Bank of Ireland Group plc (BIRG) Earnings Call Transcript & Summary

Everyone, welcome to your conference call. Sarah, you're now live. Please go ahead.

Thank you. Good morning, everyone, and welcome to the Annual General Meeting of Bank of Ireland Group plc. I will now hand over to our Chairman, Patrick Kennedy to begin the meeting.

Good morning, everyone. I am joined in the room, which has been adapted to adhering to social distancing measures by our Chief Executive, Francesca McDonagh; our Chief Financial Officer, Myles O'Grady; our group Secretary, Sarah McLaughlin; and a number of other Bank of Ireland colleagues who are kindly facilitating the meeting today. And we're also joined in person by Niamh Marshall, the lead audit partner from KPMG, our auditor, very welcome to you. I hope those of you who are joining us today are well. I know people have faced many challenges during the pandemic, and I would like to extend our sympathies to all who have been impacted by it. We very much hope that our next AGM in 2022 will mark a return to a more normal way of interacting with you from our shareholders. For today, however, we have taken steps to make this meeting accessible to as many shareholders as possible while respecting the government's guidelines on social distancing and public gatherings. In order to facilitate greater shareholder engagement this year, we are providing both an audio cast and a telephone facility. The audio cast facility has been made available through the Lumi platform and allows shareholders to listen live to the AGM and to submit questions during the meeting. If shareholders wish to submit a question through Lumi, please do so now by picking on the message icon, which is located in the navigation bar at the top of your screen. Type your message into the ask a question box and click the arrow button to the right-hand side of the message box, and we will respond to questions today during the meeting before I propose the resolutions. Any questions submitted and not answered during the meeting will be replied to separately after the meeting. Shareholders were also invited to raise questions in writing in advance of the meeting. We have responded directly to all shareholders who availed this option, and the responses have been published on our website. And a summary of these questions and our responses will also be shared with you by Sarah later. Under Article 51 of the company's constitution, a quorum for the AGM requires the attendance of 2 persons entitled to vote upon the business to be transacted. Each being a member or a proxy for a member. I have been advised by the group Secretary that the requisition 2 persons are represented at the meeting by proxy. A quorum is therefore present, and the meeting is duly constituted and can proceed. To begin, I will invite our Chief Executive, Francesca McDonagh, to give us an overview of the group's financial and business performance, and I will then advise the Group Secretary to outline the procedure for the remainder of the meeting. Francesca, may I pass to you first, please.

Thank you very much, Patrick. Good morning, everyone, and I hope you're all safe and well. We're here today to receive the financial statements for the year ended 31st of December 2020. As we set out in our annual results update, 2020 was an exceptional year with myriad challenges for the people and communities we serve and indeed, for all businesses, including banks. At Bank of Ireland from the start of the COVID-19 pandemic, we immediately focused our efforts on protecting and supporting our customers, our colleagues and our communities. To this end, we've swiftly put in place a very wide range of support services and initiatives. Our previous investment in transforming our culture, our systems and our business model materially helped the speed of our response to COVID. During this period, we also remained focused on our strategic priorities and our 2020 results reflect this. They show a return to profitability in the second half of 2020 along with continued delivery of our transformation program and a strong focus on cost management. Arising from the difficulties posed by COVID-19, we reported an underlying loss before tax of EUR 374 million for 2020. We took a substantial EUR 1.1 billion impairment charge for the year. However, despite the impairment charge, we maintained our strong capital position. Our NPE ratio increased from 4.4% in 2019 to 5.7%, remaining stable in the second half of the year. And we achieved our 2021 cost target of circa EUR 1.7 billion, 1 year early and sets a new cost target of EUR 1.5 billion by 2023. As we set out in our 2020 annual results update, we recognized the importance of distributions to our shareholders. Our policy of approving distributions on a prudent and progressive basis remains unchanged. Our focus is on a return to profitability in 2021, and our intention is for distributions to recommence as soon as possible based on performance and capital position. Our distribution policy also facilitates either cash dividends, share buybacks or a combination of both. In the context of the bank's share price, it's also likely that future distributions may include share buybacks. On the 16th of April of this year, we announced that we have entered into a memorandum of understanding with KBC Bank Ireland. This sets out our intention to explore a route that could potentially lead to a transaction, whereby Bank of Ireland commits to acquire substantially all of KBC Bank Ireland's performing loan assets and liabilities. This transaction remains subject to customary due diligence, further negotiation and agreement of final terms and binding documentation as well as obtaining all appropriate internal and external regulatory approvals. We will make further announcements on this in due course. Our latest interim management statement was issued on the 30th of April and related to our performance for the first quarter of 2021. For the first quarter, we reported a strong capital position a fully loaded CET1 capital ratio of 13.5% and the regulatory CET1 capital ratio of 14.7%. Net interest income was stronger than expectations with performance stable in the 3 months to the end of March. Net lending was also stable in the period. And in relation to asset quality, we saw no notable change in loan losses since December 2020. On payment rates, 96% of payment breaks had concluded with 4% remaining outstanding at the end of March 2021. Of the breaks that have concluded, 96% have returned to their pre-COVID-19 terms with circa 4% needing some further forbearance assistance. I will now give an overview of the steps Bank of Ireland has taken to support our customers, colleagues and communities over the course of 2020. 2020 was an exceptional year for our customers, colleagues and the communities in which we live and work. Bank of Ireland colleagues' response to the challenges of the pandemic has been outstanding. And this morning, I would again like to reiterate my pride in them and personal appreciation for all that they have done. We put in place a wide range of support for our customers and protections for our colleagues, while continuing to be highly focused on the delivery of our strategy. This has included continuing our transformation, delivering service improvements for our customers and managing our costs. This has also included making progress in our responsible sustainable business strategy, which is core to how we operate as a bank. During 2020, COVID-19 also accelerated the multiyear trends for digital engagement by our customers. We have reached a tipping point between online and off-line banking. That is why we announced the decision earlier this year to reshape our branch network. In taking this step, we have entered into a new partnership with the Irish postal service An Post. This will provide all of our customers with access to banking services at their local post office. Combined, Bank of Ireland and An Post have a footprint of more than 1,000 locations across Ireland. I will now hand over to our Group Secretary to deal with the procedures for the meeting. Sarah?

There are 12 resolutions to be put to today's meeting all of which are set out and explained in the Notice of the Meeting, which will be taken as read. For each resolution today, the Chairman is declaring a poll, our registrar, investor services, has already provided the details of the proxies received from shareholders, including those proxies, which instruct the Chairman how to vote on behalf of the relevant shareholders in his capacity as the Chair of the meeting. Details of the poll results will be made available at the end of the meeting, published on the group's website and released to the stock exchanges after the meeting. While votes withheld not to vote for the purpose of today's poll, details of any votes withheld will also be provided. As the Chairman advised, similar to last year's AGM, we invite questions in advance of the meeting. We responded to all shareholders. The questions and our responses are available on the group website. And any questions not made available on the website relate to individual accounts and administrative matters. A number of shareholders query the timing for the reintroduction of dividends. As referenced by Francesca, the Board recognizes the importance of distributions to shareholders. The Board's policy of proven distributions on a prudent and progressive basis remains unchanged. Focus is on a return to profitability and the intention is for distributions to recommence as soon as possible based on performance and capital position. One shareholder also asked if we intended on reintroducing a dividend reinvestment option when dividends were reintroduced. As mentioned, there is a clear policy on improving distributions on a prudent and progressive basis and the manner in which distributions might take place will remain under review by Board. Finally, a shareholder queried the potential impact of Resolution 8 through 12, which provides authorities to the Board to allot equity in the company. These authorities are requested on an annual basis and are within all standard governance guidelines. The Board currently has no plan to use these authorities, but they do provide the Board with flexibility to take action if they consider it to be in the best interest of shareholders as a whole and if all the required regulatory approvals are in place. Again, full details are available on the Investor Relations section of the group website. So to ask a question today via Lumi, you can do so again by clicking on a message icon located in the navigation bar at the top of your screen. You then type your message into the ask-a-question box and click the arrow bottom to the right-hand side of the message box. I'll hand back now to our Chairman for the business of the meeting. Patrick?

Thank you, Sarah. Before I put the resolutions to the meeting, I will now take questions raised through the Lumi platform. Sarah, if you can just order, please?

Great. Thank you, Patrick. We have not yet received any questions through the platform. So shareholders want to take a moment, if you have any questions, otherwise, we can move on to the business of the meeting, Patrick.

Most happy to, and give us a moment, Sarah.

No. Nothing for now.

Okay. Well, look, in the absence of questions, I will move to the business of the meeting. The company is presenting its statutory financial statements for the financial year ended 31st of December 2020, which were published on the 1st of March 2021. Copies of the statutory financial statements, which were approved by the Board, the Directors' report and the auditors' report may be found on the company's website. The affairs of the company since that date, which Francesca referenced earlier, are summarized in the quarter 1 interim management statement, which was published on the 30th of April 2021 and is available on the company's website. The full text of each resolution is set out in the Notice of the Meeting. I now formally propose that each of the resolutions as set out in the Notice of the Meeting is posted to the meeting as follows: Resolution 1 that the financial statements, the report of the Directors and the report of the Auditor for the year ended December 31, 2020, submitted to this meeting be considered and received. Resolutions 2(a) to 2(k) are for the election and reelection of the Directors and are each proposed as a separate resolution. So please bear with me. Resolution 2(a), Mr. Giles Andrews, be elected a Director of the company. Resolution 2(b) that Ms. Evelyn Bourke be reelected a Director of the company. Resolution 2(c) that Mr. Ian Buchanan, be reelected a Director of the company. Resolution 2(d) that Ms. Eileen Fitzpatrick to be reelected a Director of the company. Resolution 2(e) that Mr. Richard Goulding be reelected as a Director of the company. Resolution 2(f) that Ms. Michele Greene be reelected as a director of the company. Resolution 2(g) that I, Patrick Kennedy, be reelected as a Director of the company. Resolution 2(h) that Ms. Francesca McDonagh be reelected a Director of the company. Resolution 2(i) that Ms. Fiona Muldoon be reelected a Director of the company. Resolution 2(j) that Mr. Myles O'Grady be reelected a Director of the company. Resolution 2(k) that Mr. Steve Pateman be reelected as a Director of the company. Resolution 3 that the appointment of KPMG as the company's auditor be continued until the conclusion of the next AGM of the company. Resolution 4 that the remuneration of the auditors be fixed by the Board of Directors for the 2021 financial year. Resolution 5 that an Extraordinary General Meeting other than an Extraordinary General Meeting caused for the passing of a special resolution may be caused by not less than 14 clear days notice in writing in accordance with Article 50(b) of the Company's Articles of Association. I now move to the items of special business to be covered today. Again, the full text of each resolution is set out in the notice of the meeting. Resolution 6 to receive and consider the Director's remuneration report for the year ended December 31, 2020. This is an advisory nonbinding resolution. Resolution 7, this resolution seeks to renew the authority of the company or any of its subsidiaries to make market purchases of up to approximately 10% of the company's issued ordinary shares and is proposed as a special resolution. The authority, if granted, will remain in force until the close of business on the earlier of the date of the Annual General Meeting in 2022 or the 25th of August 2022. Resolution 8, this resolution seeks to renew the authority of the directors to issue ordinary shares, representing approximately 33% of the issued share capital of the company and is proposed as an ordinary resolution. The authority would expire at the close of business on the earlier of the date of the Annual General Meeting in 2022 or the 25th of August 2022. Resolution 9, this resolution seeks to renew the directors' authority to allot ordinary shares for cash without offering them first to the other ordinary shareholders and is proposed as a special resolution. This authority is limited to an allotment pursuant to a rights issue authorized under Resolution 8 and up to a maximum number of ordinary shares, representing approximately 5% of the issued share capital at the company. The authority will expire at the close of business on the earlier of the date of the Annual General Meeting in 2022 or the 25th of August 2022. Resolution 10, this resolution seeks authority for the directors to allot an additional 5% of ordinary shares for cash without offering them first to the other ordinary shareholders for the purpose of financing an acquisition or other capital investment in accordance with the Preemption Group's statement of principles and is proposed as a special resolution. This authority is limited to an allotment pursuant to a rights issue authorized under Resolution 8 and up to a maximum number of ordinary shares representing approximately 5% of the issued share capital of the company. The authority will expire at the close of business on the earlier of the date of the Annual General Meeting in 2022 or the 25th of August 2022. The company currently has no plans to use this authority. Resolution 11, this resolution seeks to renew the directors' authority to issue Tier 1 contingent equity conversion notes and to allot ordinary shares on the conversion of such notes. It is proposed as an ordinary resolution. This resolution will authorize the directors to issue up to a maximum aggregate number of shares -- of ordinary shares of EUR 1 each in the event of conversion of Tier 1 contingent equity conversion notes, representing approximately 15% of the issued ordinary shares of the company. The authority will expire at the close of business on the earlier of the date of the Annual General Meeting in 2022 or the 25th of August of 2022. And finally, Resolution 12, this resolution will renew the directors' authority to issue for cash on a nonpreemptive basis Tier 1 contingent equity conversion notes and ordinary shares on the conversion of such notes. It is proposed as a special resolution. This resolution will authorize the directors to issue up to a maximum aggregate number of ordinary shares of EUR 1 each in the event of conversion of Tier 1 contingent equity conversion notes, representing approximately 15% of the issued ordinary shares of the company. The authority will expire at the close of business on the earlier of the date of the Annual General Meeting in 2022 or the 25th August 2022. We will now conduct the poll on the proposals before the meeting. Shareholders who have already submitted proxies do not need to take any further action today. As such, I declare the polls for each matter to be voted on this meeting open. [Voting]

The polls are now closed. On the basis of the proxy votes received in advance of the meeting, we are now ready to present the preliminary voting results. The voting results show that all 11 directors have been elected or reelected as proposed. And the proposals 1 through 12 have been voted for and the related resolutions have been carried. As advised earlier, details of the poll results will be published on the group's website and released to the stock exchanges later today. We now move on to any other business. I have been advised by the group secretary that no other items of business or other proposals were properly made by any shareholder of the company that requires consideration at this time. So that concludes the business of today's meeting. On behalf of the Board, I would like to repeat Francesca's appreciation and gratitude to all colleagues for their continued hard work and dedication during these difficult times. It's very much appreciated. And I would also, again, like to thank our shareholders for their cooperation and their understanding regarding the restricted nature of today's meeting. I'm pleased to see the phased reopening of our economy as part of the government's Recovery and Resilience Plan and the progress being made onto the country's vaccination program. There is -- thankfully, there is clear light now at the end of the tunnel. But in the meantime, I hope you and your families continue to remain healthy and stay safe. That now completes the business of today's meeting. Thank you very much.