Allied Irish Banks, p.l.c.
Introduction to
AIB Mortgage Bank (AIBMB)
Covered Bond Programme
Aaa / AAA / AAA
Benchmark Transaction
December 2006
1
Contents
 Overview of Allied Irish Banks p.l.c.
 The Irish Economy and the Irish Housing Market
 AIB’s Funding Profile
 AIB Mortgage Bank’s ACS Issuance
2
Allied Irish Banks, p.l.c.



Ireland’s largest publicly quoted company

By market capitalisation


Y/E 2005
- total assets € 133bn, PBT € 1.7bn
1H 2006
- total assets € 144bn, PBT €1.2bn

Senior debt ratings
Retail & commercial bank with strong franchises in all geographies
# 1 bank in Ireland with leading market shares in core banking products
 €18.6bn (November 2006)
 >17% of Irish Stock Market Index
Moody’s
S&P
Fitch IBCA
‘Aa3’ (stable outlook)
‘A+’ (stable outlook)
‘AA-’ (stable outlook)
3
Geographic profile- June ‘06
AIB Bank, ROI Division
PBT
37%
RWA’s
41%
5yr Av.GDP 5.1%
M&T Bank
Shareholding of 24% in M&T Bank
Contribution to PBT 7%
5yr Av.GDP
2.6%
UK Division
Capital Markets Division
PBT 27%
RWA’s 37%
PBT
15%
RWA’s
18%
5yr Av.GDP 2.3%
Poland Division
PBT
10%
RWA’s
4%
5yr Av.GDP 3.0%
4
Divisional Performance
Profit before tax
2005
2006 (H1)
 AIB Bank Republic of Ireland
€779m 24%
€453m 19%
 AIB GB & NI
€322m 18%
€184m 18%
 Capital Markets
€403m27%
€300m 45%
 Poland
€132m13%
€114m 62%
 M&T *
€148m 16%
€80m 11%

* after tax figure
5
Strong asset quality and robust capital
2004
2005
2006(H1)
1.3%
Impaired loans (ILs)
1.0%
0.8%
5.8%
Criticised loans / total loans
5.1%
5.1%
0.7%
Gross new ILs
0.4%
0.4%
73%
Total provisions / ILs
78 %
81%
15 bps
3bpts
Tier 1
7.2%
8.0%
Total Capital
10.7%
11.1%
20bpts
Bad debt charge
6
Key performance features
 Double digit growth in all principal franchises
 Cost / income ratio  2.7% and down in all divisions
 Investing in our people to underpin rates of retention &
recruitment
 Operating profit  24%
 Strong asset quality, impaired loans  to 0.8% and
down / stable in all divisions
 Intense focus on single enterprise operations
 Robust capital and funding positions
Confident we will continue to achieve balanced and well managed growth
7
The Irish Economy and Housing Market
8
Republic of Ireland Economic Trends
1990
1995
2000
2005 (e)
2006 (f)
Population (‘000)
3,506
3,601
3,789
4,131
4,235
Employment (‘000)
1,160
1,282
1,671
1,929
1,997
Unemployment (‘000)
172
177
75
86
89
Unemployment (%)
12.9
12.2
4.3
4.2
4.2
3.4
2.5
5.6
2.5
4.0
(2.0)
(1.7)
3.6
(0.4)
0
GNP per capita (€)
8,712
12,936
23,460
32,935
34,165
GNP growth rate
7.1%
8.9%
9.2%
5.4%
6.3%
94.0
81.0
37.8
27.4
25.0
Inflation (%)*
Exchequer + / (-) as (% GNP)
Gen. Govt. Debt/GDP (%)
9
The Irish Labour Market Has Been Transformed
The Irish Labour Market Has been Transformed
(‘000s)
2,000
(%)
Total Employment ’00S (LHS)
18
1,800
16
1,600
14
1,400
12
1,200
10
1,000
8
800
600
Unemployment Rate % (RHS)
6
4
200
2
0
0
Ap
r92
Ap
r94
Ap
r96
Q
4'
'9
7
Q
2'
98
Q
4
'9
8
Q
2
'9
9
Q
4
'9
9
Q
2
'0
0
Q
4
'0
0
Q
2
'0
1
Q
4
'0
1
Q
2
'0
2
Q
4
'0
2
Q
2
'0
3
Q
4
'0
3
Q
2'
04
Q
4
'0
4
400
10
Population Growth
Population Age Profile Estimates
(m)
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
0-14
15-24
1996 Census
Source: DOE and ESRI
25-44
2002 Census
45-54
55-64
65+
2010 CSO Projections
11
Robust Public Finances
 Government budget
 Surpluses average 1.5% of GDP since 1997
 Budget close to balance in coming years
 Large current budget surpluses
 Significant capital expenditure/borrowing
 Gen Gov Debt/GDP ratio
 27.4% at end 2005(e) and declining
 Down from 90% of GDP during the 1990’s
 Compares very favourably to eurozone average Debt/GDB of 71%
 Relatively Low Tax Economy
 Corporation Tax @ 12 ½% ; well below eurozone average
 Personal Tax & Insurance Rates are LOW, no property taxes
12
Many Factors Underpin Strong Housing Demand
 Continued strong inward migration
 Favourable demographic trends
 Untapped demand – Rising Headship rates
 Demand for second homes
 Strong growth in economy and employment
 Maturity of Government savings scheme (SSIA’s) in 2006/7
 Home ownership is seen as an attractive tax efficient savings scheme,
there are no personal or municipal taxes on residential property
13
Functional Demand for House Completions (Year to April)
Indigenous Population
Growth
Migration Flows
Headship
Second Homes
Replacement of Obsolete
Units
Completions
Avg
Avg
1996 –
2002 -
2002
2006
2006
2007
2008
(e)
(f)
(f)
12,550
16,500
16,300
16,300
16,300
13,650
17,800
25,800
27,700
24,000
1,250
17,000
24,000
26,000
21,500
10,800
14,000
11,500
10,800
8,600
6,500
8,300
8,800
9,200
9,600
44,750
73,600
86,400
90,000
80,000
14
Summary: A Sound Economy

Public finances to remain close to balance

Very low national debt. Declining debt/GDP ratio

Low tax economy attracting FDI and workers

Virtual full employment despite high immigration

Favourable demographics supporting growth

Inflation back close to Eurozone average
15
Allied Irish Banks, p.l.c
Funding Profile
16
AIB’s Publicly Traded Securities


Short Term Instruments

Certificates of Deposit , €, STG, US$, Can$, A$

US $ 10 bn Commercial Paper Programme

US $ 10 bn Yankee CD Programme

€ 5b French Certificate of Deposit Programme*

Can $3b Maple Commercial Paper Programme*
Long Term Instruments

AIB plc ( Aa3 / A+ / AA-)
€ 30 b EMTN programme

AIB Mortgage Bank (Aaa / AAA / AAA)
€ 15b covered bond EMTN programme
17
Source of funds
%
100
80
60
10%
4%
10%
10%
6%
3%
7%
24%
25%
52%
49%
2005
H1 2006
Capital
Senior Debt
ACS
CDs & CPs
Deposits by banks
Customer a/cs
40
20
0
18
Debt funding – well distributed and diversified
Debt Distribution October 2006
€ (m)
4,000
3,500
Euro 82%
3,000
STG 14%
2,500
US$
4%
2,000
Step-up issues – adjusted
to earliest step-up date
1,500
1,000
500
0
2007 2008 2009 2010 2011 2012 2015 2020 2025 Perp.
ACS
Snr-Priv.Place.
Snr-Benchmk
€ (m)
Tier (ii)
Tier (i)
Moody’s
S&P
Fitch
Asset Covered Securities
3,500
Aaa
AAA
AAA
Senior Debt - Private Placements
2,800
Aa3
A+
AA-
Senior Debt - Benchmark Issues
6,750
Aa3
A+
AA-
Tier (ii)
3,500
A1
A(Lwr)/A-(Uppr)
A+
Tier (i)
2,700
A2
A-
A+
Total
19,250
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AIB Mortgage Bank’s ACS Issuance
20
Overview of AIB Mortgage Bank

Registered as a Designated Mortgage Credit Institution

License granted by Regulator – Feb 2006

Non-guaranteed, Public Unlimited Company - wholly owned by AIB plc

Shareholders investment exceeds €650m

9 Directors, including 4 non-executive directors

Major activities outsourced to AIB (ROI) Division, subject to terms of the
Service Level Agreement

€13.6bn residential mortgage loans transferred to AIB MB from AIB (ROI)

Prudent Discount Factor - 15 %

Pool Overcollateralisation set @ > 5%
21
ACS Act (2001) - Irish Legislation

Restricts asset classes – currently Public Sector and Residential Mortgages

Specialist bank principle - AIB Mortgage Bank

Conservative valuation methodology – haircut applied to increases in value
(Prudent Market Value)

Prudent Market Value of Pool must be > ACS principal outstanding

Interest Receivable from pool must be > interest payable on the ACS for any
12 month period

Weighted Average maturity of the pool must be > ACS maturity

B/S interest rate sensitivity subject to limits

In the event of default

Mandatory disclosure requirements

Covered Asset Monitor – independent external monitoring

Legislative changes planned for 2007
- NTMA (Govt. Agency) appointed
- Pool exempt from bankruptcy proceedings
- Bond holders prioritised
22
ACS - Mortgage Origination
 Irish mortgage market drawn balances exceed €100bn,
AIB has a market share of 16%+
 AIB has a presence in all major towns and cities, by a
network of 188 branches and 87 sub-offices
 35% - 40% of the Banked Public have a primary account
relationship with AIB
 90%+ of our branched sourced mortgages come from
existing bank account holders
 AIBMB currently does not book mortgages introduced
through intermediaries
23
ACS - Credit Policy

Max Loan amount determined by DSR ( Debt Service Ratio ) = the
Proportion of Net Income that is prudent to allow for purposes of
Mortgage Repayments

DSR is stress tested to allow for increases in interest rates of 2%

Max LTV = 92%

Lenders have no sanctioning Targets/Quotas

Loan to be repaid by scheduled retirement date

Exceptions are approved by Senior Mortgage Lenders subject to the
customers ability to repay

Regular reporting to Regulator

Arrears as % of total advances at end June - 0.4%
24
House mortgages - Republic of Ireland
 Primary focus on debt service ratio (repayment capacity)
New Business
Consistent LTVs (% no’s of drawdowns)
Dec 02
Dec 04
Jun 06
< 75%
66
67
65
> 75% < 90%
26
24
21
8
9
14
100
100
100
Dec 02
Dec 04
Jun 06
0.8%
0.5%
0.4%
> 90%
Total
Strong arrears profile
% total mortgage advances
25
ACS - AIBMB Collateral Pool at November 2006

Minimum Contractual Overcollateralisation
5%

Actual Overcollateralisation
>10%

Pool Size by PMV
€7.8 bn

Aggregate Prudent LTV
38%

WA indexed LTV
54%

Dublin/Non-Dublin
31/69

No. of Properties
50,400

BTL/Owner Occupier
23/77

Fixed Rate
16%

Interest only
22%*

Prudent Market Discount
15%

WA Seasoning
c. 25 mths

Currently no commercial mortgages

Arrears > 3 months removed from pool

Minimal interest rate risk
* Life of interest normally <5 years then reverts to annuity
26
ACS – AIB’s Issuance Strategy

€15 billion EMTN Programme established (Aaa/AAA/AAA)

Very high quality Covered Asset Pool

Successful Inaugural Dual Tranche Issue
- €2.5bn 3 year, €1.0bn 7 year
- strong secondary market performance

One issuing document to be updated annually

Ongoing commitment to investor relations
- Regular marketing initiatives
- Establishment of web-access
- Rating Reports posted on website

Regular benchmark issuance across the curve

Participation in Euro Private Placements

To be recognised by investors as a consistent and responsible Issuer
27
Contacts
AIB Web Site
: www.aib.ie / investor relations
Provides a comprehensive library of AIB & AIB Mortgage Bank programmes,
listing particulars and presentations
AIB Economic Research :www.aibeconomicresearch.com/research.asp?2
Provides comprehensive analysis of the Irish economy and housing market
AIB Group Investor Relations
www.aibgroup.com/investorrelations
Exec., GM Group Finance
: Alan Kelly
T: + 353-1-641-4191
Manager
: Maurice Tracey
AIB Global Treasury
bond.issues@aib.ie
Chief Dealer, Debt Issuance :
Sean Cremen
T: + 353-1-641-7803
28