IRELAND: PACE OF RECOVERY QUICKENS

Set for fourth straight year of fiscal outperformance September 1st, 2014

Index

Page 3: Summary

Page 7: Macro

Page 29: Fiscal & NTMA Funding

Page 43: Rebalancing

Page 52: Property

Page 59: NAMA

Page 70: Banking

2

3

SUMMARY

Market pricing reflecting macro-fiscal recovery of the last three years

Ireland has emerged from its crisis

• Ireland on track to beat full year 2014 target with plenty to spare July 2014 Exchequer (loosely Central Government) data show revenue ahead of target by

about 0.6pp of GDP on an underlying basis and primary expenditure roughly in line Ratios helped in 2014 by near 7% boost to GDP from introduction of ESA-2010 rulebook Set for fourth year of outperformance 2011-14; EDP exit (-3% of GDP) slated for 2015

• Ireland’s GDP growth expected to rank among highest in euro area in 2014 Strong first quarter (real GDP +2.7% qoq) of 2014, following revised -0.1% qoq in Q4 2013;

high frequency indicators point to further gains in second quarter Oddities in the national accounts related to the pharma sector meant that employment

growth (+2.4% y-on-y in 2013) was not reflected in real GDP growth (0.2% in 2013) Services PMI and consumer confidence up to early 2007 levels, “core” retail sales are

growing at 3-4% year-on-year, industrial production has rebounded, the construction sector is recovering and unemployment rate is down to 11.3% - lowest since March 2009

Trading partner growth has improved: UK and US stronger although EA lagging badly

• Contingent liabilities for the State dwindling and net debt c. 92% of GDP Ireland's main contingent liability being steadily eliminated: NAMA has now repaid almost

45 per cent of its original Government-guaranteed senior bonds. There was potential for a second book of loans on the back of the IBRC liquidation: this has now been ruled out.

IBRC liquidation may actually generate surplus for the State versus written-down value Net Government debt was 91.4% of GDP at end-Q1 2014, as Ireland husbands large

financial resources to offset a large chunk of its gross debt

4

State has already tapped the market in 2014

• More than 85% of 2014 funding completed, after first bond auctions in 3.5 years Ireland issued €3.25bn across four auctions, each at a new record low 10-year

yield: 2.97% in March; 2.92% in April; 2.73% in May and 2.31% in July

• Investor base has been broadening Sold €3.75bn of same 10-year bond via syndication in January 3.54% Even broader investor interest than for previous benchmark issue (Mar. 2013):

some 400 investors submitted bids, including fund managers, pension funds, banks and insurance cos. More than 83 per cent of demand was from overseas investors; including the UK (26% of total), the Nordic region (15%), Germany, Austria and Switzerland (14%), US and Canada (14%), Middle East & Asia (4%)

This followed the initial return to the T-Bill and bond market in 2012 and two forays in early 2013: sales of €7.5bn in total in 10-year and 5-year bonds

Ireland continues to engage with investors on a regular basis: the NTMA conducted two non-deal roadshows each year during 2011, 2012 and 2013

• State exited Financial Assistance Programme at end-2013 Last Troika mission of the Programme took place in early November 2013 Government did not apply for any support in the form of a credit line Budget 2014 implemented on October 15th (brought forward under “2-pack”)

5

Irish bond market continues its strong performance

Bank losses on NAMA haircuts,

rising ELA & Deauville Agreement

EU/IMF Programme

PCAR results

Moody's downgrade to sub-inv.

EU/IMF loan

rate reduction LTRO announced

by ECB

EU summit commitment

& NTMA issuance recommences

NTMA returns with syndicated bond deals

EU/IMF Programme exit

1.9

0

5

10

15

20

25

Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14

10 Year 2 Year

OMT announced

6

Source: Bloomberg (weekly data)

2013: Third consecutive year of being best investment-grade euro area performer (yld: %)

7

SECTION 1: MACRO

Recovery commenced in 2013 and has gained momentum in 2014; Unemployment has dropped sharply from a peak of 15.1% to 11.3%

Y-o-Y GDP growth for 2013 revised upwards to 0.2%; net exports was the driver despite patent cliff

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f

Domestic demand (ex-inventories) Net exports Change in inventories GDP change

8

Source: CSO; Department of Finance(2014-16 forecast from SPU 2014); NTMA workings

Domestic demand fell -0.6% in 2013 but expected to grow in 2014-16

Q1 2014 GDP figures point to faster recovery, as also suggested by employment and soft data

-10.0

-5.0

0.0

5.0

10.0

15.0

Q2 2013 Q3 2013 Q4 2013 Q1 2014

GDP and Main Components Q-o-Q growth rates

Private Consumption Investment

Government Net Exports

GDP

• Q-Q growth for Q1 2014 was 2.7% and Q4 2013 growth was revised upwards to -0.1%; flat Q-Q change from here = ~4% full year real growth

• Net Exports was the main driver in Q1, increasing 5.8% Q-Q.

• The Q1 GDP release implemented the ESA 2010 standards for the first time; This resulted in an increase in the level of GDP to €174.8bn in 2013; and primarily reflects a new statistical treatment of R&D (as investment)

• These changes do not really affect GDP growth rates but lower Ireland’s deficit and debt ratios

9

Source: CSO; NTMA workings

Ireland’s economy is expected to outperform the euro area in 2014 and to accelerate in 2015

0

0.5

1

1.5

2

2.5

3

3.5

4

Department ofFinance (Apr-14)

IMF (Apr-14) EU Commission(May-14)

OECD (May-14) ESRI (July-14) Central Bank(July-14)

Euro Area(May-14)

2014 2015

Ireland set to be one of the top performers in the euro area in 2014

10

Note: Real GDP y-o-y growth rates forecast by various institutions Sources: Various publications; Euro area calculated as average of IMF, OECD and EU Commission forecasts

Ireland continuing to outperform EA in short-term and broad-based recovery is in train

Ireland growing faster than euro area (PMI composite difference)

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

2006 2007 2008 2009 2010 2011 2012 2013 2014

All sectors now growing (PMI change as cumulative index level, June 2000 = 100)

11

Source: Bloomberg; Markit; Investec

0

50

100

150

200

250

2000 2002 2004 2006 2008 2010 2012 2014Services PMI as index (June 2000 =100)Manufacturing PMI indexConstruction PMI index

Business surveys point to sustainable recovery

20

25

30

35

40

45

50

55

60

65

70

2000 2002 2004 2006 2008 2010 2012 2014

Services PMI Services PMI: Backlogs of work

12

-50

-40

-30

-20

-10

0

10

20

30

40

-15.0

-12.5

-10.0

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014

Domestic Demand (% Y-Y)

IBEC Domestic Sales Component of Business Confidence Index - 2Q MA(RHS)

Source: Markit; Investec

Best since early 2007

Domestic activity also expected to strengthen further in 2014 from low base

Sources: IBEC; CSO

Strength of services PMI likely to continue as backlogs build (50 is no change level)

Industrial production especially volatile due to pharma; sustained growth from traditional manufacturing

70

80

90

100

110

120

130

140

2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014

INDUSTRIAL PRODUCTION TRADITIONAL SECTOR MODERN SECTOR

Large spike in pharma will fall out in months to come

13

Source: CSO

3 month moving averages (2000 = 100)

Labour market has recovered since 2012, though employment growth rate slowed in H1 2014

Employment up 4% from cyclical low

1400

1500

1600

1700

1800

1900

2000

2100

2200

Q2 1998 Q2 2001 Q2 2004 Q2 2007 Q2 2010 Q2 2013

Unemployment rate down to 11.5%; Long term unemployment at 6.8%

15.1

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2000 2002 2004 2006 2008 2010 2012 2014

14

Source: CSO

11.5% in Q2 QNHS – est. at 11.3% in July

Although total employment has increased labour participation at lowest level for five quarters

Participation rate hovering around 60%

58

59

60

61

62

63

64

65

Q1 1999 Q1 2002 Q1 2005 Q1 2008 Q1 2011 Q1 2014

Private sector employment offsetting public sector declines; forward indicators encouraging

-70

-60

-50

-40

-30

-20

-10

0

10

20

-14

-12

-10

-8

-6

-4

-2

0

2

4

Q1 2009 Q3 2010 Q1 2012 Q3 2013

Inde

x (Im

prov

emen

t > 0

)

% c

hang

e Y-

Y

Private sector employees (ex self-employed)Public sector employeesIBEC Employment Expectation Index (RHS)

15

Sources: CSO; IBEC

Wage growth negative while hours worked flat, highlighting that excess capacity is still large

35,500

35,750

36,000

36,250

36,500

36,750

37,000

31.0

31.2

31.4

31.6

31.8

32.0

32.2

32.4

32.6

Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014

Hours Worked Average Earnings (Annualised, €, RHS)

16

Source: CSO

National accounts data showed economy-wide

wage per worker increased 0.6% in 2013

Net emigration slowed over the last year as immigration increased and emigration decreased

-2%

-1%

0%

1%

2%

3%

4%

-100

-50

0

50

100

150

200

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Pers

ons T

hous

ands

Immigration Emigration Net migration Net migration % population (RHS)

17

Source: CSO

Employment and house price rises underpin retail sales

Consumer confidence recovers

20

40

60

80

100

120

140

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

“Core”* retail sales rise steadily

90

95

100

105

110

115

120

125

Volume Index (2005 = 100) Value Index (2005 = 100)

18

Sources: KBC, ESRI, CSO *Excluding motor trade

Inflation remains low, underpinning real incomes

-4

-3

-2

-1

0

1

2

3

4

5

6

7

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

HICP Ireland HICP Euro Area

19

Ireland’s inflation below euro area’s for almost all of

the last five years

Source: CSO

Private debt levels are high, apart from “core” domestic companies

Irish Non-Financial Corporate (NFC) debt is distorted by multinationals

Household debt ratio (% DI) declining (see slide 21) but still among highest in Europe

20

0

50

100

150

200

250

300

350

400

450

Q12006

Q12007

Q12008

Q12009

Q12010

Q12011

Q12012

Q12013

€ Bi

llion

s

resident banks OFIS ROW NFCs and other

Source: Eurostat Source: Cussen, M. “Deciphering Ireland’s Macroeconomic Imbalance Indicators”, CBI * OFI = Other Fin. Intermediaries

Green bars account for true “Irish” NFC debt

0

50

100

150

200

250

300

Household deleveraging continues, but at slow pace; disposable income has bottomed at H1 2006 level

50

70

90

110

130

150

170

190

210

230

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Household Debt (€bn) Household Disposable Income (€bn, annualised)

21

Debt-to-income ratio in Q4 2013 (latest data) at 197%, the lowest since Q3 2006

Source: Central Bank of Ireland (CBI); CSO

Interest burden on households high despite help from tracker mortgages

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

0

2

4

6

8

10

12

14

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

% o

f Dis

posa

ble

Inco

me

Euro Area Benchmark Germany Ireland SpainItaly Netherlands Sweden United Kingdom

22

Sources: Eurostat; CSO Note: Interest burden is ‘actual’ (i.e. excludes FISIM adjustment) and is calculated as a share of actual gross disposable income. FISIM estimates for Ireland in 2013 based on unchanged 2012 figures

Property prices lift household net worth, while savings rate at euro area average

Household net worth improving and will underpin consumer spending

-250

0

250

500

750

1,000

2002 2004 2006 2008 2010 2012

€ bi

llion

Financial Assets Liabilities

Housing Assets Net Worth

Gross household saving rate* increasing even as disposable income increases

23

Source: CBI * Measured on ESA-95 basis Source: Eurostat, CSO

0

2

4

6

8

10

12

14

16

18

Q12002

Q32003

Q12005

Q32006

Q12008

Q32009

Q12011

Q32012

Q12014

% o

f Dis

posa

ble

Inco

me

(4Q

MA)

EA-17 Ireland UK EU-27

Core net lending volumes back at 2008 levels as pace of deleveraging is sustained

24

Sources: CBI; ECB; NTMA workings Note: ‘Core Private Sector Credit’ covers credit advanced to Irish resident private-sector enterprises excl. fin. intermediation & property-related sectors. Data are non-consolidated and cover all credit institutions operating in Ireland. March 2003 outstanding credit is used as base and updated using cumulative transactions data. Both the latter and underlying growth rates are fully adjusted for non-transaction related effects (e.g. change in reporting population, revaluations, exchange rate movements) so as to reflect activity levels through time.

-20%

-10%

0%

10%

20%

30%

40%

Q3 2004 Q3 2005 Q3 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013

Core Private Sector Credit (% of GDP) % Change Y-Y Loans to Households (% Change Y-Y)

Exports led by services as patent cliff weighs on goods exports

2.1% 3.2%

4.2% 4.4% 4.4%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f

Y-on-Y growth Rates

Goods Services Total Exports

25

Source: CSO, forecasts via Department of Finance SPU April 2014

Ireland’s tradable sectors perform best in long run (gross output) but domestic sectors now picking up

60

80

100

120

140

160

180

200

Q1 1997 Q1 1999 Q1 2001 Q1 2003 Q1 2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013

Non-tradeable Sectors* Tradeable Sectors

26

Source: CSO *Non-tradeable sectors = Agriculture and Construction

Investment rising but well below long run average

-5.7%

-3.8%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013

Building Investment % GDP Machinery, Software & Equipment % GDP (ex-aircraft)

Building investment 5.7% of GDP below long run average

27

Horizontal axis = long run average investment as % of GDP* (1970-2013)

Source: CSO * Long run average for Buildings is 12.0% of GDP; Mach. Soft & Eq. = 8.1% of GDP

Economic and fiscal forecasts: SPU 2014

2012 2013 2014f 2015f 2016f

GDP (% change, volume) -0.3 0.2 2.1 2.7 3.0

GNP (% change, volume) 1.9 3.2 2.7 2.3 2.5

Domestic Demand (Contribution to GDP, p.p.)* -0.2 -0.6 2.6 2.2 1.6

Net Exports (Contribution to GDP, p.p.) -0.8 0.6 -0.5 0.5 1.4

Current Account (% GDP) 1.6^ 4.4^ 5.8 5.2 5.3

General Government Debt (% GDP)^ 121.7 123.3 n/a n/a n/a

Underlying General Government Balance (% GDP^)† -8.1 -5.7 -4.8 -2.9 -2.2

Inflation (HICP) 2.0 0.5 0.5 0.9 1.4

Unemployment rate (%) 14.7 13.1 11.5 10.5 9.7

28

Sources: CSO; Department of Finance (Stability Programme Update (SPU) 2014) and NTMA updates * Includes stock changes ^ Calculated using ESA 2010 compliant GDP † Underlying: ex-banking recapitalisation under EDP rules

29

SECTION 3: FISCAL & NTMA FUNDING

Fiscal overhaul: debt ratio peaked in 2013 and all targets beaten

0.6% 5.9% 2.7% 3.4% 2.4% 2.1% 1.8%

0% 2% 4% 6% 8% 10% 11% 13% 15% 17% 19%

2008 2009 2010 2011 2012 2013 2014

Fiscal Consolidation thus far...

Breakdown of adjustment measures (€bn unless stated) 2008 2009 2010 2011 2012 2013 2014

Revenue 0.0 5.6 0.0 1.4 1.6 1.4 0.9

Expenditure 1.0 3.9 4.3 3.9 2.2 1.9 1.6

Total 1.0 9.4 4.3 5.3 3.8 3.5 2.5

Total (% of GDP) 0.6% 5.9% 2.7% 3.4% 2.4% 2.1% 1.8%

Progress to Date (% of Total) 3% 32% 45% 62% 74% 84% 94%

Progress to Date 1.0 10.4 14.7 20.0 23.8 27.3 29.8

Progress to Date (% of GDP) 0.6% 6.5% 9.2% 12.6% 15.0% 17.1% 18.9%

30

Sources: Department of Finance: Budgets 2011-2014 and Stability Programme Update, April 2014

% of GDP

Three straight years of fiscal outperformance – very likely to be four

-8.5 -8.1

-5.7 -4.8

-2.9

-10.6

-8.6

-7.5

-5.1

-2.9

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2011 2012 2013 2014f 2015f

GGB DoF forecasts* GGB EU target under EDP December 2010

31

Source: Department of Finance (as per SPU 2014); CSO; Eurostat; NTMA working * 2011 – 2013 outturn calculated by NTMA using ESA 2010 compliant figures

Ireland deficit likely closer to 4.0% than 4.8% - well below

EU-prescribed ceiling again

General Government Balance (% of GDP)

Much of gains from 2001-07 bubble lost, but living standards equivalent to 2003 levels

0

20

40

60

80

100

120

140

160

180

200

Successful fiscal consolidation in

late 1980s

"Celtic Tiger" 1994-2001

Credit/Property Bubble

Bubble Burst

Recovery Lower interest rates/

recovery in major export

markets

Delayed Convergence

(Real GNI per capita) 1995 = 100

32

Sources: CSO

Ireland’s mammoth fiscal turnaround

Deficit to be fully closed by 2018 (€bn)

0

10

20

30

40

50

60

70

80

90

1995 1998 2001 2004 2007 2010 2013 2016f

General Government expenditure

General Government revenue

20% reduction in primary expenditure (€bn)

0

10

20

30

40

50

60

70

80

1996 1999 2002 2005 2008 2011 2014f 2017f

Nominal Real (1995 Base)

33

Not easy to do in zero inflation

environment

Source: CSO; Department of Finance

Ireland not far from confirming debt sustainability: primary surplus (% of GDP) to be achieved this year

-15

-12

-9

-6

-3

0

3

6

9

Primary Balance Interest General Government Balance Structural Balance (% of potential GDP)

34

Source: Department of Finance; Eurostat; IMF

Likelihood of small primary surplus, whereas April forecasts suggested

slight primary deficit for 2014

Ireland’s adjustment easier on GDP because of relatively lower fiscal multiplier – thanks to openness

35

17.8

7.4 6.9

3.6

7.6 6.2

4.3

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

% C

hang

e

Change in Cyclically Adjusted Primary Balance, 2009-2013

Change in Real GDP, 2009-2013

...while adjustment continues to deliver

Greece

Portugal Spain

Italy

Ireland

UK

US

R² = 0.8088

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

0.0 5.0 10.0 15.0 20.0 25.0

% C

hang

e in

Rea

l GDP

, 200

9-20

13

Change in Cyclically Adj. Primary Balance (p.p.), 2009-2013

Growth has been possible with consolidation, unlike elsewhere in EA . . .

Source: IMF; NTMA

Cost to State of domestic bank recapitalisation; supports have yielded significant income return

36

Outgoing: €bn

Recapitalisation total (including the now liquidated IBRC) 64.1

Other direct flows (Insurance Compensation Fund and Credit Unions) 1.2

Total 65.3

Incoming: €bn

Sales of Securities 5.3

Other Income (cumulative):

• CoCo investment 0.6

• CBI income 3.9

• Bank Guarantee Income 4.2

• Net Interest (Interest receivable – interest payable*) -3.6

Total 10.4

Source: DoF; NPRF end-year accounts; CSO; NTMA analysis

Valuation of Remaining Assets (€bn) BOI AIB* PTSB Total

Equity (Government Stake) 1.4 6.5 N/A 7.9

Other (incl. preference shares) - 3.5 N/A 3.5

Overall 11.4

The third round of domestic bank recap by the State in 2011 (following earlier efforts in 2009 and 2010) was credible and fully transparent The gross cost of explicit bank support in 2009-2011 amounted to c.41% of 2011 GDP * Interest payable is estimated by the CSO as the bond risk premium paid by the Government for its banking support

Gross Government debt stabilised at 123% of GDP in 2013

37.2

63.6

79.0 87.8

92.0

62.2

87.4

111.1

121.7 123.3

0

20

40

60

80

100

120

140

2009 2010 2011 2012 2013 2014F 2015F 2016F

Net Debt Cash balances/other liquid assets GG Debt

37

Source: Department of Finance (as per SPU 2014), CSO, NTMA workings

Net debt of 92%

Peak

Net Government debt ratio (% GDP) now similar to that of Belgium

92.0 93.9

156.0

119.8

108.2

79.9

0

20

40

60

80

100

120

140

160

180

Ireland Belgium Greece Italy Portugal Spain

38

Net General Government Debt = Gross General Government Debt - EDP Debt Instruments EDP Debt Instruments = Currency and Deposits + Securities other than Shares (excluding financial derivatives) + Loans

Source: CSO; Datastream; NTMA analysis

Greater geographic balance in holdings of Irish Government Bonds (IGBs)

€ million

End quarter Dec 2013 March 2014 June 2014

1. Resident 52,495 53,773 53,959

(as % of total) (47.3%) (47.6%) (47.7%)

– Credit Institutions and Central Bank* 50,057 49,004 49,346

– General Government 2,153

1,642 1,490

– Non-bank financial 2,758 2,758

– Households (and NFCs) 284 368 364

2. Rest of world 58,512 59,124 59,247

(as % of total) (52.7%) (52.4%) (52.3%)

Total MLT debt 111,007 112,898 113,207

39

Source: Central Bank of Ireland * Since March 2013 resident holdings have increased significantly thanks to the IBRC Promissory Note repayment (non-cash settlement) which resulted in €25.034bn of long-dated Government bonds being issued to the Central Bank of Ireland on liquidation of IBRC. The CBI also took €3bn of 2025 IGBs formerly held by IBRC. The CBI sold €0.35bn of its 2025s by end-2013.

Breakdown of General Government debt

€ million 2009 2010 2011 2012 2013

Currency and deposits (mainly retail debt) 10,307 13,708 58,386 62,092 31,344

Securities other than shares, exc. financial derivatives 91,391 96,317 94,001 87,285 112,660

- Short-term (T-Bills, CP etc) 20,443 7,203 3,777 2,535 2,389

- Long-term (MLT bonds) 70,948 89,114 90,224 84,750 110,270

Loans 2,842 34,138 37,723 60,849 71,534

- Short-term 707 735 569 1,907 1,466

- Long-term (official funding and prom notes 2009-12)

2,135 33,403 37,154 58,942 70,069

General Government Debt 104,540 144,163 190,111 210,226 215,538

EDP debt instrument assets 41,981 32,883 54,943 58,494 54,787

Net Government debt 62,559 111,280 135,168 151,732 160,751

40

Source: CSO (July 2014)

Improved maturity profile following post-programme operations

41

2

8 6

9

15

21

6 7

1

2 3

4

6

6

4 1 0

5

10

15

20

25

30

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Billi

ons €

Bond IMF and Other

Source: NTMA Note: EFSF loans have already been extended. EFSM loans are subject to a 7-year extension that will bring their weighted-average maturity from 12.5 years to 19.5 years. It is not expected that Ireland will have to refinance any of its EFSM loans before 2027. However, the revised maturity dates of individual EFSM loans will only be determined as they approach their original maturity dates.

Further improvement to profile in coming

years could arise from possible re-financing of

IMF loans

0

2

4

6

8

10

12

14

16

2014 2015 2016

Exchequer Borrowing Requirement (SPU, April 2014) Rollovers

Total funding requirements are steadily declining (€bn)

42

Source: NTMA; Department of Finance

• Funding requirement improved following sale of BOI CoCos and Irish Life. Restructuring of IBRC Promissory Note and extension of EFSF/EFSM maturities also benefited significantly.

• NTMA pre-funded well into 2015 after 85 per cent of 2014 funding plan complete by August.

• End-December Exchequer cash and deposits of €18.5bn already had provided a considerable funding buffer

1. Rollovers include maturing Government bonds and EU/IMF Programme loans. 2. EFSF loans have been extended by a weighted average 7 years . EFSM loans are also subject to a 7 year extension. It is not expected that Ireland will have to refinance any of its EFSM loans before 2027. A €5bn EFSM loan originally due to mature in 2015 is therefore no longer part of the “Latest Est. Funding Requirement” in 2015.

When this year’s €8bn funding plan is complete all of the 2015 requirement will be more than covered (85% done)

2014 & 2015 funding need achieved

43

SECTION 4: REBALANCING

Ireland has accomplished the bulk of its “internal devaluation”: current account is in large surplus and price level is converging with EA average

Ireland’s BoP current account surplus reflects large-scale rebalancing of economy (% GDP)

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Published

44

Source: CSO * Adjusted for estimates of the undistributed profits of redomiciled PLCs (for more information, see Fitzgerald, J. (2013), ‘The Effect of Redomiciled PLCs on GNP and the Irish Balance of Payments’)

Historically-high current account surplus somewhat flattered by

record net factor inflows

Ireland benefits from export diversification by destination and openness relative to other non-cores

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1992 1995 1998 2001 2004 2007 2010 2013

% o

f tot

al g

oods

exp

orts

US Euro area UK Other

45

Source: CSO

US & ROW (ex-EA and UK) account for 46%

of Irish goods exports

Exports (%GDP)

1999

Exports (%GDP)

2013

Ireland 87 105

Spain 27 34

Italy 24 30

Portugal 27 41

Belgium 70 86

Source: Datastream (value of exports)

Ireland’s competitive position is different to the other non-core countries

Relative Real Effective Exchange Rates have corrected sharply (Base:2002=100

80

90

100

110

120

130

140

2002 2004 2006 2008 2010 2012 2014f

Ireland Italy Portugal Spain Greece

Back to 2002-03 levels by this metric

Current Account Balance (% GDP)

-20

-15

-10

-5

0

5

10

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Ireland Portugal Spain Greece Italy

46

Source: Eurostat; NTMA Workings Note Ireland’s CA Balance re-calculated using ESA 2010 compliant GDP series

Note: REERs are deflated by unit labour costs and measure performance relative to 36 industrial countries - double export weights

Source: AMECO

‘Internal devaluation’ enabled recovery of lost price competitiveness, but low EA inflation slows progress

47

Prices have fallen across most consumer goods and services, yet some remain high

Ireland closed the gap quickly between 2008 and 2010 (index: euro area=100)

Sources: Eurostat; NTMA workings Note: % price variations labelled are for Ireland compared to euro area in 2012

Sources: Eurostat; NTMA workings Note: Price levels are based on household final consumption expenditure including indirect taxes

100

105

110

115

120

125

130

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

17.9 16.9

-4.4

7.4 0.8

55.6

5.7 13.9 7.0

27.7

-20.2

77.5

-40

-20

0

20

40

60

80

100

% a

bove

/bel

ow E

U27

ave

rage

2003 2008 2013

Ireland’s price competitiveness recovery since 2008 outperforms other periphery countries

95

97

99

101

103

105

107

109

111

113

2008 2009 2010 2011 2012 2013 2014

HICP Price Indices for Selected Euro Area Countries 100 = January 2008

Euro Area Germany Ireland Other Periphery*

48

Sources: Eurostat; NTMA workings; Non Seasonally Adjusted Data *Other Periphery is a weighted average of Spain, Italy, Greece, Portugal indices where the weights used are the individual countries weighting in the standard euro area HICP inflation calculation

Competitiveness recovery still exceptional even when compositional effects are corrected for

49

Source: Bruegel, 2014. ‘Real effective exchange rates for 178 countries: a new database’ Note: REERs cover business sector excluding agriculture, construction and real estate activities and are calculated against 30 trading partners using fixed weights from Q1 2008. Data available to Q1 2014. See Darvas, Z (2012) for more details.

-0.9 -1.0

-3.0 -3.2 -3.3 -3.5 -3.7 -3.7 -3.8 -4.0 -4.8 -4.8 -4.9 -5.3

-6.1 -6.3 -7.6 -7.9

-12.8 -13.1

-14.8

-17.9 -19.0 -20.0

-16.0

-12.0

-8.0

-4.0

0.0

% d

eclin

e si

nce

peak

Competitiveness gains not explained away by shift to highly productive/

less labour-intensive sectors

Favourable population characteristics underpin debt sustainability over longer term

50

1.01.21.41.61.82.02.2

Hung

ary

Rom

ania

Pola

ndLa

tvia

Port

ugal

Germ

any

Spai

nM

alta

Italy

Aust

riaCz

ech

Rep.

Gree

ceSl

ovak

iaCr

oatia

Cypr

usBu

lgar

iaEs

toni

aLu

xem

bour

gSw

itzer

land

Euro

are

aSl

oven

iaEU

-27

Denm

ark

Lith

uani

aN

ethe

rland

sFi

nlan

dBe

lgiu

mN

orw

aySw

eden U

KIc

elan

dFr

ance

Irela

ndTu

rkey

354045505560

Slov

akia

Pola

ndCy

prus

Rom

ania

Czec

h Re

p.Lu

xem

bour

gSl

oven

iaM

alta

Hung

ary

Switz

erla

ndBu

lgar

iaAu

stria

Croa

tiaSp

ain

Turk

eyEs

toni

aLa

tvia

Lith

uani

aIc

elan

dEU

-27

Irela

ndN

ethe

rland

sGe

rman

yN

orw

ayEu

ro a

rea

Gree

cePo

rtug

alBe

lgiu

m UK

Finl

and

Italy

Denm

ark

Swed

enFr

ance

Sources: World Bank WDI; Eurostat

Fertility rates in Ireland are above typical international replacement rates

Dependency ratios (age <15 & 65+ : ages 15-64) also compare well against euro area

Ireland continues to attract foreign investment (average FDI inflows per annum as a share of GDP, 2009 – 2013)

0

5

10

15

20

25

30

35

40

45

Ireland with the second largest average annual FDI inflows as a % of

GDP in the EU

51

Sources: UNCTADStat

52

SECTION 5: PROPERTY

House prices have begun to rise, thanks to lack of supply and increased demand; prime commercial property surge continues

Mortgage demand rises for six consecutive quarters; credit standards stable in 2014

1.5

2

2.5

3

3.5

4

4.5

2003 2005 2007 2009 2011 2013

Supply Demand

0

20

40

60

80

100

120

140

Q42005

Q12007

Q22008

Q32009

Q42010

Q12012

Q22013

Residential Investment Letting Mover purchaser FTB

Modest pick-up from

low base driven by FTBs

53

Supply tightening and demand lower below 3.0 and vice-versa

Source: ECB (Bank lending survey)

Demand conditions improving; credit standards tight but stable

Mortgage drawdowns for house purchases have bottomed (‘000s)

Source: Irish Banking Federation FTBs = First Time Buyers

Residential market continues to be boosted by non-mortgage purchasers

54

Sources: IBF; DoECLG; Property Services Regulatory Authority; NTMA Note: Non-mortgage transactions are implied by difference between total transactions on property price register and IBF mortgage data

0%

10%

20%

30%

40%

50%

60%

70%

0

2,000

4,000

6,000

8,000

10,000

12,000

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Num

ber o

f tra

nsac

tions

Mortgage drawdowns for house purchase Non-mortgage transactions

Prices rise for first time in over five years, but risks remain (Base: Q3 2007 = 100)

-50

-40

-30

-20

-10

0

10

20

30

Q1 2006 Q1 2008 Q1 2010 Q1 2012 Q1 2014

Residential - Dublin Office All Commercial Property

55

Sources: CSO; IPD

Pick up in property prices; in particular residential property in Dublin

Market led by offices; Dublin residences (% change Y-Y)

0

20

40

60

80

100

120Property Prices (Base: Q3 2007 = 100)

Residential - National Residential - DublinRetail OfficeIndustrial All Commercial Property

Housing valuations are attractive (rental yields)

Valuations as attractive as 1980s: prices /disposable income per capita

6

7

8

9

10

11

12

13

14

15

1976 1982 1988 1994 2000 2006 2012

% o

f Dis

posa

ble

Inco

me

per C

apita

Rental yields near 6% in world of near zero real interest rates

56

Sources: CSO; NTMA

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

Q11996

Q11998

Q12000

Q12002

Q12004

Q12006

Q12008

Q12010

Q12012

Q12014

Rental yields should be lower than before in

world of low real rates

Real commercial property prices as of Q4 2013 were down 63 per cent from their peak (index 1983 = 100)

210.0

76.8

0

25

50

75

100

125

150

175

200

225

1983 1988 1993 1998 2003 2008 2013

57

Real office prices have fallen below long-run levels when

bubble is excluded

Source: IPD; NTMA

Foreign buyers interested on valuation grounds

3

4

5

6

7

8

9

10

Q1 1999 Q2 2000 Q3 2001 Q4 2002 Q1 2004 Q2 2005 Q3 2006 Q4 2007 Q1 2009 Q2 2010 Q3 2011 Q4 2012 Q1 2014

5yr Euro swap rate + 300bp margin Ireland average commercial property equivalent yields

58

Source: IPD; NTMA

Large positive carry

Made no sense for foreign buyer

59

SECTION 6: NAMA

NAMA is profitable, generating healthy cash flow and repaying its debt

• NAMA’s operating performance is strong Successfully acquired 12,000 loans (over 60,000 saleable property units) related to

€74bn par of loans of 758 debtors for €32bn There was potential for a second book on the back of the IBRC liquidation, however, this

has been definitively ruled out after liquidator asset sales went well. Since inception, over 39,600 credit decisions made; completed Property and Loan Sales

of €12.3 bn; over €2bn active disposal pipeline; currently 70% disposal income generated in UK; market in Ireland showing strong signs of recovery.

NAMA has, in aggregate, over €3.5bn in loan and property assets for sale in ROI.

• Repaid €13bn (43%) of €30.2bn of original senior debt Repaid €2.5bn in July 2014, having met initial Troika target of €7.5bn by end-2013

• Financing Strategy Approved advances of over €2.5bn in working/development capital to date, providing

equity capital and credit facilities only where appropriate, to preserve and enhance value of assets securing Agency’s loans

Over €1 billion in new advances have been drawn down, including €292m in 2013

60

NAMA: one third of its original debt repaid

NAMA: Financial summary 2011 - 2013 financial results (€m)

• NAMA continues to generate net profits after impairment charges, despite unfavourable market movements

• 2013 Operating Profits of €1,198m (before an impairment charge of €914m)

61

2011 2012 2013

Net interest income 771 894 960

Operating profit before impairment

1,278 826 1,198

Impairment charges (1,267) (518) (914)

Profit before tax and dividends 11 308 284

Tax (charge)/credit and dividends

230 (80) (73)

Profit for the year 241 228 211

Source: NAMA

0

0.5

1

1.5

2

2.5

3

Mar-11 May-11 Sep-11 May-12 Dec-12 Jun-13 Oct-13 Dec-13 Mar-14 Jun-14

0.25 0.5 0.5

2

1.5 1.5

0.75 0.5

3

2.5 NAMA senior bond Repayments (€bn)

• July 2014: €2.5bn of NAMA senior bonds redeemed bringing total amount redeemed to €13bn (43% of Agency’s senior debt liabilities)

• All of €30.2bn in NAMA senior bonds expected to be redeemed by 2020

NAMA: Summary of cash flows from inception

62

• Total cash generated of €21.3bn from inception to date Disposal proceeds €16.4bn to date NAMA senior debt redemptions of €13bn by end-July 2014 Lending disbursement (new advances) of €2.5bn Latest cash and equivalent balances of €2.8bn

Source: NAMA

-

5

10

15

20

25

Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014

€ Bi

llion

s

Total Cash Generated Cash after Funding & Operating CostsCash after Lending Cash after Redemption

63

Source: NAMA

NAMA: disposal v. non-disposal income, to date 2014

• Note the high level of non-disposal income Cash generation is very important to NAMA’s future strategy €4.5bn in non-disposal cash generated (mainly rental income, despite the sale of €16.4bn

of assets and loans)

-

2

4

6

8

10

12

14

16

18

20

22

0.0

0.4

0.8

1.2

1.6

2.0

2.4

2.8

3.2

3.6

4.0

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42014

Q12014

Q22014

Q32014

€ bi

llion

s

Disposal Receipts

Non Disposal Income (mainly rentals)

Cumulative Cash Generation (RHS Axis)

Disposal transaction analysis – inception to May 2014

64

< €10m >10m - <50m > €50m Total Total Disposals (€m) 3,666 3,821 6,895.06 14,383 No. of Transactions 6,637 183 46 6,866 Average Disposal Value (€000s) 552 20,882 149,893 2,095

<10m 25%

>10m - <50m 27%

>50m 48%

Disposal Proceeds by Value Range

<10m 97%

2>10m - <50m 3%

>50m 1%

Disposal Transaction Volume by Range

20% 7%

13% 12%

24% 5%

9% 3% 3%

3% 0%

>50…>25…>10…

>50m>10m

>5m>1m

>500k>250k>100k<100k

Disposal Proceeds Value by Range

0% 0% 0% 0%

3% 2%

9% 10%

20% 35%

20%

>50…>25…>10…

>50m>10m

>5m>1m

>500k>250k>100k<100k

Disposal Transaction Volume by Range

Source: NAMA

Disposal trend by location (to May 2014)

65

LONDON 7.0 43%

NI 0.9 6%

ROI 3.8 23%

ROW 1.4 8%

UK 3.1 19%

Disposals by Location since inception (€16.3bn)

LONDON 0.6 12%

NI 0.8 15%

ROI 2.0 37%

ROW 0.5 10%

UK 1.3 24%

Disposals by location 2014 YTD (€5.2bn) • Disposals of €14.4bn to

end-May 2014.

• Deliberate NAMA focus on UK disposals during 2010 – 2013 period.

• ROI transactions have increased significantly since Q4 2013.

30 3 19 45 41 140

42

222

64 148 119 90

189 126

347

177

691

1,110

151

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

-

200

400

600

800

1,000

1,200

Q1-10 Q4-10 Q3-11 Q2-12 Q1-13 Q4-13 Q3-14

€m

ROI Disposal Trend since Inception

ROI Quarterly Trend (LHSAxis)

Cumulative ROI Disposals(RHS Axis)

Source: NAMA

Breakdown of NAMA property portfolio, June 2014

66

Source: NAMA

Geographic Breakdown Sector Breakdown

Dublin 8.7 44%

Rest of ROI 4.1 21%

London 3.6 18%

Rest of UK 1.6 8%

Rest of World

1.4 7%

Non real estate

0.3 2%

Office 3.4 17%

Retail 3.5 18%

Hotel & Leisure

1.3 6%

Industrial 0.6 3%

Developme

nt 3.8 19%

Land 3.3 17%

Residential 3.1 16%

Other 0.4 2%

Non real estate

0.3 2%

• Qualifying Investor Fund & REITs: NAMA welcomes establishment of Ireland’s first REITs (Green, Hibernia, Irish

Residential Properties) as means of adding liquidity to market NAMA partnering with Oaktree in respect of a new QIF authorised by Central Bank of

Ireland in July 2013 that combines the parties’ respective ownership of land with a development potential of up to 50,000 sq. m in Dublin’s south Docklands.

Joint Ventures:

NAMA will participate in JV projects with leading private investment firms to attract investment to Ireland. Two completed, more to follow.

Publicly seeking expressions of interest from credible counterparties to invest with NAMA

Portfolio sales:

Recently announced additional packaged portfolios of properties with minimum value of €250m will be offered for sale each quarter to help sustain positive momentum and provide investors with deal-flow certainty.

67

NAMA: Strategic initiatives

NAMA: favourable property market measures in Budgets 2013 and 2014

• Budgets 2013 and 2014 contained a number of significant measures aimed at boosting the property market Helped to boost NAMA’s book of loan assets, underpin collateral in the banking

system and brought forward mortgage demand

• Stamp duty on commercial property cut from 6% to 2% Now lower than the current UK rate. Has boosted demand from overseas

• NAMA can directly approve rent reductions with tenants of commercial properties under its control Changes to upward-only rent legislation shelved

• Tax incentive Scheme Property bought before the end of 2014 will be exempt from Capital Gains Tax

(currently 33%) on sale as long as it is held for at least seven years • REITs Introduction of REIT legislation and proposal to include REITs in the Immigrant

Investor Programme. Has stimulated interest from international investors.

68

69

NAMA meeting senior debt redemption targets ahead of schedule. €2.5bn repaid in July 2014 bringing total redemptions to €13bn or 43% of senior debt.

Vendor finance, deferred payments and social initiatives are building momentum and have been supplemented by other measures in 2013 and 2014

Floatation of a number of REITs and consideration of QIF options have favourably publicised Irish property

€2bn of vendor finance available between 2013 and 2016 to support disposal activities. The majority of new equity was to be made available in 2013-14. The initiative widens the potential investor base, even if finance is not ultimately used, and can help overcome weak credit availability

NAMA to provide €2bn of development capital to projects in Ireland between 2013 and 2016 to support income generation

Strong recurring cash position, reflecting both location and quality of assets and NAMA’s asset management approach

Focus on maximising income and managing debtors, receivers and assets to enhance value

NAMA: on track to achieve long-term objectives

More NAMA information available on www.nama.ie

70

SECTION 7: BANKING*

Banks overhauled since late 2010; AIB and BOI returned to profit in H1 2014; next target is euro area-wide stress tests in Q4 2014 * Some information in this section is provided by the banking unit of the Department of Finance

Asset quality reflects huge losses already recognised

71

Impaired loans and provisions at PCAR banks (group and 3 banks)

Source: Published bank accounts and Department of Finance (DoF)

Impaired Loans % (Coverage %)1 by Bank and Asset Dec-12 Dec-13 Jun-14 Book (€bn)2

BOI Irish Residential Mortgages 13.1 (40) 14.2(49) 14.1(51) 26.3 UK Residential Mortgages 2.3 (22) 2.4(24) 2.3(22) 25.0 Irish SMEs 26.5 (43) 26.7(50) 26.7(51) 10.0 UK SMEs 17.9 (37) 17.1(50) 15.7(44) 2.7 Corporate 10.1 (44) 7.5(41) 8.8(38) 8.2 CRE - Investment 35.9 (35) 42.3(38) 41.9(41) 13.6 CRE - Land/Development 89.5 (60) 89.3(68) 89.9(73) 3.1 Consumer Loans 9.4 (85) 8.4(90) 7.6(91) 2.9

17.7 (43) 18.5(48) 18.2(50) 91.8

PCAR Banks (€bn) Dec-12 Dec-13 Jun-14 Total Loans 224.9 208.9 205 Impaired 53.3 53.9 50.8 (Impaired as % of Total) 24.5% 25.8% 24.8% Provisions 27.2 29.4 27.8 (Provisions as % of book) 12.1% 14.1% 13.6% (Provisions as % of Impaired) 49.5% 54.5% 54.7%

AIB Irish Residential Mortgages 19.9 (38) 23.0(43) 23.8(41) 37.3 UK Residential Mortgages 9.2 (67) 11.3(53) 11.5(56) 2.6 SMEs 34.4 (67) 34.6(68) 31.7(69) 13.7 Corporate 15.6 (73) 11.1(65) 9.4(62) 4.4 CRE 62.0 (59) 66.7(64) 59.7(67) 18.0 Consumer Loans 30.5 (80) 33.2(81) 33.0(81) 4.1

32.7 (56) 34.9(59) 32.5(59) 80.1

PTSB Irish Residential Mortgages 19.6 (45) 26.0(47) 27.6(46) 23.7 UK Residential Mortgages 1.7 (57) 1.3(85) 1.0(129) 7.0 Commercial 49.7 (66) 68.7(63) 69.2(65) 2.1 Consumer Loans 32.1 (105) 26.0(105) 23.2(103) 0.3

17.9 (51) 23.6(51) 24.5(51) 33.1

1 Total impairment provisions are used for coverage ratios (in parentheses) 2 Book value before impairment provisions as at June 2014

Loan Asset Mix (PCAR banks end ‘13)

AIB and BOI have returned to profit in H1 2014 (€bn)

-6

-4.5

-3

-1.5

0

1.5

3

4.5

2011 2012 2013 2014 H1-2

-1.5

-1

-0.5

0

0.5

1

1.5

2011 2012 2013 2014 H1

Pre-Provisions Post-Provisions

72

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2011 2012 2013 2014 H1

Allied Irish Bank Bank of Ireland Permanent TSB

Source: Interim & annual reports of banks

AIB and BOI returned to profit in H1 2014; net interest margins on new lending are favourable

73

Source: Central Bank of Ireland Note: Margins are derived from weighted average interest rates on loans and deposits to and from households and non-financial corporations.

More favourable margins on new business are slowly feeding into overall book (%)

Source: Annual reports of Irish domestic banks

Cost income ratios beginning to improve

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Outstanding Business New Business

74%

63%

85%

96%

78%

111%

123%

88%

144%

77%

60%

119%

55% 55%

114%

0%

15%

30%

45%

60%

75%

90%

105%

120%

135%

150%

AIB BOI PTSB

2010 2011 2012 2013 2014 H1

Bank deposits have stabilised; Drawings on ECB facilities reduced

74

Covered banks’ deposit base (€bn) Covered banks’ funding structure (€bn)

0

50

100

150

200

250

300

350

Jan

Feb

Mar Ap

rM

ay Jun Jul

Aug

Sep

Oct

Nov De

cJa

nFe

bM

ar Apr

May Jun Jul

Aug

Sep

Oct

Nov De

cJa

nFe

bM

ar Apr

May Jun Jul

Aug

Sep

Oct

Nov De

cJa

nFe

bM

ar Apr

May Jun

2011 2012 2013 2014

Other Domestic Deposits Private Sector Deposits

Foreign Deposits Total Deposits

Source : CBI *including ELA until Feb. 2013 Source: CBI & DoF (excludes (i) NTMA pre-recapitalisation deposits, (ii) AIB Poland)

• ELG scheme ended for new liabilities Mar 2013 with no significant impact on deposit retention

• All three Covered Banks returned to market funding: since Nov 2012 >€3bn raised in term repo markets via private placements; €4bn in secured covered bond market transactions; €1.75bn in unsecured bonds; €0.25bn in LT2 debt; €0.5bn in first RMBS since 2007

• Irish-Headquartered banks’ usage of Central Bank facilities has fallen significantly following the end of ELA funding in 2013 and reduced recourse to the ECB repo facility.

• Deposits (both resident and non-resident) account for 65% of Irish-Headquartered banks’ funding in Jun 2014 versus 51% in Dec 2011.

-

100

200

300

400

500

600

Dec 11 Dec 12 Dec 13 Jun 14

Deposits Debt Securities

Capital and Reserves Borrowing from Eurosystem

Remaining liabilities*

Capital and loan-to-deposit ratios strengthened

75

Loan-to-Deposit Ratios (Dec-10 to Jun-14)

96% Jun-14

112% Jun - 14

166% Dec-10

176% Dec-10

AIB

BOI

122.5% Former PCAR Target (AggregatePillar Banks easily passed

original 122.5% PCAR targets for end-2013

• Core Tier 1 capital ratios at the PLAR banks remain well above minimum requirements.

• Pillar bank LDRs easily beat former PCAR targets for end 2013.

Core Tier 1 Capital Ratios (Jun-14)

Source: Published bank accounts Source: Published bank accounts

Note: “Transitional” refers to the transitional Basel III required for CT1 ratios which came into effect 1 January 2014. “Fully loaded” refers to the actual Basel III basis for CT1 ratios. * Dec-13 Figure

15.2%

10.8%

13.2%

10.0%

12.7%

10.9%*

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

CET1 % (Transitional) CET1 % (Fully Loaded)

AIB BOI PTSB

Irish residential mortgage arrears – still challenging

76

• PDH mortgage arrears have fallen in Q4 2013 and Q1 2014. The smaller BTL market (c. 25% of total) shows relatively higher arrears but also saw declines in the same period.

• Forbearance strategies were initially short-term in nature, though some restructurings straddle several categories and interest only restructurings are now down to 25% of total from over 37% at end-2012.

Mortgage Arrears (90+ days) Total Restructured/Rescheduled Cases

Source: CBI

* Only includes accounts with these restructurings and no other forbearance arrangement. ** ‘Other’ comprises accounts offered long-term solutions pending 6 months completion of payments. Figures are updated accordingly when these transition into permanent arrangements.

Interest Only 25%

Reduced Payment

(> interest only) 15%

Term Extension

* 17%

Arrears Capitalisat

-ion* 25%

Reduced Payment

(< interest only) 4%

Payment moratoriu-

m 2%

Other** 12%

0

2

4

6

8

10

12

14

16

18

Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

2009 2010 2011 2012 2013 14

PDH (by number) BTL (by number)

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

0

2

4

6

8

10

12

14

16

18

Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

2009 2010 2011 2012 2013 14

PDH (by balance)

PDH Arrears Formation (p.p. Q-Q by number, RHS)

%

Small and Medium-sized business (SME) credit trends and lending policy supports

• In 2013, the NPRF introduced three new SME funds to provide equity, credit and restructuring/recovery investment worth up to €850m: the NPRF (ISIF) acts as a cornerstone investor alongside third-party investors.

• Range of additional funding supports include: MicroFinance Fund - €40m available over 5 years Loan Guarantee Scheme - €150m per annum over 3 years Enterprise Ireland – upwards of €200m in 2013 European Investment Bank , European Investment Fund (€80m through AIB) and Silicon Valley Bank

partnership with the NPRF ($100m over 5 years)

77

Source: CBI

0 20 40 60

Real Estate Activities

Wholesale and Retail

Hotels and Restaurants

Primary Industries

Business and Admin

Manufacturing

Community and Social

Construction

Other

Health and Social

Sector share of SME Non-financial Credit

New Lending (€2.2 billion, yr to end-2013) Oustanding Credit (€56 billion, end-2013)

Source: CBI gross new lending excl. fin intermediation

0%

20%

40%

60%

80%

100%

Active Enterprises Private SectorEmployment

All Enterprises GVA

SME Share of the Irish Economy

SMEs Other Enterprises

SME deleveraging continuing as new lending remains steady

-3,500

-3,000

-2,500

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Gross New Lending and Repayments of Non-Financial SMEs

New Lending Repayments Net Transactions

• Necessary SME deleveraging is continuing with on average €1.6bn repaid per quarter

• Repayments are persistent and wide-spread across sectors

• Gross new lending (excluding financial intermediation) to SMEs has averaged €674m per quarter since Q2 2010

• It is notable that new lending advanced to property-related sectors is substantially lower than repayments (approx. 1/3) – highlighting the particular need to deleverage in this area

78

Source: CBI

0

0.5

1

1.5

2

2.5

0

1

2

3

4

5

6

7

8

9

2008 2009 2010 2011 2012 2013 2014

Stan

dard

Dev

iatio

n

%

Standard Deviation Austria Germany Spain

Finland France Greece Ireland

Italy Netherlands Portugal Euro Area

Latest ECB data show dispersion in SME interest rates persisting across EA (new NFC loans <1yr, <€1m)

79

Source: ECB

Rates on loans (<€1m) to Irish NFCs c.170bps over German

competitors

Note: Annualised Agreed Rate is defined by the ECB as ‘the interest rate that is individually agreed between the reporting agent and the NFC for a loan, converted to an annual basis and quoted in percentages per annum. The rate shall cover all interest payments on loans, but no other charges that may apply.’

Main provisions of Personal Insolvency Act

• Personal Insolvency legislation enacted and in use, but take-up has been slow • 442 applications for PIAs were received in H1 2014 but only 32 arrangements were

approved by Irish courts by end-June (note that there are approximately 121,000 mortgages in arrears > 90 days)

• The number of bankruptcies adjudicated on in H1 2014 - 164 - compares with 58 in the whole of 2013. The aggregate amount of debt involved in these adjudications totalled €278m of which €187m was secured (67%).

80

Personal Insolvency Arrangement (PIA)

Insolvent Debtor

€20,000 -€3,000,000 Secured/

Unsecured (>6yrs)

Insolvency Service of

Ireland

Debt settlement/restructuring mechanism provided. Family

home protected, protected from action by all “bound” creditors &

covered unsecured debts discharged after supervision

period if conditions met

Exposed to creditor action and possible bankruptcy with discharge period of 3yrs