AIB Group plc (A5G) Earnings Call Transcript & Summary

[Audio Gap] the nearest fire exit in a calm manner and upon exiting the building, please follow the instructions of the security team and now please make a note of the exit closest to you. I'll now hand you back to Tom Foley, our Senior Independent Director, who is chairing the meeting. Thank you.

Thank you, Helen. My name is Tom Foley. I'm the Senior Independent Director of AIB Group plc. And I've been asked by the Board to Chair today's proceedings in place of our Deputy Chairman, Brendan McDonagh, who because of travel restrictions, cannot make the journey to Dublin to chair the meeting in person. Brendan is joining us by phone but as the meeting must be chaired in Dublin, it is my honor to do so. I have confirmed that we have a quorum, and so I can now formally open the meeting. The notice of the meeting was posted to shareholders on the 30th of March 2020 and is available on our website. This meeting has been held in circumstances which are unprecedented given the global crisis of COVID-19. AIB regrets that you, our shareholders, cannot be with us in person, but we are obliged to comply with government restrictions relating to public gatherings. We have, however, the minimum required number of people present in our group head office here at 10 Molesworth Street, Dublin 2 to allow the meeting to be validly held. That is the quorum of 10, including myself. Additionally, we have our group CEO, Colin Hunt; the Group General Counsel and Company Secretary, Helen Dooley; and the Group Chief Financial Officer, Donal Galvin. And between us, we hope to be able to answer your questions. I will later outline the Q&A procedures in place. Meanwhile, our physical arrangements today ensure that we are observing the social distancing guidelines with at least a distance of 2 meters between each one of us. All the other directors are joining us today by phone. I will invite Colin to give an overview of the bank's performance later in the meeting including the work that he and his executive team and the entire AIB workforce have been undertaking to help our customers through the challenging -- challenges presented by COVID-19. With that, I would like to turn to the first formal part of our proceedings, namely the independent auditor's report. This is set out on Pages 225 to 236 inclusive of our 2019 Annual Financial Report, copies of which you have received and that are available on our website. John McCarroll from our auditor, Deloitte, has joined the meeting by telephone. However, I propose that with the consent of the members present here at the meeting, we take the auditor's report as read. Thank you. Prior to his retirement as Chairman, Richard Pym set out some of the highlights of 2019 in his Chairman statement in the 2019 financial report. Since Richard wrote that, the world in which we live and operate has changed profoundly. We think of those who have suffered the loss of loved ones, and we think also of the many frontline staff in our health services and other essential services. They are all doing an incredible service to our countries. The new reality facing the world from COVID-19 has overtaken any remarks concerning trading made at the time of our results announcement. The Board's proposal for a final dividend will not now be put to this meeting, following a recommendation from the ECB to all banks operating in the Eurozone. In his Chairman statement, Richard highlighted the continuation of AIB's culture improvement journey. The commitment and actions of our entire staff in looking out for our customers since COVID-19 forced the lockdown has been remarkable. Under Colin Hunt's leadership, they have all demonstrated a deep desire to do the right thing for our customers. To find and implement the right solutions and to minimize where at all possible, the financial impact for them. And on your behalf and on behalf of the Board, I want to thank them all sincerely. The impact of COVID-19 on our health and economy is now the focus of all our energies, and Colin will explain the bank's support for customers through this period of crisis. We are committed to expanding our sustainability agenda, where we are the leading bank in Ireland. Our strategy is that we will play a leadership role in creating innovative propositions and partnerships to help our customers in the transition to a low-carbon economy. We will also make a meaningful contribution to the sustainability of the societies in which we operate. Our detailed sustainability report, which was published alongside our annual financial report is available on our website. This evidenced some of the initiatives taken by the group in advancing our sustainability agenda during 2019 under the guidance of the Sustainability Business Advisory Committee. I want now to pay tribute to Richard's contribution to the group and to the Board during his tenure as Chairman. His leadership has contributed greatly to the current financial strength of the bank. We faced the present crisis with a strong balance sheet with a market-leading capital position and nonperforming exposures of EUR 3.3 billion, down from a peak of over EUR 30 billion. Richard brought new talent on to the Board and other appointments commenced by him are making their way through the approval process. We thank Richard and wish him good health and continued success in his future activities. Since our last AGM, the Board appointed Elaine MacLean and Basil Geoghegan as directors. Ann O'Brien and Raj Singh were introduced to you at the AGM last year, although they did not officially join the Board onto the day after that meeting. I welcome all of these new directors to the group, and I am pleased to repeat Richard's observation in the annual report that they are already contributing very effectively at Board and committee meetings. I took the decision to retire from the Board some time ago and thus, have not put myself forward for reelection at today's meeting, which incidentally is my eighth AGM. My time on the Board has been both interesting and challenging, and I have greatly enjoyed working with 20 different nonexecutive directors over those years, together with some incredibly bright and hard-working executives. Board refreshment and rotation is a necessary and healthy process. Carolan Lennon will take over from me as Senior Independent Director today. As mentioned earlier, a number of Board appointments are in the pipeline, of which the group will hopefully announce later this year. I will now pass over to Colin. Given the unique circumstances of today's meetings, there is no video or PowerPoint presentation. Rather, Colin will address you here in this room and those of you joining us on the conference line. So thank you for the moment, and I'll hand over to Colin.

Thank you, Tom. Good morning, everyone. I'm pleased to be here today to speak to you briefly on the group's performance for 2019. My comments comprise an abridged version of the information that Donal Galvin, our CFO and I shared with analysts and investors after the publication of our results on the 6th of March. Since then, COVID-19 has thrown our country into a state of crisis, just as it has worldwide. The pandemic is an event that none of us will have experienced before in our lifetimes. As the largest bank in the Irish state, we are one of the principal institutions that have been relied upon to sustain economic well-being through this crisis. And as such, I will also provide you with an overview of the measures we are taking to support our customers and to protect our staff through these unprecedented times. As regards our 2019 financial performance, the fundamentals of the group remains strong. With sustainable underlying profits and a robust capital base with a fully loaded CET1 ratio at the end of December 2019 of 16.4%. Our pre-exceptional profit before tax for the year was EUR 1.1 billion. Our net profit was lower at EUR 499 million, primarily as a result of restitutions. Highlighting the importance of putting these legacy issues behind us for once and for all. We have the #1 banking franchise in this country with leading market shares across all key categories, not least within the mortgage market, where we held 31.4% market share through 2019. We are, without question and by a margin, the largest and the most digitally-enabled provider within the Irish banking office, and we have the #1 Irish banking app with 1.5 million of our customers using our digital technology. 1.3 million of them choose to engage with us primarily using the mobile app. Thanks to the investments we've made in recent years. We now have a modern, resilient and flexible IT infrastructure that will support our strategy for the years ahead. 2019 was a year of steady progress in the bank against a challenging backdrop. We strengthened our customer proposition and our digital leadership. Led by our purpose, we streamlined service to our 2.8 million customers, and we introduced ever more competitive products, particularly in the mortgage space, where we reduced interest rates in fixed products on 2 locations. We also further enhanced our existing leading fintech capabilities. We had a key focus on credit risk management and engaged in very high-quality new lending, with more than 98% of the new loans written in 2019, being graded strong or satisfactory. New lending of EUR 12.3 billion in 2019 was up from EUR 12.1 billion in 2018. Across our core segments, new mortgage lending increased by 8% to EUR 3 billion, and personal lending increased by 15% to EUR 1 billion. With the Irish economy continuing to perform well last year, corporate credit demand remained solid. We saw increased lending to the renewable energy sector, offset by lower syndicated in international lending. Notwithstanding the fact that Brexit uncertainty remained an overhang in the SME sector, new lending there increased by 7%. In the U.K., new lending of GBP 2.1 billion, an increase of 7% in the previous year was focused on our chosen defensive sectors such as renewable energy and infrastructure. Addressing NPEs in a sustainable way continue to be a top priority for the group, and we made enormous headway in this regard throughout the year. We achieved our milestone by reducing our NPEs very significantly from almost 10% to 5.4%. We renewed our focus on our cost base and reduced our headcount by 5% in the second half of the year. We made major advances in sustainability and also on the culture agenda, both of which now sit at the very heart of our strategy. We've put in place a EUR 5 billion climate action fund. We reduced our own carbon footprint by 20% since 2014, and we have a target of reducing it by 50% by 2030. The single fastest-growing part of our bank is our energy and climate action area. Its book doubled in 2018, it doubled in 2019, and we expect it to be the single fastest-growing part of the bank's balance sheet over the course of the next 3 years. With nothing short of transformation required in the industry's reputation, the AIB Board has set a cultural ambition for the organization. This consists in adopting evolved values and articulated behaviors that involve the delivery of high-quality service and fair outcomes to our customers. We changed our structure to align this to our priority of simplifying and streamlining and strengthening the bank for the challenges that lie ahead. We made management changes and refreshed our team, and we continue to deal with legacy issues and regulatory developments with particular reference to the ongoing Tracker Mortgage Examination. With regard to the Tracker Mortgage Examination, in February of this year, we made a new provision of EUR 265 million for a group of 5,907 customers who were included in the scope of the Tracker Mortgage Examination, but who were never on a tracker mortgage. These customers had the option of choosing a tracker mortgage after they rolled off a fixed rate, but at the time tracker mortgages were no longer available. Our view has always been that these customers were not disadvantaged by not being offered a tracker mortgage because from October 2008 onwards, we believe the tracker mortgages would have been more expensive than other rates on offer if trackers had continued to be available. In the Tracker Mortgage Examination process, these customers received compensation of EUR 1,000 plus EUR 615 towards independent advice. Unlike all customers who were included in the Tracker Mortgage Examination, they have the right to appeal the compensation to the independent appeals panel or to complain to the Financial Services and Pensions Ombudsman. In March, the Financial Services and Pensions Ombudsman issued a final decision in relation to a complaint made by one of these customers, awarding a 12% write-down in the capital balance of the mortgage as at the date of the roll-off of the fixed rate. And the refund of the interest on the amount written off. As I have mentioned, we do not believe that these customers are disadvantaged by not being able to avail a tracker mortgage when they roll off their fixed rates. But in the interest of all of our stakeholders, we have confirmed that we will be applying the FSPO decision to all other customers in that group. It is imperative that Ireland has a robust well-functioning banking industry. As a financial institution at the heart of Ireland economy, AIB must be put in the strongest possible footing with a solid balance sheet, a robust capital structure and a controlled cost base. The steps taken in recent years were made with a view to positioning us for any headwinds that might come in the future. We did not foresee COVID-19 and the impact of the global economy coming. But it is clear now is that we took the right approach and that we are now well positioned to face the challenges that lie ahead for the group and for all our stakeholders. As per usual, we will update our shareholders throughout the year as to how the bank is performing, and our next scheduled trading update will be issued on the 12th of May. Steady progress was made across a number of fronts, but there's more work to be done as we embark in the next phase of our strategic development, which will see the banking simplified, streamlined and strengthened in the interest of all our stakeholders. Before the onset of COVID-19, I'd shared details with the market on how the successful implementation of the strategy will manifest itself in 2022, including a strong and resilient balance sheet, we will be generating sustainable profits and returning capital to our shareholders. We will have a customer experience that is characterized by excellence with highly competitive products and efficient processes, and we will have a streamlined appropriate cost base for a leaner, simpler and more agile business. Our strategic priorities remain unchanged. The core priorities of our refreshed strategy to strengthen and streamline and simplify the group's operations in the interest of our customers, our shareholders and the communities we're proud to serve are more relevant today as we work through this current crisis. As we set out on our strategy, as we embark on our mission, it is important to recognize the challenges that the bank now faces. As you are aware, the economic environment has changed enormously in the last few weeks. But the COVID-19 pandemic will abate eventually from a health crisis perspective, and we have to look at how we support our customers and assist in the great task of reboosting the economy. Since the beginning of this pandemic, our entire unrelenting effort has been focused on putting supports in place to deal with the shock inflicted on our customers and on the economy generally. Our main priority is to support our customers and the economy through this crisis and also ensuring the health safety and well-being of our staff. All aspects of our business, including our lending criteria are under constant review, given the current environment. There is also a responsibility to be prudent in our lending as much to protect the customer as to protect the bank. But right now, our focus is to shore up our customers to back them. We are completely embedded in their community and are maintaining the delivery of banking services through all our channels, physical and digital. Already, we have put a number of supports in place, including AIB, EBS and Haven have made available an online process, allowing customers to access a 3-month payment break on a home mortgage, personal and SME loans. For SME customers, AIB is also providing working capital support and the rescheduling of loan payments for impacted customers. And information on that is available at www.aib.ie/covid19. We are postponing transaction and maintenance charges for impacted SME customers onto the auto. We have processed well over 40,000 payment breaks thus far, 16,000 mortgage payment breaks, 12,000 in the SME sector and 12,000 personal customers. We continue to waive contactless payment fees. This also applies to Apple Pay, Google Pay and Fitbit Pay contactless transactions, which are not subject to what was the contactless payment limits of EUR 30 in most merchants. The bank has increased this limit to EUR 50 for contactless card transactions. We are refunding all unpaid charges for customers in March and April. Our AIB and EBS branches remain open to our customers, except for those locations on campuses that closed following advice from the health authorities. And finally, priority banking time is allocated for our older and more vulnerable customers from 10 a.m. until 11:00 a.m. each morning. And we are asking our other customers to plan their branch visits outside this time. We also announced our partnership with Trinity College Dublin in the battle against COVID-19 by pledging EUR 2.4 million to the dedications AIB COVID-19 research laboratories hub at the university's to urgently accelerate the college's immunology project to tackle the COVID-19 pandemic. As one of our leading financial institutions, we have a role to play in helping our country through this terrible health crisis. And it is imperative that we mobilize the resources we have at our disposal in a strategic way by investing in a national and international endeavor to help save lives. At AIB, we have a rich history of supporting our local communities. Last week, during this time of great need, we announced a further commitment to our community investment program, AIB Together. Through fundraising and donations, we will aim to raise EUR 1 million to support the charities at the forefront of helping the most vulnerable in our communities. The bank will match this fund, making up to EUR 2 million available to our community investment partners, FoodCloud and Soar as well as a number of local charities that provide critical services. In real terms, this means more meals delivered to people in need, more services for the old people struggling to cope and additional support for the elderly and the most vulnerables. In addition, every branch will receive EUR 1,000 to help the local community efforts of their staff's choice. Ensuring the physical and emotional well-being of our colleagues is without doubt of paramount importance during these times. As such, we have focused our efforts across 5 primary objectives, namely: firstly, the physical well-being of our people and minimizing COVID-19 transmission; alternative working arrangements were effected with speed, enabling 7,000 of 9,500 people to be able to work from home. The migration to remove working is achieved for 70% of our staff in the first 2 weeks of the pandemic. We have a working environment safety measures of split teams, multiple locations and physical distancing and they've been put in place and continue to be adhered to. Protection screens have been installed across the branch network, coupled with increased cleaning schedules as well as preventative sanitizations of customer areas. And people leader support backs, HR support lines and an update to our leave policies, have been rolled out to help answer our people's questions and allay their concerns. All of these actions have enabled us to fulfill our commitment of keeping our 200 branches in communities across the country open by keeping our staff and our customers safe. Secondly, the mental and emotional welfare of our people. We have delivered a pep talk app for mental well-being support and encouraging social connection amongst our staff. Thirdly, we have focused on keeping AIB personnel informed in a timely and transparent manner with daily communications relaying pertinent information as quickly as possible and regularly updated COVID-19 and HR FAQ sheets. Fourthly, we have been prioritizing resource allocations to support business continuity and our COVID-19 response through the redeployment of a central pool of volunteer staff to support the entire business. And finally, in terms of the national COVID-19 response, we have been providing frontline staff and support volunteers, and we've been working with our unions regarding heed to our best practice and awareness raising. Our people support program has been very effective to this point. There will be ongoing challenges in dealing with resource optimization, both employee welfare and sustaining our business operations with restrictions continuing in the near term. But balancing the considerations of service and safety remain a priority. The experience to date of the response of our people has not been found wanting and have even more energy, creativity and resilience. It has reinforced our organizational purpose and our defined values, most notably being agile and acting as one team. While it was our intention to put forward a resolution of this AGM seeking your approval for the payment of a dividend of $0.08 per share for 2019, the Board resolved to withdraw this resolution from today's agenda, respecting the recommendation from the open Central Bank, to all European banks supervised and regulated buyers. Eurogroup has a strong balance sheet and capital levels well in excess of regulatory requirements. We came into this crisis well funded, and this will have the highest capital ratios in Europe, and it is this balance sheet strength that enables us to support our customers and the economy at this time of great uncertainty. This is an extraordinary period globally. At AIB, we are working well as a team and are concentrating our efforts right now on supporting our customers and the economy through this exceptionally challenging event while ensuring the well-being of our staff, our suppliers and other stakeholders. That's what's important. The support we can offer our customers, communities and our country, so we can all emerge from this as strong as possible. Thank you.

Thank you, Colin. We now come to the formal part of the meeting where we consider and vote on the resolutions. There are 22 resolutions to be proposed in total, which may seem high, but this is due to the need to treat the proposed resolutions regarding the election of each director separately. You will have an opportunity to ask questions in a few moments. But if you would prefer to ask your question privately, then please make contact with the Company Secretary at any time after the meeting, and your question will be answered. The relevant e-mail dress is in the meeting notice. As I said at the outset of the meeting, I am deputizing for Brendan McDonagh at relatively short notice today. So I'll do my best to answer your questions, but where more information may be required, I will ask that you provide your details and questions after the meeting, and we will ensure they are followed up. Also, just to respectfully ask that your questions should focus primarily on the business of today's meeting. As a matter of procedure, I will propose the 22 resolutions in one section and then take questions in relation to all 22 resolutions when that's completed. You are entitled to ask any question on any resolution in that question section. I hope this makes it easier for you. So I seek your patience as the question time will come later. The Board believes it is important that the intention of all shareholders who register a vote are taken into account. And therefore, I am calling a poll on each of the resolutions proposed. We will be voting by poll on each of them separately at the end of the meeting. In that way, all the proxies received prior to the meeting will be taken into account. As the full text of each resolution is included at Pages 6 to 9 of the notice of the meeting, unless there are any objections I do not intend to read out the full text of each resolution. Thank you. We will come to the questions after I have proposed the resolutions. The first resolution on the agenda relates to the 2019 annual financial report, which I propose as an ordinary resolution. Thus following a review of the company's affairs, the financial statements for the year ended 31 December, 2019, together with the reports of the directors and the auditors thereon be received and considered. As announced by the group on the 30th of March 2020, the second resolution in the notice of the meeting has been withdrawn by the Board and will not now be proposed. Resolution 3 deals with auditors remuneration. The work of the auditor and the level of audit fees are viewed on behalf of the Board by the Board Audit Committee. Such committee is satisfied with the effectiveness of the auditor and that the fees are appropriate. I am pleased, therefore, to propose as an ordinary resolution to authorize the directors to fix the remuneration of the auditor. Resolution 4 relates to the continuation in office of Deloitte as auditor. Under Irish company law, the statutory auditor is automatically reappointed, except in very specific and limited circumstances, which do not pertain here. Accordingly, this vote is an advisory vote only. So I propose the following ordinary resolution as an advisory resolution. Thus the continuation in office of Deloitte as auditor of the company until the conclusion of the next Annual General Meeting of the company is considered. Resolution 5 deals with the election or reelection of the directors. As advised in the letter from the Deputy Chairman accompanying the notice of the meeting, AIB Group plc is required to comply with the provisions of the Irish Listing Rules and the U.K. Listing Rules relating to controlling shareholders and the election or reelection of independent nonexecutive directors. As the Minister of Finance in Ireland is a controlling shareholder for the purposes of the listing rules, that is the minister exercises or controls more than 30% of the voting rights of the company. Resolution 5 A, C, D, E, F, G, H and J must be approved by a majority vote of both the shareholders of the company and the independent shareholders of the company, that is the shareholders of the company who are not controlling shareholders of the company. The Board is confident that all directors are experienced and knowledgeable and that they each bring valuable skills to the Board and provide an objective perspective. The Board considers that the contribution of each of the individual directors and the Board as a whole is and continues to be important to the long-term sustainable success of the company. Biographical information on each of the directors being proposed for reelection or election is set out on Pages 44 and 45 of the 2019 Annual Financial Report. So I now propose as separate ordinary resolutions that each of Basil Geoghegan, Colin Hunt, Sandy Kinney Pritchard, Carolan Lennon, Elaine MacLean, Brendan McDonagh, Helen Normoyle, Ann O'Brien, Tomas O'Midheach and Raj Singh be elected or reelected as a director. Resolution 6 is another advisory resolution, which deals with the remuneration of the company's directors as disclosed in the 2019 Annual Financial Report. So I propose the following ordinary resolution as an advisory resolution. That the directors remuneration report, as set out on Pages 216 to 218 of the 2019 Annual Financial Report be considered. Resolution 7 is an advisory resolution in relation to the remuneration policy. I propose as an ordinary resolution that the remuneration policy, as set out on Pages 212 to 215 of the 2019 Annual Financial Report be considered. Resolution 8 to 11 are very technical in nature and are quite long-winded, unfortunately, and are set out in detail in the notice of the meeting and explained in the accompanying letter from the Deputy Chairman. They are considered to be in line with market practice and take account of relevant guidelines and principles. Resolution 8 is an ordinary resolution, which I'll now propose to authorize the directors to allot and issue new shares should the need arise. I propose resolution 9a. This is a special resolution, which, if passed, would allow for the limited disapplication of preemption rights, while empowering the directors to allot equity securities for cash, otherwise done in accordance with statutory preemption rights. This limited disapplication is restricted to just 5% of the current issued share capital. I also propose Resolution 9b. This is another special resolution, which, if passed, would allow for the limited disapplication of preemption rights proposed to empower the directors to allot equity securities for cash to fund an acquisition or what the directors determined to be a specified capital investment. This limited disapplication is also capped at 5% of the current issued share capital. Paving these 2 resolutions in this way, is the recommended practice of the preemption group, which monitors the protection of shareholder rights in the U.K. and in Ireland. Resolution 10 is proposed by me as a special resolution to authorize the market purchase by the company of its own shares up to 10% of the company's issued ordinary shares as at the date of the passing of the resolution. Resolution 11 is a special resolution to authorize the company to reissue shares purchased by it and not count them as treasury shares. If granted, the minimum and maximum prices at which treasury shares may be reissued shall be determined in accordance with the company's Articles of Association. I propose resolution 11 to the meeting. Resolution 12 is proposed by me as a special resolution to authorize the directors to call a general meeting other than an Annual General Meeting or a meeting for the passing of a special resolution or the appointment of a director on not less than 14 clear days notice. We will now open for your questions. First, I will take questions which were submitted in advance of the meeting, and I will ask Helen Dooley to read these into the record on behalf of these shareholders. While she is doing this, should anyone on the phone lines wish to ask a question, please press Star 1 to signify this to the operator, who will open the line for you one person at a time. Please clearly state your name before asking your question. To be fair to everyone on the phone lines and to provide as many people as possible the opportunity, I would ask that you please get to your question as quickly as possible. I also ask that you limit your questions today to matters which are specifically related to the resolutions before today's meeting. So Helen, if I could ask you to read the questions which have been submitted and the answers that we're providing.

Thank you, Tom. Yes. As we mentioned, this is an unprecedented AGM. So we did ask shareholders, if they wanted to submit questions in advance to do so, and we've received a number. Now there were some questions submitted with regard to individual customer accounts. They will not be addressed here, but they have been or are in the course of being responded to individually. And after I've read out the questions we've received in advance. As Tom said, we'll move to questions from shareholders on the phone. I know some of you may have experienced delays in joining the call today. I apologize for that. It is due to the unprecedented nature of this AGM, the number of shareholders accessing at the same time. So again, my apologies, and we will try to get through as many questions as possible. So with regard to the questions received in advance, the first question is from [ Patrick Tumi ] and his question related to correspondence. For individuals communicating by post with AIB, one maybe reasonably expect a reply to their letter and does the same timetable applies if they are nonresidents. Our answer is, we aim to issue a written response within 5 business days of receipt of the letter. Sometimes this isn't possible. In that case, we'll acknowledge the letter within 5 days and send the detailed response as soon as we can. We are aware that the current unprecedented COVID-19 circumstances is causing delays with regard to written post. The next questions are from Bernard Byrne, and they relate to shareholdings. Our preferred dividend on the AGM, I would ask the Board to consider during this unprecedented time paying any dividends by way of shares. Also, in light of the absolute hammering shareholders have had to endure since the financial crisis, the Board might also consider issuing some bonus shares to flattened shareholders, especially small ones. Our answer in order to pay dividends by way of shares, that requires what's called a scrip dividend scheme to be in place, which AIB does not currently have. With regard to whether bonus shares could be issued to small shareholders, essentially, and anything the Board would propose with regard to share capital, must be applied equally to all shareholders, large shareholders and small shareholders in order to comply with the preemption rights of shareholders. The next questions are from [ Hugh McGuire ] The first question relates to the provision for the tracker issue. Can the bank update the meeting on how discussions are proceeding with the Central Bank, on how AIB will treat the approximately 6,000 customers that were denied tracker mortgages and why the bank only offered this group EUR 1,615 in 2017? How did the Board get it so wrong? What is the Board's view on the fact the provision takes away from the potential return to shareholders? Our answer. As mentioned by the CEO earlier, following the recent issuance by the ombudsman of a final decision in relation to a customer who is never on a tracker mortgage, but had the option of choosing a tracker mortgage after they rolled off a fixed rate, we will be applying the FSPO decision to all other customers in that group. The ombudsman's decision awarded a 12% writedown in the capital balance of the mortgage as at the date of the roll-off of the fixed rate and the refund of the interest on the amount written off. Notwithstanding the inclusion of this customer group by AIB in the Tracker Mortgage Examination process, we do not believe that these customers were disadvantaged by not being able to avail of a tracker mortgage when they rolled off their fixed rate. Because from October 2008 onwards, we believe that tracker mortgages would have been more expensive than other rates on offer if trackers have continued to be available. The second question from [ Hugh McGuire ] relates to the results announcement. Can the Board advise why the group annual 2019 and investors update, scheduled to be held on 6th March was planned to be held in London and not in Dublin? AIB is an Irish company with approximately 88% of its income coming from Ireland. I am of the view that all AIB meetings, updates should be held in Ireland and AIB should support the Irish economy. Our answer. We agree AIB is an Irish company with many Irish shareholders and its roots are very firmly in this country, society and the economy. As our results update in March, we were also due to provide an update to the market about our future plans and targets. Given that the vast majority of market analysts that cover AIB, that's 11 of the 14 analysts, given that they are based in London, together with a significant proportion of our investors, we intended to present both our 2019 results and the refresh of our strategy at a meeting in London on the 6th of March. However, given the outbreak of COVID-19, we decided it was best to host the results and strategic update from Dublin, and that was done at our Molesworth Street office. The next question is from -- there are 2 questions -- or 3 questions with regard to employee pensions. The first question from [ Colin McDonald ]. Would you confirm that each nonexecutive director is aware that pensioners of the AIB Group Irish Pension Scheme who transferred from their existing benefits in 1991, continue and will continue to rely on the explicit written commitment by the bank that the new pension benefits would be increased annually in line with the consumer price index? And if each nonexecutive director aware that this commitment was sent to every member of the scheme and that this commitment was made by the bank for the purpose of persuading them to transfer to the new benefits. There is a similar question from [ David Ryan ], which is given AIB's commitment to staff to pay fully index-linked pensions, will the directors commit to informing themselves on AIB's position, as stated in Note 34 of the accounts regarding the payment of increases to pensions in payment in the light of AIB's commitment to change its culture as set out on Page 12 of the annual report. And our response on both of those questions is with regard to committed increases in pensions and payment, the pension trustee carried out a comprehensive review of this issue in 2016. Following that review, the trustee addressed this issue and notified the relevant members of their specific entitlements at that time. The bank is satisfied that these steps fully addressed the issue, and that there are no additional entitlements owed directly to members by the bank. Another question on pensions from [ Liam Kinsella ]. Given AIB's explicit written commitment to staff, furnished to each member on the establishment of the pension scheme in 1991 to pay fully index-linked pensions, why has the Board per Note 34 of the 2019 accounts, decided that the funding of discretionary increases was not appropriate for 2020? Whereas such funding was provided in 2019? And why has no provision been made in the accounts for this ongoing liability as has been done with respect to tracker mortgages? Our answer. The Board's decision on the provision of funding of discretionary pension increases is made annually in accordance with the process set out in the Annual Financial Report. The Board ensures that its accounting for pensions fully meets the accounting standards. And finally, we have 2 questions from [ Jim Flanagan ]. The first relates to directors' shareholdings. I note in the 2019 accounts that the 5 directors appointing -- appointed during the last financial year, noting that 2 are government appointees have not 1 share between the 5 of them. Perhaps they might comment on their lack of investment in the organization. Our answer, it's not a requirement for directors to hold shares in AIB. A number of directors, including some of the new directors you refer to, purchased shares or added to their existing holdings in March as soon as the closed period ended, and they were permitted to purchase shares under the relevant regulations. And the final question from [ Jim Flanagan ], which I will ask Tom Foley, please to respond to, relates to directors' fees. Will the nonexecutive directors be taking a reduction in their director fees during the current year, given that: a, they are not exposed to the current pandemic like all of your frontline staff, who, if one believes the Irish Times will be in receipt of the magnificent sum of EUR 250 by way of vouchers; and b, there will be few, if any, board meetings for the foreseeable future. And if there are any, they will be via telephone link cutting on time spent traveling, et cetera.

Yes. I'll answer that one. And [ Jim ], thank you for your question. I would say that in response to your question, we are all living the pandemic in our families, our friends and in our communities. And certainly, at this time, we are not considering a reduction in fees or any remuneration levels. And the Board has been working very closely with management and staff, navigating our way through the pandemic crisis. Supporting our customers during this extraordinary difficult time, as you know, banking is an essential service, and we have kept our branch network open throughout the country and dealt with a 400% increase in calls from anxious customers to our contact centers. Our priority at all times has been to provide the assistance they need to ensure their viability while also preparing to help Ireland's economic recovery. For now, our entire effort is to ensure that economic recovery is secured as quickly as possible. So with that answer, I will move over to the telephone questions. And if we could have our first telephone question, please?

Your first telephone question comes from Brendan Burgess, private shareholder.

Am I coming across clearly? Hello, Chairman, am I coming across clearly?

Question, please?

You can hear me clearly, Chairman.

Please, go ahead. We can hear you.

You can hear? Chairman, you can hear me? Sorry, Chairman. I'm not getting a confirmation if you can hear me?

Yes, we can.

Chairman, my name is Brendan Burgess, and I have 4 questions for you. One, when will you be announcing the redress scheme for the 5,900 prevailing rate customers whose contracts you broke; two, will you be applying the full Central Bank redress scheme to these customers and putting them on a tracker mortgage for the remainder of the mortgage term; three, how many customers have lodged high court proceedings on the prevailing rate issue? And four, did any of the nonexecutive directors of AIB challenged the group think on the prevailing rate issue? By way of background, these customers had a mortgage contract which stated that at the end of their fixed rate period, they could choose between a fixed rate, a standard variable rate and a tracker rate at the then prevailing rates. When their fixed rates ended, AIB did not offer these customers the prevailing rates as they were contractually obliged to do. AIB's steadfast refusal to honor the terms of that contract was based on the most flawed arguments. And I just outlined some of these flawed arguments. The first argument, the contract said that the borrower would have a choice of a tracker mortgage. But it didn't say that AIB had to offer them a tracker mortgage. The second argument, we no longer had a prevailing rate because we no longer offer tracker rates to new customers. Even though the mortgage contract does not define prevailing rate at all, never mind defining it at the rate an offer to new customers. AIB claimed that this is what was meant by the contract. The third argument, this was not a breach of contract. This was a service failure. We did nothing much wrong. A service failure, Chairman, is where the bank makes a mistake and takes 3 months to resolve it. The failure to offer a prevailing rate according to the contract was not just the service figure. It was as the Ombudsman ruled a breach of a fundamental term of the contract. The fourth argument, this failure to offer to customers tracker mortgage did not cause the customer to lose anything because the prevailing tracker rate would have been up to 7% higher than the SVR or the fixed rates. And I note that Colin Hunt this morning has repeated this completely flawed argument. Up until 2008, when AIB did offer tracker mortgage to customers rolling off fixed rates, the tracker rate was set at or below the standard variable rate. But now 10 years later, you try claiming that they have -- that if they had been offered a tracker rate, it would have been 7% higher. I find it extraordinary that the nonexecutive directors who we're being asked to reelect today who are paid fees of between EUR 100,000 a year and EUR 365,000 a year did not point out how flawed these arguments were. I mean, if you had a marked forward of transition year students, they would have seen the flaws in these arguments immediately. When this problem was uncovered back in 2015, you should have admitted the mistake and redressed those customers. Instead of doing the right thing, you fought this all the way. You dismissed all the complaints from customers on the issue. You dismissed me when I raised it at every AGM for the last 4 years. You dismissed the Central Bank when they tried to get you to do the right thing. You dismissed the Oireachtas Finance Committee, making a show of yourselves, arguing what the difference between a breach of contract and a service failure. But you could not dismiss the ombudsman. This is where you came a cropper. Last month, the ombudsman told you that you committed a breach of the fundamental terms of the contract and told you to write down the mortgages by 12%. If you had faced up to this problem in 2015, you would have reduced the cost to the AIB shareholders and you would have reduced the damage to AIB's reputation. Admitting a mistake early and fixing it costs a lot less. It's a sign of strength. Being forced to do the right thing by the ombudsman or by the high court is a sign of weakness. And it costs you a lot more in the long run. But this is not just about AIB and its profits. It's about the 5,900 customers and their families, every month that you delay fixing this problem, you pile on the middle link, which your high mortgage rates imposed on these impacted families. How many of these borrowers have been pushed into arrears because of your failure to get them tracker mortgages? How many have lost their homes? How much is it going to cause AIB to compensate these people for the damage done? This could have been greatly reduced, had you acted responsibly and faced up to the problem earlier. But even if you couldn't bring yourselves to do the right thing in 2015 when the problem was uncovered, why did you not do it in October 2017, when the Minister for Finance called into Chief Executive of AIB and the other banks, and he told you, and I quote, "The legalistic approach taken by some banks to avoid doing the right thing is simply unacceptable. Ultimately, such behavior is not in the interest of customers or shareholders." And the Minister for Finance, Paschal Donohoe, he went on to say the banks have committed all redress and compensation will be in line with the principle for redress set by the Central Bank. I hope that the Minister's actions today will match his stern words and that he votes against the reappointment of the 3 directors who are on the Board in 2017, and they are still on the Board today. They are Brendan McDonagh, Carolan Lennon and Helen Normoyle. It's too late for AIB to undo the damage you have done so far to the families and to the finances and to the reputation of AIB. But I would ask you now at this late-stage to face up to the problem. While the Ombudsman upheld our complaint and directed that you give this customer a 12% write-down on the mortgage, he did not direct you to apply the full Central Bank redress scheme. So I'd ask you as a small gesture of remorse and apology to apply the full Central Bank redress scheme to these customers. One, refund the interest over charges that came off the fixed rate; two, pay them 15% of the interest overcharge as compensation for your failures; and three, put them on a tracker rate of 1.5% for the remaining term of the mortgage. Let me stress here that the borrowers are not being greedy. A mortgage rate of 1.5% is not a cheap tracker. It is still well above the mortgage rate charge in other Eurozone countries. Your breach of contract and continuing dismissiveness has caused the AIB shareholders EUR 300 million so far and has damaged the reputation of the bank instead of putting this tracker scandal behind you as a legacy issue, you've seemed hellbent on keeping the tracker scandal alive. You continue to waste management time on this issue when there are other substantial issues for you to be dealing with. But it makes financial sense to do a deal -- to deal with this properly now. If you don't, some of the very angry customers will take this to the high court. And if they win, it will double the cost of AIB from EUR 300 million to EUR 600 million. As I say this over the phone, I can sense your arrogance and your dismissiveness. It's the same arrogance and dismissiveness I encountered when I raised the prevailing rate issue at the 2016 AGM, at the 2017 AGM, again at the 2018 AGM and last year, but instead of arrogance and dismissiveness, you should be showing humility and engagement. Your arrogance and your dismissiveness did not work with the ombudsman and it won't work with the high court either. So to conclude, let me just remind you of my 4 questions, Chairman. When will you be announcing the redress scheme for the 5,900 impacted families? Will you be applying the full Central Bank redress scheme to these customers? How many customers have lodged high court proceedings? And did any of the nonexecutive directors of AIB challenge the group think on the prevailing rate issue?

Yes. Thank you very much for your question. I know you didn't introduce yourself, but I recognize your voice, Brendan, from the many radio interviews you've done recently. I'm not going to unpick all of the questions that you've asked, but let me answer 2 of them. And then Colin or others will pick up on the specific questions -- some of the specific questions you asked also. The matter of reelection of directors is entirely up to the shareholders. And as such, we have no role other than been small shareholders ourselves in that process. So we leave that to shareholders to make their own conclusions. You asked the question about Board challenge. And I could spend quite a long time on this, but I don't think it's appropriate given the nature of this meeting. But over the years, I've been on the Board, we've had -- or I've mentioned previously, I've worked with 20 individual nonexecutive directors from very diverse backgrounds, very experienced people and they are always challenging as is their nature, different -- 3 different chairmen, chairpeople. And again, the challenge was always there on every aspect of this particular matter. We, as a Board, and I'm talking about, again, over a protracted period, came to the conclusion and we do not believe there was detriment to customers in this specific cohort. With that said, in the interest of moving on and arising, obviously, from the findings of the FSPO, we have decided to -- in the interest of all our stakeholders to move on and apply the findings of the FSPO. So on other specific aspects of Brendan Burgess's question, Colin Or Helen?

Yes. So I'd take the first question. And for those impacted customers, they will receive payments in redress in the months of July and August of this year. And in relation to what form that redress will make, as you're aware, the FSPO's final decision in relation to one of the complaints made by one of these customers, were awarded a 12% writedown in the capital balance of the mortgage as at the days of the rolloff of the fixed rate and the refund of the interest on the amount written off, and we will be applying that decision as it pertains to one customer to the entirety of the 5,907 customers that are in this grouping. Helen, do you want to take the high court action?

With regard to the number of litigation cases, Brendan, I'm not sure which courts, these are in -- but in total, there are 12 cases initiated against us with regard to this cohort of customers.

Okay. So on that basis, I propose we go to the next question.

There are no other questions.

There are no more telephone questions at this time.

Okay. So look, if that's the answer, that's the end of the question session. I propose that we move forward, and we will now proceed to hold the polls on the resolutions proposed today. Votes may be given by registered holders of ordinary shares present here in person or by proxy and entitled to vote. Every such shareholder has one vote for every ordinary share held. I will vote on behalf of those shareholders who have submitted a valid proxy appointing the Chairman to vote on their behalf. I should mention that for those shareholders who have already lodged their proxy, they do not need to complete a poll card unless they want to change their vote. The poll card is on the reverse of the proxy form. I will now ask shareholders present who wish to complete polling cards to complete, sign and deposit them in the ballot box in this room. Should anyone have any questions on the poll process, please ask Mr. Conor Gouldson, our Head of Corporate Governance. The polls will close immediately after the meeting closes, and the votes cast will be verified under the scrutiny of Computershare. As normal, the results of the poll and the resolutions proposed will be announced publicly later today by the company through the Regulatory News Service, RNS, and will be available on the AIB website. So in conclusion, I'd say our proceedings are now concluded, and it only remains for me to thank you for joining us today and for your participation. And to which -- with each of you and your families good health in the weeks and months ahead, while we all navigate our way through this COVID-19 crisis. Let me assure you, on behalf of the Board, AIB will continue its work in supporting our customers and our economy in the challenging times we now face. Thank you very much for your attendance. Thank you.

That does conclude our conference for today. Thank you all for participating, and you may now all disconnect.