#1Credit Presentation 31 December 2018 Bank of Ireland#2Empty#3Bank of Ireland Overview 2018 Credit Presentation Bank of Ireland 2#42018 Highlights €935m . NIM of 2.20% 2018 Credit Presentation Profitability Underlying profit before tax • Net impairment gains of €42m NPES reduced by 24% to €5.0bn; NPE ratio now at 6.3% Growth €1.3bn Net lending growth • New lending €15.9bn, increase of 13% vs. 2017 New Irish mortgages; Growth of 17%, stable market share of 27% Wealth & Insurance; 21% income growth vs. 2017 Transformation 3% / €48m Reduction in costs • Taking the lead in building a great culture in the Bank Foundations of new Core Banking Platforms in place Business model initiatives to drive efficiencies progressing at pace Capital 13.4% CET1 ratio Organic capital generation of 180bps Dividend increased to 16c per share (€173m) from 11.5c per share (€124m) in 2017 Bank of Ireland 3#5Economic backdrop Irish credit growth emerging Annual % Change 4 0 -4 -8 2012 2013 2014 2015 2016 Stock of lending to households Stock of lending to businesses (non-financial corporations)1 Solid growth in Ireland; UK growth also positive notwithstanding Brexit uncertainties 7.2% 6.8% 4.5% House price growth continuing in Ireland, softening in UK 9.0% 12.1% 6.5% kki kkı 1.8% 1.4% 1.4% 4.5% 2.6% 2017 2018e ■ROI GDP UK GDP (annual real growth) 2019f 2016 2017 2017 2018 2018 Credit Presentation Unemployment rate trending down in Ireland, remains historically low in UK 6.7% 5.7% 5.0% 4.4% 4.1% 4.1% 0.5% 2018 ROI residential property prices national (change, Dec on Dec) UK residential property prices national (change, Dec on Dec) Sources: Bank of Ireland Economic Research Unit, CSO, Office for National Statistics, Nationwide, Central Bank of Ireland Forecasts assume current UK-EU trading arrangements continue to apply 1 Banks balance sheet basis, excludes loan sales and securitisations 2017 2018 2019f ROI unemployment rate UK unemployment rate (annual average) Bank of Ireland 4#6Focused on execution of our strategy to 2021 2018 Credit Presentation 110 000 +020 While there are Our ambition is clear 2018 has been transformational • Investor Day June 2018 - • Cultural change • • Technology • National Champion Bank in Ireland with selective UK and international diversification transformation • Strengthened leadership capabilities challenges ahead... • Brexit and the global economy Evolving regulatory requirements • UK competitive environment ...we are committed to delivering our strategy Growing and transforming our business Improving returns in the UK Repositioned brand strategy Bank of Ireland 5#7Strategic Priorities: Transform the Bank 2018 Credit Presentation Culture Systems Business model 2018 Progress • Defined the culture we want - ambition, purpose and values being embedded across organisation Technology transformation continues to progress - - Foundations of new Core Banking Platforms in place, single customer record for over 2m customers Testing of loan and deposit origination on new Temenos platform Modernised payments infrastructure in place with greater capacity, improved stability and higher speed processing New mobile banking app will launch in 2019, first full scale customer deliverable using new Temenos technology Creating a leaner, agile organisation, over half of end state Organisational Design now complete, 8% reduction in Senior Management roles Target Outcomes • Strengthened culture Cost base to reduce to c.€1.7bn in 2021 Absolute cost level declining year-on-year to 2021 Income growth Bank of Ireland 6#8Strategic Priorities: Serve Customers Brilliantly 2018 Credit Presentation Embedding voice of customer in our businesses Investing in digital and physical channels New brand strategy 2018 Progress Target Outcomes • Listening to our customers and taking action - 200+ front line staff driving improved service levels - 100+ branches converted to full service • Significant improvement in customer satisfaction and advocacy • Robotics delivering equivalent to >300 FTEs, resulting in significant enhancement of customer journeys Customers increasingly choosing digital channels - 10m+ monthly engagements on our mobile app, up >25% on 2017 Direct and digital wealth sales increased to 35% (from 0% 2 years ago) Repositioning of brand underway, supported by multi-year customer strategies Straight through processing; digital journeys API foundation for Open Banking #1 for customer experience and brand in Ireland Bank of Ireland 7#9Strategic Priorities: Grow Sustainable Profits Improved profitability Efficient business Robust capital position Sustainable dividends 1 See Slide 52 for calculation امر if 2018 Progress 2018 Credit Presentation 2021 Target Headline ROTE of 8.5% Adjusted ROTE of 7.2%¹ ROTE in excess of 10% Cost reduction of 3% / €48m vs. 2017 Cost base of c.€1.7bn Costs reduce every year: 2018-2021 Cost income ratio of c.50% Fully loaded CET1 ratio of 13.4% CET1 ratio in excess of 13% Dividend increased to 16c per share (€173m) Increase prudently and progressively; over time will build towards a payout ratio of around 50% of sustainable earnings Bank of Ireland 8#10Operating Performance 2018 Credit Presentation Bank of Ireland 9#11Underlying profit before tax of €935m FY 2017 FY 2018 (€m) (Єm) Total income 3,049 2,805 Operating expenses (before levies and (1,900) (1,852) regulatory charges) • Levies and Regulatory charges (99) (101) Net Impairment (losses) / gains (15) 42 Share of associates / JVs 43 Underlying profit before tax 1,078 41 935 Non-core items (226) (100) Profit before tax 852 835 Net interest margin (NIM) 2.29% 2.20% Adjusted ROTE¹ 6.9% 7.2% Dec 17 Dec 18 Customer loans (net) €76.1bn €77.0bn • Customer deposits €75.9bn €78.9bn Non-performing exposures (NPES) €6.5bn €5.0bn CET1 Ratios: Fully Loaded 13.8% 13.4% Regulatory 15.8% 15.0% Total Capital Ratio: Regulatory 20.2% 18.8% • Liquidity Metrics: LCR 136% 136% NSFR 127% 130% LDR 100% 97% Leverage Ratios: Fully Loaded 6.2% 6.3% Regulatory 7.0% 7.0% 1 See Slide 52 for calculation 2018 Credit Presentation Income Statement Net interest income of €2,146m Other income of €659m includes sustainable and diversified business income of €672m Operating expenses (before levies and regulatory charges) of €1,852m; reduction of €48m (3%) vs. 2017 • Total transformation investment in 2018 of €306m • Net impairment gains of €42m, reflecting positive economic environment in Ireland and effectiveness of our NPE resolution strategies • Non-core charge of €100m primarily related to costs associated with the Group's restructuring programme Balance Sheet Group loan book of €77.0bn at Dec 2018 reflecting; - New lending of €15.9bn; an increase of 13% vs. 2017 Redemptions of €14.6bn; 3% reduction vs. 2017 Customer deposits of €78.9bn predominantly sourced through retail distribution channels NPES of €5.0bn, 24% reduction during 2018 Strong organic capital generation continues; capital and liquidity available to support growth HoldCo senior investment grade ratings of Baa3, BBB- and BBB from Moody's, S&P and Fitch. Positive Outlook for Moody's and S&P (see Slide 20 for full ratings) Bank of Ireland 10#12Net lending growth of €1.3bn Group loan book movement €15.9bn (€14.6bn) (€0.4bn) Total €1.3bn €76.1bn Dec 17 Loan Book New Lending Redemptions IFRS 9 Day 1/ Other Dec 18 Loan Book Net lending growth €1.3bn Net lending growth of €1.3bn 2018 Credit Presentation • New lending of €15.9bn; an increase of 13% vs. 2017 €77.0bn¹ UK/International • Redemptions of €14.6bn; 3% reduction vs. 2017 Expect further net lending growth in 2019, while maintaining strong commercial pricing and risk discipline Ireland: €0.6bn net lending growth • Mortgages: loan book flat in 2018, albeit new lending of €2.3bn, up 17% on 2017, with stable market share of 27% Consumer: loan book growth of €0.1bn SME: loan book decrease of €0.2bn, albeit new lending of €2.9bn Corporate Banking: loan book growth of €0.8bn UK / International: €0.7bn net lending growth • Mortgages: loan book decrease of €0.7bn; new lending of €3.7bn, up 3% on 2017 Consumer: loan book growth of €0.7bn; new lending of €1.8bn (2017: €1.3bn), reflecting strong performance of Northridge car finance and consumer lending SME/Other: loan book decrease of €0.5bn; largely due to wind down of legacy lending portfolios Corporate Banking: loan book growth of €0.9bn; disciplined approach with strong Brexit focus . Acquisition Finance: loan book growth of €0.3bn Bank of Ireland €0.6bn Ireland €0.7bn 1 Includes UK Credit Card portfolio €0.6bn classified as held for sale as at Dec 2018 11#13NIM - Strong commercial discipline on pricing 2.23% 2018 Q4 NIM Movement (3bps) 2.20% (10bps) 2.10% 2018 Credit Presentation NIM-2.20% in 2018 • Maintaining strong commercial discipline on pricing e.g. recent price adjustments on Irish mortgages Competitive pressures in UK mortgage market driving lower front book pricing and shorter customer revert periods Adjustment to UK mortgage revert period (10bps) in Q4 2018 reflects faster refinancing activity Average Q1 - Q3 2018 NIM UK competitive pressures Underlying Q4 2018 Exit NIM UK Mortgage revert period (Non-recurring) Q4 2018 Reported NIM 2019 Outlook 2.20% Underlying Q4 2018 Exit NIM Outlook for 2019 NIM (3bps) (1bps) UK Credit Cards MREL issuance c.2.16% Expected 2019 NIM Expect 2019 NIM to be c.2.16%: - - Strategic repositioning of the UK cards portfolio adversely impacts NIM by c.3bps MREL issuance (c.1bps) UK competitive pressures expected to be offset by positive impact from new lending margins and strong commercial discipline on pricing Bank of Ireland 12#14Costs have reduced by 3% / €48m Operating expenses to reduce further €1,796m €1,739m €104m 2017 €113m 2018 Operating expenses Transformation Investment charge 2019 2018 Credit Presentation Transformation of cost base • Operating expenses (before levies and regulatory charges) of €1,852m reduced by €48m (3%) vs. 2017 Expect operating expenses, including transformation investment charge, to reduce every year to €1.7bn in 2021 Operating expenses: €1,739m • • Total staff costs decreased by €32m vs. 2017 primarily reflecting lower average staff numbers partly offset by impact of wage inflation of c.2.5% under the Group Career and Reward framework; wage inflation of c.2.6% agreed for 2019 Other costs have decreased by €68m vs. 2017 reflecting strategic sourcing and other efficiencies from business model initiatives across the businesses Expected increase in depreciation charge of €43m reflects investment in technology Transformation Investment charge: €113m • Total transformation investment in 2018 of €306m: - €113m charged as Transformation Investment to the income statement (37%) €100m capitalised as intangible asset (33%) €93m charged as non-core restructuring costs (30%) Levies and Regulatory charges: €101m Expect levies and regulatory charges to total €115m - €120m for 2019 FY 2017 FY 2018 (Єm) (€m) Total staff costs 900 868 • - Staff costs 752 721 - Pension costs 148 147 Other costs 727 659 Depreciation 169 212 Operating Expenses 1,796 1,739 Transformation Investment charge¹ 104 113 Operating Expenses (before levies and 1,900 1,852 regulatory charges) Levies and Regulatory charges 99 101 Total Operating Expenses 1,999 Average staff numbers Cost-income ratio² 11,196 65% 1,953 10,595 • 65% 1 Transformation Investment charge was previously disclosed as 'Core Banking Platform Investment charge', it has been updated to include the broader scope of Transformation covering Culture, Systems and Business Model for 2017 2 See Slide 51 for calculation Bank of Ireland 13#1524% improvement in NPE levels Non-performing exposures 8.3% 11.4% €4.4bn reduction €9.4bn Dec 2016 €6.5bn Dec 2017 6.3% €5.0bn Dec 2018 NPEs as a % of gross customer loans Non-performing exposures (€176m) 2016 Net impairment gains/(losses) €36m (€15m) 2017 Net impairment (losses) / gains 2018 2018 Credit Presentation Asset quality continues to improve • Non-performing exposures (NPEs) of €5.0bn, a reduction of €1.5bn (24%) during 2018 • NPE ratio reduced by 200bps to 6.3% • Reductions reflect successful resolution strategies and the positive economic environment. Expect further reductions in 2019 and beyond . SREP guidance received on coverage levels for NPES - coverage levels will increase on unsecured NPES (older than 2 years) and secured NPES (older than 7 years) from end of 2020 • NPE reduction strategies will be kept under review to respond to the associated and evolving regulatory framework Net impairment gains of €36m in 2018 Net impairment gains on loans and advances to customers of €36m for 2018, primarily reflecting: Strong performance of the Group's loan portfolios Positive outcomes from ongoing resolution of NPES Continued positive economic environment and an outlook of continued economic growth in key markets Absent a change in the economic environment or outlook, expect net impairment charge to be in the range of up to 20bps-30bps p.a. during 2019-2021 Bank of Ireland 14#16ROI Mortgages Continued proactive arrears management >90 days arrears¹ Industry Average Industry Average 17.4% 7.4% Bank of Ireland 2.1% Owner Occupier Owner Occupier Bank of Ireland 4.9% Buy to let Buy to let >720 days arrears¹ Industry Average Bank of Ireland Industry Average 13.0% 4.6% Bank of Ireland 1.1% Owner Occupier Owner Occupier Buy to let Buy to let 2.6% >90 days arrears . 2018 Credit Presentation Bank of Ireland is significantly below the industry average for both Owner Occupier (28% of industry average) and Buy to Let (28% of industry average) >720 days arrears • Bank of Ireland is significantly below the industry average for both Owner Occupier (24% of industry average) and Buy to Let (20% of industry average) NPE resolution strategies • Continued progress on reduction in ROI mortgage NPES, c.€0.4bn reduction in 2018 • Portfolio of Buy to Let mortgage NPEs prioritised for alternative resolution strategies e.g. potential securitisation and/or sale - Loans of c.€0.6bn - €0.8bn; Net Interest Income of c.€10m - €14m CET1 Capital Intensity of c.30bps - 50bps 1 As at September 2018, based on number of accounts, industry average excluding BOI Bank of Ireland 15#17Capital and liquidity available to support growth 63 7575 Strong liquidity ratios • Liquidity Coverage Ratio: 136% Net Stable Funding Ratio: 130% • Loan to Deposit Ratio: 97% Robust Leverage Ratio • Fully Loaded Leverage Ratio: 6.3% Regulatory Leverage Ratio: 7.0% Customer deposits: €78.9bn Dec 2017 Dec 2018 (€bn) (€bn) Customer loans 76 Liquid assets 24 25 Wealth and Insurance assets 17 17 Other assets 6 • Total assets 123 124 Customer deposits 76 79 Wholesale funding 13 11 Wealth and Insurance liabilities 17 17 Other liabilities 7 7 Shareholders' equity 9 9 • Additional Tier 1 security & other 1 1 Total liabilities 123 124 TNAV per share €7.52 €7.85 Closing EUR/GBP FX rates 0.89 0.89 2018 Credit Presentation Customer deposits predominantly sourced through retail distribution channels Wholesale funding: €11.4bn Monetary Authority borrowings of €2.7bn¹ have reduced by €2.3bn since Dec 2017 primarily due to repayment of funding drawn under the ECB's TLTRO MREL target of €13.3bn (representing 26.4% of RWA at Dec 2016) to be met by 1 Jan 2021: - - MREL ratio of 23.1% at Dec 2018 (based on RWA at Dec 2018) Modest MREL eligible issuance c.€1bn-€2bn p.a. anticipated 1 Monetary Authority borrowings of €2.7bn at Dec 18 includes: €1.0bn of ECB TLTRO funding and €1.7bn of BOE funding through TFS (c.€1.5bn) and ILTR (c.€0.2bn) Bank of Ireland 16#18Outlook Growth • • Net lending growth while maintaining commercial discipline on risk and pricing Continued growth in Wealth and Insurance business NIM in 2019 expected to be C.2.16% • • Efficiency 2018 Credit Presentation Returns Costs to reduce further in 2019 Expect further reduction in NPES Expect net impairment charge to be in the range of up to 20bps-30bps p.a. during 2019-20211 Continue to generate strong organic capital • Dividend to increase prudently and progressively; over time will build towards a payout ratio of around 50% of sustainable earnings ROTE target: in excess of 10% by 2021 1 Absent a change in the economic environment or outlook Bank of Ireland 17#19Capital & MREL 2018 Credit Presentation Bank of Ireland 18#20Corporate Structure BOIG established in 2017 Bank of Ireland Group plc (BOIG) Bank of Ireland Group AT1 Tier 2 Senior unsecured Unchanged Corporate Structure New HoldCo 100% 100% The Governor and Company of the Bank of Ireland (GovCo) Bank of Ireland O 100% Senior unsecured 100% New Ireland Assurance Company plc Bank of Ireland Mortgage Bank (BOIMB) Bank of Ireland (UK) plc NEW IRELAND ANNURANCE Bank of Ireland For small steps, for big steps, for life Bank of Ireland UK Irish Covered Bonds (ACS) 2018 Credit Presentation Preferred resolution strategy for the Group consists of a Single Point of Entry (SPE) bail-in strategy through the Group holding company (BOIG) Transparent and well-defined resolution strategy in comparison to other jurisdictions BOIG introduced on top of the existing group structure supporting an SPE preferred resolution strategy No change to any of the Group's existing operating companies Bail-in at BOIG is the primary resolution tool. MREL requirements are expected to be met through junior and senior issuance from BOIG Losses are passed to BOIG by the write-down of intragroup assets. BOIG investors bear losses in accordance with the resolution² hierarchy. Resolution authorities required to apply the "No Creditor worse off" principle in application of the bail-in tool Funding requirements may also continue to be met, as required, through the issue of Irish Covered Bonds (ACS) by Bank of Ireland Mortgage Bank and senior unsecured issuance by GovCo 1 100% shareholding via intermediate holding company 2 Per Regulations 87 and 96 of the European Union (Bank Recovery and Resolution) Regulations 2015 Bank of Ireland Capital/MREL Funding 19#21BOI Credit Ratings Investment grade ratings for BOIG and GovCo 2018 Credit Presentation 20 20 BOIG Issuer Ratings GovCo Issuer Ratings Progress on BOI Credit Ratings Key Rating Drivers STANDARD & POOR'S BBB- (Positive) BBB+ (Positive) Oct 2018: GovCo rating upgraded one notch from BBB to BBB+ and BOIG rating BBB- affirmed (outlook remains Positive) Dec 2018: Affirmed the BBB- and BBB+ ratings on BOIG and GovCo respectively (outlook remains Positive) • Upside could develop from: • Further reductions in non- performing loans Additional loss-absorbing capacity (ALAC) uplift MOODY'S Baa3 (Positive) A3 (Positive) Jul 2017: Assigned Baa3 (Positive) rating to newly established holding company Dec 2018: GovCo rating upgraded one notch from Baa1 to A3 and BOIG rating Baa3 affirmed (outlook remains Positive) Improvements in capitalisation and risk absorption capacity; while maintaining stable profitability, funding and liquidity metrics • Further reductions in non- • • Fitch Ratings BBB (Stable) BBB (Positive) Nov 2017: 1 notch upgrade for both BOIG and GovCo issuer ratings to BBB, Stable outlook Dec 2018: Affirmed the BBB ratings on BOIG and GovCo; GovCo outlook revised to Positive from Stable (BOIG outlook remains Stable) Further reductions in non-performing loans; while reducing capital encumbrance Successful execution of strategy to improve cost efficient and profitable Irish Covered Bonds (ACS) Aaa MOODY'S performing loans Bank of Ireland#22Strong capital generation and position 13.6% Fully loaded CET1 ratio 1.8% (0.4%) (0.6%) (0.7%) (0.4%) 0.1% 2018 Credit Presentation 13.4% 1 Jan 18 CET1 (post IFRS 9 impact 20bps) Organic capital generation Loan growth/ RWA Transformation investment Regulatory Capital Demand² 2018 Dividend Other Dec 18 CET1 Capital position CET1 ratio CET1 movements • Strong capital position - fully loaded CET1 ratio of 13.4% at Dec 2018 • Continued organic capital generation - 180bps of capital generated in 2018 No change to capital guidance; the Group expects to maintain a CET1 ratio in excess of 13% on a regulatory basis and on a fully loaded basis by the end of O-SII phase in period³ 1 Organic capital generation primarily consists of attributable profit and movements in regulatory deductions 2 Regulatory capital demand primarily reflects the impact of TRIM on Irish mortgages 3 The Other Systemically Important Institution (O-SII) buffer will be introduced at 0.5% in July 2019, increasing to 1.0% in July 2020 and 1.5% in July 2021 Bank of Ireland 21 21#23Strategic investment and rigorous allocation of capital Organic capital generation (180bps) 1 2 3 4 2018 Credit Presentation Growth in loan book 200-250bps Investment / allocation of capital in 2018 CET1 of c.200-250bps to accommodate c.20% loan book growth over 4 years (2018-2021) Net lending growth of €1.3bn in 2018 (c.40bps) Transformation 50-60bps p.a. • Transformation Programme: investment of 50-60bps p.a. Transformation investment of €306m (c.60bps) in 2018 On track to reduce costs every year to €1.7bn in 2021 22 22 Regulatory capital demand Dividend / distributions • IFRS 16 impact of 20 bps on 1 Jan 2019 Capital resilience demonstrated in 2018 EBA Stress Test Evolving regulatory framework including EBA and ECB guidelines (definition of default, IRB models, NPE requirements, etc.) could consume c.80bps of CET1 by end 2020 Will pursue opportunities to unlock capital in balance sheet as appropriate Dividend increased to 16c per share (€173m / 40bps) from 11.5c per share (€124m / 25bps) in 2017 No change to dividend policy or guidance Other means of capital distribution will be considered to the extent the Group has excess capital Bank of Ireland#24Robust capital ratios CET1 ratios: Fully Loaded Regulatory Dec 2017 Dec 2018 2018 Credit Presentation Tier 1 & Total Capital • Tier 1 and Total Capital ratios reflect growth in the CET1 ratio in the period and movement in the haircuts associated with subordinated debt issued by BOIG subsidiaries¹ Total Capital ratios also include the partial amortisation of Tier 2 instruments 13.8% 13.4% 15.8% 15.0% • Tier 1 ratios: Fully Loaded 14.9% 14.4% Regulatory 17.0% 16.0% Total Capital ratios: Fully Loaded 17.9% 17.2% Regulatory 20.2% 18.8% MREL: MREL ratio 23.1% Leverage ratios: Fully Loaded 6.2% 6.3% Regulatory 7.0% 7.0% Risk Weighted Assets: Fully Loaded €44.8bn €47.6bn Regulatory €45.0bn €47.8bn 23 23 MREL • MREL target of €13.3bn (representing 26.4% of RWA at Dec 2016) to be met by 1 Jan 2021: - MREL issuance of c.€1.2bn completed in 2018 - Improved MREL ratio of 23.1% at Dec 2018 up from 21.6% at Jun 2018 (based on RWA at Dec 2018 and Jun 2018 respectively) Modest MREL eligible issuance expected of c.€1bn - €2bn p.a. Risk Weighted Assets • RWA has increased from €45.0bn at Dec 2017 to €47.8bn at Dec 2018 primarily driven by loan book growth, RWA mix and the impact of ROI Mortgage TRIM exercise 1 Further to EBA Q&A 2017_3329 the calculation of Tier 1 and Total Capital ratios is stated after a prudent application of the requirements of Articles 85/ 87 of CRR. The application of the requirements of Articles 85 /87 by SSM banks is under review by the ECB Bank of Ireland#2526.39% MREL Requirement¹ Loss absorption amount MREL Target 1.5% O-SII² 2.5% CCB2 2.25% P2R2 8% Own Funds Pillar 1 Requirement Recapitalisation + amount 2018 Credit Presentation Market Confidence Charge 1.5% O-SII² 2.5% CCB2 -0.86%4 2.25% P2R2 8% Own Funds Pillar 1 Requirement -1.25% 2.75% 9.39% 14.25% The Group has been advised of the decision by the SRB and the Bank of England of its binding MREL requirement to be met by 1 January 2021. This has been set at a level of 12.86% of total liabilities and own funds as at December 2016 (equivalent to 26.39% of risk weighted assets) Based on current MREL ratio³, modest new MREL issuance expected to meet this requirement Minimum Requirement for Own Funds and Eligible Liabilities as at 31 December 2018 2 Other Systemically Important Institution (O-SII), Capital Conservation Buffer (CCB) and Pillar 2 Requirement (P2R) 3 MREL ratio of 23.1% as at 31 December 2018 (based on RWA at Deember 2018) 4 Bank Specific Adjustment of 0.86% Bank of Ireland 24#26Regulatory Capital Requirements Pro forma CET1 Regulatory Capital Requirements Pillar 1 - CET1 Pillar 2 Requirement (P2R) Capital Conservation Buffer (CCB) Set by CRR SSM CRD Range 2018 Credit Presentation 2017 2018 2019 2020 2021 4.50% 1% -2.25%² 4.50% 4.50% 4.50% 4.50% 4.50% 2.25% 2.25% 2.25% 2.25% 2.25% 1.25% 1.88% 2.50% 2.50% 2.50% 2.50% Countercyclical buffer (CCyB)1 Ireland (c.60% of RWA) (from 5 July 2019) CBI UK (c.30% of RWA) US and other (c. 10% of RWA) FPC (UK) Fed/Various 0% - 2.50% 0% - 2.50% 0%-2.50% 0.3% 0.60% 0.60% 0.60% 0.30% 0.30% 0.30% O-SII buffer (from 1 July 2019) CBI 0% - 2.00% Systemic Risk Buffer - Ireland Minister for Finance 0% - 3.00% Pro forma Minimum CET1 Regulatory Requirements N/A 8.00% Pillar 2 Guidance (P2G) N/A 8.93% Not disclosed in line with regulatory preference 0.50% 1.00% 1.50% N/A N/A N/A 10.65% 11.15% 11.65% 25 25 Regulatory Capital Requirements • A minimum CET1 ratio of 9.55% on a regulatory basis from 1 Jan 2019, increasing to 10.65% from July 2019. This includes A Pillar 1 requirement of 4.5%, a Pillar 2 requirement (P2R) of 2.25%, a capital conservation buffer of 2.50%, a UK CCyB of 0.3%, an Other Systemically Important (O-SII) Buffer of 0.5% (from 1 July 2019) and an ROI CCyB of 0.6% (from 5 July 2019) • The FPC (UK) has set the UK CCyB at 1% from Nov 2018 • The CBI (ROI) announced its intention to increase the CCyB in Ireland from 0% to 1.0%, effective from 5 Jul 2019 • . The Systemic Risk Buffer under Article 133 CRD IV is currently not implemented in Irish law but may be introduced at the discretion of the Minister for Finance Pillar 2 Guidance (P2G) is not disclosed in accordance with regulatory preference, increase of 62bps in Capital Conservation Buffer (CCB) in 2019 was offset by a like for like reduction in P2G. In addition the P2G for 2019 reduced following the outcome of the 2018 EBA Stress Test 1 CCyB could be set in excess of 2.50% in exceptional circumstances. A change in the CCYB could also be implemented in less than 12 months in exceptional circumstances 2 Expected range for Pillar 2 Requirement Bank of Ireland#272018 Credit Presentation Risk Weighted Assets (RWAs) Customer lending average credit risk weights - Dec 2018 1/2 (Based on regulatory exposure class) EBA Transparency Exercise 2018 Country by Country Average IRB risk weights Residential Mortgages - June 2018 EAD³ RWA Avg. Risk (€bn) (€bn) Weight ROI Mortgages 24.2 8.3 34% Sweden 4.2% Belgium 9.7% UK Mortgages SME 21.5 4.8 22% 15.8 11.9 75% UK Finland 10.3% 10.7% France 11.3% Corporate 10.4 9.2 88% Netherlands 11.6% Other Retail 5.8 4.0 68% Austria 11.9% Spain 12.8% Customer lending credit risk 77.8 38.1 49% Denmark 14.1% Germany 14.3% • IRB approach accounts for: Norway 17.9% Portugal 19.5% Italy 19.9% Ireland 38.0% 70% of credit exposure at default (Dec 2017: 70%) 74% of credit RWA (Dec 2017: 73%) RWA has increased from €45.0bn at Dec 2017 to €47.8bn at Dec 2018 primarily driven by changes in book size and mix and the impact of TRIM • The Group's ROI mortgages average risk weight increased from 29% at June 2018 to 34% at Dec 2018, driven primarily by the impact of the TRIM exercise Corporates - June 2018 Sweden Denmark Germany Norway Netherlands Belgium Austria Finland UK Italy France Spain Ireland Portugal 26.9% 32.2% 40.4% 41.0% 43.3% 44.9% 46.3% 47.6% 48.3% 50.2% 54.1% 55.2% 61.7% 63.8% 26 26 1 EAD and RWA include both IRB and Standardised approaches and comprises both non-defaulted and defaulted loans 2 Securitised exposures are excluded from the table (i.e. excludes exposures included in CRT executed in Nov 2017 and Dec 2016) 3 Exposure at default (EAD) is a regulatory estimate of credit risk exposure consisting of both on balance exposures and off balance sheet commitments Bank of Ireland#28Capital/MREL Summary Highlights • Ratings . . Economy • Regulatory Ratios 2018 Credit Presentation BOIG (HoldCo) investment grade ratings with positive outlook from Moody's and S&P Upgrades to the Bank's senior ratings by Moody's and S&P reflect the issuance of bail-in-able debt by BOIG leading to greater protection for the Bank's senior creditors Continued economic growth in core markets; supporting strong organic capital generation of 180bps in 2018 The Group expects to maintain a CET1 ratio in excess of 13% on a regulatory basis and on a fully loaded basis by the end of the O-SII phase-in period¹ Robust regulatory ratios provide significant buffer to credit investors (c.500bps buffer to MDA) • MREL issuance of c.€1.2bn completed in 2018 MREL • Based on current MREL ratio and SRB MREL Policy, modest new MREL issuance expected c.€1bn-€2bn p.a. 1 The Other Systemically Important Institution (O-SII) buffer will be introduced at 0.5% in July 2019, increasing to 1.0% in July 2020 and 1.5% in July 2021 Bank of Ireland 27 27#29Appendix 2018 Credit Presentation Bank of Ireland 28#30Empty#31Appendix BOI Overview - Business profile Historic financial results Profile of customer loans Gross new lending volumes ROI mortgage loan book UK mortgage loan book Income Statement Divisional performance Interest Rate Sensitivity Net interest income analysis Non-core Items Transformation Investment • Asset Quality • • Non-performing exposures by portfolio Debt Securities at fair value through other comprehensive income (FVOCI) UK Customer Loans Capital CET1 ratios Capital Guidance and Distribution Policy Defined Benefit Pension Schemes Ordinary shareholders' equity and TNAV Cost income ratio: Dec 2018 Return on tangible equity (ROTE) Forward-Looking statement Contact Details 2018 Credit Presentation Slide No. 30 30 31 33 35 36 37 38 39 40 48 33444 444 72765 53 Bank of Ireland#32BOI Overview: Ireland Ireland's leading retail and commercial bank Consumer Retail Ireland Business Wealth 2018 Credit Presentation Corporate Ireland Corporate Banking Property Finance Unique customer franchise Supporting local communities & enterprises • • 1.7m active consumer customers 225k SME customers and 500k Wealth and Insurance customers 267 branches, >2,800 front line staff Reinventing branches with workbenches and event spaces driving local community, enterprise and business development activity • Over 550 Bank of Ireland led events including National Enterprise week and National Enterprise Town Awards Ireland #1 Corporate Bank in Ireland ⚫ #1 Bank for FDI into Ireland • Country-wide coverage via regional hubs Banking relationship with 60% of Ireland's top companies • >500 corporate customers: average 5 products held Growing preference 79% digitally active current account base for digital channels • >250% increase in mobile users 2012 - 2018 • Average of > 16m interactions in our digital channels every month per customer ⚫ Disciplined • approach to risk management 60 Specialist staff; >175 customers • Leading funder of investment property and construction Markets & Treasury • Leading treasury service provider • Track record of innovation Bank of Ireland 31#33BOI Overview: UK / International 2018 Credit Presentation Attractive UK and International businesses provide diversification and further opportunities for growth Corporate UK / International Retail UK Partnerships Northern Ireland Niche Businesses Corporate Banking UK Acquisition Finance • Over 40 years in Great Britain • 11.5k branches through Post Office partnership ⚫ #1 travel money business in the UK (FRES) • Access to 3.3m AA members • Full service retail and commercial bank A distribution network of 28 branches, including six business centres Over 190 years since first branch opened Motor asset finance and motor lease finance business Proven track record of strong growth and disciplined risk appetite • Leasing company of the year 2018 (up to 20,000 vehicles) ⚫ £1.8bn loan book with >175k customers • Sector focused business in UK with 5 specialist industry sectors, industrials & manufacturing, technology, consumer ⚫ & hospitality, media and business services • • >70 Customers • Scalable platform with highly disciplined approach and growth Mid market US / European Acquisition Finance business; strong 20 year+ record Well recognised lead arranger 5 international offices • >200 customers, c.85% business from repeat sponsors Bank of Ireland 32 32#34BOI Overview Income Statement 2018 Credit Presentation 33 33 FY 2014 FY 2015 FY 2016³ FY 20174 FY 2018 (€m) (€m) (€m) (€m) (€m) Total income 2,974 3,272 3,126 3,049 2,805 - Net interest income 2,358 2,454 2,298 2,248 2,146 - Other income (net) before additional gains 448 591 677 727 650 - Additional gains 168 227 151 74 9 Operating expenses (1,601) (1,746) (1,741) (1,796) (1,739) Transformation Investment charge¹ (41) (104) (113) Levies and Regulatory charges (72) (75) (109) (99) (101) Operating profit pre-impairment 1,301 1,451 1,235 1,050 852 Net impairment (losses) / gains (472) (296) (178) (15) 42 Share of associates / JVs 92 46 41 43 41 Underlying profit before tax 921 1,201 1,098 1,078 935 Non core items (1) 31 (63) (226) (100) Profit before tax 920 1,232 1,035 852 835 Net interest margin Cost/income ratio² Dividend per share 2.11% 2.19% 2.20% 2.29% 2.20% 54% 53% 57% 62% 66% 11.50 16.0c 1 Transformation Investment charge was previously disclosed as 'Core Banking Platform Investment charge', it has been updated to include the broader scope of Transformation covering Culture, Systems and Business Model 2 Cost/income ratio is calculated as operating expenses (excluding levies and regulatory charges) divided by total income 3 Comparative figures for 2016 have been restated to reflect the impact of the reclassification of the charges relating to the Central Bank of Ireland's Tracker Mortgage Examination Review as non-core and the impact of the voluntary change in the Group's accounting policy for Life assurance operations 4 Comparative figures have been restated to reflect the impact of the reclassification of €7 million of costs from the Transformation Investment charge (formerly the Core Banking Platform Investment charge) to Operating expenses (before Transformation Investment and levies and regulatory charges) for 2017 Bank of Ireland#35BOI Overview Summary Balance Sheet 2018 Credit Presentation 34 =4 Dec 14 (€bn) Dec 15 (€bn) Dec 16 (€bn) Dec 17 (€bn) Dec 18 (€bn) Customer loans¹ Liquid assets Wealth and Insurance assets Other assets Total assets Customer deposits Wholesale funding Wealth and Insurance liabilities Other liabilities Subordinated liabilities and AT1 Shareholders' equity 2232208 20 85 78 25 24 21 24 16 16 17 17 7 6 7 131 123 75 80 75 14 14 13 16 16 17 17 10 6 3 2 9 8 9 9 T2T52=1530 6276266753 77 17 79 11 17 9 Total liabilities & Shareholders' equity 130 131 123 123 124 Fully loaded CET1 ratio 9.3% 11.3% 12.3% 13.8% 13.4% Net stable funding ratio 114% 120% 122% 127% 130% Loan to deposit ratio TNAV per share 110% 106% 104% 100% 97% €6.49 €7.24 €7.40 €7.52 €7.85 1 Loans and advances to customers is stated after impairment loss allowance Bank of Ireland#36BOI Overview Profile of customer loans¹ at Dec 18 (Gross) 2018 Credit Presentation ROI UK RoW Total Total Composition (Dec 2018) (€bn) (€bn) (€bn) (€bn) (%) Mortgages 23.7 21.7 0.0 45.4 58% Non-property SME and corporate 10.8 4.62 4.1 19.5 24% SME 7.6 1.6 0.0 9.2 11% Corporate 3.2 3.0 4.1 10.3 13% Property and construction 5.7 1.9 0.7 8.3 11% Investment property 5.2 1.8 0.7 7.7 10% Land and development 0.5 0.1 0.0 0.6 1% Consumer 2.2 3.0 0.0 5.2 7% Customer loans (gross) 42.4 31.2 4.8 78.4 100% Geographic (%) 54% 40% 6% 100% 1 Based on geographic location of customer 2 Includes GB business and corporate loan books, which BOI was required to run down under its EU approved Restructuring Plan (2017: £0.7bn; 2018: £0.4bn) Bank of Ireland 35#37Gross new lending volumes €5.3bn Retail Ireland €5.7bn £4.6bn €2.3bn €2.0bn Retail UK £5.2bn 2018 Credit Presentation Corporate Banking €4.4bn €1.1bn €3.6bn £3.3bn €0.4bn €0.5bn £3.2bn €1.1bn €1.1bn €2.9bn €2.9bn 2017 2018 €0.7bn €1.2bn €1.1bn £1.6bn £1.1bn £0.2bn 2017 £0.2bn 2018 €0.9bn €0.6bn 2017 Mortgages Consumer Business Banking Property Corporate Ireland Acquisition Finance Corporate UK 2018 Bank of Ireland 36#38ROI Mortgages: €23.7bn New Lending volumes and Market Share 25% €1.4bn 27% €2.0bn 2018 Credit Presentation ROI Mortgages (gross) €24.3bn €24.1bn €23.7bn 27% €5.3bn €7.3bn €9.5bn €7.2bn €5.8bn €4.4bn €2.3bn 2016 2017 2018 New Lending Volumes¹ Market Share €11.8bn €10.9bn €9.8bn Dec 16 Dec 17 Dec 18 Tracker Variable Rates Fixed Rates 37 37 Pricing strategy • Fixed rate led mortgage pricing strategy which provides value, certainty and stability to our customers and to the Group • Fixed rate products accounted for c.92% of our new lending in 2018, up from c.30% in 2014 Distribution strategy • Market share of 27% in 2018 consistent with 2017 Re-entered the Irish mortgage broker market in late 2018 Wider proposition 7 in 10 ROI customers who take out a new mortgage take out a life assurance policy through BOI Group 3 in 10 ROI customers who take out a new mortgage take out a general insurance policy through BOI Group with insurance partners LTV profile Average LTV of 61% on existing mortgage stock at Dec 2018 (Dec 17: 63%, Dec 16: 72%) Average LTV of 71% on new mortgages in 2018 (Dec 17: 69% 2, Dec 16: 67%²) Tracker mortgages • €9.3bn or 95% of trackers at Dec 2018 are on a capital and interest repayment basis • 79% of trackers are Owner Occupier mortgages; 21% of trackers are Buy to Let mortgages • Loan asset spread on ECB tracker mortgages was c.65bps³ in 2018 1 Excluding portfolio acquisitions (2016 - €0.2bn; 2017 - €0.1bn; 2018 - Nil) 2 LTV on new business includes the impact of the portfolio acquisitions 3 Average customer pay rate of 109bps less Group average cost of funds of 44bps Bank of Ireland#39UK Mortgages: £19.4bn/€21.7bn £20.4bn UK Mortgages (gross) £20.0bn £20.4bn £19.4bn £2.2bn 2018 Credit Presentation UK Mortgages (gross) £20.0bn £2.0bn £19.4bn £1.7bn £8.5bn £9.6bn £10.4bn £7.4bn £7.5bn £7.5bn £4.0bn £3.3bn £2.7bn £10.8bn £10.6bn £10.2bn £7.9bn Dec 16 £7.1bn Dec 17 £6.3bn Dec 18 Tracker Variable Rates Fixed Rates UK Mortgages new lending volumes Dec 16 Dec 17 Standard Buy to let Self certified Dec 18 LTV profile • Average LTV of 62% on existing stock at Dec 2018 (Dec 17: 62%, Dec 16: 62%) • £3.2bn £3.3bn £2.8bn Average LTV of 72% on new UK mortgages in 2018 (2017: 72%, 2016: 71%) 2016 2017 2018 Bank of Ireland 38#40Income Statement Divisional performance Year ended Dec 18 Retail Ireland Wealth and Insurance (formerly Bank of Ireland Life) Retail UK - € Retail UK - £ Corporate and Treasury Group Centre & other Transformation Investment charge Group 2018 Credit Presentation 39 39 Underlying profit/(loss) before tax and additional gains/(losses) (Єm) 665 Additional gains/ (losses) Underlying profit/(loss) before tax (€m) (Єm) (16) 649 67 67 175 7 182 155 6 161 477 9 486 (346) 10 (336) (113) (113) 926 9 935 Underlying profit/(loss) before tax and additional gains Additional gains (Єm) Underlying profit/(loss) before tax (€m) (€m) 700 1 701 117 117 94 9 103 83 8 91 523 22 545 (326) 42 (284) (104) (104) 1,004 74 1,078 Year ended Dec 171 Retail Ireland Wealth and Insurance (formerly Bank of Ireland Life) Retail UK - € Retail UK - £ Corporate & Treasury Group Centre & Other Core Banking Platforms investment Group 1 Comparative figures have been restated to reflect the impact of: (i) the reclassification of €7 million of costs from the Transformation Investment charge (formerly the Core Banking Platform Investment charge) to Operating expenses (before Transformation Investment and levies and regulatory charges) for 2017. The Transformation Investment charge has been booked in Group Centre for the current and comparative year; (ii) the Group's decision to re-organise the Wealth and Insurance operating segment (formerly Bank of Ireland Life) to incorporate the Private Banking and Insurance Services business units which were previously reported within Retail Ireland. This has resulted in an increase of €11 million in the underlying profit before tax of Wealth and Insurance and a corresponding decrease in the underlying profit before tax of Retail Ireland for 2017; and (ii) the Group's decision to reorganise the Corporate and Treasury segment to incorporate Group Treasury's costs which were previously reported within Group Centre. This has resulted in a decrease of €8million in the underlying profit before tax of Corporate and Treasury and a corresponding increase in Group Centre for 2017 Bank of Ireland#41Interest Rate Sensitivity 2018 Credit Presentation The table below shows the estimated sensitivity of the Group's income (before tax) to an instantaneous and sustained 1% parallel movement in interest rates Estimated sensitivity on Group income (1 year horizon) 100bps higher 100bps lower Dec 17 Dec 18 (€m) (€m) c.170 c.180 (c.200) (c.210) The estimates are based on management assumptions primarily related to: . the re-pricing of customer transactions; . the relationship between key official interest rates set by Monetary Authorities and market determined interest rates; and . the assumption of a static balance sheet by size and composition 40 40 In addition, changes in market interest rates could impact a range of other items including the valuation of the Group's IAS19 defined benefit pension schemes Bank of Ireland#42Income Statement Net interest income analysis 2018 Credit Presentation Hồ 2017 H2 2017 H1 2018 H2 2018 Average Gross Gross Volumes Interest Rate (Єbn) (€m) (%) Average Gross Volumes Interest (€bn) (€m) Gross Rate (%) Ireland Loans¹ 35.5 547 3.11% 35.3 545 3.07% Average Gross Volumes Interest (Єbn) (Єm) 34.6 Gross Average Gross Rate Volumes Interest (%) (€bn) (Єm) Gross Rate (%) 531 3.09% 34.4 531 3.06% UK Loans 29.5 460 3.15% 28.0 430 3.05% 28.1 440 3.16% 27.6 447 3.21% C&T Loans 12.7 254 4.03% 12.8 253 3.92% 13.6 259 3.85% 14.6 287 3.89% Total Loans & Advances to Customers 77.7 1,261 3.27% 76.1 1,228 3.20% 76.3 1,230 3.25% 76.6 1,265 3.28% Liquid Assets 21.3 49 0.46% 20.8 43 0.41% 22.1 35 0.32% 22.7 38. 0.33% NAMA Sub Debt 0.3 17 11.97% 0.3 17 11.97% Total Interest Earning Assets 99.3 1,327 2.70% 97.2 1,288 Ireland Deposits 20.6 (12) Credit Balances² 27.1 0 (0.00%) UK Deposits C&T Deposits 19.3 (83) (0.86%) 6.0 (10) (0.35%) Total Deposits 73.0 (105) (0.29%) (0.12%) 20.4 29.3 18.2 5.2 73.1 (9) + © 2.63% (0.08%) 20.5 0.03% 30.5 (74) (0.80%) 18.9 (0.35%) 4.7 0.2 98.6 4 1,269 (8) 2 (81) (9) 3.50% 0.1 2.60% 99.4 (0.08%) 20.7 0.01% 32.8 (0.86%) 18.6 (0.39%) 4.9 2 5.24% 1,305 2.60% (8) (0.08%) 3 0.02% (88) (0.94%) (9) (0.37%) (88) (0.24%) 74.6 (96) (0.26%) 77.0 (102) (0.26%) Wholesale Funding³ 14.3 (43) (0.60%) 12.3 (36) (0.58%) 12.3 (45) (0.73%) 11.0 (52) (0.94%) Subordinated Liabilities 1.4 (35) (5.17%) 1.8 (42) Total Interest Bearing Liabilities 88.7 (183) (0.42%) 87.2 (166) (4.80%) 2.1 (0.38%) 89.0 (49) (190) (0.43%) (4.77%) 2.1 (51) (4.86%) 90.1 (205) (0.45%) IFRS Income Classification Other4 (8) 7 5 7 7 (25) 9 (22) Net Interest Margin 99.3 1,143 Average ECB Base rate Average 3 month Euribor Average BOE Base rate 2.32% 0.00% 97.2 1,102 2.25% 0.00% 98.6 1,095 2.23% 0.00% 99.4 1,085 2.17% 0.00% (0.33%) (0.33%) (0.33%) (0.32%) 0.25% 0.32% 0.50% 0.70% Average 3 month LIBOR 0.33% 0.38% 0.62% 0.82% 1 Includes average interest earning assets of c.€0.3bn in 2018 carried at Fair Value through Profit or Loss with associated FY18 interest income of c.€15m 2 Credit balances in H2 2018: ROI €25.4bn, UK €3.3bn, C&T €4.1bn 3 Includes impact of credit risk transfer transactions executed in Dec 2016 and Nov 2017 4 Includes customer termination fees, EIR adjustments and other adjustments that are expected to be of a non-recurring nature Bank of Ireland 41#43Non-core items Cost of restructuring programme - Transformation investment costs' Other restructuring charges² Gain on disposal of Property Gross-up for policyholder tax in the Wealth and Insurance business Investment return on treasury stock held for policyholders (Loss) / gain on disposal / liquidation of business activities Tracker Mortgage Examination Review charges (Charge) gain arising on the movement in the Group's credit spreads 2018 Credit Presentation (Єm) FY 2017 FY 2018 (Єm) (48) (111) (48) (93) (18) 7 10 (7) (1) (5) (170) 651 (5) Cost of corporate reorganisation and establishment of a new holding company Total non-core items (7) (226) (100) 42 42 1 Transformation Investment costs of €93 million primarily relate to a reduction in employee numbers (€74 million), programme management costs (€8 million) and costs related to the implementation of the Group's property strategy (€11 million) 2 Other restructuring charges of €18 million primarily relate to impairment of property, plant and equipment and intangible assets Bank of Ireland#44Transformation Investment 2016-21 investment: €1.4bn €306m 2018 Credit Presentation Increasing our investment to support growth and drive efficiencies Average of €275m p.a. • Scope: Culture, Systems, Business Model 2016 2017 2018 2019 2020 2021 Average annual investment of €275m from 2018-2021; equates to CET1 capital of c.50-60bps p.a. Expected accounting treatment of investment (average €275m p.a.): - 40% capitalised as intangible asset 40% charged as Transformation Investment charge in the Income statement 20% charged as non-core restructuring costs in the Income statement - Costs will decrease every year in absolute terms c.65% c.65%¹ c.50% c.€1.9bn €1,796m €1,739m €104m 2017 €113m 2018 Operating expenses 1 See Slide 51 for calculation. 2019 2020 Transformation Investment charge Cost income ratio c.€1.7bn 2021 Efficiency targets • Cost target of c.€1.7bn in 2021 Costs reduce every year: 2018-2021 Cost income ratio improves from 65% to c.50% in 2021 Bank of Ireland 43 43#45Non-performing exposures by portfolio 2018 Credit Presentation Advances Composition (Dec 18) (€bn) Non-performing exposures (€bn) Non-performing exposures as % of advances Impairment loss allowance (€bn) Impairment loss allowance as % of non-performing exposures Residential Mortgages 45.4 2.8 6.0% 0.5 20% - Republic of Ireland 23.7 2.3 9.5% 0.4 21% - UK 21.7 0.5 2.3% 0.1 15% Non-property SME and Corporate 19.5 1.2 6.2% 0.6 52% - Republic of Ireland SME 7.6 0.8 11.2% 0.4 49% - UK SME 1.6 0.1 6.1% 0.1 53% - Corporate 10.3 0.3 2.6% 0.1 60% Property and construction 8.3 0.9 11.0% 0.4 45% - Investment property 7.7 0.8 10.7% 0.4 44% - Land and development 0.6 0.1 14.0% 0.0 54% Consumer 5.2 0.1 2.1% 0.2 140% Total loans and advances to customers 78.4 5.0 6.3% 1.7 35% Composition (Dec 17) Advances (€bn) Non-performing exposures (€bn) Non-performing exposures as % of advances Impairment loss allowance Impairment loss allowance as % of (€bn) non-performing exposures Residential Mortgages 46.7 - Republic of Ireland 24.1 32 3.1 2.7 17 6.6% 0.7 11.0% 0.6 - UK 22.6 0.4 1.9% 0.1 761 23% 24% 14% Non-property SME and Corporate 18.7 1.7 8.9% 0.9 49% - Republic of Ireland SME 8.2 1.3 15.4% 0.6 46% - UK SME 1.7 0.1 8.6% 0.1 42% - Corporate 8.8 0.3 3.0% 0.2 69% Property and construction 8.8 1.7 19.1% 0.7 44% - Investment property 8.3 1.5 17.9% 0.6 43% - Land and development 0.5 0.2 39.4% 0.1 55% Consumer 4.3 0.1 2.1% 0.1 98% Total loans and advances to customers 78.5 6.5 8.3% 2.4 36% Bank of Ireland 44#46Debt Securities at fair value through other comprehensive income (FVOCI) 2018 Credit Presentation ROI UK France Other Dec 18 (€bn) (€bn) (€bn) (€bn) (€bn) Dec 171 (€bn) Sovereign bonds 2.6 0.8 2.6 6.0 7.5 Senior debt 0.3 1.9 2.2 2.1 Covered bonds 0.2 0.4 0.9 2.2 3.7 3.1 Subordinated debt 0.1 0.1 0.4 Asset backed securities 0.0 0.1 Total FVOCI Reserve 2.8 0.2 0.4 2.0 6.8 12.0 13.2 0.2 0.3 Portfolio • On 1 Jan 2018, debt securities classified as AFS financial assets under IAS39 were reclassified in accordance with IFRS 9 • . The Group held €12.0bn of FVOCI debt securities at Dec 2018. Weighted average instrument level credit rating of the FVOCI portfolio is A+ Other exposures of €6.8bn include supranational entities (€1.7bn), Spain (€0.9bn), Belgium (€0.9bn), Sweden (€0.8bn), and Other (€2.5bn - all exposures less than €0.5bn) NAMA • • On 1 Jan 2018, on transition to IFRS 9, the previous unamortised discount² which was amortising to the income statement under IAS39, was transferred in full to retained earnings (NIM impact c.2bps) In April 2018, the Group sold €0.2bn of NAMA subordinated bonds in a buy-back auction generating an additional gain in the income statement of c.€9m • The Group holds NAMA subordinated bonds - €70m nominal value, valued at 104% at Dec 2018 (Dec 17 - 104%) 1 The Group held €13.2bn of AFS financial assets at Dec 17 which were reclassified under IFRS 9 to FVOCI (€10.1bn), Amortised Cost (€2.8bn) and FVTPL (€0.3bn) 2 An initial discount was recognised on the NAMA subordinated bonds with subsequent changes in fair value being recognised in the AFS Reserve Bank of Ireland 45#47UK Customer Loans £27.9bn (€31.2bn) UK Mortgages - £19.4bn Scotland, £1.1bn Northern Ireland,. £1.0bn Rest of England,. £8.9bn Wales, £0.7bn Greater London, £3.6bn Outer Metropolitan, £2.2bn South East, £1.9bn Other UK Customer Loans - £8.5bn £0.1bn £0.2bn £0.1bn £2.5bn £1.3bn SME Corporate £0.04bn £2.6bn £1.5bn £0.01bn £0.15bn Land & Development Consumer Investment Property Performing loans Non-performing exposures UK Mortgages Analysis - £19.4bn . Total UK mortgages of £19.4bn; (NPES: 2%) 2018 Credit Presentation Average LTV of 62% on total book (2017: 62%) Average LTV of 72% on new mortgages (2017: 72%) 70% of mortgages originated since January 2010 are standard owner occupier mortgages BTL book is well seasoned with 71% of these mortgages originating prior to January 2010 Average balance of Greater London mortgages is c.£190k, with 93% of Greater London mortgages having an indexed LTV <70% Other UK Customer Loans Analysis - £8.5bn Non-performing exposures of £0.4bn with strong coverage ratios Performing loans of £8.1bn; SME: broad sectoral diversification with low concentration risk Corporate: specialist lending teams in Acquisition Finance, Project Finance, and Corporate lending through a focused sector strategy Investment Property: primarily Retail, Office and Residential sectors Consumer (£2.7bn): Northridge (£1.4bn): Asset backed motor finance business; net loan book increase of £0.3bn in 2018; mid-market pricing targeting prime business only; below industry arrears and loan losses Personal loan volumes (£0.7bn): net loan book increase of £0.3bn in 2018; improved credit risk process has driven increase in customer applications and drawdowns Credit cards (£0.6bn): classified as held for sale as at Dec 2018 Bank of Ireland 46#48Capital CET1 ratios - Dec 2018 Regulatory ratio (€bn) 2018 Credit Presentation Fully loaded ratio (€bn) Total equity Less Additional Tier 1 Deferred tax¹ Intangible assets and goodwill Foreseeable dividend² Expected loss deduction Other items³ Common Equity Tier 1 Capital Credit RWA Operational RWA Market, CCR and Securitisations Total RWA Common Equity Tier 1 ratio Total Capital Ratio Leverage Ratio Phasing impacts on Regulatory ratio • 10.1 10.1. (0.8) (0.8) (0.4) (1.1) (0.7) (0.7) (0.2) (0.2) (0.6) (0.6) (0.2) (0.3) 7.2 6.4 41.6 41.4 4.5 4.5 1.7 1.7 47.8 47.6 15.0% 13.4% 18.8% 17.2% 7.0% 6.3% Deferred tax assets - certain DTAs¹ are deducted at a rate of 40% for 2018, increasing annually at a rate of 10% thereafter until 2024 • IFRS 9 - the Group has elected to apply the transitional arrangement which on a Regulatory CET1 basis resulted in minimal impact from initial adoption and will partially mitigate future impacts in the period to 2022. The transitional arrangement allows a 95% add-back in 2018, decreasing to 85%, 70%, 50% and 25% in subsequent years 1 Deferred tax assets due to temporary differences are included in other RWA with a 250% risk weighting applied 2 Dividend deduction of €173m 3 Other items - the principal items being the cash flow hedge reserve, securitisation deduction and 10%/15% threshold deduction Bank of Ireland 47#49Capital Guidance and Distribution Policy 2018 Credit Presentation Capital Guidance • The Group expects to maintain a CET1 ratio in excess of 13% on a regulatory basis and on a fully loaded basis by the end of the O-SII phase-in period¹ Distribution Policy • This includes meeting applicable regulatory capital requirements plus an appropriate management buffer • The Group expects that dividends will increase on a prudent and progressive basis and, over time, will build towards a payout ratio of around 50% of sustainable earnings • Dividend level and rate of progression will reflect, amongst other things: Strength of the Group's capital and capital generation; - Board's assessment of growth and investment opportunities available; Any capital the Group retains to cover uncertainties; and Any impact from the evolving regulatory and accounting environments • Other means of capital distribution will be considered to the extent the Group has excess capital Proposed Dividend Proposed dividend of 16 cent per share / €173m in respect of 2018, increased from 11.5 cent per share / €124m in 2017 1 The Other Systemically Important Institution (O-SII) buffer will be introduced at 0.5% in July 2019, increasing to 1.0% in July 2020 and 1.5% in July 2021 Bank of Ireland 48#50Defined Benefit Pension Schemes Group IAS19 Defined Benefit Pension Deficit 2018 Credit Presentation Mix of BSPF* Defined Benefit Pension Scheme Assets (%)¹ 1.60% €1.19bn 2.20% 2.10% 2.00% €0.45bn €0.48bn €0.23bn €4.0bn €5.5bn €5.6bn 45% 61% 72% 11% 21% 44% 18% Dec 12 Dec 17 23% 5% Dec 18 19 49 €313m Jun 16 Dec 16 IAS19 DB Pension Deficit Dec 17 Dec 18 EUR Discount Rate IAS19 Pension Deficit Sensitivities (Jun 2016 / Dec 2016 Dec 2017 / Dec 2018) €176m €173m €162m €162m €153m €122m €124m €128m €90m €118m €102m €71m €55m €28m €28m Interest Rates¹ Credit Spreads² Inflation³ Global Equity 1 Sensitivity of Group deficit to a 0.25% decrease in interest rates 2 Sensitivity of IAS19 liabilities to a 0.10% decrease in credit spread over risk free rates 3 Sensitivity of Group deficit to a 0.10% increase in long term inflation 4 Sensitivity of deficit to a 5% decrease in global equity markets with allowance for other correlated diversified asset classes Listed equities Diversified assets2 Credit / LDI / Hedging * BSPF = Bank of Ireland Staff Pensions Fund Graphs shows BSPF asset allocation. BSPF represents approx. 77% of DB Pension assets 2 Diversified assets includes infrastructure, private equity, hedge funds and property • IAS19 Pension deficit of €0.23bn at Dec 2018: schemes in deficit €0.27bn, schemes in surplus €0.04bn • The primary drivers of the movement were: - - Deficit reducing contribution of c. €82m to BSPF and c.€34m to other schemes Net positive impact of changes in long term assumptions and experience in 2018 • The Group has continued to support Trustees in diversifying asset portfolios away from listed equity into other return-seeking but potentially less volatile asset classes. In Q4 2018 the BSPF investment in listed equities was reduced from 15% to 5% • BSPF asset returns of +1.5% and +2.6%.p.a. were achieved over 1 year and 3 years respectively to end Dec 2018 Bank of Ireland#51Ordinary shareholders' equity and TNAV 2018 Credit Presentation 2017 2018 Movement in ordinary shareholders' equity (Єm) (€m) Ordinary shareholders' equity at beginning of period 8,612 8,859 Movements: Profit attributable to shareholders Impact of adopting IFRS 9 664 620 (31) Dividend paid to ordinary shareholders (2017 dividend of 11.5c per share) (124) Dividends on preference equity interests (4) Distribution on other equity instruments - additional tier 1 coupon (net of tax) (24) Remeasurement of the net defined benefit pension liability (113) 129 Debt instruments at FVOCI reserve movements 133 Available for sale (AFS) reserve movements (9) (341) Cash flow hedge reserve movement Foreign exchange movements Other movements Ordinary shareholders' equity at end of period (115) (51) (147) 10 39 8,859 9,243 Tangible net asset value Dec 17 (€m) Ordinary shareholders' equity at the end of period Adjustments: 8,859 Dec 18 (€m) 9,243 Intangible assets and goodwill (779) (802) Own stock held for benefit of life assurance policyholders Tangible net asset value (TNAV) 33 25 8,113 8,466 Number of ordinary shares in issue at the end of the period 1,079 1,079 TNAV per share (€) €7.52 €7.85 Bank of Ireland 50#52Cost income ratio: Dec 2018 Headline vs. Adjusted Net interest income Other income - Business income FY 2018 Headline (€m) 2,146 Pro forma adjustments (Єm) 2018 Credit Presentation FY 2018 Pro forma (Єm) 2,146 672 672 - Additional gains 9 (9) - Other valuation items¹ (22) 56 34 Total Income 2,805 47 2,852 Costs - Operating expenses - Transformation Investment Costs Cost income ratio • Cost income ratio excludes; • - - Levies and Regulatory charges Non-core items 1 Excludes IFRS income classifications which is fully offset in net interest income 1,739 113 1,852 66% 2018 adjusted cost income ratio is adjusted for; Additional Gains and valuation items¹ (€47m) - 1,739 113 1,852 65% Bank of Ireland 51#53Return on tangible equity (ROTE) 2018: Headline vs. Adjusted 2018 Credit Presentation Adjustment for CET1 Ratio at 13% 2018 Adjusted (€m) Additional gains, 2018 Headline & valuations (Єm) items¹, net of tax Adjustments 2018 impairment gains, net of tax "Normalised❞ impairment adjustment, net of tax Profit for the period 675 Non-Core items, net of tax 78 Coupon on Additional Tier 1 securities (48) Preference share dividends (7) Adjusted profit after tax 698 38 (34) (127) At Dec 2018 Shareholders' equity 9,243 Intangible assets (802) Shareholders' tangible equity 8,441 Average shareholders' tangible equity 8,229 Return on tangible equity (ROTE) 8.5% ⚫ 2018 Adjusted Return on Tangible Equity is adjusted for; Additional gains and valuations items¹, net of tax - €38m - Reversal of 2018 net impairment gain 2018, net of tax - €34m "Normalised" impairment charge (20bps), net of tax - €127m Average Shareholders' tangible equity calculated on a CET1 Ratio at 13% - €296m 1 Excludes IFRS income classifications which is fully offset in net interest income 575 (184) 9,059 (802) (184) 8,257 (296) 7,933 7.2% 52 62 Bank of Ireland#54Forward-Looking statement 2018 Credit Presentation 33 53 This document contains forward-looking statements with respect to certain of the Bank of Ireland Group plc (the 'Company' or 'BOIG plc') and its subsidiaries' (collectively the 'Group' or 'BOIG plc Group') plans and its current goals and expectations relating to its future financial condition and performance, the markets in which it operates and its future capital requirements. These forward-looking statements often can be identified by the fact that they do not relate only to historical or current facts. Generally, but not always, words such as 'may,' 'could,' 'should,' 'will,' 'expect," "intend,' 'estimate,' 'anticipate,' 'assume,' 'believe,' 'plan,' 'seek,' 'continue,' 'target,' 'goal,' 'would,' or their negative variations or similar expressions identify forward-looking statements, but their absence does not mean that a statement is not forward-looking. Examples of forward-looking statements include, among others: statements regarding the Group's near term and longer term future capital requirements and ratios, level of ownership by the Irish Government, loan to deposit ratios, expected impairment charges, the level of the Group's assets, the Group's financial position, future income, business strategy, projected costs, margins, future payment of dividends, the implementation of changes in respect of certain of the Group's pension schemes, estimates of capital expenditures, discussions with Irish, United Kingdom, European and other regulators and plans and objectives for future operations. Such forward-looking statements are inherently subject to risks and uncertainties, and hence actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, those as set out in the Risk Management Report in the Group's Annual Report for the year ended 31 December 2018. Investors should also read 'Principal Risks and Uncertainties' in the Group's Annual Report for the year ended 31 December 2018 beginning on page 61. Nothing in this document should be considered to be a forecast of future profitability or financial position of the Group and none of the information in this document is or is intended to be a profit forecast or profit estimate. Any forward-looking statement speaks only as at the date it is made. The Group does not undertake to release publicly any revision to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date hereof. Bank of Ireland#55Contact Details For further information please contact: • Group Chief Financial Officer Andrew Keating tel: +353 76 623 5141 [email protected] • Investor Relations Darach O'Leary tel: +353 76 624 4711 Colin Wallace tel: +353 76 623 5135 [email protected] [email protected] • Chief Executive, Markets and Treasury Sean Crowe tel: +353 76 623 4720 [email protected] • Capital Management Lorraine Smyth • Alan Elliott Alan McNamara Wholesale Funding Redmond O'Leary Deirdre Ceannt tel: +353 76 624 8409 tel: +353 76 624 4371 tel: +353 76 624 8725 tel: +353 76 6244198 tel: +353 76 6244219 • Investor Relations website [email protected] [email protected] [email protected] [email protected] [email protected] www.bankofireland.com/investor 2018 Credit Presentation Bank of Ireland 54#56Empty