Mr. Richie Boucher:

I thank members for the opportunity to update the joint committee on Bank of Ireland's progress since we last met. I am accompanied by my colleagues, Liam McLoughlin and Lynda Carragher. We have provided the joint committee with a presentation in advance, which hopefully provides a reasonably comprehensive picture of our position. The bank is a public company that is subject to the listing rules of the Irish, London and New York stock exchanges. The presentation is a public document and is presented under the rules of the aforementioned stock exchanges. All comments I make are governed by the stock exchange disclosure rules. As the Chairman has suggested we keep this relatively brief, if it is acceptable to members, I would like to go through the presentation relatively quickly. Clearly, however, if I have skipped or have not paused for long enough on any particular part of it, I am sure that will come up in our questions and answers session.

I will turn to slide four of our presentation, which sets out, from Bank of Ireland's perspective, its strategic goals. It is important to bear in mind that the bank raised a significant amount of capital in 2011. Virtually all this equity capital came from the private sector and was provided by investors who believe that the Irish economy is recovering and that Bank of Ireland can support and benefit from that recovery. The investors' investment case is that Bank of Ireland can become the pre-eminent bank in Ireland and they have provided the capital and endorsed the use of the bank's funding and infrastructure in support of this goal. We in Bank of Ireland believe this is a time of both challenge and opportunity. We believe that if we are the most focused bank, if we engage heavily with and work with our customers and if we derive new lines of business in our franchises, then we can establish ourselves as the pre-eminent bank in Ireland. We are extremely well positioned in our core markets. We have had agreed a European Union restructuring and viability plan and are the only Irish bank that has had such a plan agreed. Under that plan, it is clear what businesses we have exited and what businesses we are in. In accordance with the plan, those businesses that we are in, and in particular our Irish franchise, are those businesses to which we can devote capital and funding. It clearly is one of our key goals to be strongly capitalised, thereby reducing our reliance on monetary authority and Government guarantees. At 30 June 2012, our core tier 1 capital was 14%, which is a very strong capital ratio well in excess of any regulatory requirements. Over the period since 2009, we have generated equity capital of €10 billion, of which approximately €1.5 billion net has come from the State. We must ensure that, in the future, our businesses are sustainable and, in particular, sustainable from a funding proposition. Over the past three years, we have worked very hard to grow our customer deposit franchises. Our deposit franchise in Ireland has proved to be highly resilient and, in particular, we have grown a retail deposit franchise in the United Kingdom, primarily through our relationship with the United Kingdom's Post Office.

Over the past three years, we have continued to reduce our cost base and costs are down by approximately 20%. The stock market is expecting our costs to be approximately €1.5 billion within the next couple of years and we believe this to be a sustainable target. We are in the middle of a redundancy programme within our business and have taken a €66 million charge in the first half of the year, which we expect to have been utilised by the year-end. At the same time, we are continuing to invest in our businesses because we wish to ensure we are here for the long haul and it is not just about cost-cutting. Therefore, we are investing heavily in payment systems and in branch networks in Ireland and in other parts of our franchises. From our perspective, the raising of capital, restructuring and deleveraging our balance sheets and reducing our costs will not achieve our goals unless we grow revenue. It is extremely important that we grow revenue as we cannot cut or restructure our way to glory. In simple terms, the way in which we grow our revenue is to sell more products to our existing customers and to get new customers. This is a key focus in those core franchises we have decided we are in and which have been endorsed under our European Union plan. The Irish taxpayer has taken a considerable risk in supporting Bank of Ireland and has provided investments to Bank of Ireland. Clearly, as an investor, it is our absolute goal that we reduce the Irish taxpayer from any support provided to Bank of Ireland, we reward any taxpayers' investment in Bank of Ireland and, ultimately, we repay the investment in Bank of Ireland. As a public company, my colleagues and I work for our stockholders and our job is to ensure we have a sustainable business into the long term with good sustainable returns for those who have provided us with capital.

As for the restructuring of the balance sheet shown on slide five, we have achieved our business sale targets. We were required to sell €10 billion of loans and we have sold those well within the discounts assumed for the prudential capital assessment review, PCAR, 2011 exercise and well ahead of the schedule that was set therein. A total of 50% of our assets are outside of Ireland and our deleveraging initiatives are all outside of our Irish businesses. I have touched on our deposits franchises, which have remained very strong and resilient. Based on both the deleveraging and the deposit, at 30 June our loan-to-deposit ratio, which is a key target, was 136% and based on developments since that period, our loan-to-deposit ratio will have reduced further. As I mentioned, our capital ratios remain strong. Our market positions in our Irish and United Kingdom franchises are strengthening. In particular, in July 2012 we signed an extension of our very important franchise with the United Kingdom Post Office, which extends our contract with the Post Office beyond 2023. A total of 21 million people per week visit a post office in the United Kingdom and we are the chosen financial services provider.

Turning to slide six, I mentioned that we continue to work on our cost programmes. We have a redundancy charge, which we took in the first half of the year and, as I mentioned, I believe this charge will be fully utilised. From the bank's perspective, the repayment period and payback on a redundancy charge of that note is approximately 11 months. As I mentioned, we continue to invest strongly in our core franchise and in particular in payment systems. The key task we have is rebuilding the profitability of the bank. We believe we have made significant progress in capital raising, in deleveraging and in our cost initiatives but, ultimately, our route to profitability to repay taxpayers' investment and to provide a return to our other shareholders is through increasing the profitability of the bank and that is our focus in the future. On slide seven, we explain in particular our balance sheet targets and as I have just advised, I believe we are well on the way to progress in that regard. The rebuilding profitability targets are more influenced in particular by interest rates, economic growth and the self-help initiatives we are undertaking.

Slide eight demonstrates the pressure under which our income has been in the first half of the year and the initiatives we are taking as a bank to try to enhance our operating profits. The most important focus for us is to reduce the cost of raw material. The cost of raw material to the bank is influenced by the cost of wholesale funding, by deposit pay rates in the markets and in the Irish market in particular, as well as in the cost to us of the Government eligible liabilities guarantee, ELG, guarantee. We are taking a number of initiatives to reduce that cost of raw material. Slide nine shows the breakdown of our portfolios, both between the different business segments and on a geographic basis. Approximately 54% of the group's balance sheet is in mortgages, of which approximately half are in the Republic of Ireland and half in the United Kingdom. The rest of our business is spread between Ireland, the United States and the rest of the world. It is likely, in accordance with our strategic plan, that the proportion of our balance sheet in Ireland will increase and the proportion of our balance sheet outside Ireland will reduce, which is in line with our deleveraging plans. Slide 11 demonstrates the impact that low interest rates, which are not reflected in the cost of money to the bank, are having on our net interest margin. Our net interest margin reduced from the second half of 2011 to the first half of 2012. We are taking a range of initiatives to try to address this and to improve our net interest margin.

We anticipate that that margin will gradually start to improve.

Slide 12 deals with our costs, which I have already touched upon, but I am obviously happy to discuss that in more detail.

Slide 13 looks at our provisions and impairment charges in the first half of 2012 compared to the first half of 2011. It demonstrates where the provisions are taken between our different loan books. We provide significant further detail in our interim accounts. Based on the trajectory of what we anticipate and if the economic environment, both in Ireland and the UK, continues at its current pace, we believe our loan loss charges will reduce further in the second half of 2012. Key influences on our loan loss charges are commercial real estate in the Republic of Ireland and our Irish mortgages. As regards the Bank of Ireland commercial real estate book, we have estimated for our provisions a peak-to-trough fall in commercial real estate prices in Ireland of 65%. We see evidence of the market stabilising at that level.

At the interim results announcement in August, I advised the market that from Bank of Ireland's perspective the pace of increase in the formation of arrears in our Irish mortgage book was reducing and that continues to be the case.

Our assumptions for our loan loss provisions are based on a peak-to-trough fall in house prices in Ireland of 55% and then another 10% on top of that for sale costs, etc. From our perception, the market appears to be stabilising at current levels. Obviously the market is a mix of a number of different micro-markets, but our experience in the main urban areas - both in terms of our own existing book and the flow of new business - is that house prices seem to be stabilising at current levels.

Slide 15 demonstrates the mix of our deposits, in particular between Ireland and the UK. The rationale is that we can fund our UK business through retail deposits and therefore it is a sustainable business going forward. Our deposit target of €75 billion to €80 billion by December 2014, based on our experience in the period up to 30 June and since, looks eminently achievable.

I will now turn to slides 17 to 20, which deal with the two aspects of our business upon which there was a particular focus in the committee's invitation. We have tried to demonstrate in pictorial form how we see our different tasks and initiatives. One of our most important tasks is continuing to provide new mortgages in the market. That is because it is a sustainable part of our business going forward. We strongly believe in Ireland and that the Irish economy will recover. We were provided with capital liquidity by our investors to support that recovery and to benefit from it.

In the first half of 2012, mortgage demand remained relatively muted in the economy. We did about 40% of the flow of business in that economy and we have been heavily advertising our products and services. In the period since, we have seen a noted pick-up in mortgage demand and activity in September and October. We have come out with a wide range of new products and services, both for existing customers and to deal with customers who are facing financial challenges. We have a significant number of staff involved in working on short-term and long-term solutions for customers. We have more than 16,000 customers who are currently subject to mortgage forbearance or who have had their mortgages restructured. Our mortgage forbearance and mortgage restructures are based on customers who can meet, in our estimation and theirs, at least the full interest on their mortgages. Some 86% of those customers who are subject to forbearance or restructuring are fully meeting the revised arrangements. While it is early days yet, we believe that our restructuring approach is benefiting a significant number of our customers, which is evidenced by the low level of re-default.

We could probably spend a little more time on the SME sector. A key part of our future business strategy is to be the pre-eminent bank in Ireland. We are currently number two in business banking in Ireland, and it is our goal to be the number one bank. A particular focus we have is on the SME sector, where we are number two. We have a wide range and are a universal bank. We have a distribution system in every part of Ireland, primarily through our branch network, which tries to reach out to our customers. We have an internal target, which is also a target agreed with the Government, that we will provide €3.5 billion of new lending to the SME sector. From a Bank of Ireland perspective, we measure this target on the basis of new and increased lending. From our perspective, new and increased lending is what derives revenue, and that is why it has our focus.

We obviously have a number of customers in the SME sector who face different challenges and we are working closely with them to help them restructure their businesses and look at their propositions going forward. From our perspective in Bank of Ireland, we have a risk appetite in every sector because we believe that in every sector good business people can make money and can develop good businesses. We are not closed to lending in any particular sector. We have identified certain sectors which we feel have higher growth potential and we are devoting more resources to product innovation in those areas.

In slide 26, we try to demonstrate both for the market and for the committee where the different divisions are in the second half of 2012. We have tried to point out that certain of our divisions have moved more quickly towards profitably. Our Irish division continues to require the most work and therefore the contribution of our overseas and corporate divisions in rebuilding profitability for the group as a whole, as we restructure our Irish division, is extremely important.

I will now move to slide 27. As investors and representatives of the taxpayer, we try to demonstrate what the taxpayer is getting out of its support for Bank of Ireland. Our first task is to reduce the risk to the taxpayer from support provided by the taxpayer. We believe that the capital we have raised, the restructuring and deleveraging, the cost-reduction programmes we have undertaken, the agreement of our EU viability and restructuring plans, and the enhancement of our franchises - including the franchise in the UK, further protected by an extension to post office contract - have been a very important part of reducing the risk to the taxpayer. The most significant contingent liability the taxpayer has is in respect of the eligible liabilities guarantee or ELG. Through a range of initiatives, particularly deleveraging and increasing our deposit franchises, we have reduced the liabilities under the ELG from €136 billion at their peak in September 2008 to €36 billion at the end of June. They will have reduced further since that date. Bank of Ireland notes that the ELG is due to expire on 31 December and we are prepared for that.

The State invested €4.8 billion in cash in Bank of Ireland in the period up to 30 June 2012, and Bank of Ireland returned €2.5 billion in cash to the State in that period. The State's current investment in Bank of Ireland is a 15% shareholding, preference shares of €1.8 billion which bear a coupon of 10.25% per annum, and a contingent capital instrument which is not part of our core tier one, which bears a coupon of €1 billion per annum.

In summary, we are making progress against the priorities we have set for ourselves and that we have shared with our investors. It is a very challenging environment, but one that we believe creates opportunities for us. We will continue to build our businesses in Ireland and invest in our Irish franchises. As regards our progress on deleveraging our balance sheet, it is self-evident that deleveraging is outside Ireland and outside our core franchises. We will continue to reduce our reliance on the ELG and we are actively reducing the cost of money to us. We have significant enhancements of some of our key franchises and our capital remains robust. We are on track to achieve our goal of becoming the pre-eminent bank in Ireland. The most important thing we can do in Bank of Ireland is to have a strong focus on all of the objectives that are under our own control and that we can influence. That is our target going forward.

I will be pleased to take questions now.