TIDMIPM TIDM74SV
RNS Number : 7929G
Irish Life & Permanent Grp HldgsPLC
18 May 2011
Irish Life & Permanent Group Holdings plc
Interim Management Statement
Wednesday 18(th) May 2011
7.00am
Irish Life & Permanent Group Holdings plc (IL&PGH)
issues the following update on the group's business. A conference
call for analysts will be hosted by management at 9.00am today, the
details of which are set out at the end of this statement.
The Group's Annual General Meeting takes place today at 11.30am
in the RDS in Dublin.
Group Overview
While we believe the worst of the recession appears to be over
in Ireland, the recovery in 2011 is expected to be modest with
continued weakness in domestic demand and consumer sentiment being
partially offset by a strong export sector performance. Residential
property prices continue to decline. Although the unemployment rate
is showing signs of stabilising, employment is expected to continue
to fall in 2011.
The life and investment management businesses are performing
broadly in line with expectations although the impact of budgetary
changes on customers' disposable incomes has contributed to weaker
persistency experience in the Retail Life business. The acquisition
of the INBS deposit balances in February has been positive for the
Group's banking business but funding conditions continue to be
challenging. Arrears on the bank's Irish residential book continue
to increase while new mortgage demand has been very subdued year to
date.
During the period, the PCAR / PLAR exercises were completed by
the Central Bank of Ireland and the results announced in March,
which determined an additional EUR4.0bn capital requirement for the
Group.
Life assurance & fund management
New business
Overall sales (annual premium equivalent basis) of life
assurance and investment products YTD are running 20% ahead of the
corresponding period in 2010 and broadly in line with expectations.
ILIM continues to record strong institutional inflows and the life
business is seeing strong growth in single premium sales - up 20%
(excluding Irish Life International) - but recurring premiums were
down 21%. Retail sales are in line with target and ahead of April
2010 levels. Corporate sales are behind expectations because of
lower bulk annuity activity as schemes wait for new minimum funding
standards rules.
In-force
Risk and expense experience for the first quarter of the year
has been in line with expectations. Persistency experience in the
Corporate life division was also in line with expectations
following the changes made to lapse assumptions in the Corporate
life division at the end of 2010. However, lapse experience in the
Retail life division in the first quarter of 2011 was ten
percentage points ahead of Q1 2010 experience reflecting reduced
household incomes and continuing weak business conditions in the
domestic economy.
Life costs
Operating costs are running in-line with budget in the life
assurance and fund management businesses. A further cost reduction
programme is underway in 2011.
Pension levy
The Government announced this month its intention to apply a
pension levy of 0.6% on private pension funds and it is expected to
raise c. EUR1.9bn over a four year period.
Capital
As part of its capital management, the life company has repaid
the loan of EUR100m secured on its in-force book, which it had
raised and drawn down in 2010. A dividend of EUR143m will be paid
by the life company (Irish Life Assurance plc) to the bank in May
2011.
Banking
Funding
The bank continues to focus on developing its retail deposit
base. Retail deposits were c. EUR13.3bn at the end of April (Dec
2010: EUR11.1bn), the increase reflects the addition of the Irish
Nationwide Building Society (INBS) deposit book in February 2011.
However, as expected there has been some attrition on the business
transferred (circa EUR0.3bn) year to date. Existing permanent tsb
retail deposit book balances have otherwise been broadly stable in
a very competitive market while current account balances have
declined slightly.
PTSB's corporate deposits were EUR3.3bn at the end of April,
including the INBS corporate deposits acquired in February 2011.
These deposit levels reflect outflows following further sovereign
and bank ratings downgrades this year (Dec 2010: EUR3.7bn). As at
30 April 2011 the Group remains unable to access the term debt
markets and permanent tsb had ECB drawings of EUR13.1bn (Dec 2010:
EUR13.8bn).
Net interest income
Net interest income is broadly in-line with 2010 year to date.
The net interest margin before guarantee costs is currently running
slightly ahead of the 2010 level (FY 2010: 86bps). Given the
funding mix and the application of higher ELG charges, the
government guarantee costs in 2011 are running significantly ahead
of the prior year.
Lending
Lending demand in permanent tsb's home mortgages and consumer
finance continues to be extremely weak and new advances for Q1 were
approximately 40% lower than in Q1 2010.
Credit quality
Arrears in the Irish residential and commercial mortgage books
continue to rise in 2011. The Irish residential mortgage arrears
cases (over 90 days) increased by 17% to 13,500 at the end of
April. Early arrears (under 90 days) cases have risen from 4,800
cases at Dec 2010 to just over 5,000 cases at end April 2011.
Consumer finance arrears are stable and our UK mortgage book
continues to trend downwards, comparing favourably at end March
2011 (1.94%) to the industry CML +3 month arrears cases
(2.44%).
Loan impairment provisions
Based on trends to date and current assumptions, loan impairment
provisions are expected to be broadly in-line with the 2010 level
(FY 2010 actual EUR420m). As outlined in our March PCAR / PLAR
presentation, the total impairments over the next 3 years based on
the PCAR base case scenario will be EUR1.2bn, of which circa
EUR620m would occur in the full year 2011.
Bank costs
Total costs, excluding restructuring costs, are running in line
with expectations. A further phase of restructuring is being
undertaken in relation to both the acquired INBS business and the
existing PTSB banking operations.
Capital
The Central Bank of Ireland completed its PCAR / PLAR review of
the bank in March 2011. This exercise determined a gross capital
requirement of some EUR4.0bn for the Group in order to meet the
requirements of (i) a target core equity Tier 1 capital ratio of 6%
in a stress case scenario and (ii) de-leveraging the bank's balance
sheet in order to achieve a Loan to Deposit Ratio of approximately
122% by December 2013.
The Group intends to meet its increased capital requirement
through an asset disposal programme, undertaking a liability
management exercise in relation to its Tier 2 debt and through the
issue of additional capital to the Irish State.
Work has commenced on the first steps of the de-leveraging plans
in relation to the bank's UK residential loan book and Irish
commercial book.
The first phase of the liability management exercise commenced
in the last week with EUR320m of upper Tier 2 debt bought back in a
bilateral transaction generating over EUR290m of Tier 1 equity.
Preparation work for the restructuring of the Group is ongoing
and a further update will be provided in due course.
(Full details and results for the Group of the PCAR / PLAR
review that was announced on 31 March can be found on our website
at:
http://www.irishlifepermanent.ie/investor-relations/financial-analysis/p
car-plar-results.aspx).
The Group's Interim results announcement date is scheduled for
31(st) August 2011.
Conference Call & Contact Details
Kevin Murphy, Group CEO and David McCarthy, Group Finance
Director, will host a conference call for analysts at 9.00am on
Wednesday 18 May 2011.
To join the conference call, please dial in to the relevant
number below 10 minutes before and ask for the Irish Life &
Permanent call
Ireland / Other (01) 431 1257
UK (0) 20 3140 0668
Pass code: 919774#
Conference Call Replay
Replay facility available until midnight 25 May. The telephone
numbers and access code are:
Ireland / Other 021 236 3074
UK (0) 20 3140 0698
US 1877 846 3918
Pass code: 377495#
Contact details
David McCarthy, Finance Director Barry Walsh, Head of Investor
Relations
Tel: +353 1 856 3050 Tel: +353 1 704 2678
Orla Brannigan, Investor Relations Ray Gordon, Gordon MRM
Tel: +353 1 704 1345 Tel: +353 1 665 0450
Disclaimer - Forward Looking Statements
This document may contain forward-looking statements with
respect to certain plans and current goals and expectations
relating to the future financial condition, business performance
and results of the Irish Life & Permanent group. By their
nature, all forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances that are
beyond the control of the Irish Life & Permanent group
including, amongst other things, Irish domestic and global economic
and business conditions, market related risks such as fluctuations
in interest rates and exchange rates, inflation, deflation, the
impact of competition, changes in customer preferences, risks
concerning borrower credit quality, delays in implementing
proposals, the timing, impact and other uncertainties of future
acquisitions or other combinations within relevant industries, the
policies and actions of regulatory authorities, the impact of tax
or other legislation and other regulations in the jurisdictions in
which the Irish Life & Permanent group and its affiliates
operate. As a result, the Irish Life & Permanent group's actual
future financial conditions, business performance and results may
differ materially from the plans, goals, and expectations expressed
or implied in these forward-looking statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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