12th May 2005 07:00
Bank of Ireland(Governor&Co)12 May 2005 Bank of Ireland Group PRELIMINARY ANNOUNCEMENT FOR THE YEAR TO 31 MARCH 2005 Highlights 31 March 31 March +/-% 2005 2004 •m •m Profit on ordinary activities from continuingoperations before exceptional items 1,333 1,267 +5 Profit before taxation 1,321 1,170 +13 Per Unit of €0.64 Ordinary Stock EPS 113.9c 97.2c +17 Alternative EPS 114.2c 106.7c +7 Dividend 45.6c 41.4c +10 Ratios (before exceptional items) Net Interest Margin 2.01% 2.21% Cost/Income Ratio (excluding UKPOFS) 53.9% 54.3% Annual loan loss charge/average loans 11bps 14bps Return on Equity 22.4% 23.7% Balance Sheet (•bn) Total Stockholders' Funds 4.8 4.3 Total Assets 126.5 106.4 Capital Ratios Tier 1 7.6% 7.2% Total 10.6% 11.3% "Bank of Ireland performed strongly in the year to March 2005 based on theinherent strengths of our business and our significant exposure to Europe's twobest performing economies. We have a clear plan to implement our strategy byimproving efficiency, investing in a more flexible business model and improvingbusiness performance by exploiting our opportunities for growth." Brian J GogginGroup Chief Executive Forward Looking Statement This document contains certain forward-looking statements as defined in the USPrivate Securities Litigation Reform Act of 1995 with respect to certain of theGroup's plans and its current goals and expectations relating to its futurefinancial condition and performance and the markets in which it operates.Because such statements are inherently subject to risks and uncertainties,actual results may differ materially from those expressed or implied by suchforward-looking statements. Such risks and uncertainties include but are notlimited to risks and uncertainties relating to profitability targets, prevailinginterest rates, the performance of the Irish economy and the internationalcapital markets, the Group's ability to expand certain of its activities,development and implementation of the Group's strategy, including the ability toachieve estimated cost reductions, competition, the Group's ability to addressinformation technology issues and the availability of funding sources. Anyforward-looking statements speak only as of the date they were made. The Bank ofIreland Group does not undertake to release publicly any revision to theseforward-looking statements to reflect events, circumstances or unanticipatedevents occurring after the date hereof. The reader should however, consult anyadditional disclosures that the Group has made or may make in documents it hasfiled or submitted or may file or submit to the U.S. Securities and ExchangeCommission. Bank of Ireland Group PRELIMINARY ANNOUNCEMENT FOR THE YEAR TO 31 MARCH 2005 Bank of Ireland Group reports profit on ordinary activities from continuingoperations before tax and exceptional items of €1,333 million for the year to 31March 2005, an increase of 5% on the previous year. Alternative earnings pershare (which excludes goodwill amortisation and exceptional items) of 114.2 centincreased by 7%. Excluding the impact of the Group's investment in the UK Post Office FinancialServices, which continues to progress well in its early developmental phase,profit on ordinary activities from continuing operations before tax andexceptional items increased by 10% and alternative earnings per share increasedby 9%. Return on average stockholders' equity, excluding exceptional items, was 22%,the 12th consecutive year this has exceeded 20%. The Group's strong performance is based on the inherent strengths of ourbusiness position in two of Europe's best performing economies, and a clearfocused strategy designed to exploit the strongly growing dynamics in ourmarkets. Growth in the UK economy is forecast to be well above the Euro area.The Irish economy is continuing to outperform with annual growth of about 6%forecast for the medium term. Consumer spending, underpinned by strongemployment growth, low inflation and interest rates, and together withfavourable demographics, are the key drivers of this growth. This benigneconomic background will continue to drive the strong momentum evident in ourbusinesses in our home market. We made significant progress during the course of the year in our statedobjective of stepping up the implementation of our business strategy. Thestrategy of the Group is based on geographical and business diversification andis aimed at maximising the return from our leading position in the Irish market,substantially reshaping and growing our business in the UK and developing ourportfolio of international, niche skill-based businesses. To realise the fullpotential of this growth and expansion strategy we are implementing a majorstrategic transformation programme designed to reduce our costs while beginningto build a consolidated operating model. This will transform our supportservices and retail manufacturing infrastructure and will ensure we have theefficiency and flexibility to enhance our competitiveness and to capitalise ongrowth opportunities. The immediate priorities under this programme consist of specific initiatives inour retail business in Ireland, the streamlining of Group support services andthe consolidation of processing activities currently dispersed throughout theGroup. Through this initiative we will achieve an annual reduction in costs of€120 million over the next four years. A reduction of 2,100 in the Group's staffnumbers will result from this programme. The estimated rationalisation andimplementation costs associated with this programme will amount to €210 millionover the period in addition to capital expenditure of €40 million. A provisionof €117 million has been provided in the results to 31 March 2005. The achievement of this transformation initiative is a key component of ourstrategy of building a more competitive business capable of maximising thereturns from our existing markets and enabling us to exploit considerable growthopportunities. In the twelve months to March 2005, Group income and cost growth were in line,excluding the impact of our investment in the UK Post Office joint venture. Thisoutcome reflects a significant achievement in the second half of the year where,through an improved focus on efficiency, we reversed a negative 2% cost/incomegap at the half year to September 2004. The cost/income ratio for the year of53.9% was slightly lower than the corresponding year. The Group net interest margin declined from 2.21% to 2.01% in the year to 31March 2005 due mainly to balance sheet growth and higher associated wholesaleborrowings, the impact of the low interest rate environment on liability spreadstogether with the back book repricing of residential mortgages in the UK, andsome margin pressure due to competition. We also made significant progress in resolving the issues facing us in our UKbusiness. During the year we sold our financial advice business, Chase de Vere.Having concluded that the non-mortgage elements of Bristol & West (i.e. thephysical branch network and associated deposit base) were not strategicallycore, we have received a number of expressions of interest for this business.The UK market is a key focus of growth for the Group where our strategy is tocontinue the strong development of our business banking activities, maximise ourposition in the mortgage market and drive growth in our consumer bankingbusiness primarily through the development of our relationship with the UK PostOffice and our retail branches in Northern Ireland. It is a key priority of our business strategy to accelerate growth in ourinternational businesses. We made good progress in this regard during the yearagainst our targets of building high quality, sustainable earnings streams. Our Asset Management business, which accounts for 7% of divisional profits, isfacing challenges primarily related to the relative underperformance of theNorth American EAFE product with consequent mandate losses. Bank of IrelandSecurities Services (BOISS) and Iridian are both performing well. We have takensteps to strengthen Bank of Ireland Asset Management (BIAM) principally througha number of high-calibre senior appointments to our investment team. BIAM isdetermined to remain the most successful Irish-owned fund management business.While BIAM's trajectory of profit growth will be impacted in the short term, weare confident that our asset management business will recover in the medium termto contribute positively to the growth in Group performance. Asset quality remains strong. Excluding the benefit of the special loan lossrelease of €100 million the charge for loan losses was €79 million for the year,after a reduction in general provisions, and represents 11 bps of averagelending. Competitive differentiation based on quality customer service will continue tobe a defining characteristic of Bank of Ireland as we go forward. We have astrong tradition in this regard but we need to redouble our efforts in anincreasingly competitive environment and I am committed to putting in place thepeople and processes that will ensure we achieve a real, measurable differencein this area. Quality service means innovation around customer needs, consistentdelivery and full and rapid recovery when things go wrong. As a tangibleindication of our intent to improve the customer experience we are puttingadditional staff into our front-line retail operations in Ireland, even as webecome more efficient and reduce the scale of our overall workforce. This isbeing supplemented by ongoing programmes, continuing investment in branchupgrades and actions designed to deliver on quality service to our customers. At Bank of Ireland we are fortunate to have employees who consistently show thecommitment to customers that underpins the long-term sustainability of ourbusiness. The relationship between our employees and the organisation isreflected in the consistently upward trend in our employee engagement scores asindependently measured over recent years. I would like to thank our employeesfor their contribution to the continuing strong performance of the Group. As wemove forward through a period of major change for the Group, we are committed tomanaging this change to the same high standards we have always demonstrated as aquality employer. Bank of Ireland Group has a clear strategic vision for the sustainabledevelopment of its business. Recognising a changing environment, theimplementation of this strategy is being significantly stepped up so we canbuild on our fourteenth successive year of profit growth. Outlook We have a focused strategy underpinned by a clear plan to step up itsimplementation by improving efficiency, investing in a more flexible businessmodel and exploiting our opportunities for growth. Strong economic performancein our major markets provide a basis for optimism for business prospects in thecoming year. Business Performance* 31 March 2005 31 March 2004 •m •m Retail Republic of Ireland 490 419Bank of Ireland Life 135 147Wholesale Financial Services 407 371UK Financial Services 388 373Asset Management Services 115 125UK Post Office Financial Services (55) (3)Group & Central (128) (115)Grossing up (19) (50) Profit on ordinary activities from continuingoperations before taxation and exceptional items 1,333 1,267 * The results as presented in the preliminary announcement have been preparedunder Irish GAAP. All listed companies must produce Group financial statementscompiled under IFRS for financial years beginning on, or after, 1 January 2005.The Bank of Ireland Group will therefore produce full IFRS consolidatedfinancial statements for the year ending 31 March 2006. Retail Republic of Ireland Pre-tax profits in the Republic of Ireland increased by €71 million or 17% to€490 million. This was an excellent performance reflecting very strong incomegrowth, good cost control and very satisfactory asset quality. The continuing strength of the Irish economy and our competitive capability inthe domestic market resulted in excellent growth in volumes and product sales aswell as market share gains. Lending volumes grew strongly, rising by 24%. The mortgage market remainedbuoyant through the year and our year-end mortgage balances were up 27%. Growthin other lending accelerated as the year progressed and balances were up 21% atthe year end, with lending to the business sector higher by 23%. Resourcesvolumes performed very well with year-end growth of 12%, and market shareincreasing. Net interest income rose by 12%. Net interest margin contracted by 34 basispoints. This was partly due to some narrowing of product margins but mainlyreflected rapid balance sheet growth and associated higher wholesale borrowingstogether with the impact of the low interest rate environment on liabilityspreads. Non-interest income rose by 5% with foreign exchange and other fee income beingsignificant contributors to the growth. Total Income increased by 10% over thecorresponding period. The loan loss charge was €2 million lower than in theprevious year, and as a percentage of advances was down 5bps at 18bps. Costsrose by 7%. Higher salary, depreciation and information technology costs werepartly offset by savings in other areas. Bank of Ireland Life Bank of Ireland Life, the Group's life and pensions business, recorded a strongperformance in the financial year. Operating profits grew by 17% due to goodsales growth, with market share increasing by 3% to 24% based on industry newbusiness returns. Profit before tax was lower than the prior year due to a lowerinvestment variance and the impact of a change in the discount rate on the prioryear outturn. Bank of Ireland Life results are summarised below: 31 March 31 March 2005 2004 •m •m New business contribution 59 51Profit from existing business- expected return 59 54- experience variances 18 14- operating assumption changes 4 5Return on shareholder funds 5 8Less inter-company payments (26) (30)Operating profit 119 102 Investment variance 16 26Effect of economic assumption changes - 19 Profit before Tax 135 147 The growth in the new business contribution reflects strong new businessvolumes, allied to a tight focus on cost management. The Company is continuingto invest in its core IT platforms to ensure it maintains its strong competitiveposition. The positive experience variances reflects the better than expected embeddedvalue assumptions. The Company's commitment to excellent customer service and its superiorlong-term investment track record ensure that it is well positioned in a marketwith considerable future potential. Wholesale Financial Services Profit before tax for the year to March 2005 of €407 million is 10% ahead of theprevious year. The Division has benefited from significant growth in lendingvolumes and fee based income, in addition to another very strong performance byFirst Rate Enterprise's Joint Venture with the UK Post Office. Income (including share of Joint Venture) is 11% ahead, with cost growth higherat 13%, reflecting investment costs in our domestic and internationalbusinesses. These include the costs of hiring extra revenue generating personnelin Corporate Banking, Global Markets and Davy and other initiatives includingthe successful ACS (covered bond) programme. Credit quality is strong, with theloan loss charge expressed as a percentage of average lending volumes, at 26bps,the same level as last year. Corporate Banking reported an excellent result, buoyed by strong lending growthand fee income. This reflects our strong franchise in the domestic corporatebanking market, and our chosen niche international markets, includingacquisition finance and project finance. Corporate Banking's results include three months contribution from Burdale, aleading UK based comprehensive asset based lender which was acquired in earlyJanuary 2005 and which has been fully integrated into Corporate Banking. Trading conditions for Global Markets have been challenging and the businessreported a good performance, underpinned by increased customer business. Davyhas enjoyed an excellent year. UK Financial Services(In Local Currency) Profit before tax and exceptional items at £265 million for the year to 31 March2005 is 2% higher than the previous year. The loan book growth was strong across the Division, up 12% to £25 billion,while resources increased by 2%. Total income was 2% lower, primarily as aresult of tighter margins resulting from the mortgage back book re-pricing andchallenges in Chase de Vere and the Bristol and West branch network. The resultsinclude a release of £10 million from the non designated specific provision(NDSP) arising on the transfer of the commercial asset book to another part ofthe Bank of Ireland Group. Costs were flat and were tightly controlled throughthe Business Improvement Programme, which has exceeded expected cost savings forthe year. Profits in our mortgage business decreased year on year as a result of back bookre-pricing. The loan book increased by 9% during a year when the introduction ofnew mortgage regulation impacted the writing of new business. The quality of themortgage book remains very strong, and arrears across all sectors continue torun at lower levels than the industry average. Business Banking profits increased by 19% reflecting strong growth in volumesand include the benefit of the £10m release from the non designated specificprovision (NDSP). Loan book growth of 19% has been achieved whilst maintainingstrong asset quality standards. Resource balances have increased 8% over theprevious year. Our strategy in Consumer Banking is now focused on developing the full potentialof our investment in the UK Post Office Financial Services venture. The sale ofthe financial advice business, Chase de Vere, was concluded in March 2005, andhaving concluded that the non-mortgage elements of Bristol & West (i.e. thephysical branch network and associated deposit base) were not strategicallycore, we have received a number of expressions of interest for this business. Asset Management Services The Asset Management Services division, which incorporates the Group's assetmanagement and securities services businesses, saw pre-tax profits fall by 8% to€115 million over the same period last year. BIAM experienced specific challenges relating to the relative investmentperformance of specialist North American EAFE equity mandates with consequentclient losses. Assets under management in BIAM fell to €46.9 billion at 31 March2005 compared to the prior year level of €57.5 billion, a decrease of €10.6billion. Assets under management in Iridian increased by 5% to $10.3 billion at 31 March2005 and the company's relative investment performance continues to be verystrong. Bank of Ireland Securities Services (BOISS), the custody and fund administrationbusiness continues to perform well and experienced strong profit growth over thesame period last year. Group & Central Group & Central which comprises earnings on surplus capital, unallocated central& support costs and some small business units had a net cost in the year to 31March 2005 of €128 million, compared to €115 million for the correspondingperiod. Total Income is in line with last year, with higher business income at thecentre offset by the funding cost of the Group's investment in the UK PostOffice Financial Services venture, and the additional funding cost of the sharebuy back programme. Total costs are higher due to increased compliance spend together with higherstaff costs, and costs associated with business growth. FINANCIAL REVIEW Analysis of Results The Group Profit and Loss account for the years ended 31 March 2005 and 2004 areset out below. Continuing Exceptional Total Total Operations Items before Exceptional Item 31 March 31 March 31 March 31 March 2005 2005 2005 2004 • million • million • million • million Net Interest Income 1,898 - 1,898 1,744Other Income 1,275 - 1,275 1,234Total Operating Income 3,173 - 3,173 2,978Income from associatedundertakings and joint ventures 46 - 46 29Operating Expenses 1,807 117 1,924 1,654Loan Losses 79 (100) (21) 86Profit on ordinary activitiesbefore exceptional items 1,333 (17) 1,316 1,267Exceptional items - 5 5 (97)Profit before taxation 1,333 (12) 1,321 1,170 Net Interest income has grown by 9% to €1,898 million for the year to 31 March 2005. Average Earning Assets Net Interest Margin (including grossing up) 31 March 31 March 2004 31 March 2005 31 March 2005 2004 • million • million % % 57.5 47.9 Domestic 2.24 2.43 37.7 32.8 Foreign 1.65 1.87 95.2 80.7 2.01 2.21 The average earning assets for the Group have increased to €95.2 billion duringthe year which represents strong growth of 18% on the corresponding period, withthe Group's net interest margin declining by 20bps from 2.21% to 2.01% duringthe same period. The domestic margin was down 19bps on the prior year as thechange in balance sheet funding mix to accommodate the growth in assets and lowinterest rate environment continue to impact the domestic margin with somemargin pressure arising from competition. The foreign margin was 22bps lowerwith the continued back book re-pricing of residential mortgages in the UK beingthe key driver. Other Income has increased to €1,275 million, an increase of 3% on the prioryear. Strong fee income growth in Corporate Banking, an excellent performancefrom Davy together with increased sales of Group products in Retail FinancialServices Ireland underpinned strong core growth within the Group. The prior yearhad the benefit of an additional €29 million income in the Life business due toa discount rate change and higher investment gains due to a better stock marketperformance. The challenges facing BIAM have also had an impact, with otherincome falling €14 million in the year to March 2005 against the correspondingperiod last year. Income from associated undertakings and joint ventures increased by €17 millionto €46 million, with the First Rate joint venture performing very stronglyduring the year to March 2005. Total income has grown by 6.5% year on year to March 2005. Asset Quality remains strong. Excluding a special loan loss release of €100m,the charge for loan losses was €79 million for the year, a reduction of €7million over the preceding period and represents 11bps of average lending.Balances under Provision stood at €335 million at 31 March 2005 (€375 million at31 March 2004). Total provisions at 31 March 2005 stood at €319 millionfollowing a special writeback of €100 million (€472 million at 31 March 2004).The coverage ratio stands at 95% compared with 126%, the reduction beingattributable to the release of €100m loan loss writeback. Excluding the impact of the Group's investment in the UK Post Office FinancialServices, total operating expenses from continuing operations have increased by6% to €1,753 million for the year to March 2005, and have benefited fromrationalisation savings in UKFS. Key drivers of the cost growth during the yearwere wage inflation and performance-related payments, an increase in compliancespend and higher investment costs as we seek to expand our expertise in certainniche lending markets and improve operating efficiency. The Cost/Income Ratiowas 53.9% for March 2005 and is a slight improvement on the March 2004 ratio of54.3%. Including the Group's investment in UK Post Office Financial Serviceswhich contains a high level of start up related costs, operating expenses fromcontinuing operations have increased by 9%. The Group has provided €117 million for the Strategic Transformation Programmeinitiative announced in our Trading Update on 22 March 2005. A review of theloan loss provision has taken place and in light of the favourable economicconditions and the strong quality of assets, a special release of €100 millionof loan loss provisions has been made. The results for the 12 months to March2005 include €5 million of exceptional profits with the disposal of non coreactivities more than offsetting restructuring costs within UKFS. These itemshave been excluded from the Groups alternative earnings per share calculationfor March 2005. Effective Rate of Tax The effective tax rate is 18%. The standard Irish corporation tax rate of 12.5%has been impacted by higher tax rates in foreign jurisdictions and the levy onbank profits introduced by the Irish Government in December 2002. The currentyear includes a charge of €26 million (2004: €26 million) in respect of thislevy. Group Balance Sheet The Group balance sheet has increased from €106 billion to €126 billion and theGroup capital ratios remain strong with a Tier 1 ratio of 7.6% and Total CapitalRatio of 10.6%. ROE Return on Equity before exceptional items was 22.4% for the year. Dividend The Directors have recommended a final dividend of 29.0 cent. The recommendedfinal dividend together with the interim dividend of 16.6 cent paid in January2005 results in a total of 45.6 cent for the year to 31 March 2005 an increaseof 10% on prior year. The Group operates a progressive dividend policy based on the medium termoutlook as well as earnings in any particular year. Total dividend for the yearis covered 2.5 times (40% payout ratio) compared to 2.6 times (39% payout ratio)in the previous year. The final dividend will be paid on or after 15 July 2005 to Stockholders who areregistered as holding ordinary stock at the close of business on 17 June 2005. Annual General Court The Annual Report and Accounts and the Notice of the Annual General Court ofProprietors will be posted to Stockholders on 7 June 2005 and the Annual GeneralCourt will be held on 6 July 2005. Brian J GogginGroup Chief Executive11May 2005 For further information: +--------------------------+--------------------------+--------------------------+| | | || John O'Donovan | Geraldine Deighan | Dan Loughrey || Group Chief Financial | Head of Group Investor | Head of Group Corporate || Officer |Relations +353 1 604 3501 | Communications || +353 1 632 2054 | | +353 1 604 3833 |+--------------------------+--------------------------+--------------------------+ BANK OF IRELANDGroup Profit and Loss Account For the Year Ended 31 March 2005 Continuing Exceptional Total Total Operations Items before Exceptional Items 2005 2005 2005 2004 Notes •m •m •m •m INTEREST RECEIVABLE Interest receivable and similar income 418 - 418 331arising from debt securitiesOther interest receivable and 5 3,761 - 3,761 3,300similar income INTEREST PAYABLE 2,281 - 2,281 1,887 ---------- ---------- ---------- ---------- NET INTEREST INCOME 1,898 - 1,898 1,744 Fees and commissions receivable 1,200 - 1,200 1,134Fees and commissions payable (199) - (199) (200)Dealing profits 66 - 66 73Contribution from the life 161 - 161 177assurance businessOther operating income 6 47 - 47 50 ---------- ---------- ---------- ----------TOTAL OPERATING INCOME 3,173 - 3,173 2,978 Administrative expenses 7 1,621 117 1,738 1,471Depreciation and amortisation 186 - 186 183 ---------- ---------- ---------- ----------Operating profit before PRovisions 1,366 117 1,249 1,324 Provision for bad and doubtful 13 79 (100) (21) 86debts ---------- ---------- ---------- ----------OPERATING PROFIT 1,287 (17) 1,270 1,238 Income from associated undertakings 46 - 46 29and joint ventures ---------- ---------- ---------- ----------Profit on ordinary activitiesbefore exceptional items 1,333 (17) 1,316 1,267 Exceptional items 8 - 5 5 (97) ---------- ---------- ---------- ----------PROFIT BEFORE TAXATION 1,333 (12) 1,321 1,170 ====== ======Taxation 9 (241) (208) ---------- ----------PROFIT AFTER TAXATION 1,080 962 ====== ====== 2005 2004 Notes •m •m PROFIT AFTER TAXATION 1,080 962 Minority interests : equity (7) 13 : non equity 6 6Non-cumulative preference stock dividends 10 8 8 --------- ---------PROFIT ATTRIBUTABLE TO THEORDINARY STOCKHOLDERS 1,073 935 Transfer to capital reserve 16 48 62Ordinary dividends 10 442 400 --------- ---------PROFIT RETAINED FOR THE YEAR 583 473 ====== ======Earnings per unit of €0.64 Ordinary Stock 11 113.9c 97.2c ====== ======Diluted Earnings per unit of €0.64 Ordinary Stock 11 112.9c 96.6c ====== ======Alternative Earnings per unit of €0.64 Ordinary 11 114.2c* 106.7cStock ====== ======* excl. Exceptional Items and Goodwill amortisation. BANK OF IRELANDGROUP BALANCE SHEET AT 31 MARCH 2005 The Group 2005 2004ASSETS Notes •m •m Cash and balances at central banks 1,600 1,397Items in the course of collection from other banks 560 584Central government and other eligible bills 92 211Loans and advances to banks 7,783 7,753Loans and advances to customers 12 79,917 67,540Securitisation and loan transfers 344 593Less: non returnable amounts (328) (504) 16 89Debt securities 21,321 15,676Securitisation 207 243Less: non returnable amounts (188) (224) 19 19Equity shares 52 64Interests in associated undertakings 17 14Interests in joint ventures- share of gross assets 153 190- share of gross liabilities (92) (73)- goodwill - 126 61 243Intangible fixed assets 316 147Tangible fixed assets 1,236 1,268Other assets 4,075 3,767Prepayments and accrued income 870 690 ---------- ---------- 117,935 99,462Life assurance assets attributable to policyholders 8,529 6,969 ---------- ---------- 126,464 106,431LIABILITIES ====== ====== Deposits by banks 20,254 17,060Customer accounts 60,265 54,395Debt securities in issue 20,539 12,917Items in the course of transmission to other banks 230 230Other liabilities 6,269 5,676Accruals and deferred income 770 621Provisions for liabilities and charges- deferred taxation 72 66- other 321 221Subordinated liabilities 4,086 3,682Minority interests- equity 62 54- non equity 73 76 Called up capital stock 15 663 679Stock premium account 16 765 767Capital reserve 16 561 498Profit and loss account 16 2,772 2,281Revaluation reserve 16 234 239 4,995 4,464Own shares held for the benefit of life assurance (206) (183)policyholders ---------- ----------Stockholders' funds including non equity interests 4,789 4,281 ---------- ----------Life assurance liabilities attributable to 8,734 7,152policyholders ---------- ---------- 126,464 106,431 The Group 2005 2004 Notes •m •m MEMORANDUM ITEMS Contingent liabilities Acceptances and endorsements 34 33Guarantees and assets pledged as collateral security 1,268 1,291Other contingent liabilities 643 494 ---------- ---------- 18 1,945 1,818 ====== ====== Commitments 18 29,296 25,235 ====== ====== BANK OF IRELANDOTHER PRIMARY STATEMENTS FOR THE YEAR ENDED 31 MARCH 2005 NOTE OF HISTORICAL COST PROFIT AND LOSS There is no significant difference between the results as disclosed in theprofit and loss account and the results on an unmodified historical cost basis. The Group 2005 2004 Notes •m •m RECONCILIATION OF MOVEMENT IN STOCKHOLDERS' FUNDS At 1 April 4,281 4,034Profit attributable to the ordinary stockholders 1,073 935Dividends 10 (442) (400) ---------- ---------- 4,912 4,569Revaluation of property - 59Exchange adjustments (108) 62Re-issue of treasury stock under employee stock 15,16 7 25schemesOrdinary stock buyback and held as Treasury stock 15,16 - (377)Movement in cost of own shares held for benefit of (23) (57)Life Assurance policyholdersReissue of treasury stock previously held by 1 -subsidiary ---------- ---------At 31 March 4,789 4,281 ====== ======Stockholders' funds:Equity 4,724 4,215Non equity 65 66 ---------- ---------- 4,789 4,281 ====== ====== The Group 2005 2004 Notes •m •m STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Profit attributable to the ordinary stockholders 1,073 935Revaluation of property - 59Exchange adjustments 15,16 (108) 62 ---------- ----------Total recognised gains for the year 965 1,056 ====== ====== BANK OF IRELANDGROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2005 The Group 2005 2004 •m •m Net cash flow from operating activities 5,681 3,664 Dividend received from joint venture 14 7Returns on investment and servicing of finance (258) (190)Taxation (155) (201)Capital expenditure and financial investment (4,287) (2,875)Acquisitions and disposals 73 (179)Equity dividends paid (417) (381)Financing 462 609 ---------- ----------Increase/(decrease) in cash in the year 1,113 454 ====== ====== BANK OF IRELANDNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2005 1 Basis of Accounting and Accounting Policies The accounting policies as set out on pages 51 to 54 in the Report and Accountsfor the year ended 31 March 2004 are unchanged. 2 RATES OF EXCHANGE The principal rates of exchange used in the preparation of the accounts are asfollows: 31 March 2005 31 March 2004 Average Closing Average Closing •/US$ 1.2647 1.2964 1.1796 1.2224•/Stg£ 0.6834 0.6885 0.6926 0.6659 3 SEGMENTAL ANALYSIS (a) Geographical segment 2005 Republic United Rest Continuing Exceptional of Kingdom of Operations Items Total Ireland World before Exceptional Items •m •m •m •m •m •m Turnover 2,301 3,206 192 5,699 - 5,699 ===== ===== ==== ===== ==== ===== Profit on ordinaryactivities before 990 326 36 1,352 (17) 1,335exceptional items ===== ===== ==== =====Exceptional items 5 5Grossing up (1) - (19) -------- --------Profit before taxation (12) 1,321 ===== =====Net assets 2,780 1,519 490 4,789 - 4,789 ===== ===== ===== ===== ==== ===== Total assets (2) 108,395 50,446 4,262 163,103 - 163,103 ===== ===== ===== ===== ==== ===== 3 SEGMENTAL ANALYSIS (continued) (a) Geographical segment 2004 Republic United Rest of of Kingdom World Total Ireland •m •m •m •m Turnover 2,658 2,283 153 5,094 ===== ===== ==== ===== Profit before exceptional items 936 340 41 1,317 ===== ===== ====Exceptional items (97)Grossing up (1) (50) --------Profit before taxation 1,170 =====Net assets 2,422 1,399 460 4,281 ===== ===== ===== ===== Total assets (2) 91,249 52,158 2,410 145,817 ===== ===== ===== ===== 2005(b) Business UK Post Continuing Exceptionalclass Retail Wholesale UK Asset Office Group Operations Items Republic BOI Financial Financial Management Financial and before of Ireland Life Services Services Services Services Central Exceptional Total Items •m •m •m •m •m •m •m •m •m •m Net interest 1,018 - 302 605 4 6 (23) 1,912 - 1,912incomeOther income 304 135 339 241 252 1 8 1,280 - 1,280 ---------- ------ ---------- ---------- ---------- ------- ------- ------- ------- ---------Total 1,322 135 641 846 256 7 (15) 3,192 - 3,192operatingincomeAdministrative 778 - 249 472 141 54 113 1,807 117 1,924expensesProvision forbad and 51 - 38 (14) - 4 - 79 (100) (21)doubtful debts ---------- -------- ---------- ---------- ---------- -------- ------- ------- ------- ---------Operating 493 135 354 388 115 (51) (128) 1,306 (17) 1,289ProfitIncome fromassociatedundertakings (3) - 53 - - (4) - 46 - 46and jointventures ---------- -------- ---------- ---------- ---------- -------- -------- ------- ------- --------- 490 135 407 388 115 (55) (128) 1,352 (17) 1,335 ====== ==== ======= ====== ======= ====== ====== ======Exceptional 5 5itemsGrossing up(1) (19) --------- ---------Profit before (12) 1,321taxation ====== =====Net assets 1,403 101 722 1,622 377 112 452 4,789 - 4,789 ====== ==== ======= ====== ======= ====== ====== ====== ====== =====Total assets 57,609 8,977 100,369 42,836 2,980 213 17,744 230,728 - 230,728(2) ====== ==== ======= ====== ======= ====== ====== ====== ====== =====Total RiskWeighted 21,969 - 26,454 26,029 284 - 1,156 75,892 - 75,892Assets ====== ==== ======= ====== ======= ====== ====== ====== ====== ===== 3 SEGMENTAL ANALYSIS (continued) 2004(b) Business UK Postclass Retail Wholesale UK Asset Office Republic BOI Financial Financial Management Financial Group & of Ireland Life Services Services Services Services Central Total •m •m •m •m •m •m •m •m Net interest 909 - 292 601 3 - (26) 1,779incomeOther income 289 147 298 246 258 - 11 1,249 ---------- ------ ---------- ---------- ---------- ------- ------- ----------Total operating 1,198 147 590 847 261 - (15) 3,028incomeAdministrative 724 - 221 472 136 - 101 1,654expensesProvision for bad and 53 - 31 2 - - - 86doubtful debts ---------- -------- ---------- ---------- ---------- -------- ------- ----------Operating Profit 421 147 338 373 125 - (116) 1,288Income fromassociated (2) - 33 - - (3) 1 29undertakings andjoint ventures ---------- -------- ---------- ---------- ---------- -------- -------- ----------Profit before 419 147 371 373 125 (3) (115) 1,317exceptionalitems ====== ==== ======= ====== ======= ====== ======Exceptional (97)itemsGrossing up(1) (50) ----------Profit before 1,170taxation ======Net assets 1,210 95 697 1,483 369 - 427 4,281 ====== ==== ======= ====== ======= ====== ====== ======Total assets (2) 36,324 7,401 60,328 38,716 1,606 - 10,110 154,485 ====== ==== ======= ====== ======= ====== ====== ======Total Risk 18,922 - 20,893 22,828 149 - 569 63,361Weighted Assets ====== ==== ======= ====== ======= ====== ====== ====== (1) The Group undertakes tax based transactions at rates which differ fromnormal market rates in return for tax relief arising from various incentives andreliefs. To assist in making valid comparison of pre-tax performance, theanalysis of business unit performance is grossed up. (2) Total assets include intra-group items of €36,639m (2004: €39,386m) ingeographic segments and €104,264m (2004: €48,054m) in business class. 4 ACQUISITIONS - CURRENT YEAR A) Burdale On 5 January 2005, Bank of Ireland announced that its wholly owned subsidiaryBOI UK Holdings Limited acquired a 100% interest in Burdale Financial HoldingsLimited for a consideration of Stg£49m (€70m). As analysed below, the acquisition gave rise to goodwill of Stg£37m (€52m),which has been capitalised and will be written off to the profit and lossaccount over the estimated useful life of 20 years. Stg£m •m Debtors 145 206Cash at Bank 5 7Creditors due within one year (131) (186) -------- --------Net assets acquired 19 27Goodwill 37 52 -------- -------- 56 79 ===== ===== Consideration 49 70Cost of Acquisition 1 2Deferred Consideration 6 7 -------- -------- 56 79 ===== ===== There were no fair value adjustments to the Balance Sheet of Burdale FinancialHoldings Limited at 5 January 2005. The profit before tax for Burdale Financial Holdings Limited from 1 January 2004to 31 December 2004 was Stg£6.4m (year ended 31 December 2003 Stg£7.5m). A summarised profit and loss account for the period from 5 January 2005 to 31March 2005 is as follows: Stg£m •mIncome 2.5 3.6Operating expenses (1.0) (1.5) -------- --------Operating profit 1.5 2.1 ===== ===== B) Iridian During the year the Bank acquired an additional 15% stake in Iridian AssetManagement LLC ("Iridian"), increasing its stake to 76%. The acquisition gaverise to goodwill of $37.2m (€28.7m) which has been capitalised and will bewritten off over the estimated useful life of 15 years. The Bank has the ability to acquire the remaining 24% over the subsequent 3 yearperiod via a series of call options exercisable each year in broadly equalstakes at a pre-agreed market multiple of profits of the business at the time ofpurchase of each individual stake. Each year the Bank may purchase any availablestakes not previously purchased. The Iridian members have a similar series of put options applying the same priceformula. The put and call options are mismatched as to timing and consequentlyprice with yearly intervals between when the Bank can exercise each call optionfollowed by when the members can put the corresponding stake. The acquisition is treated as a piecemeal acquisition as, in the Directors'view, the risks and rewards of ownership over the remaining shareholding havenot passed to the Bank and, given the mismatched put and call mechanism there isuncertainty as to the exercise of, and therefore the timing of, either the putor call options. In the interim the remaining members will have a continuingeconomic interest in Iridian, including the right to any distributions declared. 5 OTHER INTEREST RECEIVABLE AND SIMILAR INCOME 2005 2004 •m •m The Group Loans and advances to banks 204 227 Loans and advances to customers 3,305 2,858 Finance leasing 129 119 Instalment credit 123 96 ---------- ---------- 3,761 3,300 ====== ====== 6 OTHER OPERATING INCOME 2005 2004 •m •m The Group Profit/(loss) on disposal of investment 14 (2) securities Profit on disposal of tangible fixed assets 8 20 Securitisation servicing fees 4 6Related Shares:
BKIR.L