Ms Francesca McDonagh:

In its letter of invitation, the committee highlighted a particular interest in two areas, namely, Brexit readiness and the proposed individual accountability framework for the banking sector. I will address both in my opening statement but, first, I will provide a brief overview of some developments in Bank of Ireland since our last meeting in July 2018.

Bank of Ireland is focused on the delivery of the multi-year strategy we announced last year. This strategy sets out the plan we are following from 2018 to 2021. It seeks to transform our culture, our systems and our business model, as well as improve customer service and grow sustainable profitability. In 2018 we delivered new lending of €15.9 billion groupwide, an increase of 13% year on year. Last year was the first year of net new lending growth in ten years.

A core part of our strategy is to strongly support home building and buying. In 2018 we increased mortgage lending by 17%. We are funding the construction of 5,500 residential units across approximately 140 sites nationwide. We are also the largest provider of new business lending into the economy and support two out of every three foreign direct investment projects coming into Ireland.

In addition to lending, since last June, we have taken several steps to improve the service we deliver to our customers. With more than 250 branches nationwide, we have the largest network of any Irish bank. In the second half of last year, we expanded cash services at more than 100 of our locations, opened two new branches and increased the number of front-line staff serving customers directly by more than 200.

We are also focused on reducing our non-performing exposures, NPEs. At 6.3%, we have the lowest level of NPEs of any bank in Ireland but we must do more. This is why, last week, we announced a transaction involving a potential securitisation of a portfolio of non-performing buy-to-let mortgage loans. In common with all banks, our regulators have set out the capital requirements we must adhere to in respect of any NPEs that we hold. This includes holding up to ten times more capital against certain impaired mortgages compared with others which are current with their repayments. This represents capital that could otherwise be lent into the economy or invested in improving customer service.

Brexit, is of course, a topic that dominates the landscape in Ireland, the UK and across the EU. It is also top of mind for many of our customers. Bank of Ireland’s economic pulse, our monthly index which tracks consumer and business sentiment, has reported weakening sentiment over the recent 12 months.

In March, this was down by 1.4 points to 89.4, a reduction of 7.7. compared with a year ago, with Brexit being the key factor.

At Bank of Ireland we look at Brexit in two ways. First, how we can support our customers to navigate Brexit. Second, how we are prepared as a Bank to deal with the outcome whatever that may be. Within our customer base we see resilient businesses that are adapting to changing circumstances. Nonetheless, particular challenges do arise for some customers. These can include managing foreign exchange risk, investing in their working capital or changing their supply chains, operations or logistics. In response, Bank of Ireland has launched a €2 billion Brexit fund to support businesses across the island of Ireland. Notwithstanding present issues, many businesses are also identifying opportunities for investment and growth, domestically and internationally, which we are keen to support.

Regarding our own business, Bank of Ireland was subject to two European Banking Authority, EBA, stress tests in 2018 - a baseline test and an adverse scenario assuming a severe economic downturn. We performed considerably better than UK peers. These tests demonstrated our resilience and showed we have enough capital reserves in the event of a severe financial downturn.

The committee raised in its letter the individual accountability framework for banking. I mentioned earlier that transforming Bank of Ireland's culture is an important element of our strategy. We believe that the individual accountability framework will act as an enabler of cultural change, not just in Bank of Ireland but across the sector. A good corporate culture makes a tangible and positive difference for our customers, colleagues and sustainable financial performance. Given this significance, we have made the transformation of our culture a core element of our entire transformation programme, and just as important as the transformation of our technology and how we are structured. Bank of Ireland has, therefore, welcomed the proposals to increase accountability in the sector in Ireland. We believe this will help to further drive the ongoing cultural change in banking, and we look forward to engaging proactively with the Central Bank on this matter.

Banking touches all parts of society. I look at the work under way on culture and an increasing accountability in our sector as core to Bank of Ireland's task of rebuilding trust with our customers and the wider society that we serve. I thank members for their attention. We are happy to take any questions now.