Ireland: Risks reduced as economy looks to recovery in 2021 - Vaccine roll-out and Brexit deal reduce long- term risks going into new year - NTMA
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Ireland: Risks reduced as economy looks to recovery in 2021 Vaccine roll-out and Brexit deal reduce long- term risks going into new year January 2021
Index
Page 3: Summary
Page 8: Macro
Page 20: Fiscal
Page 28: NTMA Funding
Page 41: Structure of Irish Economy
Page 52: Brexit
Page 57: Property
Page 64: Other Data
2
Summary Considerable Covid shock cushioned by structure of economy and large fiscal response
First steps to recovery along uneven road: Intermittent
lockdowns expected before vaccine rollout is completed
GDP strong in 2020 while U rate uncertain**; Value added from ICT & pharma
domestic sectors hampered Lockdown impact Oct/Nov has given Ireland resilience
35% 600 200
30% 180
500 160
25%
20% 140
400
15% 120
300 100
10%
80
5%
200 60
0%
40
-5% 100
20
-10%
0
-15% 0
2012
2000
2002
2004
2006
2008
2010
2014
2016
2018
2020
-20%
2017
2005
2007
2009
2011
2013
2015
2019
GVA: Multinational dominated
Unemployment claimants sectors (€bns)
Domestic Demand GDP (Index, Jan 20 = 100) GVA: Domestic sectors
Source: CSO
* Domestic demand series accounts for multinational activity and known as modified final domestic demand
(excludes inventories)
4
** Whether those on government income supports are unemployed is statistically debatable. Some will have
left the labour force, others are just temporarily furloughed.
Ireland used 2014-19 growth to improve debt sustainability;
added fiscal room now needed to fight Covid
Primary surpluses to end; Improved debt position created Debt will rise from pre-Covid
GG deficit forecast €21.6bn room for fiscal response level of 95% of national income
180%
10%
Debt-to-GNI* 160%
5% (95% 2019, from 166% peak)
140%
0% 120%
Debt-to-GG Revenue 100%
-5%
(230% 2019, from 353%)
80%
-10%
60%
-15% Average interest rate
40%
(2.1% 2019, from 5.1%)
-20% 20%
1995
1998
2001
2004
2007
2010
2013
2016
2019
0%
GG Balance (% GNI*) Debt-to-GDP^ 1995 2000 2005 2010 2015 2020f
(57% 2019, from 120%) Debt to GNI* Debt to GDP
Primary Balance (% GNI*)
Source: CSO, Department of Finance
^ due to GDP distortions, Debt to GDP is not representative for Ireland, we suggest using other 5
measures listed.
Covid-19 and Ireland: significant hit to domestic economy
followed by powerful policy response
Recession Exposure Policy
Ireland (ex. Multinationals) is in Ireland’s domestic economy hit Significant stimulus announced
recession. hard like others but equivalent to 19% of GNI* over
internationally-traded sectors 2020 and 2021
Economy has begun first steps (Pharma/ICT) have thrived
to recovery along uneven road. ECB and Fed actions should cap
Vaccine progress gives The worst case scenarios for interest costs and allow
optimism for H2 2021 onwards. Brexit avoided by UK-EU FTA necessary fiscal room
6
NTMA has indicated a funding plan of €16-€20bn for 2021;
€24bn funded in 2020 at record low rates
Flexibility 10 years AA-
Ireland has large cash balances Weighted average maturity of Ireland has been affirmed in AA
and a year free of maturing debt one of longest in Europe category by S&P
bonds in 2021
The ECB’s QE enabled NTMA to On relative basis, hit to Ireland
Funding will come from several extend debt maturities, reduce less than for other countries.
sources. Bonds, short-term interest cost and repay the IMF. Reasons include multinationals,
paper, EU Sure, and private Now ECB is buying aggressively smaller tourism sector and
placements. again with few limitations smaller domestic economy
7
Section 1: Macro Multinationals raced ahead in 2020; domestic sectors hit badly but aided by policy response
Second wave subdued by Q4 lockdown; Case numbers
spiked in December forcing another lockdown for January
14 day cumulative Covid-19 cases/deaths Ireland case numbers versus other countries
per 100k of population (per 100k of population)
300 25 1,000
900
250 800
20
700
200 600
15 500
150 400
10 300
100 200
100
5 -
50
- -
Ireland France Germany
Italy Spain US
Cases Deaths (RHS) UK
Source: DataStream 9
On a relative basis Ireland performed better economically
than most EU peers in 2020 – thanks to tech/pharma firms
Real GDP up 3.0% Y-o-Y in 2020 for Ireland: Real MFDD down 6.6% Y-o-Y in 2020: MFDD
GDP overstates impact of multinationals understates impact of multinationals
4% 0%
2% -2%
0%
-4%
-2%
-6%
-4%
-8%
-6%
-10%
-8%
-10% -12%
-12% -14%
NL
NL
EA
Italy
Italy
Norway
Sweden
Denmark
Belgium
France
Denmark
Sweden
Belgium
France
Australia
Finland
UK
Finland
UK
S Korea
US
Austria
S Korea
US
Austria
Germany
Germany
Ireland
Ireland
Canada
Japan
Japan
Portugal
Portugal
Switzerland
Switzerland
Y-o-Y impact to GDP (Q1-Q3, 2020 constant prices) Y-o-Y MFDD impact (Q1-Q3 2020, constant prices)
Source: CSO, DataStream 10
Note: MFDD for Ireland is modified for multinational activity by Ireland’s Central Statistics Office (CSO). For
other countries MFDD = Domestic demand = Consumption + Government (current) spending + InvestmentSector breakdown for 2020 Q1-Q3 – Multinationals racing
ahead, domestic side hit hard
30%
22% Domestic sectors hit badly – 26% of economy in
these four categories
20% 16%
12%
10%
3% 2% 2%
0%
-10%
Two Sectors least
-20% impacted are -14% -15%
-18%
dominated by FDI
-30%
-40%
-50%
-51%
-60%
Industry ICT Agri, Fish Real Estate Public, Educ Fin & Construction Prof, Distribution, Arts & other
(incl. & Health Insurance science, Transport,
pharma) technical Hotels and
Restaurants
GVA Growth (Q1-Q3 2020, constant prices)
11
Source: CSOLabour market data shows stark Covid-19 impact; Second
lockdown has seen a reversal in unemployment rate
True unemployment rate is uncertain: Covid- At end-Q3, adjusted employment was
19 adjusted rate 21%* in November estimated just below 2.1m
35 2.4
millions
30 2.3
2.2
25
2.1
20
14.7 2.0
15
1.9
10 1.8
5 1.7 Actual hours worked down
5.2 5.4% y-o-y in Q3, an
1.6 improvement from -22% in Q2
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
1.5
2004
1998
1999
2001
2002
2005
2007
2008
2010
2011
2013
2014
2016
2017
2019
2021
Unemployment
Covid-19 Adjusted Unemployment Total Employment Covid Adjusted
Source: CSO
* The CSO have estimated the upper bound of the unemployment rate at 21% in November. The CSO
have urged caution around labour market data given the likelihood of revisions and the unique nature 12
of employment status for some people in the pandemic.Government income supports extended into 2021; have
helped maintain aggregate household income
Oct/Nov numbers increased by lockdown; Supports have meant aggregate household
numbers will fluctuate in H1 2021 income has been more than maintained
1.2 100
Millions
1 90
80
0.8
70
0.6
60
0.4 50
0.2 40
0 30
20
10
Temporary WageSubsidy Scheme/Employment Wage 0
Subsidy Scheme 2019 Q1-Q3 2020 Q1-Q3
Pandemic Unemployment Payment Other Disposable Income Social Protection
Source: Revenue, DEASP, CSO 13Consumption fell sharply in Q2 despite incomes being
maintained; the result is record savings rates
Consumption sharply hit in Q2 – down 22% Retail sales rebounded in Q3; Q4 lockdown
y-o-y: Q3 saw rebound saw reversal for some sectors
30 20% 40%
15%
25 20%
10%
0%
20 5%
0% -20%
15
-5% -40%
10 -10%
-60%
-15%
5 -80%
-20%
0 -25% -100%
1997 2000 2003 2006 2009 2012 2015 2018 2018 2019 2020
Consumption Growth (Y-o-Y, RHS) All Retail Food Retail
Consumption (€bns, LHS) Bars Department Stores
Source: CSO
14Savings rate increased sharply in Q2 due to forced
savings; H2 saw spending return close to 2019 levels
Gross household saving rates jump in Q2 – Card data shows Q3 consumption rebound;
Ireland larger than most lockdown impacted Q4 so far but not like Q2
20 10%
18 5%
0%
% of Disposable Income (4Q MA)
16
-5%
14 -10%
-15%
12
-20%
10 -25%
Spending in December up 5%
8 -30% on 2019 after lockdown ended
-35%
6
-40%
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec 20 (1-14th)
2020f in total
4
2
0
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Spending on debit and credit cards (y-o-y change)
Ireland EU-27 EA-19 UK
Source: Eurostat, ONS, CSO ; CBI, Eurostat; CBI
15
Note: Gross Savings as calculated by the CSO has tended to be a volatile series in the past, some
caution is warranted when interpreting this dataInvestment hit as construction sector was shuttered in Q2;
Construction rebounded Q3, un-impacted by Q4 lockdown
Building and construction investment hit by Another surge of IP into Ireland in 2019-2020
40% in Q2 but rebounded in Q3 – helps ICT but distorts investment picture
300 10 200
9 180
250 160 Four-quarter
8
sum (€bns)
7 140
200
6 120
100
150 5
80
4
100 60
3
40
2
50 20
1
0
2010
1996
1998
2000
2002
2004
2006
2008
2012
2014
2016
2018
2020
0 0
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Building Investment Other Domestic Investment
Construction Employment (000s) Distortions (mainly IP) Modified GFCF
Building GFCF (€bn RHS) Total GFCF
Source: CSO; NTMA calculations 16PMI – Manufacturing holding up better than services;
lockdown impact seen in Oct/Nov
Ireland’s Composite PMI has tended to be a All three PMIs softened recently –
good guide for MDD Composite 47.7, Manu 52.2, Services 45.4
65 70
60 R² = 0.61
60
55
50
Composite PMI
50
40
45
30
40
20
35
10
30
25 0
-20% -15% -10% -5% 0% 5% 10% 15% 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Modified Domestic Demand y-o-y change Services Manufacturing Composite
17
Source: Markit, NTMA analysisExternal environment supportive for Ireland – 2021 should
see the global economy rebound given large stimulus
Oil price drop might boost the economy by
2020 2021
c.0.5% of GNI*
Maximum Maximum 100 8
EA Monetary Policy
accommodative accommodative
90 7
EU Fiscal Policy Expansionary Expansionary 80
6
70
Maximum Maximum
US Monetary Policy 5
accommodative accommodative 60
50 4
US growth Covid-19 shock Rebound
40 3
Significantly down 30
Oil price Unclear 2
despite rebound 20 significant drop in
import cost in 2015/16 1
10
Covid-19 shock; Brexit resolved; reversing in 2017/18
UK growth
Brexit unresolved Rebound 0 0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Euro Growth Covid-19 shock Rebound
Brent Oil €/Barrel
Strengthening vs.
Euro currency Unclear Mineral Fuels Imports (RHS, 12m rolling, €bns)
Dollar
Source: NTMA analysis, DataStream, CSO 18Ireland has used recovery period to repair private sector
balance sheets – especially households
Household debt ratio has decreased due to Legacy of 2008-12 financial crisis is on the
deleveraging and increasing incomes Government balance sheet
40 400%
20 350% Economic growth has
allowed smooth private
- 300% sector deleveraging
-20
250%
-40
200%
-60
150%
-80
100%
-100
50%
-120
NL
Italy
Denmark
Greece
France
Sweden
Belgium
UK
Poland
Finland
Portugal
Germany
Slovenia
Austria
Czech Rep
Ireland
Romania
Spain
EA19
0%
Public and Private Private debt (% of Public debt (% of
debt (% of GNI*) GNI*) GNI*)
10 year pp change in HH Debt/Disposable Income ratio 2003 2008 2013 2020H1
Source: Eurostat (2019 versus 2009) Source: CBI data, CSO
Note: Private debt includes household and Irish-resident enterprises (ex. financial intermediation) 19
CBI quarterly financial accounts data used for household and CSO data for nominal government
liabilities.Section 2: Fiscal Ireland’s economic structure has meant revenues have held up despite Covid-19
Fiscal Policy response was large and swift in 2020; Budget
2021 set on conservative no vaccine/no Brexit deal basis
Response Revenues Debt
Total fiscal response of €38bn Ireland’s economic structure has Debt ratios will reverse due to
over 2020 and 2021 (19% of meant revenues have held up Covid.
GNI*) is large despite Covid-19
Gross Government debt 57% of
Ireland has responded to Covid Strength of both Corporate and GDP at end-2019 but close to
with first attempt at counter- Income tax revenues from 95% of GNI*. Ireland will give
cyclical fiscal policy in its 100 Multinational sectors has helped back some hard won gains in the
year history sustain government coffers short term
21Total fiscal response of €38bn over 2020 & 2021 (19% of
GNI*) is large; contingency may not be needed given Brexit
€bn 2020 2021 % GNI* Description
Taxation Measures 4.1 3.4 0.7 2.1
• Warehousing/Deferrals 2.0 2.0 0.0 1.0 Corporate Tax, VAT, Stamp duty tax deferrals
Temporary VAT decrease; hospitality VAT decrease,
• Other 2.1 1.4 0.7 1.1
CRSS
Expenditure Measures 28.7 16.8 11.9 14.1
• Social Protection PUP/TWSS extended into 2021; TWSS transforming
13.6 10.4 3.2 6.7
(income supports) into EWSS
• Health 4.4 2.5 1.9 2.2 Covid-19 capacity expenditure
Business supports, Grants, Education, Arts, Tourism
• Business Supports 1.0 0.9 0.1 0.5
and Transport
• Housing, Local Govt 1.2 1.1 0.1 0.6 Commercial Rates waivers
Help-to-Buy, other grants and aids, Recovery Fund,
• Other 8.5 1.9 6.6 4.2
Covid/Brexit contingency response
Total Direct Supports 32.8 20.2 12.6 16.2
Credit Guarantee Scheme, Pandemic Stabilisation
Indirect supports 5.0 5.0 0.0 2.5
and Recovery Fund, other schemes
Total Supports 37.8 25.2 12.6 18.7
Source: Department of Finance 22Fiscal discipline in evidence in last decade – after Covid-19
stimulus ends Ireland plans to narrow its deficit again
Gen. Govt. Balance (€bn) will be in Revenues holding up despite pandemic;
significant deficit in 2020/21 expenditure is increasing (Central Govt.)
10 25%
20%
5
15%
0
10%
-5 5%
-10 0%
-5%
-15 2020
GGB % of GDP -6.2% -10%
-20 GGB % of GNI* -10.7% -15%
-25 -20%
Jan-Nov 20 vs Jan-Nov 19
Income tax VAT Excise duties
GG Balance Primary Balance Corporation tax Total Revenue Total Expenditure
Source: CSO; Department of Finance 23Gross Government debt 57% of GDP at end-2019 but close
to 95% of GNI*; will give back some gains in the short term
Debt-to-GNI* had dropped since last crisis; No country will be running primary surplus
could increase 20pp in coming years necessary to keep debt ratio in check
180% 15.0%
160% 10.0%
5.0%
140%
0.0%
120%
-5.0%
100%
-10.0%
80% -15.0%
60% -20.0%
40% -25.0%
~
-30.0%
20% -40%
0%
1995 1999 2003 2007 2011 2015 2019 Primary Balance (% of GNI*)
Debt to GNI* Debt to GDP Debt Stabilising PB (% of GNI*)
Source: CSO; Department of Finance, NTMA analysis 24CT revenue cushioned by 2019 payments and defensive
nature of Pharma and ICT; income tax protected also
Corporation tax (CT) receipts continue to Progressiveness of income tax system and
rise – have nearly tripled in 6 years sector mix limits hit to overall receipts
24% 14.0 40%
20% 12.0 35%
10.0 30%
16%
8.0 25%
12%
6.0 20%
8% 15%
4.0
4% In 2019, 40% of CT paid 2.0 10%
by 10 companies
0% - 5%
2021f
1997
1995
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
0%
Corporation Tax (€bns, RHS)
Corporation Tax (% of tax revenue)
Corporation Tax (% of GG Revenue) % of taxable income cases % of income tax collected
Source: Department of Finance, Revenue, NTMA analysis
Note: Most affected sectors include construction, wholesale and retail trade, transport, accommodation 25
and food service activities, real estate activities, professional, scientific and technical activities;
administrative and support service activities, arts, entertainment and recreationNTMA’s job is to finance the cash deficit (EBR) but it’s best
to use accruals-based GGB for comparison to peers
Methodological
EBR and GGB (€bns) usually minor – gap is EBR GGB
Differences
larger currently
Accounting basis Cash (exchequer) Accrual
10 Financial
Included Excluded
transactions
0
Subset of Central Includes all of
Scope
Govt. Central & Local
-10
Intra-Government
No Yes
Consolidation
-20
2020 2021 Comments
This is the deficit in cash terms that the
-30 EBR -16.7 -17.6 NTMA must finance each year
Prom. Note capital
transfer to recap Accruals can relate to interest, taxes, other
-40 Adjust for Accruals 3.1 0.4 expenditures
banks hit GGB in
2010 but not EBR Transactions between the Exchequer and
-50 (non-cash Exclude Equity &
-4.6 -1.5
NAMA, CBI and other govt. entities: this
Loan Transactions benefits funding req.
expenditure)
-60 Social Insurance Archaic funding structure of social insurance
-2.2 -0.6 in Ireland is outside Exchequer. Consolidated
Fund in GGB
Semi State, ISIF, Dividends and profits from government
-0.2 -0.2 entities
other funds
GG Balance EBR
Local Govt. -1.0 -0.9 Local governments fund themselves
Most complete metric for fiscal position. Use
GGB -21.6 -20.5 this for deficit comparison with other
Source: CSO, nations 26
Department of Finance,
NTMA analysisNeed to assess other metrics apart from debt to GDP when
analysing debt sustainability
GG debt to GG revenue % GG interest to GG rev % GG debt to GDP %
Greece 370.0% 6.2% 176.6%
Italy 286.4% 7.2% 134.8%
Portugal 274.7% 7.0% 117.7%
Spain 244.2% 5.8% 95.5%
Cyprus 231.6% 6.1% 95.5%
Ireland 229.1% 5.0% 58.8%
UK 227.3% 5.6% 85.4%
Belgium 196.1% 3.9% 98.6%
France 186.7% 2.7% 98.1%
EA19 181.0% 3.5% 84.1%
EU28 176.1% 3.7% 79.3%
Austria 143.7% 2.9% 70.4%
Germany 127.6% 1.7% 59.8%
Finland 113.2% 1.6% 59.4%
Netherlands 111.2% 1.8% 48.6%
Source: Eurostat
Ireland 95% Debt to GNI* ratio in 2019 27Section 3: NTMA Funding Flexibility in funding strategy due to smooth maturity profile and no 2021 bond redemptions
NTMA has indicated a funding plan of €16-€20bn for 2021;
€24bn funded in 2020 at record low rates
Flexibility 10 years AA-
Ireland has large cash balances Weighted average maturity of Ireland has been affirmed in AA
and a year free of maturing debt one of longest in Europe space by S&P
bonds in 2021
The ECB’s QE enabled NTMA to On relative basis, hit to Ireland
Funding will come from several extend debt maturities, reduce less than for other countries.
sources. Bonds, short-term interest cost and repay the IMF. Reasons include multinationals,
paper, EU Sure, and private Now ECB is buying aggressively smaller tourism sector and
placements. again with few limitations smaller domestic economy
29Flexibility helped by smoother maturity profile and no bond
redemptions in 2021
20
18
16
14
12
10
Billions €
8
6
4
2
0
Bond (Fixed) EFSM EFSF Bond (Floating Rate) Green Other (incl. Bilateral)
Source: NTMA
Note: EFSM loans are subject to a 7-year extensions. It is not expected that Ireland will refinance any
of its EFSM loans before 2027. As such we have placed the pre-2027 EFSM loan maturity dates in the
30
2027-33 range although these may be subject to change.Near-term redemptions much lower than last four years;
lower borrowing costs also provides NTMA with flexibility
NTMA issued €92.5bn MLT debt since 2015; Even with extra Covid-19 borrowings, NTMA
13.2 yr. weighted maturity; avg. rate 0.83% might not match supply in 2017-2020 period
7.0 27 80
€ Billions
24
6.0 70
5.5 21
5.0
18 60
3.9
4.0 15
7Y 50
2.8 10Y 12
3.0 10Y 10Y 15Y
12Y 12Y 9 40
2.0 1.5 15Y 30Y
6
0.8 0.9 1.1 0.9 30
1.0 5Y 5Y 10Y 7Y 5Y 0.2 3
8Y 10Y 16Y 30Y 10Y 20Y
0.0 0 20
2012 2013 2014 2015 2016 2017 2018 2019 2020
10
Auction
Syndication 0
Weighted Average Yield % (LHS) Issuance (2017-2020) Redemptions (2021-2024)
Source: NTMA 31
Only showing marketable MLT debt (auctions and syndications). Other issuance such as inflation
linked bonds, private placement and amortising bonds occurred but not shown.The NTMA took advantage of QE to extend debt profile
Various operations have extended the …Ireland (in years) now compares
maturity of Government debt … favourably to other EU countries
20 12
18
10
16
14 8
12 6
11.1 10.8 10.5
10
4 7.9 7.8 7.3
8 7.1 7.0 6.7 6.6 6.4
6 2
4
0
2 AT IR BG ES FR NL IT BD DK FN PT
0
2015 2016 2017 2018 2019 2020
Govt Debt Securities - Weighted Maturity
Weighted Average Maturity Issued (Years)
EA Govt Debt Securities - Avg. Weighted Maturity
Source: NTMA; ECB Note: Data excludes programme loans. 32In addition to PSPP, ECB’s PEPP with its flexibility (no
limits) & size (€1.85trn) will underpin Irish bond market
6 70
€ Billions
5 PEPP monthly IGB purchases running 60
at roughly €1.3bn a month
50
4
40
3
30
2
20
1 10
0 0
Q4 2020f
Q1 2021f
Q2 2021f
Q3 2021f
Q4 2021f
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q1 2019
PSPP Net IGB purchases (LHS) PEPP/PSPP net purchases (LHS)
Cumulative Net ECB Purchases (RHS)
Source: ECB, NTMA Calculations
Notes:
Forecasts sees Ireland’s capital key of 1.69% and assumes 90% of new purchases will be for public sector 33
assets with 7% of public sectors assets being supranational issuers.Diverse holders of Irish debt – sticky sources account for
over 50%; will increase further with Eurosystem’s PEPP
Ireland roughly split 80/20 on non-resident “Sticky” sources - official loans, Eurosystem,
versus resident holdings (Q2 2020) retail - make up over 50% of Irish debt
250
200
Other Debt
(incl. IGBs - 150
Official) Private Non
28% Resident
100
33%
Retail, 50
Resident IGBs -
11% Private 0
2019
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2020
Resident
Eurosystem
22% Short term 6%
1% IGBs - Private Non Resident IGBs - Private Resident
IGBs - Private Non Resident IGBs - Private Resident Short term Eurosystem
Short term Eurosystem Retail Other Debt (incl. Official)
Retail Other Debt (incl. Official) Total Debt (€bns)
Source: CSO, Eurostat, CBI, ECB, NTMA Analysis
IGBs excludes those held by Eurosystem. Eurosystem holdings include SMP, PSPP and CBI holdings of
FRNs. Figures do not include ANFA. Other debt Includes IMF, EFSF, EFSM, Bilateral as well as IBRC- 34
related liabilities. Retail includes State Savings and other currency and deposits. The CSO series has
been altered to exclude the impact of IBRC on the data.Investor base for Government bonds is wide and varied
Investor breakdown: Country breakdown:
Average over last five syndications Average over last five syndications
6.6%
Other, 8.8% 15.0%
Pensions/
Insurance, Fund/Asset 23.2%
14.2% Manager,
36.2%
8.8%
Banks/ 45.0%
Central
Banks*,
38.4%
Ireland UK
US and Canada Continental Europe
Nordics Asia & Other
Source: NTMA 35
* Does not include ECB. ECB does not participate on primary market under its various asset purchasing
programmesIreland rated in “AA” category by Standard & Poor's
Date of last
Rating Agency Long-term Short-term Outlook/Trend
change
Standard & Poor's AA- A-1+ Stable Nov 2019
Fitch Ratings A+ F1+ Stable Dec 2017
Moody's A2 P-1 Stable Sept 2017
DBRS Morningstar A(high) R-1 (middle) Stable May 2020
R&I A a-1 Stable Jan. 2017
36
Source: NTMAIrish Sovereign Green Bonds (ISGB) - €6.1bn issued with
€3.9bn allocated to green projects
• Launched 2018 January 2021 Update
• Based on ICMA Green Bond Principles – Use of proceeds • €6.1bn nominal outstanding
model
• Governed by a Working Group of government • €3.9bn allocated to eligible green projects
departments and managed by the NTMA since inception
• Compliance reviews by Sustainalytics • €2.2bn remaining to be allocated to eligible
expenditure in 2020
• Issuance through two syndicated sales and
one auction
• Pipeline for eligible green expenditure
remains strong
• ISGB 2019 Allocation Report
• ISGB 2017/2018 Impact Report
Irish Rail train at Avoca on the Dublin to Rosslare route. Heavy rail was allocated some €400m from
ISGBs in 2019
37Allocation of ISGB funding has focussed on Water/Waste
management and transportation
€2,300
Allocation per eligible green category 2019
€2,200
€2,100 Built Environment/
€2,000 energy efficiency
11%
€1,900
Clean transportation
€1,800 35%
Allocation €million
2017/8 2019 2020frcst
Climate change
adaptation
Management of living
natural resources and
42% land use
1%
Renewable energy
8%
3%
Sustainable water and
Construction of the new water treatment plant at Vartry (March 2020) wastewater
management
38Irish Sovereign Green Bond Impact Report 2018: Some 50 Impact
measures reported
Some highlights from Report*
• Built Environment/ Energy Efficiency
– Energy saving (GigaWattHours) : 621.06
– GHG emissions reduced/ avoided in tonnes
of CO2 : 150.5
– Number of homes renovated : 27,549
• Clean Transportation
– Number of public transport passenger
journeys : 268.66 million
– Additional km of cycling infrastructure works
(feasibility/ design/ screening phase) : 85km
– Take-up of Grant Schemes/ Tax foregone
provided (number of vehicles) : 15,712
• Climate Change Adaptation (2017 and 2018)
– Number of properties protecting from
flooding on completion : 7,403
– Amount of damages/ losses avoided on
completion : €658 million
Waterford Greenway
*For a more detailed break-down please see the ISGB 2017/ 2018 Impact
39
Report hereIrish Sovereign Green Bond Impact Report 2018: Some 50 Impact
measures reported
Some highlights from Report
• Environmentally Sustainable Management of Living
Natural Resources and Land Use
– Number of hectares of forest planted : 4,025
– Number of hectares of peatlands restored :
203
• Renewable Energy
– Number of companies (including public sector
organisations) benefitting from SEAI Research
& Innovation programmes as lead, partner or
active collaborators : 68
– Number of SEAI Research & Innovation awards
benefitting research institutions : 52
• Sustainable water and wastewater management
– Water savings (litres of water per day) : 79.1
million
– New and upgraded water treatment plants :
10
– New and upgraded wastewater treatment
plants: 11
– Length of water main laid (total) : 416km
– Length of sewer laid (total) : 74km
Irish peatlands
40Section 4: Structure of Irish economy Multinationals distort Irish economy picture but have added resilience during Covid-19
Multinational activity has distorted Ireland’s data;
notwithstanding those issues, MNCs have real impact
Multinationals dominate GVA: profits are booked Domestic side of economy adds jobs; MNCs
here but overstate Irish wealth generation add GVA/high wages
Arts & Other
1% Share of Share of Gross Weekly
Share of
Wage Bill GVA Earnings € (Q4
Employment
(2019) (2019) 2019)
Public sector
10% Agriculture 4.5% 1% 1% N/A
Industry (incl.
Professional
Industry (incl.
12.2% 14% 35% 916
services Pharma.)
Pharma)
11%
35%
Construction 6.2% 4% 3% 821
Real estate
7% Dist., Tran,
25.4% 20% 11% 571
Hotel & Rest
ICT (Tech) 5.4% 8% 15% 1,241
Financial &
insurance
Financial 4.5% 8% 6% 1,235
Dist, tran,
6% hotel & rest ICT (Tech)
Real Estate 0.4% 1% 7% 730
11% 15% Professional 10.8% 13% 11% 810
Agri, forest & Public Sector 25.6% 28% 10% 836
Construction fish
3% 1%
Arts & Other 5% 2% 1% 514
Source: CSO 42Sizeable inflows of intellectual property into Ireland by
tech. & pharma. in recent years: exports & jobs created
Ireland is a leader in Computer Services; Enormous inflows of IP assets into Ireland
Exports have trebled since 2014 since 2015 on the back of BEPS reforms
140 18.0% 300
120 16.0%
14.0% 250 c.€500bn in
100 IP assets
€billions, Constant prices
12.0% transferred
80 10.0% 200 to IE since
8.0% 2015
60
6.0% 150
40
4.0%
20 2.0% 100
0 0.0%
2006
2014
2005
2007
2008
2009
2010
2011
2012
2013
2015
2016
2017
2018
2019
50
Computer Services Exports (€bn) 0
Chemical Products (€bn) 1995-2014 2015 2016-19
% of World Computer Services Exports (RHS) 2015 once-off IP assets increase estimate
% of World Chemical Products Exports (RHS) Fixed Capital Investment - IP assets
Source: IMF, UN Comtrade, CSO, NTMA Economics Calculations 43Ireland has deftly navigated the changing global economy
landscape in this century (adjusted GVA for Ireland)
Euro Area manufacturing base hollowed out The digitalisation of the economy: Ireland
over time: Ireland less impacted than most able to grow its tech sector in recent years
2 3
0 2.5
Ireland: 3% of EA19
-2 2 tech sector wages
but only 1.4% of
-4 1.5
EA19 population
-6 1
-8 0.5
-10 0
-12 -0.5
-14 -1
Italy
Estonia
Italy
Estonia
Cyprus
Cyprus
Belgium
France
Latvia
Belgium
Ireland*
Greece
Greece
Austria
France
Finland
Latvia
Ireland*
Malta
Finland
Austria
EA 19
Malta
Slovenia
Slovenia
EA 19
Germany
Slovakia
Lithuania
Lithuania
Germany
Slovakia
Netherlands
Netherlands
Spain
Portugal
Spain
Portugal
Luxembourg
Luxembourg
Manufacturing GVA: pp change in share of economy since Tech Sector GVA: pp change in share of economy since
1999 1999
Source: Eurostat, NTMA calculations
* Ireland’s GVA data has been adjusted to strip out the distortionary effects of some of the
multinational activity that occurs in Ireland. Specifically a profit proxy is removed from the GVA
data for the sectors in which MNCs dominate (parts of Manufacturing, ICT, and renting and leasing
services). Unadjusted Ireland’s figures are +7.1pp (manufacturing) and +6.5pp (tech sector).Adjusting for MNC profits, underlying economy was robust
pre-Covid: MNCs add real substance to IE economy
Ireland’s income = wages (all sectors) + Pre-Covid, Ireland had a robust underlying
domestic sectors profits + tax on MNC profits economy; compared favourably to EA
MNC sectors 250
contributed
€17bn CoE in ‘19 200 Index, Constant
prices, 100 = 2008
150
Comp of
Employee,
100
€100bn ,
MNC Sector
30%
Profits, 50
€142bn ,
43% 0
Three MNC sectors
contributed €5bn
in CT in 2019 Domestic MNC Sector Profits
Sector
Profits, Domestic Sector Profits
€90bn , 27% Compensation of Employee
Real GVA ex. MNC Sector Profits
Real GVA - EA19
Source: CSO, NTMA calculations (Nominal 2019 data used in left chart)
Ireland’s GVA data has been adjusted to strip out the distortionary effects of some of the
45
multinational activity that occurs in Ireland. Specifically a profit proxy is estimated for the sectors
in which MNCs dominate (MNC sectors = part of Manufacturing, ICT, and renting and leasing
services).The result of high value MNC activity in Ireland: Economy
less impacted by Covid - in particular the tax base
GDP overstates Ireland’s progress but is still a good Multinational sectors critical for Income tax
barometer for Revenue, in particular CT and IT
and Corporation tax: proven true in 2020
Income Revenue
Elasticity GG Revenue Tax Corporate Tax Ex. CT 100%
MDD 0.96 0.93 2.26 0.86 90%
GDP 1.08 1.03 1.33 1.05 80%
70%
40% 60%
30%
20% 50%
10% 40%
0% 30%
-10%
-20% 50% of CT, PAYE, VAT 20%
-30% comes from five least 10%
-40% impacted sectors* 0%
-50%
-60% VAT PAYE CT Three taxes
Industry (excl.
Information and
Agriculture, Forestry and
Real Estate Activities
Public Admin, Education
Financial and Insurance
Construction
Professional, Admin and
Distribution, Transport,
Arts, Entertainment and
Hotels and Restaurants
Communication
Construction)
combined
Support Services
Other Services
Other Sectors
and Health
Activities
Fishing
Financial and Insurance
Admin + support (incl. Aircraft Leasing)
ICT (tech sector)
% of CT, PAYE, VAT y-o-y change in GVA, Q1-Q3 2020 Manufacturing (incl. Pharma)
Source: CSO, Revenue, NTMA Calculations
* Agriculture sector pays minimal tax 46
Elasticity based on 1995-2019 data.
E = (annual % change in tax)/(annual % change in growth variable)On a relative basis Ireland could perform better than most
EU peers during Covid - thanks to ICT and pharma firms
The Irish wage bill is not going to be as ICT sector has acted as a bulwark in
impacted as other countries protecting incomes in Ireland
Latvia Ireland
Lithuania UK
France Latvia
Spain Sweden
Netherlands Finland
UK Luxembourg
Malta France
Cyprus Malta
Sweden Netherlands
Portugal
Luxembourg Germany
Denmark Denmark
Austria EU 27
EA 19 Cyprus
Finland EA 19
EU 27 Slovakia
Slovenia 40% of Lithuania
Belgium wage bill in Spain
Greece most Austria
Italy Belgium
Ireland affected Slovenia
Slovakia sectors Italy
Germany Portugal
Greece
30 35 40 45 50
0.0 2.0 4.0 6.0 8.0 10.0
Compensation of Employee in most affected sectors (% of
total) % of Compensation of Employee % of Employment
Source: Eurostat (2019)
Note: Most affected sectors include construction, wholesale and retail trade, transport, 47
accommodation and food service activities, real estate activities, professional, scientific and technical
activities; administrative and support service activities, arts, entertainment and recreationOECD’s BEPS 2.0 process could impact the business tax
landscape globally – agreement delayed to at least 2021
Pillar One : proposal to re-allocate taxing Pillar Two: proposal for minimum global tax
rights on non-routine profits
• The OECD has proposed further corporate tax • Pillar Two - the basic idea is to introduce a
reform - a BEPS 2.0. minimum tax rate with the aim of reducing
incentives to shift profits.
• BEPS 2.0 looks at two pillars. The first pillar
focuses on proposals that would re-allocate taxing • Where income is not taxed to the minimum level,
rights between jurisdictions where assets are held there would an “income inclusion rule” which
and the markets where user/consumers are operates as a ‘top-up’ to achieve the minimum
based. Non-routine profits could - to some - rate of tax.
degree be taxed where customers reside.
• The obvious questions arise:
• Under such a proposal, a proportion of profits what is the appropriate minimum tax rate?
would be re- allocated from small countries to who will get the ‘top-up’ payment?
large countries. Such a proposal would probably Is the minimum rate taxed at a global (firm)
reduce Ireland’s corporation tax base but it is level or on a country-by-country basis?
impossible to predict the size of the impact.
• These questions are as yet unanswered. If the
• Nothing has been decided yet. There are minimum rate agreed is greater than the 12.5%
disagreements across countries. OECD has revised rate that Ireland levies, it might erode this
the deadline to mid-2021. country’s comparative advantage.
48Outside of sector makeup, Ireland’s population helps
growth potential: Age profile younger than the EU average
Ireland’s population estimated at 4.98m in Ireland’s population will remain younger
2020: younger population than EU than most of its EA counterparts
70% Japan
Greece
60% Portugal
Italy
Spain
50%
Germany
Finland
40% France
Denmark
30% Ireland
UK
Belgium
20% China
Canada
10% Sweden
USA
World
0%Migration has improved Ireland’s human capital; post-
Covid migration to be closer to zero given travel bans
Latest Census data show net migration Migration inflow particularly strong in highly
positive since 2015 – mirroring economy educated cohort – work in MNCs attractive
150 3.0% 120
100 2.0% 90
60
50 1.0%
30
0 0.0%
0
-50 -1.0%
-30
-100 -2.0%
-60
2003
1987
1989
1991
1993
1995
1997
1999
2001
2005
2007
2009
2011
2013
2015
2017
2019
-90
Emigration (000s)
Immigration (000s) -120
Net Migration (000s) Third level Other Education Net Migration
Net Migration (% of Pop, RHS) 2009-2013 2015-2019
50
Source: CSOIncome equality has improved: Ireland’s progressive
system the main driver and cushioned the economy in 2020
Lower inequality (1985-2015): economic rise Progressive system means Ireland is around
reduced GINI coefficient unlike others the OECD average for GINI after tax
0.06 0.8
Lower GINI score means more
0.7
0.04 equal society
0.6
0.02 0.5
0.4
-
0.3
(0.02) 0.2
(0.04) 0.1
0
Denmark
Belgium
France
Italy
Latvia
Greece
Norway
Sweden
Austria
Poland
USA
Chile
South Africa
Slovenia
Iceland
Estonia
Finland
Germany
Australia
Russia
Israel
UK
Mexico
Costa Rica
Canada
Ireland
Slovakia
Czech Rep
Lithuania
Hungary
Netherlands
Portugal
Japan
Luxembourg
Spain
Korea
Turkey
Switzerland
(0.06)
(0.08)
Italy
France
Denmark
Belgium
Norway
Sweden
Greece
USA
Finland
Austria
Germany
Ireland
UK
Japan
Portugal
Netherlands
Canada
Spain
Switzerland
Luxembourg
Pre Taxes and Transfers
GINI Coefficient (Post Taxes and Transfers)
Source: IMF, OECD 51Section 5: Brexit Free Trade Agreement agreed at final hour. “Hard Brexit” risk eliminated leaving smaller long term impact
Following intense negotiations, a Free Trade Agreement
was agreed in December 2020 allowing for tariff free trade
Main points of FTA
• From January 1, the UK becomes a “third country” outside the EU’s single market and customs union. As
such without a free trade agreement, trade would be subject to tariffs and quotas.
• Under the deal, goods trade between the two blocs will remain free of tariffs.
However, goods moving between the UK and the EU will be subject to customs and other controls, and
extra paperwork is expected to cause disruptions.
Due to these non-tariff barriers, Brexit will likely result in less trade.
• Under the deal, services trade between the two blocs will continue but again could be hampered.
The Agreement provides for a significant level of openness for trade in services and investment.
But providing services could be hampered. For example, UK service suppliers no longer have a
“passporting” right, something crucial for financial services. They may need to establish themselves in
the EU to continue operating.
• The deal in conjunction with the Withdrawal Agreement signed in 2019 significantly reduces the risks
concerning a physical border on the island. For more detail see pg. 55.
• Brexit is likely to result in less trade in the long run between the EU and the UK but the deal does avoid the
worst case scenarios: Hard Brexit has been averted and the economic impact to Ireland will be modest.Impact of Brexit on Ireland will be net negative but deal
means the shock is smaller and spread over long horizon
Modelled impact on output versus No Brexit IE trading partners: UK important for good
baseline: FTA reduces impact significantly imports (land bridge) & services exports
0 % of Goods Services Total
total (2019) (2019) (2019)
-1 Exp. Imp. Exp. Imp. Exp. Imp.
-2 US 30.8 15.5 15.8 18.6 21.9 17.9
-3 UK
8.9 20.6 15.8 6.9 13.5 10.6
(ex NI)
-4
NI 1.4 1.9 n/a n/a n/a n/a
-5
EU-27 37.1 36.7 29.8 19.8 32.8 23.8
-6
China 5.9 5.8 2.8 1.3 4.0 2.3
-7
2020 2021 2022 2023 2024 2025
Other 15.9 19.4 35.9 53.4 27.8 45.5
FTA WTO Disorderly No-Deal
54
Source: CBI, NTMA analysisOne possible offset to Brexit impact is FDI inflows into IE;
service suppliers in UK may need to re-establish in EU
FDI: Ireland benefitting already Companies that have indicated jobs have or
will be moved to Ireland
Ireland could be a beneficiary from displaced FDI.
The chief areas of interest are
Financial services
Business services
IT/ new media.
Dublin is primarily competing with Frankfurt,
Paris, Luxembourg and Amsterdam for financial
services.
The UK (City of London) has lost significant
degree of access to EU market so there may be
more opportunities in time.
55Withdrawal Agreement in 2019 solves Northern Ireland
border issues
Main points of Withdrawal Agreement
• The withdrawal agreement is a legally binding international treaty which works in tandem with the free
trade agreement.
• Northern Ireland will remain within the UK Customs Union but will abide by EU Customs Union rules –
dual membership for NI.
• No hard border on the island of Ireland: the customs border will be in the Irish sea. Goods crossing
from Republic of Ireland to Northern Ireland will not require checks, but goods that are continuing on
to the UK mainland will.
• Complex arrangements will be necessary to differentiate between goods going to NI and those
travelling through NI to UK or vice versa. Customs checks at ports, VAT and tariff rebates and alignment
of regulations will be needed.
• All of this is backed by a layered consent mechanism, which allows Stormont to opt-out under simple
majority at certain times.
56Section 6: Property Property market showing fewer transactions, completions; prices less affected
House prices had plateaued before the virus arrived; Covid
price impact minimal so far
House prices have stabilised 20% Covid-19 impact: transactions, approvals
below their peak (100 in 2007) down sharply initially; prices stable
120 Level
Jun Jul Aug Sep Oct
(y-o-y % change)
100 2,988 3,327 2,927 4,227 5,463
# of transactions
(-31.1%) (-39.7%) (-42.1%) (-17.2%) (-1.8%)
80
2,263 3,397 3,875 4,621 5,207
# of mortgage
approvals (-49.5%) (-33.8%) (-11.0%) (20.8%) (15.4%)
60
1,187 1,621 1,571
40 Commencements
(-36.7%) (-25.3%) (-45.5%)
Residential 134.2 134.4 134.5 134.7 135.5
20 Property Price
Index (0.0%) (-0.7%) (-0.9%) (-0.9%) (-0.4%)
0 113.8 114.0 114.2 114.6 114.0
Private Rent Index
2014
2016
2005
2006
2007
2008
2009
2010
2011
2012
2013
2015
2017
2018
2019
(-1.2%) (-1.4%) (-1.8%) (-2.6%) (-3.2%)
National Excl. Dublin Dublin
Source: CSO; BPFI, PPR, Department of Housing 58Housing supply still below demand; supply was catching
up before Covid-19 slowed market
12.0
Average annual New Dwelling
10.0 housing demand Completions (last four
(2020-2030) quarters)
8.0
State 33.6 19.7
6.0 GDA 17.2 10.5
Ex-GDA 16.5 9.2
4.0
• Greater Dublin Area (Dublin + Mid East)
2.0
requires the majority of needed dwellings.
-
• On average, 9,200 housing units are
demanded a year in the regions that are
not currently funded by markets.
Average annual housing demand (2020-2030)
New Dwelling Completions (last four quarters)
Source: CSO; NTMA analysis 59Covid-19 has impacted supply for 2020 and 2021
Housing supply picked up pre-Covid:
Housing Completions* above 25,000 in 2019
coronavirus to hamper supply for 2020/21
30000 30000
25000
25000
20000
20000
15000
15000
10000
10000
5000
0 5000
2015 2016 2017 2018 2019 2020**
New dwelling completion Unfinished 0
Reconnection Non-Domestic 2017 2018 2019 2020 2021
All connections Starts (advanced 12 months) Completions
Source: DoHPCLG, CSO, NTMA Calculations
* Housing completions derived from electrical grid connection data for a property. Reconnections of 60
old houses or connections from “ghost estates” overstate the annual run rate of new building.
**2020 completions forecasted down 20% on 2019Demand will fall off given lower migration and rising
unemployment – demand may drop below 30,000 in ST
Mortgage drawdowns (000s) rose from Non-mortgage transactions still important;
deep trough before Covid-19 impact transaction volume hit in Q2/Q3
120 20 80.0%
Thousands
18 70.0%
100 16
60.0%
14
80
12 50.0%
60 10 40.0%
8 30.0%
40 6
20.0%
4
20
2 10.0%
0 0 0.0%
Q4 2010
Q2 2011
Q4 2011
Q2 2012
Q4 2012
Q2 2013
Q4 2013
Q2 2014
Q4 2014
Q2 2015
Q4 2015
Q2 2016
Q4 2016
Q2 2017
Q4 2017
Q2 2018
Q4 2018
Q2 2019
Q4 2019
Q2 2020
2006 2008 2010 2012 2014 2016 2018 2020
Residential Investment Letting
Mover purchaser Non-mortgage transactions
Mortgage drawdowns for house purchase
First Time Buyers Non-mortgage transactions % of total (RHS)
Source: BPFI (4 quarter sum used) Source: BPFI; Residential Property Price Register
61Covid-19 impact on prices unclear as both supply and
demand impacted, but rents should come off highs
Dublin house prices unmoved in 2020 Rents are well above previous peak but have
fallen in recent months
30% 180
160 Rents now well
20% above prices
140
10% 120
100
0%
80
-10% Prices were
60 above rents
-20% 40
20
-30%
0
2005 2007 2009 2011 2013 2015 2017 2019
2008
2009
2005
2006
2007
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
National (Y-o-Y %) Ex Dublin (Y-o-Y %)
Dublin (Y-o-Y %) Rents (100 = 2005) Price
Source: CSO; RTB 62Irish house price valuation metrics remained well below
2008 levels throughout last cycle
Deviation from average price-to-income ratio (Q4 2019, red dot represent Q1 2008)
60%
40%
20%
0%
-20%
BG SD OE NL LX NW DN FR ES IE PT EA UK BD GR FN IT
Deviation from average price-to-rent ratio (Q4 2019, red dot represent Q1 2008)
100%
80%
60%
40%
20%
0%
-20%
SD NW BG UK LX FR DN ES NL IE OE FN EA BD PT GR IT
Source: OECD, NTMA Workings 63
Note: Measured as % over or under valuation relative to long term averages since 1980.Section 7: Banks & other Ireland’s banks now among best capitalised in Europe – complete reverse of late 2000s
Ireland’s pillar banks in relative good shape to weather
Covid-19 storm
• Banks profitable before Covid-19: income, cost and balance sheet metrics much improved.
• Interest rates on mortgages and to SMEs are still high compared to EU thanks to legacy issues and the
slow judicial process in accessing collateral.
• An IPO of AIB stock (28.8%) occurred in June 2017. This returned c. €3.4bn to the Irish Exchequer: used
for debt reduction. Further disposal of banking assets unlikely in the short term given low valuations
• Irish banks had paid dividends in recent years.
All three pillar banks were profitable in recent years, Covid impact in H1
Net Interest Margin Profit before Tax
3.0% 1.5
2.5% 1
2.0% 0.5
1.5%
0
1.0% AIB BOI PTSB
-0.5
0.5%
-1
0.0%
AIB BOI PTSB -1.5
2017 2018 2019 2020 H1 2017 2018 2019 2020 H1
65
Source: Annual reports of banks - BOI, AIB, PTSBIreland’s banks are among the best capitalised in Europe
11
Leverage Ratio (%, Fully phased in definition)
10 Slovenia
Stronger Greece Ireland
9
Latvia
8 Cyprus
Portugal
Malta
7
Austria Luxembourg
Belgium
6
Italy SSM Countries Finland
Spain
France
5
Germany Netherlands
4
10 12 14 16 18 20 22
Common Equity Tier 1 Ratio (%)
Source: ECB consolidated banking data (Q4 2019)
Note: Leverage Ratio = Tier 1 capital/Total leverage exposure; CET1 = Common tier 1 capital/total risk 66
exposures. “Fully loaded” refers to the actual Basel III basis for CET1 ratios.Capital ratios strengthened as banks shrunk and
consolidated in last ten years
CET 1 capital ratios allow for amble Loan-to-deposit ratios have fallen
forbearance in Q2 significantly as loan books were slashed
20% 200
18% 180
160
16%
140
14%
120
12% 100
10% 80
17.3% 16.4% 60
8%
13.8% 14.6% 13.6% 13.9% 40
6%
20
4%
-
2% Loan-to- Loans (€bn) Loan-to- Loans (€bn)
Deposit % Deposit %
0%
CET1 % (Dec 2019) CET1 % (June 2020) AIB BOI
AIB BOI PTSB Dec-10 Dec-19
Source: Published bank accounts Source: Published bank accounts
Note: “Transitional” refers to the transitional Basel III required for CET1 ratios
67
“Fully loaded” refers to the actual Basel III basis for CET1 ratios.Domestic bank cost base has risen due to Covid
Cost income ratios increased … … IE banks* below EU average pre-Covid
90%
150% 80%
144%
70%
123% 60%
125%
50%
40%
100%
88% 30%
79% 20%
75% 66% 10%
63%
0%
NO
DK
DE
MT
PL
PT
NL
SK
SI
FI
EU
FR
SE
EE
GR
ES
GB
AT
LT
CZ
RO
LV
IS
HU
IE
IT
LU
BG
HR
CY
BE
50%
Staffing (000s) halved post crisis
25% 30
20 26
0%
AIB BOI PTSB 16
10
10 10
2012 2013 2014 2015 2016 5 2
0
2017 2018 2019 2020 H1 AIB BOI PTSB
2008 2019
Source: Annual reports of Irish domestic banks, EBA 68
* EBA data includes three domestic banks as well as Ulster Bank, DEPFA & Citibank.Irish residential mortgage arrears may reverse course in
2020
Mortgage arrears (90+ days) Repossessions*
20% 12.0 3500 6.0%
18% 10.0
3000 5.0%
16% 8.0
PDH Arrears
14% 6.0 (by thousands) 2500
4.0%
12% 4.0
2000
10% 2.0
3.0%
8% 0.0 1500
6% -2.0 2.0%
4% -4.0 1000
2% -6.0 1.0%
500
0% -8.0
10 11 12 13 14 15 16 17 18 19 20 10 11 12 13 14 15 16 17 18 19 20 0 0.0%
Over 90 days 90-180 days 13 14 15 16 17 18 19 20
PDH + BTL (by balance)
181-360 days 361-720 days
PDH + BTL (by number) PDH BTL % of MA90+ (RHS)
>720 days Total change
Source: CBI
* Four quarter sum of repossessions. Includes voluntary/abandoned dwellings as well as court ordered 69
repossessionsThe European Commission’s ruling on Apple annulled in
court; further appeal by EC means case continues
• Back in 2016, the EC had ruled that Ireland illegally provided State aid of up to €13bn, plus interest to
Apple. This figure is based on the tax foregone as a result of a historic provision in Ireland’s tax code.
The Irish Government closed this provision on December 31st 2014.
• Apple appealed the ruling, as did the Irish Government. The General Court granted the appeal in July,
annulling the EC’s ruling.
• This case had nothing to do with Ireland’s corporate tax rate. It related to whether Ireland gave unfair
advantage to Apple with its tax dealings. The General Court has judged no such advantage occurred.
• The Commission has decided to appeal to a higher court: the European Court of Justice. This process
could still be lengthy. Pending the outcome of the second appeal, the €13bn plus EU interest will
remain in an escrow fund.
• The NTMA has made no allowance for these funds in any of its planning throughout the whole
process. There is no need to adjust funding plans given the decision by the General Court in July or by
the Commission’s decision to appeal.
70Disclaimer
The information in this presentation is issued by the National Treasury Management Agency (NTMA) for
informational purposes. The contents of the presentation do not constitute investment advice and should
not be read as such. The presentation does not constitute and is not an invitation or offer to buy or sell
securities.
The NTMA makes no warranty, express or implied, nor assumes any liability or responsibility for the accuracy,
correctness, completeness, availability, fitness for purpose or use of any information that is available in this
presentation nor represents that its use would not infringe other proprietary rights. The information
contained in this presentation speaks only as of the particular date or dates included in the accompanying
slides. The NTMA undertakes no obligation to, and disclaims any duty to, update any of the information
provided. Nothing contained in this presentation is, or may be relied on as a promise or representation (past
or future) of the Irish State or the NTMA.
The contents of this presentation should not be construed as legal, business or tax advice.
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