Bank of Ireland Group plc Annual Report

1 Bank of Ireland Group plcAnnual Report 2020 HoldCo Annual Report 2020 - 1 27/02/2021 03:18 Page 1 Bank of IrelandAnnual Report 20202 Inside this reportStrategic Report 32020 key performance highlights 3 Chairman s review 4 Chief Executive s review 8 Our Ambition, Purpose and Values 12 Our strategy 13 Responsible and Sustainable Business at Bank of Ireland 20 Governance in action 42 Risk review 45 Financial Review 47

2 Governance 71 Risk Management Report 134 Financial Statements 190 Other Information 342 2020 was an exceptional year with a myriad of challengesforpeople, communitieswhere we operate, and for allbusinesses, including banks. At Bank of Ireland ,from thestart of the covid -19 crisis, we quickly focused ourresources and effortsonprotectingandsupportingourcusto mers, colleagues and communities.

3 The investmentwe vemadeinrecentyearsin transforming our culture,systems and business model underpinned our ability toquickly adapt to the impacts of covid -19. Francesca McDonaghGroup Chief ExecutiveThe Group 's forward looking statementcan be found on page this Report onlineThis Annual Report and other information relating toBank of Ireland is available at: Annual Report 2020 - 1 27/02/2021 03:18 Page 2 Bank of IrelandAnnual Report 2020 Strategic ReportRisk Management ReportFinancial StatementsOther InformationFinancial ReviewGovernance3 Financial Performance Return toprofitability in H2 2020.

4 Net interest margin of (2019: ). 6thstraight reporting period of reductions;costs reduced by further 4% vs. 2019. Irish mortgage market; share increased 2% to in 2020. Total operating income2reduced by 8% versus 2019; lowerbusiness income and valuation item movements. Underlying1lossbefore tax 374m(2019: 758m profit)Loss before tax 760m(2019: 645m profit)Asset Quality Net credit impairment charge of (2019: ), of which relates to performing loans. NPE ratio increased from in 2019 to ; stable in H2.

5 Payment break outcomes more positive than expected; 94% expired and only migratedinto new charge (2019: 215m)Transformation Achieved 2021 cost target of c. year early. New cost target of by 2023. Further progress in the UK; Northern Ireland strategic review complete. Digital progresssupports newbranch strategy; of branches to closeReduction inunderlying operatingexpenses24%/ 65m(2019: <4%/ 67m)Capital Strong capital position; regulatory CET1 ratio and headroom to minimum regulatory requirements; fully loaded CET1 ratio Pre-impairment organic capital generation of 80bps in H2 vs 45bps in H1 Successfully completed two Additional Tier 1 (AT1)transactions, totalling 975 engagement score(increase of 5% since Q4 2019)59:41male / female appointments tomanagement andleadership positions77% reduction in carbonemissions intensity (on2011 baseline)c.

6 10minvested in learningand development forcolleagues10ksecondary school pupils availed of 'MoneySmarts', a free financialeducation programme 2bnSustainable Finance Fund and first bank inIreland to introduce agreen mortgage2020 key performance highlightsStrategic Report1 The Group s financial results are presented on an underlying basis. Underlying excludes non-core items which are those items of 386 million that the Group believes obscure the underlyingperformance trends in the business. For further details on the Group 's non-core items see page income net of insurance now categorised as arrears not in arrears prior to payment breaks; as at 12 February core transformation investment charges, exclude non-core items of 424million, levies and regulatory charges of 125 million and impairment of intangibleassets and goodwill of 12 million.

7 Including these items total costs were 216 million or 10% higher than2019. The calculation of which is set out on page information on financial measuresreferred to in our 2020 key performancehighlights is found in Alternative performancemeasures on page loaded CET1 (2019: )Regulatory CET1 (2019: )HoldCo Annual Report 2020 - 1 27/02/2021 03:18 Page 3 Chairman s reviewOur purpose, to enable our customers, colleagues andcommunities to thrive, was a clear North Star for theGroup in responding to covid -19. The banking systemsupported the economy during the pandemic, and willcontinue to be a key player in the impact of covid -19 on our society hasbeen unprecedented.

8 On behalf of theBoard of Bank of Ireland , I would like toextend our sympathies to all who havebeen affected by the pandemic. I wouldalso like to thank Francesca and herleadership team, and all of our colleaguesacross the Group , for their ongoingcommitment to our customers over auniquely challenging path to post- covid -19 normality is nowbecoming visible; however, theconsequences of the pandemic willendure for some considerable time for usall, including for Bank of Ireland . Otherexternal challenges include the interestrate environment, and continueduncertainties relating to the UK s decisionto leave the European Union.

9 That said, as the leading lender to thefastest-growing economy in Europe lastyear, the Group benefits from an extensivecustomer base and franchise in a countrywith one of the youngest, fastest-growingpopulations in the developed progress was made in 2020 onadvancing the Group s strategy. Wemaintained strong momentum on our keypriorities and accelerated certaininitiatives in response to changingcustomer behaviours, needs andexpectations. Our customers availed of a wide range ofnew digital enhancements during the hit our 2018 Investor Day target toreduce our cost1base to c.

10 Billion oneyear earlyand we now target reducing ourcost base to billion by 2023. Wecontinued to progress our strategicpriority to improve returns in our UKbusiness. In Great Britain, we will have a morefocused, smaller, but more profitablebusiness. In Northern Ireland , we willoptimise our physical footprint while alsoinvesting in technology to support ourbusiness. We will also relocate our UKHeadquarters from London to Belfast,reinforcing our commitment to NorthernIreland, where Bank of Ireland has had apresence since preferences continue to evolve,and our significant transformationinvestment over recent years hasimproved our technology infrastructure,digital offering and customer the same time, we have seen asustained decline in the use of ourbranches.