#12018 Results Announcement 31 December 2018 Bank of Ireland O#2Empty#3Group CEO Francesca McDonagh Bank of Ireland 2018 Results Announcement Bank of Ireland 2#4Empty#52018 Highlights Profitability €935m Underlying profit before tax Growth €1.3bn Net lending growth Transformation 3% / €48m Reduction in costs Capital . NIM of 2.20% Bank of Ireland 2018 Results Announcement • Net impairment gains of €42m . NPES reduced by 24% to €5.0bn; NPE ratio now at 6.3% • • • New lending €15.9bn, increase of 13% vs. 2017 New Irish mortgages; Growth of 17%, stable market share of 27% Wealth & Insurance; 21% income growth vs. 2017 Taking the lead in building a great culture in the Bank Foundations of new Core Banking Platforms in place Business model initiatives to drive efficiencies progressing at pace 13.4% CET1 ratio Organic capital generation of 180bps Dividend increased to 16c per share (€173m) from 11.5c per share (€124m) in 2017 Bank of Ireland 4#6Economic backdrop Irish credit growth emerging Annual % Change 4 0 -4 -8 2012 2013 2014 2015 2016 Stock of lending to households Stock of lending to businesses (non-financial corporations)1 Solid growth in Ireland; UK growth also positive notwithstanding Brexit uncertainties 7.2% 6.8% 4.5% House price growth continuing in Ireland, softening in UK 9.0% 12.1% 6.5% kki kkı 1.8% 1.4% 1.4% 4.5% 2.6% 2017 2018e ■ROI GDP UK GDP (annual real growth) 2019f 2016 2017 Bank of Ireland 2018 Results Announcement 2017 2018 Unemployment rate trending down in Ireland, remains historically low in UK 6.7% 5.7% 5.0% 4.4% 4.1% 4.1% 0.5% 2018 2017 2018 2019f 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, CSO, Office for National Statistics, Nationwide, Central Bank of Ireland Forecasts assume current UK-EU trading arrangements continue to apply 1 Banks balance sheet basis, excludes loan sales and securitisations ROI unemployment rate UK unemployment rate (annual average) Bank of Ireland 5#7Focused on execution of our strategy to 2021 Bank of Ireland 2018 Results Announcement 110 000 +020 Our ambition is clear - Investor Day June 2018 • National Champion Bank in Ireland with selective UK and international diversification While there are challenges ahead... 2018 has been transformational • Cultural change • • Technology transformation • Strengthened leadership capabilities . Brexit and the global economy Evolving regulatory requirements • UK competitive environment ...we are committed to delivering our strategy Growing and transforming our business Improving returns in the UK Repositioned brand strategy Bank of Ireland 6#8Three Strategic Priorities Bank of Ireland 2018 Results Announcement ههه Transform the Bank Serve customers brilliantly Grow sustainable profits Bank of Ireland 7#9Transform the Bank Culture Systems Bank of Ireland 2018 Results Announcement Business model 2018 Progress • Defined the culture we want - ambition, purpose and values being embedded across organisation • Technology transformation continues to progress - - Foundations of new Core Banking Platforms in place, single customer record for over 2m customers Testing of loan and deposit origination on new Temenos platform Modernised payments infrastructure in place with greater capacity, improved stability and higher speed processing New mobile banking app will launch in 2019, first full scale customer deliverable using new Temenos technology Creating a leaner, agile organisation, over half of end state Organisational Design now complete, 8% reduction in Senior Management roles Target Outcomes • Strengthened culture Cost base to reduce to c.€1.7bn in 2021 Absolute cost level declining year-on-year to 2021 Income growth Bank of Ireland 8#10Serve Customers Brilliantly Embedding voice of customer in our businesses Investing in digital and physical channels 2018 Progress Bank of Ireland 2018 Results Announcement New brand strategy Target Outcomes • • Listening to our customers and taking action - 200+ front line staff driving improved service levels - 100+ branches converted to full service Robotics delivering equivalent to >300 FTEs, resulting in significant enhancement of customer journeys Customers increasingly choosing digital channels 10m+ monthly engagements on our mobile app, up >25% on 2017 Direct and digital wealth sales increased to 35% (from 0% 2 years ago) • Repositioning of brand underway, supported by multi-year customer strategies Significant improvement in customer satisfaction and advocacy Straight through processing; digital journeys API foundation for Open Banking #1 for customer experience and brand in Ireland Bank of Ireland 9#11Grow Sustainable Profits Improved profitability Efficient business Robust capital position Sustainable dividends 1 See Slide 56 for calculation امر if 2018 Progress Bank of Ireland 2018 Results Announcement 2021 Target Headline ROTE of 8.5% Adjusted ROTE of 7.2%¹ ROTE in excess of 10% Cost reduction of 3% / €48m vs. 2017 Cost base of c.€1.7bn Costs reduce every year: 2018-2021 Cost income ratio of c.50% Fully loaded CET1 ratio of 13.4% CET1 ratio in excess of 13% Dividend increased to 16c per share (€173m) Increase prudently and progressively; over time will build towards a payout ratio of around 50% of sustainable earnings Bank of Ireland 10#12Retail Ireland - well positioned to grow Investor Day Strategic Initiatives • Unlocking growth Supporting home building and buying Building out wealth and insurance business Improving customer experience and driving efficiency Bank of Ireland 2018 Results Announcement 2018 Progress . Market share maintained or grown across all key business lines New mortgage lending up 17% with broker re-entry in Q4; new personal lending up 20% Wealth and Insurance: 21% income growth vs. 2017 and increased penetration of our customer base to 26% Improved customer experience: new digital platforms and digitised customer journeys Target outcomes in 2021 ↑ c.20% overall growth in loan book ↑ Increase in wealth AUM Bank of Ireland 11#13Retail UK - focused on increasing returns Bank of Ireland 2018 Results Announcement Investor Day Strategic Initiatives Committed to the UK, focused on increasing returns - Investing in businesses that are generating above-hurdle returns Improving returns in businesses with potential to meet return and efficiency hurdles Reposition business where less certainty exists about meeting hurdle expectations 2018 Progress . • Investing in growth segments, where we can generate attractive returns: Income growth of 6% with improved cost of funding, costs have reduced by 2% vs. 2017 Northridge car finance new lending of ₤1.1bn Improving the position of certain portfolios through a reduction in the cost of funds, cost of acquisition and cost to serve. Value delivery from partnership model Mortgage new lending of £3.3bn; maintaining risk discipline amid competitive backdrop Consumer new lending of £0.6bn Repositioning: progressing UK credit card portfolio options; continued run down of legacy portfolios Target outcomes in 2021 ↑ c.10% overall growth in loan book Increase RoTE to high single digit Bank of Ireland 12#14Corporate and Markets - strengthening customer relationships Bank of Ireland 2018 Results Announcement Investor Day Strategic Initiatives 2018 Progress • Retain established market-leading positions in core markets - Support housing and economic development in Ireland Scale UK business Selectively expand Acquisition Finance in Europe and US . Corporate Ireland: New lending of €1.1bn; remain Ireland's #1 Corporate Bank Property Finance: New lending of €1.1bn; funding the construction of c.5,400 residential units across c.140 sites in Ireland Corporate UK: New lending of €0.9bn; disciplined approach with strong Brexit focus • Acquisition Finance: New lending of €1.2bn; grew loan book selectively in 2018 Markets: Supporting growth in balance sheet. Optimising capital position • Target outcomes in 2021 ↑ c.€2bn overall growth in loan book - Ireland c.€2bn overall growth in loan book - International Bank of Ireland 13#15Group CFO Andrew Keating Bank of Ireland 2018 Results Announcement Bank of Ireland 14#16Empty#17Key areas of focus Income growth Transformation of cost base Bank of Ireland 2018 Results Announcement Capital generation, investment and return Target is to increase ROTE to in excess of 10% by 2021 Bank of Ireland 16#18Underlying profit before tax of €935m Total income FY 20171 (€m) FY 2018 (€m) 3,049 2,805 - Net interest income 2,248 2,146 - Other income (net)* 801 659 Operating expenses (before levies and (1,900) (1,852) regulatory charges) - Operating expenses (1,796) (1,739) Transformation Investment charge² (104) (113) - Levies and Regulatory charges (99) (101) Net Impairment (losses) / gains (15) 42 • Share of associates / JVS 43 41 Underlying profit before tax 1,078 935 Non-core items (226) (100) Profit before tax 852 835 *Of which additional gains 74 9 Net interest margin (NIM) 2.29% 2.20% Cost income ratio³ 65% 65% Adjusted ROTE4 6.9% 7.2% Bank of Ireland 2018 Results Announcement Net interest income of €2,146m, reduction of €102m vs. 2017 reflecting lower NIM (2018: 2.20%) primarily due to lower liquid assets income, cost of securities issued in advance of TRIM and MREL during 2017 and UK competitive pressures Other income of €659m includes: Sustainable and diversified business income of €672m, increasing from €662m in 2017 Additional gains, valuation and other adjustments on financial instruments - net charge of €13m (2017: net gain of €139m) Operating expenses (before levies and regulatory charges) of €1,852m; reduction of €48m (3%) vs. 2017 Net impairment gains of €42m, reflecting positive economic environment in Ireland and effectiveness of our NPE resolution strategies Non-core charge of €100m primarily related to costs associated with the Group's restructuring programme 1 Comparative figures have been restated to reflect the impact of the reclassification of €7 million of costs from the Transformation Investment charge (formerly the Core Banking Platform Investment charge) to Operating expenses (before Transformation Investment and levies and regulatory charges) for 2017 2 Transformation Investment charge was previously disclosed as 'Core Banking Platforms Investment', it has been updated for the twelve months ended 31 December 2018 to include the broader scope of Transformation covering Culture, Systems and Business Model 3 See Slide 55 for calculation 4 See Slide 56 for calculation Bank of Ireland 17#19Net lending growth of €1.3bn €76.1bn Group loan book movement €15.9bn (€14.6bn) (€0.4bn) Total €1.3bn Dec 17 Loan Book New Lending Redemptions IFRS 9 Day 1/ Other Dec 18 Loan Book Net lending growth €1.3bn Bank of Ireland 2018 Results Announcement Net lending growth of €1.3bn • New lending of €15.9bn; an increase of 13% vs. 2017 €77.0bn¹ UK/International • Redemptions of €14.6bn; 3% reduction vs. 2017 Expect further net lending growth in 2019, while maintaining strong commercial pricing and risk discipline Ireland: €0.6bn net lending growth Mortgages: loan book flat in 2018, albeit new lending of €2.3bn, up 17% on 2017, with stable market share of 27% Consumer: loan book growth of €0.1bn SME: loan book decrease of €0.2bn, albeit new lending of €2.9bn Corporate Banking: loan book growth of €0.8bn UK / International: €0.7bn net lending growth • Mortgages: loan book decrease of €0.7bn; new lending of €3.7bn, up 3% on 2017 Consumer: loan book growth of €0.7bn; new lending of €1.8bn (2017: €1.3bn), reflecting strong performance of Northridge car finance and consumer lending SME/Other: loan book decrease of €0.5bn; largely due to wind down of legacy lending portfolios Corporate Banking: loan book growth of €0.9bn; disciplined approach with strong Brexit focus . Acquisition Finance: loan book growth of €0.3bn Bank of Ireland €0.6bn Ireland €0.7bn 1 Includes UK Credit Card portfolio €0.6bn classified as held for sale as at Dec 2018 18#20NIM - Strong commercial discipline on pricing Bank of Ireland 2018 Results Announcement 2.23% Average Q1 - Q3 2018 NIM 2.20% 2018 Q4 NIM Movement (3bps) 2.20% (10bps) 2.10% NIM-2.20% in 2018 . Maintaining strong commercial discipline on pricing e.g. recent price adjustments on Irish mortgages Competitive pressures in UK mortgage market driving lower front book pricing and shorter customer revert periods Adjustment to UK mortgage revert period (10bps) in Q4 2018 reflects faster refinancing activity UK competitive pressures Underlying Q4 2018 Exit NIM UK Mortgage revert period (Non-recurring) Q4 2018 Reported NIM 2019 Outlook Outlook for 2019 NIM (3bps) (1bps) Underlying Q4 2018 Exit NIM UK Credit Cards MREL issuance c.2.16% Expected 2019 NIM Expect 2019 NIM to be c.2.16%: - - Strategic repositioning of the UK cards portfolio adversely impacts NIM by c.3bps MREL issuance (c.1bps) UK competitive pressures expected to be offset by positive impact from new lending margins and strong commercial discipline on pricing Bank of Ireland 19#21Sustainable business income Bank of Ireland 2018 Results Announcement 20 20 FY 20171 FY 2018 (€m) 287 207 (€m) 267 250 E&r ¢ @ 8€ &b。 ཊྛ8ཆ༈༙ས8༞ 8* 662 672 Retail Ireland Wealth and Insurance Retail UK Corporate and Treasury Group Centre and other Business Income Additional gains Valuation and other items CVA, DVA, FVA, other IFRS income classifications² Wealth and Insurance - Interest rate movements 1 175 74 65 37 (3) 22 29 (20) - Unit-linked investment variance (27) Other Income 801 659 • Business income of €672m, increasing from €662m in 2017; - Retail Ireland: reduction vs. 2017 due to strategic customer initiatives and solutions Wealth and insurance: investments in improved customer experience are driving growth in customer and business value; 21% income growth vs. 2017 Market share +2%, APE +13%, increased penetration of our customer base (23% to 26%) Corporate and Treasury: primarily driven by lower fee income in Acquisition Finance and lower equity income Additional gains of €9m driven by repurchase of the high yielding subordinated bonds by NAMA. Gains of €74m in 2017 included €45m related to bond sales to protect capital ahead of IFRS 9 Valuation and other adjustments on financial instruments: - - Net charge of €22m (2017: net gain of €65m) Interest rate movements; impact primarily due to movements in financial markets (widening of credit spreads, higher euro interest rates) Unit-linked investment variance; due to lower equity markets, particularly in Q4 2018, impacting the value of policyholder unit-linked funds and the associated value of the Group's future fee income 1 Comparative figures have been restated to reflect the impact of the Group's decision to re-organise the Wealth and Insurance operating segment (formerly Bank of Ireland Life) which resulted in a decrease of €30 million in business income in Retail Ireland and a corresponding increase in Wealth and Insurance for 2017 2 IFRS income classifications include €15 million of interest income in 2018 on 'Life loan mortgage products' which on transition to IFRS 9 were mandatorily classified as FVTPL, with all income on such loans reported in 'net other income'. IFRS income classifications are fully offset in net interest income Bank of Ireland#22Costs have reduced by 3% / €48m Operating expenses to reduce further Bank of Ireland 2018 Results Announcement €1,796m €1,739m €104m 2017 €113m 2018 Operating expenses Transformation Investment charge 2019 FY 2017 FY 2018 Transformation of cost base • Operating expenses (before levies and regulatory charges) of €1,852m reduced by €48m (3%) vs. 2017 Expect operating expenses, including transformation investment charge, to reduce every year to €1.7bn in 2021 Operating expenses: €1,739m • Total staff costs decreased by €32m vs. 2017 primarily reflecting lower average staff numbers partly offset by impact of wage inflation of c.2.5% under the Group Career and Reward framework; wage inflation of c.2.6% agreed for 2019 Other costs have decreased by €68m vs. 2017 reflecting strategic sourcing and other efficiencies from business model initiatives across the businesses Expected increase in depreciation charge of €43m reflects investment in technology Transformation Investment charge: €113m • Total transformation investment in 2018 of €306m: (€m) (€m) Total staff costs 900 868 • - Staff costs 752 721 - Pension costs 148 147 Other costs 727 659 Depreciation 169 212 Operating Expenses 1,796 1,739 104 113 Operating Expenses (before levies and 1,900 1,852 regulatory charges) Levies and Regulatory charges Total Operating Expenses Average staff numbers 99 1,999 1,953 11,196 10,595 101 • Cost-income ratio² 65% 65% Transformation Investment charge¹ - €113m charged as Transformation Investment to the income statement (37%) €100m capitalised as intangible asset (33%) €93m charged as non-core restructuring costs (30%) Levies and Regulatory charges: €101m Expect levies and regulatory charges to total €115m - €120m for 2019 1 Transformation Investment charge was previously disclosed as 'Core Banking Platform Investment charge', it has been updated to include the broader scope of Transformation covering Culture, Systems and Business Model for 2017 2 See Slide 55 for calculation Bank of Ireland 21#23Transformation programme is delivering expected efficiencies Actions Outcomes Bank of Ireland 2018 Results Announcement • Simplifying our Organisation €32m (4%) reduction in staff costs; 55% of optimised spans and layers redesign completed • • FTES are 5% lower than Dec 2017, Senior Management roles reduced by 8% Repositioning of UK Credit Cards will support 2019 cost reduction plans 22 22 • 34% reduction in non-IT Professional Fees Sourcing Strategically • Daily Rate Contractor resources reduced by 65% since 2017 • Delivering the Digital Bank • • • Ways of Working • Consolidation of Dublin property footprint for Head Office / Administration buildings Increase of in-house resources and change capability; c.70 hires made in 2018 to replace higher cost outsourced activities Re-entered the broker mortgage channel in Ireland in late 2018, leveraging off our award winning technology platform from the UK Ways of Working pilot with c.1,700 colleagues, 4 out of 5 colleagues identify a positive impact, saving an average of 4 hours commuting time every week Full rollout across the Group in 2019 Enabling Brilliant Customer Experiences • Focus on further process simplification and automation of customer journeys Robotics delivering equivalent to >300 FTEs, resulting in significant enhancement of customer journeys Bank of Ireland#2424% improvement in NPE levels Non-performing exposures 8.3% 11.4% €4.4bn reduction €9.4bn Dec 2016 €6.5bn Dec 2017 6.3% €5.0bn Dec 2018 NPEs as a % of gross customer loans Non-performing exposures (€176m) 2016 Net impairment gains/(losses) €36m (€15m) 2017 Net impairment (losses) / gains 2018 Bank of Ireland 2018 Results Announcement 23 23 Asset quality continues to improve • Non-performing exposures (NPEs) of €5.0bn, a reduction of €1.5bn (24%) during 2018 • NPE ratio reduced by 200bps to 6.3% • Reductions reflect successful resolution strategies and the positive economic environment. Expect further reductions in 2019 and beyond . SREP guidance received on coverage levels for NPES - coverage levels will increase on unsecured NPES (older than 2 years) and secured NPES (older than 7 years) from end of 2020 • NPE reduction strategies will be kept under review to respond to the associated and evolving regulatory framework Net impairment gains of €36m in 2018 Net impairment gains on loans and advances to customers of €36m for 2018, primarily reflecting: Strong performance of the Group's loan portfolios Positive outcomes from ongoing resolution of NPES Continued positive economic environment and an outlook of continued economic growth in key markets Absent a change in the economic environment or outlook, expect net impairment charge to be in the range of up to 20bps-30bps p.a. during 2019-2021 Bank of Ireland#25224 24 Capital and liquidity available to support growth 63 727522~O 79 Strong liquidity ratios • Bank of Ireland 2018 Results Announcement Liquidity Coverage Ratio: 136% Net Stable Funding Ratio: 130% • Loan to Deposit Ratio: 97% Robust Leverage Ratio • Fully Loaded Leverage Ratio: 6.3% Regulatory Leverage Ratio: 7.0% Customer deposits: €78.9bn Dec 2017 Dec 2018 • (€bn) (€bn) Customer loans 76 Liquid assets 24 Wealth and Insurance assets 17 17 Other assets 6 • Total assets 123 124 Customer deposits 76 Wholesale funding 13 11 Wealth and Insurance liabilities 17 17 Other liabilities 7 Shareholders' equity 9 9 • Additional Tier 1 security & other 1 1 Total liabilities 123 124 TNAV per share €7.52 €7.85 Closing EUR/GBP FX rates 0.89 0.89 Customer deposits predominantly sourced through retail distribution channels Wholesale funding: €11.4bn Monetary Authority borrowings of €2.7bn¹ have reduced by €2.3bn since Dec 2017 primarily due to repayment of funding drawn under the ECB's TLTRO MREL target of €13.3bn (representing 26.4% of RWA at Dec 2016) to be met by 1 Jan 2021: - - MREL ratio of 23.1% at Dec 2018 (based on RWA at Dec 2018) Modest MREL eligible issuance c.€1bn-€2bn p.a. anticipated 1 Monetary Authority borrowings of €2.7bn at Dec 18 includes: €1.0bn of ECB TLTRO funding and €1.7bn of BOE funding through TFS (c.€1.5bn) and ILTR (c.€0.2bn) Bank of Ireland#26Strong capital generation and position 13.6% Fully loaded CET1 ratio Bank of Ireland 2018 Results Announcement 1.8% (0.4%) (0.6%) (0.7%) (0.4%) 0.1% 13.4% 1 Jan 18 CET1 (post IFRS 9 Organic capital generation! Loan growth/ RWA Transformation investment Regulatory Capital Demand² 2018 Dividend Other Dec 18 CET1 impact 20bps) Capital position CET1 ratio CET1 movements • Strong capital position - fully loaded CET1 ratio of 13.4% at Dec 2018 • Continued organic capital generation - 180bps of capital generated in 2018 No change to 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 O-SII phase in period³ 1 Organic capital generation primarily consists of attributable profit and movements in regulatory deductions 2 Regulatory capital demand primarily reflects the impact of TRIM on Irish mortgages 3 The Other Systemically Important Institution (O-SII) buffer will be introduced at 0.5% in July 2019, increasing to 1.0% in July 2020 and 1.5% in July 2021 Bank of Ireland 25 25#27Strategic investment and rigorous allocation of capital Bank of Ireland 2018 Results Announcement Organic capital generation (180bps) 1 Growth in loan book 200-250bps Investment / allocation of capital in 2018 CET1 of c.200-250bps to accommodate c.20% in loan book growth over 4 years (2018-2021) Net lending growth of €1.3bn in 2018 (c.40bps) 2 Transformation 50-60bps p.a. 3 4 • Transformation Programme: investment of 50-60bps p.a. Transformation investment of €306m (c.60bps) in 2018 On track to reduce costs every year to €1.7bn in 2021 26 26 Regulatory capital demand Dividend / distributions • . IFRS 16 impact of 20 bps on 1 Jan 2019 Capital resilience demonstrated in 2018 EBA Stress Test Evolving regulatory framework including EBA and ECB guidelines (definition of default, IRB models, NPE requirements, etc.) could consume c.80bps of CET1 by end 2020 Will pursue opportunities to unlock capital in balance sheet as appropriate Dividend increased to 16c per share (€173m / 40bps) from 11.5c per share (€124m / 25bps) in 2017 No change to dividend policy or guidance Other means of capital distribution will be considered to the extent the Group has excess capital Bank of Ireland#28Delivering attractive and sustainable returns Return on Tangible Equity (ROTE) 6.9% 7.2% 1/2 2017 1 See slide 56 for calculation 2 Calculated on a CET1 Ratio of 13% 2018 Bank of Ireland 2018 Results Announcement In excess of 10%² 2021 Bank of Ireland 27 27#29Outlook Growth • • Net lending growth while maintaining commercial discipline on risk and pricing Continued growth in Wealth and Insurance business NIM in 2019 expected to be c.2.16% • . Efficiency Bank of Ireland 2018 Results Announcement Returns Costs to reduce further in 2019 Expect further reduction in NPES Expect net impairment charge to be in the range of up to 20bps-30bps p.a. during 2019-20211 Continue to generate strong organic capital • Dividend to increase prudently and progressively; over time will build towards a payout ratio of around 50% of sustainable earnings ROTE target: in excess of 10% by 2021 1 Absent a change in the economic environment or outlook Bank of Ireland 28#30Appendix Bank of Ireland 2018 Results Announcement 29 29 Bank of Ireland#31Appendix BOI Overview - Business profile Historic financial results Profile of customer loans Gross new lending volumes ROI mortgage loan book UK mortgage loan book Income Statement Divisional performance Interest Rate Sensitivity Net interest income analysis Non-core Items Transformation Investment • Asset Quality Non-performing exposures by portfolio ROI Mortgages Debt Securities at fair value through other comprehensive income (FVOCI) UK Customer Loans Capital - CET1 ratios Capital Guidance and Distribution Policy Regulatory Capital Requirements Risk Weighted Assets Defined Benefit Pension Schemes Ordinary shareholders' equity and TNAV Cost income ratio: Dec 2018 Return on tangible equity (ROTE) Forward-Looking statement Contact Details Bank of Ireland 2018 Results Announcement Slide No. 31 33 35 36 37 Bank of Ireland GASGASSE & ED wwwwww 54 55 57 58 46 48 49 50 51 52 45 30 30#32BOI Overview: Ireland Ireland's leading retail and commercial bank Retail Ireland Consumer Business Wealth Bank of Ireland 2018 Results Announcement Corporate Ireland Corporate Banking Property Unique customer franchise Supporting local communities & enterprises • • 1.7m active consumer customers 225k SME customers and 500k Wealth and Insurance customers 267 branches, >2,800 front line staff Reinventing branches with workbenches and event spaces driving local community, enterprise and business development activity • Over 550 Bank of Ireland led events including National Enterprise week and National Enterprise Town Awards Ireland #1 Corporate Bank in Ireland ⚫ #1 Bank for FDI into Ireland • Country-wide coverage via regional hubs Banking relationship with 60% of Ireland's top companies • >500 corporate customers: average 5 products held Growing preference 79% digitally active current account base for digital channels • >250% increase in mobile users 2012 - 2018 • Average of > 16m interactions in our digital channels every month per customer Finance ⚫ Disciplined • approach to risk management 60 Specialist staff; >175 customers • Leading funder of investment property and construction Markets & Treasury • Leading treasury service provider • Track record of innovation Bank of Ireland 31#33BOI Overview: UK / International Bank of Ireland 2018 Results Announcement Attractive UK and International businesses provide diversification and further opportunities for growth Retail UK Partnerships Northern Ireland Niche Businesses Corporate UK / International Corporate Banking UK Acquisition Finance • Over 40 years in Great Britain • 11.5k branches through Post Office partnership ⚫ #1 travel money business in the UK (FRES) • Access to 3.3m AA members • Full service retail and commercial bank A distribution network of 28 branches, including six business centres Over 190 years since first branch opened Motor asset finance and motor lease finance business Proven track record of strong growth and disciplined risk appetite • Leasing company of the year 2018 (up to 20,000 vehicles) ⚫ £1.8bn loan book with >175k customers • Sector focused business in UK with 5 specialist industry sectors, industrials & manufacturing, technology, consumer ⚫ & hospitality, media and business services • >70 Customers • Scalable platform with highly disciplined approach and growth • Mid market US / European Acquisition Finance business; strong 20 year+ record Well recognised lead arranger 5 international offices • >200 customers, c.85% business from repeat sponsors Bank of Ireland 32 32#34BOI Overview Income Statement Bank of Ireland 2018 Results Announcement 33 33 FY 2014 FY 2015 FY 2016³ FY 20174 FY 2018 (€m) (€m) (€m) (€m) (€m) Total income 2,974 3,272 3,126 3,049 2,805 - Net interest income 2,358 2,454 2,298 2,248 2,146 - Other income (net) before additional gains 448 591 677 727 650 - Additional gains 168 227 151 74 9 Operating expenses (1,601) (1,746) (1,741) (1,796) (1,739) Transformation Investment charge¹ (41) (104) (113) Levies and Regulatory charges (72) (75) (109) (99) (101) Operating profit pre-impairment 1,301 1,451 1,235 1,050 852 Net impairment (losses) / gains (472) (296) (178) (15) 42 Share of associates / JVS 92 46 41 43 41 Underlying profit before tax 921 1,201 1,098 1,078 935 Non core items (1) 31 (63) (226) (100) Profit before tax 920 1,232 1,035 852 835 Net interest margin Cost/income ratio² Dividend per share 2.11% 2.19% 2.20% 2.29% 2.20% 54% 53% 57% 62% 66% 11.50 16.0c 1 Transformation Investment charge was previously disclosed as 'Core Banking Platform Investment charge', it has been updated to include the broader scope of Transformation covering Culture, Systems and Business Model 2 Cost/income ratio is calculated as operating expenses (excluding levies and regulatory charges) divided by total income 3 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 4 Comparative figures have been restated to reflect the impact of the reclassification of €7 million of costs from the Transformation Investment charge (formerly the Core Banking Platform Investment charge) to Operating expenses (before Transformation Investment and levies and regulatory charges) for 2017 Bank of Ireland#35BOI Overview Summary Balance Sheet Bank of Ireland 2018 Results Announcement 34 === Dec 14 (€bn) Dec 15 (€bn) Dec 16 (€bn) Dec 17 (€bn) Dec 18 (€bn) Customer loans¹ Liquid assets Wealth and Insurance assets Other assets Total assets Customer deposits Wholesale funding Wealth and Insurance liabilities Other liabilities Subordinated liabilities and AT1 Shareholders' equity 2232208 20 85 78 25 24 21 24 16 16 17 7 6 7 131 123 75 80 75 14 14 16 16 17 10 6 3 2 9 8 9 75752271530 12762037539 79 11 9 Total liabilities & Shareholders' equity 130 131 123 123 124 Fully loaded CET1 ratio 9.3% 11.3% 12.3% 13.8% 13.4% Net stable funding ratio 114% 120% 122% 127% 130% Loan to deposit ratio TNAV per share 110% 106% 104% 100% 97% €6.49 €7.24 €7.40 €7.52 €7.85 1 Loans and advances to customers is stated after impairment loss allowance Bank of Ireland#36BOI Overview Profile of customer loans' at Dec 18 (Gross) Bank of Ireland 2018 Results Announcement ROI UK RoW Total Total Composition (Dec 2018) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 23.7 21.7 0.0 45.4 58% Non-property SME and corporate 10.8 4.62 4.1 19.5 24% SME 7.6 1.6 0.0 9.2 11% Corporate 3.2 3.0 4.1 10.3 13% Property and construction 5.7 1.9 0.7 8.3 11% Investment property 5.2 1.8 0.7 7.7 10% Land and development 0.5 0.1 0.0 0.6 1% Consumer 2.2 3.0 0.0 5.2 7% Customer loans (gross) 42.4 31.2 4.8 78.4 100% Geographic (%) 54% 40% 6% 100% 1 Based on geographic location of customer 2 Includes GB business and corporate loan books, which BOI was required to run down under its EU approved Restructuring Plan (2017: £0.7bn; 2018: £0.4bn) Bank of Ireland 35#37Gross new lending volumes €5.3bn Retail Ireland €5.7bn £4.6bn €2.3bn €2.0bn €0.4bn €0.5bn £3.2bn €2.9bn €2.9bn 2017 2018 Retail UK £5.2bn Bank of Ireland 2018 Results Announcement Corporate Banking €4.4bn €1.1bn €3.6bn £3.3bn €1.1bn €1.1bn €0.7bn €1.2bn €1.1bn £1.6bn £1.1bn £0.2bn 2017 £0.2bn 2018 €0.9bn €0.6bn 2017 Mortgages Consumer Business Banking Property Corporate Ireland Acquisition Finance Corporate UK 2018 Bank of Ireland 36#38ROI Mortgages: €23.7bn New Lending volumes and Market Share 25% €1.4bn 27% €2.0bn Bank of Ireland 2018 Results Announcement ROI Mortgages (gross) €24.3bn €24.1bn €23.7bn 27% €5.3bn €7.3bn €9.5bn €7.2bn €5.8bn €4.4bn €2.3bn 2016 2017 2018 New Lending Volumes¹ Market Share €11.8bn €10.9bn €9.8bn Dec 16 Dec 17 Dec 18 Tracker Variable Rates Fixed Rates 37 37 Pricing strategy • 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.92% of our new lending in 2018, up from c.30% in 2014 Distribution strategy • Market share of 27% in 2018 consistent with 2017 Re-entered the Irish mortgage broker market in late 2018 Wider proposition 7 in 10 ROI customers who take out a new mortgage take out 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 LTV profile Average LTV of 61% on existing mortgage stock at Dec 2018 (Dec 17: 63%, Dec 16: 72%) Average LTV of 71% on new mortgages in 2018 (Dec 17: 69% 2, Dec 16: 67%²) Tracker mortgages • €9.3bn or 95% of trackers at Dec 2018 are on a capital and interest repayment basis • 79% of trackers are Owner Occupier mortgages; 21% of trackers are Buy to Let mortgages • Loan asset spread on ECB tracker mortgages was c.65bps³ in 2018 1 Excluding portfolio acquisitions (2016 - €0.2bn; 2017 - €0.1bn; 2018 - Nil) 2 LTV on new business includes the impact of the portfolio acquisitions 3 Average customer pay rate of 109bps less Group average cost of funds of 44bps Bank of Ireland#39UK Mortgages: £19.4bn/€21.7bn £20.4bn UK Mortgages (gross) £20.0bn £20.4bn £19.4bn £2.2bn Bank of Ireland 2018 Results Announcement UK Mortgages (gross) £20.0bn £2.0bn £19.4bn £1.7bn £8.5bn £9.6bn £10.4bn £7.4bn £7.5bn £7.5bn £4.0bn £3.3bn £2.7bn £10.8bn £10.6bn £10.2bn £7.9bn Dec 16 £7.1bn Dec 17 £6.3bn Dec 18 Tracker Variable Rates Fixed Rates UK Mortgages new lending volumes Dec 16 Dec 17 Standard Buy to let Self certified Dec 18 LTV profile • Average LTV of 62% on existing stock at Dec 2018 (Dec 17: 62%, Dec 16: 62%) • £3.2bn £3.3bn £2.8bn Average LTV of 72% on new UK mortgages in 2018 (2017: 72%, 2016: 71%) 2016 2017 2018 Bank of Ireland 38#40Empty#41Income Statement Divisional performance Year ended Dec 18 Retail Ireland Wealth and Insurance (formerly Bank of Ireland Life) Retail UK - € Retail UK - £ Corporate and Treasury Group Centre & other Transformation Investment charge Group Bank of Ireland 2018 Results Announcement 40 40 Underlying profit/(loss) before tax and additional gains/(losses) (Єm) 665 Additional gains/ (losses) (€m) Underlying profit/(loss) before tax (Єm) (16) 67 175 7 155 477 (346) 09620 649 67 182 161 486 10 (336) (113) (113) 926 9 935 Underlying profit/(loss) before tax and additional gains Underlying profit/(loss) Additional gains (Єm) before tax (€m) (€m) 700 1 701 117 117 94 9 103 83 8 91 523 22 545 (326) 42 (284) (104) (104) 1,004 74 1,078 Year ended Dec 171 Retail Ireland Wealth and Insurance (formerly Bank of Ireland Life) Retail UK - € Retail UK - £ Corporate & Treasury Group Centre & Other Core Banking Platforms investment Group 1 Comparative figures have been restated to reflect the impact of: (i) the reclassification of €7 million of costs from the Transformation Investment charge (formerly the Core Banking Platform Investment charge) to Operating expenses (before Transformation Investment and levies and regulatory charges) for 2017. The Transformation Investment charge has been booked in Group Centre for the current and comparative year; (ii) the Group's decision to re-organise the Wealth and Insurance operating segment (formerly Bank of Ireland Life) to incorporate the Private Banking and Insurance Services business units which were previously reported within Retail Ireland. This has resulted in an increase of €11 million in the underlying profit before tax of Wealth and Insurance and a corresponding decrease in the underlying profit before tax of Retail Ireland for 2017; and (ii) the Group's decision to reorganise the Corporate and Treasury segment to incorporate Group Treasury's costs which were previously reported within Group Centre. This has resulted in a decrease of €8million in the underlying profit before tax of Corporate and Treasury and a corresponding increase in Group Centre for 2017 Bank of Ireland#42Interest Rate Sensitivity Bank of Ireland 2018 Results Announcement 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 Dec 17 Dec 18 (€m) (€m) c.170 c.180 (c.200) (c.210) The estimates are based on management assumptions primarily related to: . the re-pricing of customer transactions; . 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 IAS19 defined benefit pension schemes Bank of Ireland 41#43Income Statement Net interest income analysis Bank of Ireland 2018 Results Announcement 44 42 Hồ 2017 H2 2017 H1 2018 H2 2018 Average Gross Gross Volumes Interest Rate (Єbn) (€m) (%) Average Gross Volumes Interest (€bn) (€m) Gross Rate (%) Ireland Loans¹ 35.5 547 3.11% 35.3 545 3.07% 531 Average Gross Gross Average Gross Volumes Interest Rate Volumes Interest (Єbn) (Єm) (%) (€bn) (Єm) 34.6 Gross Rate (%) 3.09% 34.4 531 3.06% UK Loans 29.5 460 3.15% 28.0 430 3.05% 28.1 440 3.16% 27.6 447 3.21% C&T Loans 12.7 254 4.03% 12.8 253 3.92% 13.6 259 3.85% 14.6 287 3.89% Total Loans & Advances to Customers 77.7 1,261 3.27% 76.1 1,228 3.20% 76.3 1,230 3.25% 76.6 1,265 3.28% Liquid Assets 21.3 49 0.46% 20.8 43 0.41% 22.1 35 0.32% 22.7 38. 0.33% NAMA Sub Debt 0.3 17 11.97% 0.3 17 11.97% 0.2 4 3.50% 0.1 2 5.24% Total Interest Earning Assets 99.3 1,327 2.70% 97.2 1,288 Ireland Deposits 20.6 (12) (0.12%) 20.4 (9) Credit Balances² 27.1 0 (0.00%) 29.3 4 2.63% (0.08%) 20.5 0.03% 30.5 98.6 1,269 (8) 2 UK Deposits C&T Deposits 19.3 (83) (0.86%) 18.2 (74) (0.80%) 18.9 (81) 2.60% (0.08%) 20.7 0.01% (0.86%) 18.6 99.4 1,305 2.60% (8) (0.08%) 32.8 3 0.02% (88) (0.94%) 6.0 (10) (0.35%) 5.2 (9) (0.35%) 4.7 (9) (0.39%) 4.9 (9) (0.37%) Total Deposits 73.0 (105) (0.29%) 73.1 (88) (0.24%) 74.6 (96) (0.26%) 77.0 (102) (0.26%) Wholesale Funding³ 14.3 (43) (0.60%) 12.3 (36) (0.58%) 12.3 (45) (0.73%) 11.0 (52) (0.94%) Subordinated Liabilities 1.4 (35) (5.17%) 1.8 (42) Total Interest Bearing Liabilities 88.7 (183) (0.42%) 87.2 (166) (4.80%) (0.38%) 2.1 89.0 (49) (190) (0.43%) (4.77%) 2.1 (51) (4.86%) 90.1 (205) (0.45%) IFRS Income Classification (8) 5 7 7 Other4 7 (25) 9 (22) Net Interest Margin 99.3 1,143 Average ECB Base rate Average 3 month Euribor Average BOE Base rate 2.32% 0.00% 97.2 1,102 2.25% 0.00% 98.6 1,095 2.23% 0.00% 99.4 1,085 2.17% 0.00% (0.33%) (0.33%) (0.33%) (0.32%) 0.25% 0.32% Average 3 month LIBOR 0.33% 0.38% 0.50% 0.62% 0.70% 0.82% 1 Includes average interest earning assets of c.€0.3bn in 2018 carried at Fair Value through Profit or Loss with associated FY18 interest income of c.€15m 2 Credit balances in H2 2018: ROI €25.4bn, UK €3.3bn, C&T €4.1bn 3 Includes impact of credit risk transfer transactions executed in Dec 2016 and Nov 2017 4 Includes customer termination fees, EIR adjustments and other adjustments that are expected to be of a non-recurring nature Bank of Ireland#44Non-core items Cost of restructuring programme - Transformation investment costs' Other restructuring charges² Gain on disposal of Property Gross-up for policyholder tax in the Wealth and Insurance business Investment return on treasury stock held for policyholders (Loss) / gain on disposal / liquidation of business activities Tracker Mortgage Examination Review charges (Charge) / gain arising on the movement in the Group's credit spreads Bank of Ireland 2018 Results Announcement FY 2017 (Єm) FY 2018 (Єm) (48) (111) (48) (93) (18) 7 10 (7) (1) (5) (170) 651 (5) Cost of corporate reorganisation and establishment of a new holding company Total non-core items (7) (226) (100) 1 Transformation Investment costs of €93 million primarily relate to a reduction in employee numbers (€74 million), programme management costs (€8 million) and costs related to the implementation of the Group's property strategy (€11 million) 2 Other restructuring charges of €18 million primarily relate to impairment of property, plant and equipment and intangible assets Bank of Ireland 43 43#45Transformation Investment 2016-21 investment: €1.4bn €306m Bank of Ireland 2018 Results Announcement Increasing our investment to support growth and drive efficiencies Average of €275m p.a. • Scope: Culture, Systems, Business Model 2016 2017 2018 2019 2020 2021 Average annual investment of €275m from 2018-2021; equates to CET1 capital of c.50-60bps p.a. Expected accounting treatment of investment (average €275m p.a.): - 40% capitalised as intangible asset 40% charged as Transformation Investment charge in the Income statement 20% charged as non-core restructuring costs in the Income statement - Costs will decrease every year in absolute terms c.65% c.65%1 c.50% c.€1.9bn €1,796m €1,739m €104m 2017 €113m 2018 Operating expenses 1 See Slide 55 for calculation 2019 2020 Transformation Investment charge Cost income ratio c.€1.7bn 2021 Efficiency targets • Cost target of c.€1.7bn in 2021 Costs reduce every year: 2018-2021 Cost income ratio improves from 65% to c.50% in 2021 Bank of Ireland 44 44#46Non-performing exposures by portfolio Bank of Ireland 2018 Results Announcement 45 45 Advances Composition (Dec 18) (€bn) Non-performing exposures (€bn) Non-performing exposures as % Impairment loss allowance Impairment loss allowance as % of of advances (€bn) non-performing exposures Residential Mortgages 45.4 2.8 6.0% 0.5 20% - Republic of Ireland 23.7 2.3 9.5% 0.4 21% - UK 21.7 0.5 2.3% 0.1 15% Non-property SME and Corporate 19.5 1.2 6.2% 0.6 52% - Republic of Ireland SME 7.6 0.8 11.2% 0.4 49% - UK SME 1.6 0.1 6.1% 0.1 53% - Corporate 10.3 0.3 2.6% 0.1 60% Property and construction 8.3 0.9 11.0% 0.4 45% - Investment property 7.7 0.8 10.7% 0.4 44% - Land and development 0.6 0.1 14.0% 0.0 54% Consumer 5.2 0.1 2.1% 0.2 140% Total loans and advances to customers 78.4 5.0 6.3% 1.7 35% Composition (Dec 17) Advances (€bn) Non-performing exposures (€bn) Non-performing exposures as % of advances Impairment loss allowance Impairment loss allowance as % of (€bn) non-performing exposures Residential Mortgages 46.7 - Republic of Ireland 24.1 32 3.1 2.7 17 6.6% 0.7 23% 11.0% 0.6 24% - UK 22.6 0.4 1.9% 0.1 14% Non-property SME and Corporate 18.7 1.7 8.9% 0.9 49% - Republic of Ireland SME 8.2 1.3 15.4% 0.6 46% - UK SME 1.7 0.1 8.6% 0.1 42% - Corporate 8.8 0.3 3.0% 0.2 69% Property and construction 8.8 1.7 19.1% 0.7 44% - Investment property 8.3 1.5 17.9% 0.6 43% - Land and development 0.5 0.2 39.4% 0.1 55% Consumer 4.3 0.1 2.1% 0.1 98% Total loans and advances to customers 78.5 6.5 8.3% 2.4 36% Bank of Ireland#47ROI Mortgages Continued proactive arrears management >90 days arrears¹ Industry Average Industry Average 17.4% 7.4% Bank of Ireland 2.1% Owner Occupier Owner Occupier Bank of Ireland 4.9% Buy to let Buy to let >720 days arrears¹ Industry Average Bank of Ireland Industry Average 13.0% Bank of Ireland 4.6% 1.1% Owner Occupier Owner Occupier Buy to let Buy to let 2.6% >90 days arrears . Bank of Ireland 2018 Results Announcement Bank of Ireland is significantly below the industry average for both Owner Occupier (28% of industry average) and Buy to Let (28% of industry average) >720 days arrears • Bank of Ireland is significantly below the industry average for both Owner Occupier (24% of industry average) and Buy to Let (20% of industry average) NPE resolution strategies • Continued progress on reduction in ROI mortgage NPES, c.€0.4bn reduction in 2018 • Portfolio of Buy to Let mortgage NPEs prioritised for alternative resolution strategies e.g. potential securitisation and/or sale - Loans of c.€0.6bn - €0.8bn; Net Interest Income of c.€10m - €14m CET1 Capital Intensity of c.30bps - 50bps 1 As at September 2018, based on number of accounts, industry average excluding BOI Bank of Ireland 46#48Debt Securities at fair value through other comprehensive income (FVOCI) Bank of Ireland 2018 Results Announcement ROI UK France Other (€bn) (€bn) (€bn) (€bn) Dec 18 (€bn) Dec 171 (€bn) Sovereign bonds 2.6 0.8 2.6 6.0 7.5 Senior debt 0.3 1.9 2.2 2.1 Covered bonds 0.2 0.4 0.9 2.2 3.7 3.1 Subordinated debt 0.1 0.1 0.4 Asset backed securities 0.0 0.1 Total FVOCI Reserve 2.8 0.2 0.4 2.0 6.8 12.0 13.2 0.2 0.3 Portfolio • On 1 Jan 2018, debt securities classified as AFS financial assets under IAS39 were reclassified in accordance with IFRS 9 • . The Group held €12.0bn of FVOCI debt securities at Dec 2018. Weighted average instrument level credit rating of the FVOCI portfolio is A+ Other exposures of €6.8bn include supranational entities (€1.7bn), Spain (€0.9bn), Belgium (€0.9bn), Sweden (€0.8bn), and Other (€2.5bn - all exposures less than €0.5bn) NAMA • • On 1 Jan 2018, on transition to IFRS 9, the previous unamortised discount² which was amortising to the income statement under IAS39, was transferred in full to retained earnings (NIM impact c.2bps) In April 2018, the Group sold €0.2bn of NAMA subordinated bonds in a buy-back auction generating an additional gain in the income statement of c.€9m • The Group holds NAMA subordinated bonds - €70m nominal value, valued at 104% at Dec 2018 (Dec 17 - 104%) 1 The Group held €13.2bn of AFS financial assets at Dec 17 which were reclassified under IFRS 9 to FVOCI (€10.1bn), Amortised Cost (€2.8bn) and FVTPL (€0.3bn) 2 An initial discount was recognised on the NAMA subordinated bonds with subsequent changes in fair value being recognised in the AFS Reserve Bank of Ireland 47#49UK Customer Loans £27.9bn (€31.2bn) UK Mortgages - £19.4bn Bank of Ireland 2018 Results Announcement UK Mortgages Analysis - £19.4bn • Total UK mortgages of £19.4bn; (NPES: 2%) Scotland, £1.1bn Northern Ireland,. £1.0bn Rest of England,. £8.9bn Wales, £0.7bn Greater London, £3.6bn Outer Metropolitan, £2.2bn South East, £1.9bn Other UK Customer Loans - £8.5bn £0.1bn £0.2bn £0.1bn £2.5bn £1.3bn SME Corporate £0.04bn £2.6bn £1.5bn £0.01bn £0.15bn Investment Property Land & Development Consumer Performing loans Non-performing exposures Average LTV of 62% on total book (2017: 62%) Average LTV of 72% on new mortgages (2017: 72%) 70% of mortgages originated since January 2010 are standard owner occupier mortgages BTL book is well seasoned with 71% of these mortgages originating prior to January 2010 Average balance of Greater London mortgages is c.£190k, with 93% of Greater London mortgages having an indexed LTV <70% Other UK Customer Loans Analysis - £8.5bn Non-performing exposures of £0.4bn with strong coverage ratios Performing loans of £8.1bn; SME: broad sectoral diversification with low concentration risk Corporate: specialist lending teams in Acquisition Finance, Project Finance, and Corporate lending through a focused sector strategy Investment Property: primarily Retail, Office and Residential sectors Consumer (£2.7bn): Northridge (£1.4bn): Asset backed motor finance business; net loan book increase of £0.3bn in 2018; mid-market pricing targeting prime business only; below industry arrears and loan losses Personal loan volumes (£0.7bn): net loan book increase of £0.3bn in 2018; improved credit risk process has driven increase in customer applications and drawdowns Credit cards (£0.6bn): classified as held for sale as at Dec 2018 Bank of Ireland 48#50Capital CET1 ratios - Dec 2018 Bank of Ireland 2018 Results Announcement Total equity Less Additional Tier 1 Deferred tax¹ Intangible assets and goodwill Foreseeable dividend² Expected loss deduction Other items³ Common Equity Tier 1 Capital Credit RWA Operational RWA Market, CCR and Securitisations Total RWA Common Equity Tier 1 ratio Total Capital Ratio Leverage Ratio Phasing impacts on Regulatory ratio • 19 49 Regulatory ratio (€bn) Fully loaded ratio (€bn) 10.1 10.1. (0.8) (0.8) (0.4) (1.1) (0.7) (0.7) (0.2) (0.2) (0.6) (0.6) (0.2) (0.3) 7.2 6.4 41.6 41.4 4.5 4.5 1.7 1.7 47.8 47.6 15.0% 13.4% 18.8% 17.2% 7.0% 6.3% Deferred tax assets - certain DTAs¹ are deducted at a rate of 40% for 2018, increasing annually at a rate of 10% thereafter until 2024 • IFRS 9 - the Group has elected to apply the transitional arrangement which on a Regulatory CET1 basis resulted in minimal impact from initial adoption and will partially mitigate future impacts in the period to 2022. The transitional arrangement allows a 95% add-back in 2018, decreasing to 85%, 70%, 50% and 25% in subsequent years 1 Deferred tax assets due to temporary differences are included in other RWA with a 250% risk weighting applied 2 Dividend deduction of €173m 3 Other items - the principal items being the cash flow hedge reserve, securitisation deduction and 10%/15% threshold deduction Bank of Ireland#51Capital Guidance and Distribution Policy Bank of Ireland 2018 Results Announcement 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 period¹ Distribution Policy Proposed Dividend • This includes meeting applicable regulatory capital requirements plus an appropriate management buffer • 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 Any impact from the evolving regulatory and accounting environments • Other means of capital distribution will be considered to the extent the Group has excess capital Proposed dividend of 16 cent per share / €173m in respect of 2018, increased from 11.5 cent per share/ €124m in 2017 1 The Other Systemically Important Institution (O-SII) buffer will be introduced at 0.5% in July 2019, increasing to 1.0% in July 2020 and 1.5% in July 2021 Bank of Ireland 50 50#52Regulatory Capital Requirements Bank of Ireland 2018 Results Announcement Ireland (c.60% of RWA) (from 5 July 2019) Pro forma CET1 Regulatory Capital Requirements Pillar 1 CET1 Pillar 2 Requirement (P2R) Capital Conservation Buffer (CCB) Countercyclical buffer (CCyB)' UK (c.30% of RWA) Set by Range CRR SSM CRD 4.50% 1% 2.25% 2.50% 2017 4.50% 2.25% 1.25% 2018 2019 2020 2021 4.50% 4.50% 4.50% 4.50% 2.25% 2.25% 2.25% 2.25% 1.88% 2.50% 2.50% 2.50% CBI 0% - 2.50% US and other (c. 10% of RWA) FPC (UK) Fed/Various 0% - 2.50% 0.3% 0.60% 0.60% 0.60% 0.30% 0.30% 0.30% 0% - 2.50% O-SII buffer (from 1 July 2019) CBI Systemic Risk Buffer - Ireland Minister for Finance 0% - 2.00% 0% - 3.00% N/A Pro forma Minimum CET1 Regulatory Requirements 8.00% N/A 8.93% 0.50% 1.00% 1.50% N/A N/A N/A 10.65% 11.15% 11.65% Pillar 2 Guidance (P2G) Not disclosed in line with regulatory preference Regulatory Capital Requirements • A minimum CET1 ratio of 9.55% on a regulatory basis from 1 Jan 2019, increasing to 10.65% from July 2019. This includes . A Pillar 1 requirement of 4.5%, a Pillar 2 requirement (P2R) of 2.25%, a capital conservation buffer of 2.50%, a UK CCyB of 0.3%, an Other Systemically Important (O-SII) Buffer of 0.5% (from 1 July 2019) and an ROI CCyB of 0.6% (from 5 July 2019) The FPC (UK) has set the UK CCyB at 1% from Nov 2018 • The CBI (ROI) announced its intention to increase the CCyB in Ireland from 0% to 1.0%, effective from 5 Jul 2019 • The Systemic Risk Buffer under Article 133 CRD IV is currently not implemented in Irish law but may be introduced at the discretion of the Minister for Finance Pillar 2 Guidance (P2G) is not disclosed in accordance with regulatory preference, increase of 62bps in Capital Conversion Buffer (CCB) in 2019 was offset by a like for like reduction in P2G. In addition the P2G for 2019 reduced following the outcome of the 2018 EBA Stress Test 1 CCyB could be set in excess of 2.50% in exceptional circumstances. A change in the CCyB could also be implemented in less than 12 months in exceptional circumstances 2 Expected range for Pillar 2 Requirement Bank of Ireland 51#53Risk Weighted Assets (RWAs) Customer lending average credit risk weights - Dec 2018 1/2 (Based on regulatory exposure class) Bank of Ireland 2018 Results Announcement EBA Transparency Exercise 2018 Country by Country Average IRB risk weights EAD³ RWA Avg. Risk Residential Mortgages - June 2018 (€bn) (€bn) Weight ROI Mortgages 24.2 8.3 34% Sweden 4.2% Belgium 9.7% UK Mortgages SME 21.5 4.8 22% UK 10.3% 15.8 11.9 75% Finland 10.7% France 11.3% Corporate 10.4 9.2 88% Netherlands 11.6% Other Retail 5.8 4.0 68% Austria 11.9% Spain 12.8% Customer lending credit risk 77.8 38.1 49% Denmark 14.1% Germany 14.3% • IRB approach accounts for: Norway 17.9% Portugal 19.5% Italy Ireland 19.9% 38.0% 70% of credit Exposure at default (Dec 2017: 70%) 74% of credit RWA (Dec 2017: 73%) RWA has increased from €45.0bn at Dec 2017 to €47.8bn at Dec 2018 primarily driven by changes in book size and mix and the impact of TRIM • The Group's ROI mortgages average risk weight increased from 29% at June 2018 to 34% at Dec 2018, driven primarily by the impact of the TRIM exercise Corporates - June 2018 Sweden Denmark Germany Norway Netherlands 26.9% 32.2% 40.4% 41.0% 43.3% Belgium Austria 44.9% 46.3% Finland 47.6% UK 48.3% Italy 50.2% France 54.1% Spain 55.2% Ireland Portugal 61.7% 63.8% 1 EAD and RWA include both IRB and Standardised approaches and comprises both non-defaulted and defaulted loans 2 Securitised exposures are excluded from the table (i.e. excludes exposures included in CRT executed in Nov 2017 and Dec 2016) 3 Exposure at default (EAD) is a regulatory estimate of credit risk exposure consisting of both on balance exposures and off balance sheet commitments Bank of Ireland 52#54Defined Benefit Pension Schemes 1.60% €1.19bn Group IAS19 Defined Benefit Pension Deficit 2.20% 2.10% Bank of Ireland 2018 Results Announcement Mix of BSPF* Defined Benefit Pension Scheme Assets (%)¹ 2.00% €4.0bn €5.5bn €5.6bn €0.45bn €0.48bn €0.23bn 45% 61% 72% 11% 21% 44% 18% Dec 12 Dec 17 23% 5% Dec 18 €313m Jun 16 Dec 16 IAS19 DB Pension Deficit Dec 17 Dec 18 EUR Discount Rate €176m IAS19 Pension Deficit Sensitivities (Jun 2016 / Dec 2016 Dec 2017 / Dec 2018) €173m €162m €162m €153m €122m €124m €128m €90m €118m €102m €71m €55m €28m €28m Credit Spreads² Inflation³ Global Equity Interest Rates¹ 1 Sensitivity of Group deficit to a 0.25% decrease in interest rates 2 Sensitivity of IAS19 liabilities to a 0.10% decrease in credit spread over risk free rates 3 Sensitivity of Group deficit to a 0.10% increase in long term inflation 4 Sensitivity of deficit to a 5% decrease in global equity markets with allowance for other correlated diversified asset classes Listed equities Diversified assets² Credit / LDI / Hedging * BSPF = Bank of Ireland Staff Pensions Fund O Graphs shows BSPF asset allocation. BSPF represents approx. 77% of DB Pension assets 2 Diversified assets includes infrastructure, private equity, hedge funds and property • IAS19 Pension deficit of €0.23bn at Dec 2018: schemes in deficit €0.27bn, schemes in surplus €0.04bn • The primary drivers of the movement were: - - Deficit reducing contribution of c. €82m to BSPF and c.€34m to other schemes Net positive impact of changes in long term assumptions and experience in 2018 • The Group has continued to support Trustees in diversifying asset portfolios away from listed equity into other return-seeking but potentially less volatile asset classes. In Q4 2018 the BSPF investment in listed equities was reduced from 15% to 5% • BSPF asset returns of +1.5% and +2.6%.p.a. were achieved over 1 year and 3 years respectively to end Dec 2018 Bank of Ireland 53 53#55Ordinary shareholders' equity and TNAV Bank of Ireland 2018 Results Announcement Movement in ordinary shareholders' equity Ordinary shareholders' equity at beginning of period Movements: Profit attributable to shareholders Impact of adopting IFRS 9 2017 (Єm) 2018 (€m) 8,612 8,859 664 620 Dividend paid to ordinary shareholders (2017 dividend of 11.5c per share) (31) (124) Dividends on preference equity interests (4) Distribution on other equity instruments - additional tier 1 coupon (net of tax) (24) Remeasurement of the net defined benefit pension liability (113) 129 Debt instruments at FVOCI reserve movements 133 Available for sale (AFS) reserve movements (9) (341) Cash flow hedge reserve movement (115) (51) Foreign exchange movements Other movements Ordinary shareholders' equity at end of period (147) 10 39 8,859 9,243 Dec 17 Tangible net asset value (€m) Ordinary shareholders' equity at the end of period Adjustments: 8,859 Dec 18 (€m) 9,243 Intangible assets and goodwill (779) (802) Own stock held for benefit of life assurance policyholders 33 25 Tangible net asset value (TNAV) 8,113 8,466 Number of ordinary shares in issue at the end of the period 1,079 1,079 TNAV per share (€) €7.52 €7.85 Bank of Ireland 54#56Cost income ratio: Dec 2018 Headline vs. Adjusted Net interest income Other income - Business income Bank of Ireland 2018 Results Announcement FY 2018 Headline (€m) 2,146 Pro forma adjustments (Єm) FY 2018 Pro forma (Єm) 2,146 672 672 - Additional gains 9 (9) - Other valuation items¹ (22) 56 34 Total Income 2,805 47 2,852 Costs - Operating expenses - Transformation Investment Costs Cost income ratio 1,739 113 1,852 66% • Cost income ratio excludes; - - Levies and Regulatory charges Non-core items ⚫ 2018 adjusted cost income ratio is adjusted for; Additional Gains and valuation items¹ (€47m) - 1 Excludes IFRS income classifications which is fully offset in net interest income 1,739 113 1,852 65% Bank of Ireland 55#57Return on tangible equity (ROTE) 2018: Headline vs. Adjusted Bank of Ireland 2018 Results Announcement 56 56 Additional gains, 2018 Headline & valuations (Єm) items¹, net of tax 2018 impairment gains, net of tax Adjustments "Normalised❞ impairment adjustment, net of tax Adjustment for CET1 Ratio at 13% 2018 Adjusted (€m) Profit for the period 675 Non-Core items, net of tax 78 Coupon on Additional Tier 1 securities (48) Preference share dividends (7) Adjusted profit after tax 698 38 (34) (127) 575 At Dec 2018 Shareholders' equity 9,243 Intangible assets (802) Shareholders' tangible equity 8,441 Average shareholders' tangible equity 8,229 Return on tangible equity (ROTE) 8.5% (184) 9,059 (802) (184) 8,257 (296) 7,933 7.2% ⚫ 2018 Adjusted Return on Tangible Equity is adjusted for; Additional gains and valuations items¹, net of tax - €38m - - Reversal of 2018 net impairment gain 2018, net of tax - €34m "Normalised" impairment charge (20bps), net of tax - €127m Average Shareholders' tangible equity calculated on a CET1 Ratio at 13% - €296m 1 Excludes IFRS income classifications which is fully offset in net interest income Bank of Ireland#58Forward-Looking statement Bank of Ireland 2018 Results Announcement 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, 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, those as set out in the Risk Management Report in the Group's Annual Report for the year ended 31 December 2018. Investors should also read 'Principal Risks and Uncertainties' in the Group's Annual Report for the year ended 31 December 2018 beginning on page 61. Nothing in this document should be considered to be a forecast of future profitability or financial position of the Group 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. Bank of Ireland 57#59Contact Details For further information please contact: • Group Chief Financial Officer Andrew Keating tel: +353 76 623 5141 . Investor Relations Darach O'Leary tel: +353 76 624 4711 Kate Butler Eoin Veale Colin Wallace tel: +353 76 623 1297 tel: +353 76 624 1873 tel: +353 76 623 5135 Capital Management Lorraine Smyth Alan Elliott Alan McNamara [email protected] [email protected] [email protected] [email protected] [email protected] tel: +353 76 624 8409 tel: +353 76 624 4371 tel: +353 76 624 8725 [email protected] [email protected] [email protected] • Group Communications Pat Farrell Damien Garvey tel: +353 76 623 4770 tel: +353 76 624 6716 . Investor Relations website www.bankofireland.com/investor [email protected] [email protected] Bank of Ireland 2018 Results Announcement Bank of Ireland 58#60Empty