £7.9bn £7.2bn Dec 15 Dec 16 Dec 17 Dec 15 Dec 16 Dec 17 Tracker Variable Rates Fixed Rates Standard Buy to let Self certified LTV profile • Average LTV of 62% on existing stock at Dec 2017 (Dec 16: 62%, Dec 15: 63%) • Average LTV of 72% on new UK mortgages in 2017 (Dec 16: 71%, Dec 15: 69%) Bank of Ireland Group 35#38Income Statement Divisional performance Year ended Dec 17 Retail Ireland Bank of Ireland Life Retail UK - € Retail UK - £ Corporate & Treasury Group Centre & Other Core Banking Platforms investment Group Year ended Dec 16¹ Retail Ireland Bank of Ireland Life Retail UK - € Retail UK - £ Corporate & Treasury Group Centre & Other Core Banking Platforms investment Group Bank of Ireland Group Underlying profit/(loss) before tax and additional gains Underlying profit/(loss) (€m) Additional gains (€m) before tax (€m) 711 1 712 106 106 94 9 103 83 8 91 531 22 553 (327) 42 (285) (111) (111) 1,004 74 1,078 Underlying profit/(loss) before tax and additional gains Additional gains Underlying profit/(loss) before tax (€m) (€m) (€m) 549 87 636 127 127 128 5 133 102 4 106 451 80 531 (287) (1) (41) (288) (41) 927 171 1,098 *Comparative figures for 2016 have been restated to reflect the impact of the reclassification of the charges relating to the Central Bank of Ireland's Tracker Mortgage Examination Review as non-core and the impact of the voluntary change in the Group's accounting policy for Life assurance operations 36#39Income Statement Net interest income analysis H1 2016 H2 2016 H1 2017 H2 2017 Average Gross Gross Volumes Interest Rate (€bn) (€m) (%) Average Gross Gross Volumes Interest Rate (€bn) (€m) (%) Average Gross Volumes Interest (€bn) (€m) Gross Rate Average Gross Volumes Interest Gross Rate (%) (€bn) (€m) (%) Ireland Loans 36.5 567 3.12% 36.0 559 3.08% 35.5 547 3.11% 35.3 545 3.07% UK Loans 33.5 571 3.43% 30.2 489 3.22% 29.5 460 3.15% 28.0 430 3.05% C&T Loans 12.6 248 3.97% 12.7 254 3.98% 12.7 254 4.03% 12.8 253 3.92% Total Loans & Advances to Customers 82.6 1,386 3.38% 78.9 1,302 3.28% 77.7 1,261 3.27% 76.1 1,228 3.20% Liquid Assets 22.5 921 0.82% 20.5 781 0.76% 21.6 661 0.62% 21.1 601 0.56% Total Interest Earning Assets 105.1 1,478 2.83% 99.4 1,380 2.76% 99.3 Ireland Deposits 22.1 (26) (0.24%) 21.9 (17) (0.15%) 20.6 1,327 (12) 2.70% (0.12%) 20.4 97.2 1,288 2.63% (9) (0.08%) Credit Balances² 23.8 (1) (0.01%) 25.3 (1) (0.01%) 27.1 (0) (0.00%) 29.3 4 0.03% UK Deposits C&T Deposits 24.6 (154) (1.26%) 20.7 (111) 7.7 (21) (0.55%) 6.8 (14) Total Deposits 78.2 (202) (0.52%) 74.7 (143) Wholesale Funding 13.6 (49) (0.71%) 13.4 (32) Subordinated Liabilities. 2.4 (91) (7.72%) 1.5 (48) (1.07%) 19.3 (0.41%) 6.0 (0.38%) 73.0 (0.47%) 14.3 (6.13%) 1.4 (83) (0.86%) 18.2 (74) (0.80%) (10) (0.35%) 5.2 (9) (0.35%) (105) (0.29%) 73.1 (88) (0.24%) (43)3 (0.60%) 12.3 (36)³ (0.58%) (35) (5.17%) 1.8 (42) (4.80%) Total Interest Bearing Liabilities 94.2 (342) (0.73%) 89.6 (223) (0.49%) 88.7 (183) (0.42%) 87.2 (166) (0.38%) IFRS Income Classification (32) (13) (8) 5 Other4 14 (9) Net Interest Margin 105.1 1,118 Average ECB Base rate in the period Average 3 month Euribor in the period Average BOE Base rate in the period Average 3 month LIBOR in the period 2.14% 0.02% 99.4 1,135 2.27% 99.3 7 1,143 (25) 2.32% 97.2 1,102 2.25% 0.00% 0.00% 0.00% (0.22%) (0.31%) (0.33%) (0.33%) 0.50% 0.30% 0.25% 0.32% 0.59% 0.41% 0.33% 0.38% Bank of Ireland Group 'Excludes any additional gains from portfolio re-configuration during the period 2Credit balances in H2 2017: ROI €21.8bn, UK €3.2bn, C&T €4.3bn Includes impact of CRT transactions executed in December 2016 and November 2017 "Includes customer termination fees, EIR adjustments and other one-off adjustments. 37#40Interest Rate Sensitivity The table below shows the estimated sensitivity of the Group's income (before tax) to an instantaneous and sustained 1% parallel movement in interest rates Estimated sensitivity on Group income (1 year horizon) 100bps higher 100bps lower The estimates are based on management assumptions primarily related to: • The re-pricing of customer transactions; Dec 16 (€m) Dec 17 (€m) c.140 c.170 (c.170) (c.200) . The relationship between key official interest rates set by Monetary Authorities and market determined interest rates; and • The assumption of a static balance sheet by size and composition In addition, changes in market interest rates could impact a range of other items including the valuation of the Group's IAS 19 defined benefit pension schemes Bank of Ireland Group 38#41Income Statement Non-core items FY 2016¹ FY 2017 (€m) (€m) Tracker Mortgage Examination charges (21) (170) Cost of restructuring programme (35) (48) Cost of corporate reorganisation and establishment of a new holding company (7) Loss on disposal / liquidation of business activities (7) (5) Gain (charge) arising on the movement in the Group's credit spreads Investment return on treasury stock held for policyholders Loss on liability management exercises Gross-up for policyholder tax in the Life business Total non-core items 52 12 (19) (5) (1) 10 (63) (226) Bank of Ireland Group 'Comparative figures for 2016 have been restated to reflect the impact of the reclassification of the charges relating to the Central Bank of Ireland's Tracker Mortgage Examination Review as non-core and the impact of the voluntary change in the Group's accounting policy for Life assurance operations 39#42Non-performing exposures by portfolio Advances Non-performing Non-performing Impaired Composition (Dec 17) (€bn) exposures exposures as % loans Impaired loans as % Impairment Specific impairment Specific impairment (€bn) of advances (€bn) of advances provisions (€bn) provisions provisions as % (€bn) of impaired loans Residential Mortgages - Republic of Ireland - UK Non-property SME and Corporate - Republic of Ireland SME - UK SME - Corporate Property and construction 46.7 3.1 6.6% 1.3 2.8% 24.1 2.7 11.0% 1.1 4.7% 22.6 0.4 1.9% 0.2 0.8% 18.7 1.7 8.9% 1.3 7.1% - Investment property - Land and development Consumer co co co co O+ 278 8353 8.2 1.3 15.4% 1.0 12.0% 1.7 0.1 8.6% 0.1 5.9% 8.8 0.3 3.0% 0.2 2.9% 8.8 1.7 19.1% 1.3 14.9% 8.3 1.5 17.9% 1.1 13.7% 0.5 0.2 39.4% 0.2 35.3% 4.3 0.1 2.1% 0.1 2.1% 0.1 769961276 ooooooooood 0.7 0.5 37% 0.6 0.5 42% 0.1 0.0 11% 0.9 0.8 57% 0.6 0.6 56% 0.1 0.1 52% 0.2 0.1 62% 0.7 0.6 52% 0.6 0.5 51% 0.1 0.1 60% 0.1 63% Total loans and advances to customers 78.5 6.5 8.3% 4.0 5.2% 2.4 2.0 49% Advances Non-performing Non-performing Impaired Composition (Dec 16) exposures exposures as % loans Impaired loans as % Impairment Specific impairment Specific impairment provisions provisions provisions as % (€bn) (€bn) of advances (€bn) of advances (€bn) (€bn) of impaired loans Residential Mortgages 48.2 3.6 7.6% 1.6 3.4% 1.0 - Republic of Ireland 24.3 3.1 13.0% 1.4 6.0% 0.9 - UK 23.9 0.5 2.1% 0.2 0.7% 0.1 190 0.7 42% 0.7 45% 0.0 15% Non-property SME and Corporate 20.0 2.2 11.0% 1.8 9.1% - Republic of Ireland SME 8.8 1.7 19.1% 1.4 15.7% - UK SME 1.9 0.2 9.1% 0.1 6.3% FOO 1.1 1.0 55% 0.8 0.8 55% 0.1 0.1 55% - Corporate 9.3 0.3 3.7% 0.3 3.5% 0.2 0.2 54% Property and construction 10.4 3.5 33.6% 2.7 25.8% 1.7 1.6 61% - Investment property 9.4 - Land and development 1.0 Consumer 3.8 200 2.7 29.4% 2.0 21.1% 1.2 1.1 57% 0.7 71.6% 0.7 68.8% 0.5 0.5 73% 0.1 2.8% 0.1 2.7% 0.1 0.1 66% Total loans and advances to customers 82.4 9.4 11.4% 6.2 7.6% 3.9 3.4 54% Bank of Ireland Group 40#43Non-performing exposures 31% reduction in NPEs during 2017 Non-performing exposures (NPEs) €9.4bn €0.7bn €1.8bn €0.7bn €6.2bn 31% reduction €6.5bn €0.6bn €1.4bn €0.5bn €4.0bn Non-performing exposures • NPEs are aligned with the EBA definition and include; • Impaired loans loans with a specific provision attached to them Exposures >90 days past due but not impaired Forborne exposures reliant on collateral realisation that are neither impaired nor >90 days past due - Forborne Collateral Realisation loans are loans that are not impaired but where future reliance on the realisation of collateral is expected for the repayment in full of the relevant loans Other/probationary loans - loans that have yet to satisfy exit criteria in line with the EBA guidance to return to performing Dec 16 Dec 17 Impaired Loans >90 days past due Forborne Collateral Realisation Other / Probationary Bank of Ireland Group 41#44ROI Mortgages Arrears performance 3 to 4 times better than Industry Average Industry Average >90 days arrears¹ 8.2% Bank of Ireland 2.4% Owner Occupier Owner Occupier Industry Average 17.8% Bank of Ireland 5.7% Buy to let Buy to let >90 days arrears . Bank of Ireland is significantly below the industry average for both Owner Occupier (29% of industry average) and Buy to Let (32% of industry average) >720 days arrears • Bank of Ireland is significantly below the industry average for both Owner Occupier (27% of industry average) and Buy to Let (23% of industry average) >720 days arrears¹ Industry Average Industry Average 13.1% 5.2% Bank of Ireland Bank of Ireland 1.4% Owner Occupier Owner Occupier Buy to let 3.0% Buy to let Bank of Ireland Group 'As at September 2017, based on number of accounts, industry average excluding BOI 42#45UK Customer Loans £28.0bn (€31.6bn) UK Mortgages - £20.0bn Scotland, Northern Ireland, £1.0bn Rest of England, £8.8bn £1.0bn Wales, £0.8bn Greater London, £4.0bn Outer Metropolitan, £2.5bn South East, £2.0bn Other UK Customer Loans - £8.0bn 39% 85% 42% 53% 67% £0.02bn £0.02bn £0.4bn £0.1bn £2.1bn £1.8bn £2.1bn £1.4bn £0.04bn £0.14bn SME Corporate Investment Property Performing loans Non-performing exposures Land & Development Consumer Impaired loans coverage ratio UK Mortgages Analysis - £20.0.bn Total UK mortgages of £20.0bn; (NPES - 2%; impaired loans - 1%) Average LTV of 62% on total book (2016: 62%) • Average LTV of 72% on new mortgages (2016: 71%) • UK mortgage book continues to perform in line with industry averages¹ • 83% of mortgages originated since 2010 are standard owner Occupier mortgages BTL book is well seasoned with 77% of these mortgages originated pre 2009 Average balance of Greater London mortgages is c.£195k. 89% of Greater London mortgages have an average LTV <70% Other UK Customer Loans Analysis - £8.0bn Impaired loans of £0.6bn with strong coverage ratios. Investment Property impaired loans have decreased by 67% 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 (50%), Office (14%), Residential (15%) Other (22%) Consumer: largest segment is asset backed motor financing of £1.1bn. Book also includes Post Office / AA branded credit cards (£0.6bn) and personal loans (£0.4bn) Bank of Ireland Group 'Data published by the Council of Mortgage Lenders (CML) for September 2017 indicates that the proportion of the Retail UK mortgage book in default (defined for CML purposes as greater than 90 days but excluding possessions and receivership cases) is in line with the UK industry average of 1% across all segments (Retail UK equivalent: 1%) 43#46Asset Quality Available for Sale Financial Assets ROI UK France Other Dec 17 (€bn) (€bn) (€bn) (€bn) (€bn) Dec 16 (€bn) Sovereign bonds 4.8 0.5 0.8 1.4 7.5 5.2 Senior debt 0.3 1.8 2.1 1.7 Covered bonds 0.2 0.6 0.4 1.9 3.1 3.5 Subordinated debt 0.3 0.1 0.4 0.3 Asset backed securities 0.1 0.1 0.1 Total 5.3 1.2 1.5 5.2 13.2 10.8 AFS Reserve 0.34 0.34 0.35 Portfolio 2017 2018 • During 2017, €1.8bn of Irish Government HTM bonds were reclassified to AFS Interest received on NAMA subordinated bonds IAS 39 IFRS 9 (€m) (€m) • Weighted average credit rating of the AFS portfolio is AAA to AA- NAMA • The Group's holding of €0.5bn of NAMA senior bonds at Dec 2016 was fully redeemed during 2017 • The Group holds NAMA subordinated bonds - €0.3bn nominal value, valued at 104% (Dec 16 - 98%) Interest coupon @ 5.264% Amortisation of previous impairment¹ On transition to IFRS 9, the previous impairment is treated as an adjustment to revenue reserves and is no longer amortised in the income statement (NIM impact c.2bps); the Group's capital position is unaffected 15 15 19 Recognised in Net Interest Income 34 15 Bank of Ireland Group 'In 2014, the Group revised its assumption as to future expected cash flows on the NAMA subordinated bonds, resulting in an impairment reversal of €70m 44#47Capital Guidance and Distribution Policy Capital Guidance The Group expects to maintain a CET1 ratio in excess of 13% on a regulatory basis and on a fully loaded basis by the end of the O-SII phase-in period. This includes meeting applicable regulatory capital requirements plus an appropriate management buffer Distribution Policy As anticipated, the Group is re-commencing dividends in respect of the 2017 financial year; a dividend of 11.5 cents per share has been proposed The Group expects that dividends will increase on a prudent and progressive basis and, over time, will build towards a payout ratio of around 50% of sustainable earnings Dividend level and rate of progression will reflect, amongst other things; • ° Strength of the Group's capital and capital generation; Board's assessment of growth and investment opportunities available; Any capital the Group retains to cover uncertainties; and Bank of Ireland Group • Any impact from the evolving regulatory and accounting environments 'The Other-Systemically Important Institution (O-SII) buffer will be introduced at 0.5% in July 2019, phasing in at 0.5% per annum to 1.5% in July 2021 45#48Regulatory Capital Requirements Supervisory Review and Evaluation Process (SREP¹) requirement 15.8% Capital Conservation Buffer (CCB) of 2.5% fully phased in by 2019 1.5% O-SII¹ Buffer phased in over 3 years from July 2019 +P2G 1.875% CCB Regulatory C.0.3% CCyB CET1 Ratio 2.25% P2R Dec 2017 4.5% Min CET1 Requirement SREP¹ 2018 OSII +0.5% 2.5% +1.0% 2.5% +1.5% 2.5% SREP requirement for 2019 onwards not known at this point Requirement to be reviewed annually CCyB subject to quarterly review² 2019 2020 2021 Minimum Regulatory Capital Requirement • A minimum CET1 ratio of 8.625% on a regulatory basis from 1 January 2018 • Includes a Pillar 1 requirement of 4.5%, a P2R of 2.25% and a capital conservation buffer for 2018 of 1.875% The FPC (UK) have set the countercyclical buffer (CCYB)2 at 0%; increasing to 0.5% in June 2018 and 1% in November 2018. This will increase the Group's capital requirement by c.0.15% in June 2018 and a further c.0.15% in November 2018. • The CBI (ROI) continues to set the CCyB2 at 0% • Pillar 2 guidance (P2G) is not disclosed in accordance with regulatory preference • The Group expects to maintain a CET1 ratio in excess of 13% on a regulatory basis and on a fully loaded basis by the end of the O-SII phase-in period. This includes meeting applicable regulatory capital requirements plus an appropriate management buffer • We expect to receive our initial MREL target in H1 2018 Bank of Ireland Group *SREP 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). 46#49Capital CET1 ratios Dec 2017 Regulatory ratio (€bn) Fully loaded ratio (€bn) Total equity Less Additional Tier 1 Deferred tax¹ Pension deficit Available for sale reserve National filters Intangible assets and goodwill Foreseeable dividend Other items² Common Equity Tier 1 Capital Credit RWA³ Operational RWA Market, CCR and Securitisations Total RWA Common Equity Tier 1 ratio 9.7 9.7 (0.8) (0.8) (0.3) (1.1) 0.1 (0.1) (0.1) (0.7) (0.7) (0.1) (0.1) (0.6) (0.8) 7.1 6.2 38.7 38.5 4.6 4.6 1.7 1.7 45.0 44.8 15.8% 13.8% 7.0% 6.2% Leverage ratio CRD-IV phasing impacts on Regulatory ratio • Deferred tax assets - certain DTAs are deducted at a rate of 30% for 2017, increasing annually at a rate of 10% thereafter until 2024 . Pension deficit - addback is phased out at 80% in 2017, and will be fully phased out in 2018 • Available for sale reserve - unrealised losses and gains are phased in at 80% in 2017, and will be fully phased-in in 2018 • IFRS 9 - The Group has elected to apply the transitional arrangement which on a Regulatory CET1 basis will result in minimal impact from initial adoption and partially mitigate future impacts in the period to 2022. The transitional arrangement allows an 95% add-back in 2018, decreasing to 85%, 70%, 50% and 25% in subsequent years Bank of Ireland Group 'Deferred tax assets due to temporary differences are included in Credit RWA with a 250% risk weighting applied 2Other items - the principal items being the cash flow hedge reserve, expected loss deduction, securitisation deduction, 10%/15% threshold deduction ³Includes RWA relating to non-credit obligation assets / other assets, settlement risk and RWA arising from the 10% / 15% threshold deduction 47#50Risk weighted assets (RWA) RWA Density 47% 41% 37% 42% Dec 16 Dec 17 Total RWA/ Total Assets (Incl BOI Life Assets) Total RWA/ Total Assets (Excl BOI Life Assets) Bank of Ireland Group Customer lending Average Credit Risk Weights 1/2 (Based on regulatory exposure class) Credit EAD³ Avg. RWA Risk (€bn) (€bn) Weight ROI Mortgages 24.7 7.3 30% UK Mortgages 22.4 4.5 20% SME 16.2 11.6 71% Corporate 9.4 8.4 90% Other Retail 5.1 3.3 65% Total customer lending 77.8 35.1 45% IRB approach accounts for: • 70% of credit EAD (Dec 2016: 74%) 73% of credit RWA (Dec 2016: 77%) • The decrease in RWA density in 2017 is primarily driven by the improving asset quality, the execution of the CRT transaction and changes in methodology and policy • RWA has reduced from €50.7bn at December 2016 to €45.0bn at December 2017 primarily driven by: • ° Impact of FX movements (€1.0bn) Changes in book size and quality (€1.8bn) Changes in methodology and policy (€1.2bn) CRT transaction in November 2017 (€1.6bn) Sourced from the Group's Pillar III disclosures. EAD and RWA include both IRB and Standardised approaches and comprises both non-defaulted and defaulted loans 2Securitised exposures are excluded from the above table (i.e. excludes exposures included in CRT executed in December 2016 and November 2017) Exposure at default (EAD) is a regulatory estimate of credit risk exposure consisting of both on balance exposures and off balance sheet commitments 48#51IFRS 9 - Impairment loss allowance Pro-forma estimated impact on 1 Jan 2018 1 Jan 2018 impact Shareholders' Equity Reserves CET1 Fully Loaded NPES Provisions NPE Coverage ratio (€120m) (c.20bps) Unchanged +€130m +2% Pro-forma impact Fully Loaded CET1 ratio - Dec 17 13.8% (0.25%) 0.05% Dec 17 Fully Loaded CET1 Net increase in Impairment loss allowance Tax Credit 13.6% Pro-forma Fully Loaded CET1 • New IFRS 9 accounting standard effective from 1st January 2018 replacing IAS 39. Impairment provisioning model now based on expected credit losses (ECL) as opposed to incurred losses • Estimated quantitative impact on initial adoption of IFRS 9 is a reduction in shareholders' equity of c.€120m, largely due to an increase in impairment loss allowance on loans and advances to customers Increase in impairment loss allowance partially offset by the ending of the probationary provisioning framework for performing ROI mortgages. No change in quantum of NPES on transition to IFRS 9 Pro-forma impact on fully loaded CET1 ratio is expected to be c.20bps • The Group is availing of the transitional arrangements for mitigating the impact of IFRS 9 on regulatory capital Expect the impairment charge for 2018 to be up to c.20 bps, reflecting the transition to IFRS 9 and a slower pace of impairment reversals with a consequent trend towards more normalised levels Bank of Ireland Group 49#52Defined Benefit Pension Schemes • The Group has developed a framework for pension funding and investment decision making as part of its long-term strategic planning Management of the Group's sponsored Defined Benefit pensions schemes involves a multi-year programme, categorised into 3 broad areas. Activity in these areas is set out below: Mix of BSPF Defined Benefit Pension Scheme Assets (%)¹ €4.0bn 45% €5.7bn €5.5bn 62% 61% 11% 22% 16% 21% 18% Dec 12 Dec 16 Dec 17 Listed equities Diversified assets2 Credit / LDI / Hedging 44% BSPF Surplus/ Deficit under Relevant Bases Dec 17 Minimum funding standard Actuarial / on-going basis (€274m) (€134m) (€285m) (€145m) IAS19 Estimated surplus/ (deficit) at Dec 17 €264m €404m Pro-forma position following €140m expected cash or other suitable assets contribution to BSPF Reduce Liabilities • Defined Benefit ('DB') Pension schemes closed to new members in 2007 and hybrid scheme introduced • Pensions Review 2010 and 2013 reducing liabilities by c.€1.2bn - shared solutions with DB members - successfully executed and extended to smaller schemes in 2014 and 2015 • A Defined Contribution ('DC') Pension scheme was introduced in 2014 for new hires and the existing hybrid scheme closed to new members • Enhanced transfer value exercises completed for BSPF and BAPF schemes in 2015 and 2016 Increase Assets • >€950m of asset contributions made since 2010; further c.€206m expected to be made across Group schemes between 2018 and 2020 ⚫ BSPF asset returns of +2.8% p.a. were achieved over 3 years to end Dec 17 Improve correlation between assets and liabilities Reduced deficit sensitivity to both euro and sterling interest rate and inflation rate movements through increased hedging • Group supported the Trustees of BSPF, Group UK and BAPF schemes in their decisions to extend the level of euro and sterling interest rate and inflation hedging to 75% of assets Group has continued to support Trustees in diversifying asset portfolios away from listed equity into other return-seeking but potentially less volatile asset classes. Bank of Ireland Group 1Graphs shows BSPF asset allocation. BSPF represents approx. 76% of DB Pension assets 2Diversified assets includes infrastructure, private equity, hedge funds and property 50#53Defined Benefit Pension Schemes IAS19 requires that the rate used to discount Defined Benefit pension liabilities be selected by reference to market yields on high quality corporate bonds with a corresponding duration. However, only a small number of long duration AA Euro corporate bonds are in issuance and those bonds tend to be relatively illiquid Group IAS19 Defined Benefit Pension Deficit 2.30% €0.74bn 1.60% €1.19bn 2.20% 2.30% IAS19 Pension deficit of €0.48bn at Dec 2017 • 2.10% €0.45bn €0.49bn €0.48bn Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 IAS19 DB Pension Deficit EUR Discount Rate €313m IAS19 Pension Deficit Sensitivities (Jun 2016 / Dec 2016 Dec 2017) €176m €173m €162m €162m €122m €124m €128m €118m €71m €55m €28m Credit Spreads² Inflation³ Global Equity Interest Rates¹ 'Sensitivity of Group deficit to a 0.25% decrease in interest rates 2Sensitivity of IAS19 liabilities to a 0.10% decrease in credit spread over risk free rates 3Sensitivity of Group deficit to a 0.10% increase in long term inflation "Sensitivity of deficit to a 5% decrease in global equity markets with allowance for other correlated diversified asset classes Discount rate decreased by 10bps to 2.1% - reflecting higher interest rates and decrease in credit spreads • The primary drivers of the movement in the deficit were: . • The net positive impact of higher euro interest rates (which reduced liabilities albeit partly offset by the decrease in hedging LDI assets); Modest growth in the value of other assets (i.e. listed equities and diversified assets); • Deficit reducing contributions of c.€100m; offset by; • The increase in long term euro inflation assumption increased liabilities c.30bps decrease in the credit spreads used by the Group to value its liabilities Potential for interest rate and inflation volatility reduced Group supported the Trustees of BSPF, Group UK and BAPF schemes in their decisions in 2017 to extend the level of euro and sterling interest rate and inflation hedging to 75% of assets • Continuing programme to further match asset allocation with the evolving nature and duration of liabilities Pension Review Programmes • The Pension Review programmes of 2010 and 2013 resulted in significant restructurings of scheme liabilities ⚫ Liability reduction of c.€1.2bn achieved through these programmes • Accepted by staff and unions through individual member consent with comprehensive communications campaign completed In return for liability reduction achieved, the Group agreed to increase its support for the schemes by making matching contributions totalling c.€1.2bn Asset contributions of c.€206m remain to be made between 2018 and 2020 (no impact on fully loaded CET1 ratio where schemes are in deficit) Bank of Ireland Group 51#54Ordinary shareholders' equity and TNAV Movement in ordinary shareholders' equity Ordinary shareholders' equity at beginning of period 2016 2017 (€m) 8,317 (€m) 8,612 Movements: Profit attributable to shareholders 799 664 Distribution on other equity instruments - additional tier 1 coupon (73) (24) Dividends on preference stock (8) (4) Available for sale (AFS) reserve movements (169) (9) Remeasurement of the net defined benefit pension liability 167 (113) Cash flow hedge reserve movement (4) (115) Foreign exchange movements Other movements Ordinary shareholders' equity at end of period Tangible net asset value (419) (147) 2 (5) 8,612 8,859 Dec 16 Dec 17 (€m) (€m) Ordinary shareholders' equity at beginning of period 8,612 8,859 Adjustments: Intangible assets and goodwill (635) (779) Own stock held for benefit of life assurance policyholders 11 33 Tangible net asset value (TNAV) 7,988 8,113 Number of ordinary shares in issue at the end of the period (millions of shares) 1,079 1,079 TNAV per share (€) €7.40 €7.52 Bank of Ireland Group 52#55Contact Details For further information please contact: . Group Chief Financial Officer Andrew Keating tel: +353 76 623 5141 [email protected] . Investor Relations Alan Hartley Niall Murphy Colin Wallace tel: +353 76 623 4850 tel: +353 76 624 1385 tel: +353 76 623 5135 [email protected] [email protected] [email protected] • Capital Management Brian Kealy Alan McNamara tel: +353 76 623 4719 tel: +353 76 624 8725 Group Communications Pat Farrell tel: +353 76 623 4770 Damien Garvey tel: +353 76 624 6716 • Investor Relations website www.bankofireland.com/investor Bank of Ireland Group [email protected] [email protected] [email protected] [email protected] 53#56Forward-Looking statement This document contains forward-looking statements with respect to certain of the Bank of Ireland Group plc (the 'Company' or 'BOIG plc') and its subsidiaries' (collectively the 'Group' or 'BOIG plc 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, 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, 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. Nothing in this document should be considered to be a forecast of future profitability, dividends or financial position and none of the information in this document is or is intended to be a profit forecast, profit estimate or dividend forecast. 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. Investors should read 'Principal Risks and Uncertainties' in the Group's Annual Report for the year ended 31 December 2017 and also the discussion of risk in the Group's Annual Report for the year ended 31 December 2017. Bank of Ireland Group 54#57Bank of Ireland Group 55#58Bank of Ireland Group#59Empty#60Empty