Annual Report2018...bank, serve customers brilliantly and grow sustainable profits. Delivering on...

Bank of Ireland Group plc Annual Report 2018

Enabling our customers,colleagues and communities to thrive

HoldCo Annual Report 2018 - Front .qxp_Layout 1 23/02/2019 01:32 Page i

HoldCo Annual Report 2018 - Front .qxp_Layout 1 23/02/2019 01:32 Page ii

Annual Report 2018

HoldCo Annual Report 2018 - Front .qxp_Layout 1 23/02/2019 01:32 Page 1

Our Ambition is to be the National Champion Bank in Ireland, with UK and selectiveinternational diversification.

Our Purpose is to enable our customers, colleagues andcommunities to thrive.

Inside this report

Strategic Report 3

2018 key performance highlights 3

Chairman’s review 4

Chief Executive’s review 6

Our purpose and values 10

Our ambition 11

Our strategy 12

Responsible and sustainable business 20

Our governance structure 31

Risk review 32

2018 financial results 34

Divisional review 44

Risk Management Report 62

Governance 114

Financial Statements 159

Other Information 303


2018 key performance highlights

Strong financial performance

€935mUnderlying profitbefore tax

NIM of 2.20%

Netimpairmentgains of €42m

NPEs reducedby 24% to€5.0bn; NPEratio now at6.3%

Growth

€1.3bnNet lendinggrowth

New lending€15.9bn,increase of13% vs. 2017

New Irishmortgages;Growth of17%, stablemarket shareof 27%

Wealth &Insurance;21% incomegrowth vs.2017

Transformation

3% /€48mReductionin costs

Taking the lead in building agreat culture in the Bank

Foundations of new corebankingplatforms inplace

Businessmodelinitiatives todriveefficienciesprogressing at pace

Capital

13.4%CET 1 ratio

Organic capitalgeneration of 180bps

Dividend increased to16c per share (€173m)from 11.5c (€124m) in2017

Further information onmeasures referred to in our2018 key performancehighlights is found inAlternative performancemeasures on page 326.

Strategic Report Risk Management Report Governance Financial Statements 3

Bank of Ireland Annual Report 2018

Other Information

55%employeeengagement score

58:42male / female appointmentto management andleadership positionsin 2018

€4.9mtotal communityinvestment in 2018

50%carbon reduction targetby 2030 agreed

c.€14minvested in Learning& Development forcolleagues

250new customerfacing roles

6,000+colleagues attendedPurpose & ValuesRoadshow in 2018

1,396volunteer days

16minteractions on our digital channels every month


Chairman’s review

The Group’s financial position is strong and our strategyis clear. Over the period to 2021, our priorities are totransform our culture, systems and business model,serve customers brilliantly and grow sustainable profits.

I am delighted to have been appointed asChairman and Governor. This is an excitingtime to be at Bank of Ireland; building onvery strong foundations, our next chapteris one of transformation, investment andgrowth.

Strategy

Our ambition is clear: to be the NationalChampion Bank in Ireland, with UK andselective international diversification. Thisis ambitious, but realistic. It is in our handsto deliver.

At our Investor Day in June 2018 our CEO,Francesca McDonagh, and her executiveteam set out Bank of Ireland’s strategy. Wewill transform the bank, serve customersbrilliantly, and grow sustainable profits.This will deliver multi-year growth across

the Group’s businesses and franchises.Good progress has already been madeagainst the growth and transformationstrategy with the Group performingstrongly during 2018 across all of ourbusinesses.

Customer expectations continue to evolverapidly. The financial services sector mustadapt and develop to meet theseexpectations and compete efficiently.While electricity powered the 20th century,technology will fuel the 21st century. Oursignificant technology investment meansthe Group is well positioned to face themany opportunities and challenges on thehorizon. Successful implementation of ourbusiness transformation strategy willenable us to compete from a position ofstrength and ensure we continue tosupport our customers and drive economic

activity in our core markets. I am confidentthe Group will deliver against its objectives.

I am excited about our new chapter inbecoming Ireland’s National ChampionBank. The Group plays a pivotal role inenabling and supporting growth,investment and prosperity in Ireland. Weare investing in our people, ourinfrastructure and our businesses tostrengthen the level of support, productsand services we provide to all of our Irishconsumer, business and corporatecustomers.

We are also investing in our UK andinternational businesses. This investmentrepresents important strategicdiversification for shareholders andattractive opportunities for growth.Improving returns in our UK business is apriority. We continue to strengthen andenhance our long standing partnershipwith the UK Post Office and our morerecent partnership with the AutomobileAssociation (AA). While Brexit uncertaintiesremain to the fore, we continue to takeappropriate steps to mitigate related risksto the Group and our customers.

The Group’s strong operating and financialperformance combined with continuedorganic capital generation has contributedto a robust capital position in 2018. TheGroup continues to have the capital andliquidity available to support our strategicambition and commitment to our Irish, UKand international customers.

The strength of the Group’s financialperformance is evident in our dividend. Iam pleased to announce a proposeddividend in respect of 2018 to shareholdersof 16 cent per share, an increase on the11.5 cent per share in 2017. This

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Patrick KennedyChairman


demonstrates continued progress againstour ambition to increase dividends on aprudent and progressive basis and, overtime, build towards a payout ratio ofaround 50% of sustainable earnings.

Purpose

Our purpose is to enable our customers,colleagues and communities to thrive. Anappropriate corporate culture embeddedacross the organisation is necessary tounderpin this purpose. There is much tolike in Bank of Ireland’s existing culture, butwe are aiming to sharpen the customerfocus, agility, accountability andcollaboration across the organisation.

Customers are deliberately referred to inour purpose and values. We want todevelop and maintain long termsustainable relationships based on trustand confidence. We aim to provide theright products and services, through theright channels, to meet our customers’preferences. We will enhance customerexperience through investment across ourmulti-channel platforms.

Conducting our business responsibly is anintegral part of our interactions with ourcustomers, colleagues and communities. Itis positive that our approach to responsiblebusiness continues to be recognisedexternally, including accreditation by theNational Standards Authority of Ireland.

Board

Archie Kane stepped down as Chairmanand Governor on 31 July 2018. I would liketo thank Archie for his service to Bank ofIreland since his appointment in 2012 untilhis recent retirement. His considerableexperience and sound judgement wereinvaluable to the Group. During his time asChairman, Bank of Ireland repaid in full thesupport received from the Irish Stateduring the financial crisis, exited theEligible Liabilities Guarantee Scheme,returned to sustainable profitability, andrecommenced dividend payments. As detailed in the Corporate GovernanceStatement on pages 120 to 129, we

regularly review the Board’s compositionand diversity. We are committed toensuring we have the right balance of skillsand experience within the Board, includingdiversity across all its dimensions. TheBoard has retained its gender diversitytarget of 33 per cent female directors bythe end of 2020, and has a medium termaspiration to have broadly equal genderrepresentation.

Evelyn Bourke and Ian Buchanan joinedthe Board in May 2018. Evelyn has astrong track record in global executivemanagement and extensive experience infinancial services, risk and capitalmanagement, and mergers andacquisitions. She was appointed CEO ofBupa Group in July 2016. She is also amember of the Bupa Board.

Ian has extensive technology, digital,business transformation and customeroperations experience gained through hiswork in a number of international retail,commercial and investment banks. Ian is anon-executive director at Openwork, oneof the largest financial advisor networks inthe UK, and a senior operations andtechnology advisor to Cerberus CapitalManagement.

Steve Pateman joined the Board inSeptember 2018. Prior to joining theBoard, Steve served as CEO of ShawbrookBank and held a variety of senior positionsat Santander, RBS and Nat West. Stevehas extensive knowledge of the bankingsector, particularly in corporate and retailbanking, and has considerable lendingexperience in the UK.

Davida Marston retired from the Board inSeptember 2018. I would like to thankDavida for her contribution andcommitment over almost six years ofmembership of the Board.

I am delighted that Patrick Haren hassucceeded me in the role of DeputyChairman and Deputy Governor. He bringsconsiderable experience and judgement tothis role and I look forward to workingclosely with him.

Remuneration

After a period of restructuring, the Group isin a strong financial position. We are seeinga return to normalisation within the bankingsector in Ireland; however, challengesremain, including the attraction andretention of staff at all levels in anincreasingly competitive labour market.

Shareholders were advised in theChairman’s Letter and Notice of the 2018Annual General Meeting (AGM) that theGroup’s goal is to operate a remunerationpolicy including variable remunerationconsistent with European BankingAuthority (EBA) guidelines. To this end, theGroup Remuneration Committee (GRC)engaged with major shareholders during2018 in regard to the adoption of anappropriate executive incentive schemeand to obtain feedback from majorshareholders. Any such scheme is subjectto the removal or amendment of thecurrent remuneration restrictions in Irelandand approval by shareholders.

Outlook

In a rapidly changing world, we believe wehave the right strategy and approach totransforming our business. I am confidentthat the quality of the Group’s businessesand franchises, combined with a clearcustomer focus, strong leadership fromFrancesca and her executive team, and thecommitment of colleagues across theGroup, position us well to deliver value forour shareholders. We look forward withconfidence to 2019 and beyond.

Strategic Report Risk Management Report Governance Financial Statements 5Other Information



Chief Executive’s review

The Group has made good progress in2018 and is already delivering against thestrategic targets for growth andtransformation we have set out for 2021.

I am pleased to report that good progresshas been made by the Group in 2018.

We defined our multi-year strategy in June2018, setting out clear targets until 2021.We have grown our loan book with netlending of €1.3 billion in 2018 as wesupport our retail and corporate customersacross all our markets. This inflection pointrepresents growth for the first time in anumber of years and we are confident offurther growth. We have reduced ouroperating expenses by 3%, a first steptowards fundamentally improving theGroup’s efficiency. Our systemstransformation has made good progresswith the testing of our first customers onthe new core banking platform. We aretaking actions to increase returns in our UKbusiness. Our non-performing exposures(NPE) continue to reduce. This progressunderpins our 2018 results, with the Groupdelivering an underlying profit of €935million.

Our ambition is clear - to be the NationalChampion bank in Ireland, with UK andselective international diversification. Wehave defined the culture we want at Bankof Ireland while achieving this ambition. I

believe this cultural transformation is asimportant as the changes we are making toour technology and business model.

Strategic ambition

Our strategic priorities are to transform thebank, serve customers brilliantly and growsustainable profits. Delivering on thesepriorities is key to achieving our ambition.We have accelerated and broadened ourtransformation with a particular focus ongrowth in Ireland, and a reshaped UKbusiness to generate increased profitabilityand returns.

Expected growth in our Irish business willdrive expansion in lending volumes and feeincome, and increase our revenue on asustainable basis. We will enable this byallocating capital and resources to be theleading supporter of home building andbuying in Ireland, and building out ourwealth management and insurancebusiness.

We are committed to investing in our multi-year transformation programme includingour core technology investment. This willsupport our growth ambitions, improve

customer service, and drive efficiency.Transformation will also build a trulycustomer focused organisation whichpositively impacts the communities weserve and delivers attractive, sustainablereturns to our shareholders.

A strategic focus is to increase returns inthe UK market. We will do this by investingin the growth of our more profitablebusinesses; improving those businessesthat have potential but need to deliverbetter returns; and repositioning thosebusinesses where we have less certaintyabout achieving our return expectations.

Execution and delivery of the Group’sstrategic plan will enable us to generate areturn on tangible equity in excess of 10%,reduce our costs to €1.7 billion in 2021,and prudently and progressively increaseour dividend per share over time, buildingto a payout ratio of around 50% ofsustainable earnings.

Strong performance in 2018

The Group generated an underlying profitbefore tax of €935 million in 2018. Alltrading divisions are profitable.

The Irish economy performed strongly in2018 and continues to be the fastestgrowing economy in the Eurozone. DespiteBrexit uncertainties, the UK economyexpanded, but at a more moderate pace in2018. Job gains continued in botheconomies, with the unemployment rateending 2018 at a 10-year low of 5.7% inIreland and at a multi-decade low of 4.0%in the UK. Brexit-related uncertainty ishowever impacting on sentiment andactivity levels. In Ireland, some firms haveput their investment plans on hold and inthe UK there is a clear weakening ininvestment by businesses.

Net Lending of €1.3 billion representedgrowth for the first time in a number ofyears. New lending volumes of€15.9 billion were 13% higher than thesame period in 2017 on a constantcurrency basis. New mortgage lending in

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Francesca McDonaghGroup Chief Executive


Ireland increased by 17% compared to2017 and we maintained our market shareat 27%. We successfully re-entered thebroker mortgage channel in Ireland in late2018, leveraging off our award winningtechnology platform from the UK. Thefundamentals in the Irish market remainstrong and we continue to support homebuilding and buying. In 2018, we fundedthe construction of 5,400 new homes on140 sites as well as 2,750 student bedsincluding 1,400 under development. In theUK, we grew our new lending by 13% andremain committed to improving returns inan increasingly competitive market, whilstmaintaining commercial pricing and riskdiscipline.

We are transforming our culture, systemsand business model and this is deliveringefficiencies across the Group. Operatingexpenses (excluding levies and regulatorycharges) in 2018 of €1.9 billion decreased by€48 million or 3% compared to 2017. Thisincluded €113 million, or 37%, of the €306million we invested in our transformationprogramme during the period. We expectoperating expenses to further reduce in2019 and each year to 2021.

Transformation of our technology remainsa key enabler to support growth, improvecustomer experience, and drive efficienciesin our businesses. The investments we aremaking in our core banking platforms willdeliver simpler, state of the art technology,and improve our digital channels, servicesand security. A number of key programmemilestones have been delivered in 2018.The foundations of our core bankingplatforms are now in place. A singlecustomer view of over 2 million customershas been created and we havecommenced the testing of loan anddeposit origination on the new Temenosplatform. Our new mobile banking app willlaunch during 2019, delivering an improvedcustomer experience for retail customers.

Our fully loaded CET 1 capital ratio was13.4% at December 2018. The Groupcontinues to generate strong organiccapital with organic capital generation of180 basis points in 2018. We continue tostrategically invest and allocate this capitalsupporting ongoing investments in loanbook growth, our transformationprogramme, regulatory capital demandsand distributions to our shareholders. Ourcapital and dividend guidance remainsunchanged and the strength of our capitalposition is reflected in a proposed dividendof 16 cent per share or €173 million.

Our net interest margin (NIM) for the Groupwas 2.20% in 2018. This reflects thepositive impact from new lending marginsand our continued strong commercialpricing discipline, offset by the impact ofthe ongoing low interest rate environment,

NAMA sub debt reclassification andcompetitive pressures in the UK mortgagemarket driving lower than expected marketpricing and shorter customer reversionperiods.

Fees and other income of €625 millionarise from diversified business activitiesincluding wealth, bancassurance, foreignexchange (FX) and transactional bankingfees. This includes sustainable businessincome of €672 million, an increase from€662 million in 2017. A key driver of thiswas the growth in our Wealth andInsurance business where income grew byc.20% and market share grew by c.2%.

Our asset quality continues to improve.This reflects ongoing improvement in thecredit quality of our loan portfolios, ouractions to manage our non-performingloans and the positive economicenvironment and outlook particularly in ourhome market in Ireland. We had netimpairment gains of €36 million in 2018.NPEs reduced over the year by €1.5 billionto €5.0 billion, which equates to an NPEratio 6.3% of gross customer loans. NPEreduction strategies continue to be keptunder review given the evolving regulatoryframework.

Customers, Colleagues andCommunities

Customers are the absolute core of ourbusinesses. Their expectations andpreferences are changing rapidly and wehave been listening to them, and takingaction. We have upgraded over 100branches to full service branches whilealso recruiting 250 frontline staff to driveimproved service levels. With an average ofover 10 million monthly engagements onour mobile app during 2018, up over 25%on 2017, our customers are increasinglychoosing digital and self-serve channels.Our customer focused strategy is to servecustomers brilliantly and we continue toinvest across all our businesses. We will dothis as we transform our businesses byproviding products and services whichmeet their financial requirements througheasy, simple and accessible processeswhich align to their digital expectations.

With our ambition to become the NationalChampion Bank we are taking the lead inbuilding a great culture in the Bank. Cultureenables long term customer relationships,a reduced cost of risk, and growth insustainable revenue and I am committed toembedding a new culture within the Group.During 2018, over 6,000 colleaguesattended purpose and values roadshowsand there has been a continualimprovement in our staff engagement levelscores - improving from 50% to 55%.There is still far more to do. We are alsotransforming our ways of working for our

colleagues as we further invest incapabilities and agile working practices.

Fostering an inclusive and diverseworkforce is critical to ensuring that Bankof Ireland is reflective of the modern anddiverse communities we serve, as well asbuilding a better place to work and a betterplace for our customers to do business.We will continue to focus on attracting,developing and retaining the talent weneed to deliver our ambition. In 2018, I setout a commitment to achieve a 50:50gender ratio in all new management andleadership appointments by 2021, and weare making good progress with femalesrepresenting 42% of all seniorappointments in 2018.

The extensive reach of the Group allows usto engage and support our customers intheir local communities and enterprises. In2018, we hosted over 64 local enterpriseevents, reaching 225 communities. OurInnovation Programme hosted over 550events across our Workbenches andStartlabs.

Responsible and sustainable business is ofsignificant importance to our colleaguesacross the Group. Our new integratedreport includes a comprehensive accountof our business approach and practicefrom the perspective of customers,colleagues and communities on pages 18to 25.

Looking forward

2018 has been a year of business growth,improved efficiency, and progress in thetransformation of our culture, systems andbusiness model. We are on the right trackto achieve our 2021 commitments. We aremindful of the risks and uncertaintiesrelating to Brexit and the global economy.However, we are committed to makingfurther progress against our strategicobjectives in the year ahead.

We expect our loan book to grow again in2019 with our NIM to be c.2.16%. Weexpect further reductions in operatingexpenses, and asset quality to continue toimprove. Absent a deterioration in theeconomic environment or outlook, wecontinue to expect the net impairmentcharge to be in the range of up to 20 to 30basis points per annum during 2019 to2021.

I am confident in our ability to execute ourstrategy and we will continue toresponsibly develop our profitable, longterm franchises, and achieve our ambitionto serve our customers brilliantly in a waythat delivers attractive, sustainable returnsto our shareholders.




Our purpose and valuesBank of Ireland has a clearly articulatedpurpose underpinned by our four values

Enabling our customers,colleagues andcommunities to thrive

Bank of Ireland’s purpose is to enable ourcustomers, colleagues and communitiesto thrive.

Customers are at the heart of ourbusiness and always come first.

Colleagues keep our organisation working,innovating and adapting to meet ourcustomers’ needs.

Communities are where we live and workand also include other groups bothlocal and global such as our shareholders,regulators, government and partners.

Our purpose Our values

Our purpose is supported by four keyvalues which guide us in everything wesay and do.

Customer focused

We understand our customers well. Welisten to them to ensure they feel valued,and use our insights to consider how bestto serve their needs. We take appropriateactions to deliver solutions to meetcustomers' changing requirements.

One Group, One Team

We know we work smarter when we cometogether behind our common purpose.We learn from each other and share ideasto expand our thinking. We build an open,trusting and supportive environment,and foster diversity of thought, ideas andexperiences to spark creativity andinnovation.

Agile

We embrace change with an open mindand a can-do attitude. We respond quicklyand proactively seek different perspectives.We challenge ourselves to look for newand simplified ways to efficiently deliver thebest solutions for our customers.

Accountable

We are empowered to take ownership andtrusted to do the right thing to support ourcustomers, colleagues and communities.We lead by example and challengeourselves and each other to do our bestwork at all times. We learn from ourmistakes and celebrate our successestogether.

‘Typically, the mostsuccessful companies inthe world are the mostpurposeful. Turning ourpurpose into a reality is abig part of my role as CEO.We want to transform andgrow to become theNational Champion Bank inIreland. But this isn’t justabout our organisation - theway we live this purposeshould have a positiveeffect because it willchange how we serve ourcustomers’

Francesca McDonagh

Group CEO, Bank of Ireland

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Our ambition

To be the National ChampionBank in Ireland

Bank of Ireland’s ambition is to be the National Champion Bank in Ireland, withUK and selective internationaldiversification.

To be a ‘National Champion’, we willhave strong market shares and be adriver of economic growth. We will befocused and transparent in how we runour businesses, and be recognised as aconsumer champion by our customers.We will have a strong brand position,and be an employer of choice.

Delivering on this ambition will transformBank of Ireland for our customers,colleagues and communities.

We will be easier to do business withand to bank with - supporting ourcustomers in the way, at the time and inthe place they want. And, we will be abetter place to work - closer to thecustomer, with the right culture and ourvalues guiding all we say and do.

To achieve our ambition we have setthree strategic priorities. These are totransform the bank, serve customersbrilliantly, and grow sustainable profits.

Our Group strategy to 2021 is anchoredin these priorities. We have set out aclear strategy for the Group which isfocused on transformation, customerservice and growth, coupled with clearfinancial targets.

Our ambitionTo be the National Champion Bank in Ireland

The attributes of a National

Champion Bank



Aspirationalbrand

Customer champion

Strong marketshare

Generatecapital & positivepotential returns

Focused andtransparent

business

Driver ofeconomic

growth

Employerof choice


Our strategyTo transform the bank, to servecustomers brilliantly and to growsustainable profits

In June 2018 we set out our strategy. Weare changing our culture, our systems andour business model to support our growthambitions, improve customer service andbecome a progressive employer of choice.

In the coming years we will build on ourstrengths, unique history and heritage, andproven capabilities. We have strongbusinesses and close relationships withour customers. We operate in growingeconomies in Ireland and the UK. We areIreland’s leading retail and commercialbank, with select and profitable operationsin the UK and internationally. And ourMarkets and Treasury business has aproven track record.

Our plans for the future are also informedby our experience of the past decade. TheBank has moved from restructuring andrisk reduction after the financial crisis togreater stability in recent years, and wenow see growth and transformationopportunities. The regulatory frameworkcontinues to be demanding, with strong

capital and investment requirements. Thisevolving framework is a challenge that wemust navigate carefully and effectively toensure we meet our customers’,shareholders’ and regulators’ expectations.

Our growth opportunities are primarily inIreland which is an attractive, modern andoutward-looking market, undergoing itsown transformation. Reflecting thecountry’s National Development Plan,‘Ireland 2040’, we foresee populationgrowth of over one million people, a one-third increase in job creation and peopleliving in half a million new homes. We’reinvesting in our channels includingmaintaining and upgrading our branchnetwork as well as deepening ourintermediary relationships. Technology thatbalances with an engaging personalexperience, is an opportunity for our bank.And we’re focused on what matters mostto our customers - those big decisions thatpunctuate their lives, like buying a home,growing a business, and protecting theirfamily.

Unlocking growth in our Irish business willdrive expansion in lending volumes and feeincome, while increasing our revenue. Wewill enable this by reallocating capital andresources to be the leading supporter ofhome building and buying in Ireland and bymaximising our wealth management andinsurance business.

In all this, our customers, colleagues andshareholders have high expectations thatwe must meet and strive to exceed.

By the end of 2021, delivering our strategywill see Bank of Ireland as:• a trusted brand that has retained

customer loyalty and acquired newbusiness;

• a strong enabler of the success of thefastest growing economy in Europe;and

• having taken some tough calls to beefficient, build a talented team and fulfilour potential.

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‘I am confident in our ability toexecute our plan, materiallyenhance the sustainablereturns for our shareholdersand deliver on our sharedcommon purpose ‘Enablingour customers, colleaguesand communities to thrive’Francesca McDonagh

Group CEO, Bank of Ireland

‘Investor Day’ - 13 June 2018


Our ambition

Our purpose

Our values

Strategicpriorities

Transform the Bank

Serve customersbrilliantly

Grow sustainableprofits

Culture

Systems

Business model

#1 for service

#1 for brand

Increase revenue

Reduce costs

Manage risk

Customerfocused

One Group,One Team

Agile Accountable

Enabling our customers,colleagues and communities

to thrive

National Champion Bank in

Ireland; UK & selective international

diversification




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Our strategyTransform the Bank

We are transforming our culture, systems andbusiness model to enable our customers,colleagues and communities to thrive.

We have embarked on a multi-year transformation of our culture.A healthy internal culture improves staff engagement andbecomes a magnet for talent. It also creates great customeroutcomes, long-term customer relationships, a reduced cost ofrisk, and growth in sustainable revenue. Changing our culture iscentral to the bank’s transformation, but it won’t happenovernight. Throughout 2018, we focused on building awarenessof our purpose and values and establishing baseline measuresthrough roadshows and employee engagement research. Nextsteps are to embed the changes underway so that colleaguesexperience them in their day-to-day working lives.

• Best-in-class employeeengagement.

• All management andleadership appointments willrepresent a 50:50 genderratio by end 2021. Culture

Systems

Business model

Context Target outcomes

We are making a significant investment in transforming oursystems as technology is critical to our growth strategy - itenables our transformation and improves efficiency, but it alsoimproves our service to customers, who increasingly expect 24/7banking, or banking on the move and on their phone. We arereplacing our core banking systems to improve efficiency and toenhance customer experience. Almost 80% of our customer baseis digitally active with over 16 million interactions in our digitalchannels every month and we will launch a new mobile app in2019 to improve our digital services.

• Improved customerexperience.

• Simplification of productsand processes.

• Excellence in digitisation androbotics.

• Cost base reduced from €1.9billion to €1.7 billion.

• Digital across all technology‘layers’ from core tocustomer facing channels.

We have reviewed our current business model and how we areorganised and resourced, and identified clear opportunities tofurther reduce costs and improve overall efficiency. We arebecoming a flatter organisation by reducing the layers between theCEO and frontline and by getting closer to our customers.Technology and automation must blend with personal experienceto support the engaging relationships we want to have with ourcustomers. Digital services are best combined with a physicalpresence, and while we have a clear plan to reduce costs, it won’tbe at the expense of customer service delivered by the largestbranch banking network in Ireland.

• Focused front lineorganisation.

• Simplified, delayeredstructure.

• Effective, sustainablesourcing arrangement.

• Diversified set of efficientportfolios.




• Launch of an extensive programmeof cultural transformation.

• Colleague engagement hasincreased each quarter from 50%(2017) to 53% (Q1: 2018) to 55%(Q2: 2018).

• 76% of Bank of Ireland employeesbelieve the strategy being followed isthe right one, which is 9% betterthan the Global Financial Services(GFS) norm.

• 6,000 colleagues participated in 50roadshows across the Ireland andthe UK on our purpose and values.

• In 2018, the ratio of managementand leadership appointments were58:42 male / female.

• The Bank joined the board of the30% Club.

• In 2018, the Bank supported theestablishment of the Irish BankingCulture Board.

What we’ve achieved in 2018

• 2018 infrastructure build of our newplatform sets a foundation for thedelivery of future plannedenhancements including PSD2compliance.

• Single customer record created forover 2 million customers.

• The first customer transactions weretested successfully on our new corebanking platform for deposits andloans.

• Development of new mobile bankingapp commenced with launchexpected in 2019; which will represent

the first full scale customer deliverableusing new Temenos technology.

• Our state-of-the-art roboticscapability, recognised as the largest inIreland is improving outcomes forcustomers. We are now running 100robots across 120 processes,improving processing times andreducing risk of error.

• The use of robotics to search systemsfor proof of identification has avoidedthe need to contact more than250,000 customers to requestinformation.

• €34 million / 4% reduction in staffcosts with 55% of end-state spansand layers structure completed.

• We have enhanced our customerfacing business and are buildingcapability in key areas such as ITChange delivery and analytics.

• Consolidation of Dublin footprint byreducing the number of officebuildings occupied.

• Introduction of flexible workingacross the organisation.

• Creating a leaner, agile organisationwith over half of the end-stateorganisational design now completeand 8% reduction in seniormanagement roles.


Our strategyServe customers brilliantly

We are committed to building a customer-focusedorganisation that invests in improving service and digitalcapabilities, while also getting the basics right. We listen tocustomers and respond to their feedback. We are investingin our brand to help our customers know what we standfor and how we bring value to their lives.

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Customers are the heart of our business. But the way they bank,and the services they expect, are changing and evolving fasterthan ever. We are committed to improving the financial wellbeingof our various customer segments through a suite of initiativesrelevant to their life stages. Listening to what our customerswant, understanding and acting on their reasons for complainingabout our service and building segment specific propositionsand strategies that will enable our customers to thrive both nowand in the future is the core of our customer strategy.

• Significant improvement incustomer satisfaction andadvocacy.

• Clear listening posts for allcustomer cohorts.

• Serving customers aroundtheir key life moments.

• Customer centricity at theheart of our culture.

• Colleagues enabled to servecustomers brilliantly.


We’re investing in our channels including an upgrade to ourbranch network and deepening our intermediary relationships. Wehave the most extensive owned branch network in Ireland with40% of our frontline staff now enabled to meet our customers ata time and place that suits them. Transforming the bank will furtherdeliver on our customers’ appetite for better digital services. Thisincludes new channels and features that are intuitive and offer afull range of services. We’ll make further progress on redesigningkey customer journeys supported by investment in robotics. Thismakes everything faster and easier for customers and reducescosts.

• Digitally enabled Bank.• Straight through processing;

digital journeys.• Build the API foundation for

Open Banking.

We have identified our brand purpose and drivers, puttingthe customer at the heart of everything we do. We arerepositioning our brand to bring our purpose to life in a way thatdifferentiates us and offers real value to our customers, colleaguesand communities. This new positioning will bring all constituentparts of the business together and will be reflected in newadvertising and sponsorship assets. Our creative brand positionwill sustain us over the next three to five years.

• #1 Bank brand in Ireland.

Embedding voiceof customer inour businesses

Investing in digitaland physicalchannels

New brandstrategy




• Established the Group CustomerBoard to drive improvement inservice levels and customerpropositions.

• Delivered a ‘Brilliant BasicsProgramme’ across the organisationgathering ideas from our colleagues:3,100+ ideas and suggestions made,with 50% actioned by the end of2018.

• Trained 3,800+ frontline colleagues inour ‘Be the Difference’ trainingprogramme - improving our customerservice capability across the Group.

• Successfully re-entered to the Irishmortgage broker market using awardwinning UK mortgage brokerplatform with launch of The MortgageStore in October.

• In the youth segment, currentaccounts have increased by 7% overthe past 2 years to over 440,000customers, and our student marketshare has increased from 41% to43%.

• Post Office Money improved its NetPromoter Score for customer loansto second in the UK market.


• Direct and digital wealth salesincreased to 35%.

• During 2018, we upgraded 101branches to full cash services andincreased our focus on call centres,increasing customer facing roles byc.15%, resulting in higher servicelevels and fewer complaints.

• We processed c.280 millioncustomer electronic payments,including c.65% of all credit transfersand c.45% of all direct debitsprocessed in Ireland - a 5% increaseover 2017 volumes.

• Creative Brand Platform developedand due for launch in March 2019.

• Proud sponsor of all four rugbyprovinces in Ireland.

• €4.9 million total communityinvestment in 2018 whichincorporates our ‘Give Together’charity investment programme,enterprise programme, community

sponsorships and financial wellbeingprogrammes. Highlights include:- 1,396 days volunteered in our

communities;- National Enterprise Town Awards

with entries from 83 towns; and- 110,000 financial literacy hours

delivered to students acrossIreland.


Our strategyGrow sustainable profits

We are focused on delivering sustainable returns for our shareholders.This is based on business growth in our key markets to expandlending, grow fee income and increase revenue sustainability. At thesame time, our costs will reduce each year as the benefits are realisedfrom multi-year transformation investment. Our UK business is beingreshaped to increase returns and improve margins and efficiency.

16


Creating growth in our Irish business will expand lendingvolumes and fee income, and increase our revenue. We’re allocating capital and resources to help us become the leadingsupporter of home building and buying in Ireland, and to growour wealth management and insurance business. As Ireland’sleading retail and commercial bank and the only bancassurer inthe market, we are building on our strengths, supported by thestrong fundamentals - in particular the demand for housing andthe supportive demographic changes called out in Ireland 2040,the national planning framework.

• National Champion Bank inIreland with selectiveinternational diversification.

• Leading supporter of homebuilding and buying in Ireland.

• Building out wealth andinsurance business.

• Loan book growth in RetailIreland of c.20% by 2021;Corporate Banking up €4billion, c.50% in Ireland.


A broader and accelerated transformation means a deeperinvestment in our IT systems to support our growth plans, tobetter serve our customers and to improve efficiency. Independentof the investment in our systems, we are also changing how weare structured as a business. This broadening and accelerating ofour transformation will enable our costs to reduce every yearbetween now and 2021.

• An improvement in our costincome ratio from 65% today,to c.50% in 2021.

Bank of Ireland is committed to the UK market where our focus ison increasing returns. We are investing in profitable parts of ourUK business to support further growth. In other parts of our UKbusiness we are improving returns by reducing costs of funding,customer acquisition and servicing. We are repositioning businesswhere less certainty exists about meeting hurdle expectationsincluding our UK credit card portfolio.

• Lower cost of funding,acquisition and servicing.

• New propositions targetingunder-served customersegments.

• Reviewing those portfoliosand products where returnsare below expectations.

• Loan book growth in UK ofc.10% by 2021.

Businessgrowth

Acceleratedbenefits fromtransformationinvestments

Reshaping theUK business




• Underlying profit of €935 million withall trading divisions profitable.

• #1 Corporate Bank positionmaintained.

• Growth in net new lending volumesin Ireland of €1.3 billion -representing the first growth formany years.

• New mortgage lending increased by17% to €2.3 billion in Ireland.

• Organic capital generation of 180basis points enabling investment inloan book growth and transformationprogramme.

• Improved asset quality with NPEsreduced by 200 basis points to 6.3%of gross loans.


• Cost reduction across theorganisation, in line withimprovement in spans and layers,and targeted spending behaviours toreduce professional fees.

• Reduction of €48 million in operatingexpenses, while continuing to investin our Transformation programme,with a €113 million charge in 2018.

• We have rationalised and optimisedour spend with third parties, andhave embedded cost awareness

through effective policies andgovernance, the results of which areevident though significant third-partycost reduction: - 34% / €32 million reduction in

professional fees;- 18% reduction in travel costs;

and - 65% reduction in Day Rate

Contractors.

• New lending across all portfoliosincreased in 2018 by 13% to £5.2billion, maintaining commercial andrisk management discipline, whilelaunching a number of new productsincluding those supporting first timemortgage buyers.

• Northridge new business lendingexceeded £1 billion (+30% versus2017).

• Deleverage of legacy commerciallending portfolios ahead of plan.

• Strong margin management acrossdeposits.

• Core operating costs reduced yearon year


Responsible and sustainable business

Conducting our business in a responsible and sustainable way isfundamental to achieving our purpose of enabling our customers,colleagues and communities to thrive.

Having previously published a stand-alone Responsible BusinessReport, we now present our non-financial performance as part ofour new Strategic Report. Combining the Group’s financial andnon-financial performance in one single report provides acomprehensive picture of the Bank’s activities in 2018.

Growing expectations

Responsible and sustainable business isan evolving area, and the expectations ofstakeholders for greater transparency, arecontinually growing. Adopting theSustainable Development Goals at anational level in Ireland, increases theirrelevance to both business and society.Legislative change is also affecting thisarea, with the EU non-financial reportingdirective now including issues such asdiversity and human rights. In addition,cultural change and businesstransformation within the Bank (as outlinedon pages 10 to 17) are creating a contextfor increased focus on this area.

Stakeholder engagement

Engaging our stakeholders helps usaddress the issues that are important tothem and understand their expectations,so we can continually evolve ourresponsible and sustainable businessapproach. We engage with a wide varietyof stakeholders, including customers,colleagues, partners, Non-GovernmentalOrganisations (NGOs) and investors, aswell as experts in the area of responsibleand sustainable business. We do thisthrough research, meetings, mediaanalysis, and participation in expert forumsand other events, and we use what welearn to inform our planning in this area.

Governance

The Group Nomination and GovernanceCommittee (GNGC) of the Board hasoverall responsibility for Responsible andSustainable Business. It receives regularupdates on progress, and reviews andapproves the annual programme.Responsibility for implementing theprogramme as approved by the committeerests with an expert Responsible andSustainable Business Team.

18



Future development

Given growing expectations, stakeholders’interest and the business transformationwithin the Bank, we intend to evolve ourresponsible and sustainable businessapproach further in 2019. This will includepublishing a multi-year plan informed by amateriality exercise, the successful

reaccreditation of the Business WorkingResponsibly Mark, and the development ofa community and charity investmentstrategy fully aligned to our business.

Our performance in 2018 is presented inthe following pages through the lens ofcustomer, colleague and community in linewith our Group Purpose.

Environmental matters • Group Environment policy (ISO 14001)1 • Environment and Energy (page 26) • Group Energy policy (ISO 50001)1

Social and employee matters • Inclusion and Diversity policy • Vulnerable customers (page 21) • Group Code of Conduct1 • Inclusion and diversity (page 23) • Equal opportunities policy • Learning (page 23) • Group Health and Safety policy • Wellbeing (page 23) • Employee Data Privacy • Employee Representative Bodies (page 23) • Group Vulnerable Customers Policy • Communities (page 24) • Group Learning Policy • People risk (page 62)

Respect for human rights • Modern slavery and human trafficking statement1 • Information security (page 21) • Group procurement policy • Operational risk (page 103) • Group data protection and privacy policy

Bribery and corruption • Group Code of Conduct1 • Code of conduct (page 27) • Speak Up policy • Integrity and honesty (page 27) • Group Anti-Money Laundering Policy (AML) • AML (page 27) • Group Anti-bribery and Corruption Policy • Conduct risk (page 100)

Diversity report • Board Diversity Policy1 • Corporate Governance statement (page 120)

Business model • Divisional Review (page 42)

Policies followed, due diligence and outcome • Risk management framework (page 68)

Description of principal risks and impact of business activity • Key risk types (page 31) • Principal risks and uncertainties (page 61)

Non-financial key performance indicators • Key highlights (page 3)

Reporting Requirement Policies Risks and Management

Non-financial information statementWe aim to comply with the new European Union (disclosure of non-financial and diversity information by certain large undertakings and groups) Regulations2017. The purpose of this table is to assist stakeholders in understanding our policies and management of key non-financial matters.



Improving our cultureOur commitment to being a responsible andsustainable business includes transforming ourculture within the bank and playing our part incultural improvement across the wider sector.In 2018, we supported the establishment of theIrish Banking Culture Board (IBCB) - anindependent board funded by five retail banksin Ireland. The IBCB has been formed inrecognition of the fact that public trust in thebanking sector has been damaged and that adetermined effort is required to rebuild thattrust and support cultural reform. In late 2018,the IBCB surveyed all colleagues within the fiveretail banks, held a public consultation, andappointed Mr Justice John Hedigan to the roleof Chairman.

At the invitation of our regulators, Bank ofIreland took part in a number of events tocontribute to the debate on cultural change inthe sector. In October, our Group CEOFrancesca McDonagh participated in a paneldiscussion as part of a joint Central Bank ofIreland (CBI) and Trinity College Dublinconference on corporate governance, ‘Culture,Diversity and the Way Forward’. In NovemberFrancesca also addressed the EuropeanCentral Bank (ECB) conference on‘Communications ethics and compliance: risk,reputation and returns’ in Frankfurt, on thetopic ‘Values and valuations - why culture inbanking really matters’.

1 These policies are available on the Group’s website. All other policies listed are not published externally.


Financial wellbeing

Financial wellbeing is defined as ‘theextent to which someone is able to meetall their current commitments and needscomfortably and has the financial resilienceto do so’ (CCPC, 2018). We have aresponsibility to enable and promote

financial wellbeing among our customersand our communities. In 2018, we focusedour support in this area on our youngerand older customers.

Younger customers

Within our youth segment, our mainobjective is to enable young people tothrive, through engaging financialwellbeing programmes for studentsthroughout Ireland. Our comprehensiveyouth literacy programme focuses on twocritical life-skill areas, financial skills andenterprise education.

Specific activities include:

• ‘Talking Cents with Ollie magazine’, afinancial literacy magazine for primaryschools.

• BizWorld, a two-day entrepreneurshipprogramme for 4th and 5th Classstudents with over 10,000 participantsin 2018.

• Financial Literacy Week to helpsecondary students understand basicfinancial skills.

• TY Academy - a three-day workshopthat helps students develop key skillsand provides practical guidance onstarting their own business was heldfor students from 200 schools.

• Financial Literacy Weeks in third-levelcolleges, including the ‘Quest Room’(an escape room with financial literacyquestions).

Older customers

Supporting our customers at all stages oflife is essential. We always strive to engagewith our older customers to ensure wemeet their ever-changing financial needs.

Specific activities include:

• ‘Manage Your Money Safely’ - atraining programme with our flagshipcharity partner, Age Action, including a60-minute session focusing on digital,card and doorstep security for olderpeople. This has been delivered to 300participants around the country sinceits launch in November 2018.

• Positive Ageing Week (PAW) 2018 -with Age Action. It included 54 Bank ofIreland events, held nationwide with upto 1,000 people attending in total.

We aim to enhance our services for oldercustomers, with a new home-improvementloan proposition, wealth products, and AgeFriendly Ireland reaccreditation, amongother developments.

20


Responsible and sustainable businessEnabling customers to thrive

There are many sides to our responsibility to ourcustomers. Supporting their financial wellbeing isa key part of this responsibility, as well as ensuringthat we are inclusive of our more vulnerablecustomers. As the bank with the largest branchnetwork in Ireland, we are uniquely placed tosupport the business community.

Tracker mortgage

Serving customers brilliantly is one of ourstrategic priorities. In 2018, we placed amajor focus on making things right forcustomers affected by the tracker mortgageissue - ensuring relevant customers wereon the right rate and making them an offerof redress and compensation appropriate totheir circumstances. We continue to engagewith our regulator on the issue. We are fullycommitted to becoming a more customerfocused bank, and to rebuilding trust withour customers and the wider society weserve.

110,000literacy hours delivered tostudents across Ireland

300older people through the‘Manage your money safely’

620MWof wind energy funded

€800,000invested in communities across Ireland through our National Enterprise Programme

Peter Cooney is one of 29 National YouthCoordinators supporting our financialwellbeing programmes for students. Basedin Wexford and in the role since August2017, Peter enjoys the opportunity to builda community and bring the youthprogrammes to life in schools.


Vulnerable customers

In November 2018, we created aVulnerable Customer Segment team,responsible for providing regulatory andprofessional guidance to the Group, andfor removing barriers affecting ourvulnerable customers. Working withcolleagues across many differentdisciplines, we helped create and distributethe ‘Safeguarding your money’ guide,which encourages customers to planahead for when they may need assistancein managing and safeguarding theirfinances. We also created a specialistVulnerable Customer phone team.

Our focus for 2019 will be on redesigningour product and service review process,ensuring all new and existing products andservices are assessed for vulnerablecustomers with reference to health,capability, resilience and life events. Wealso aim to provide additional translationservices for both our vision and hearingimpaired customers.

Supporting enterprise andbusiness

Small and medium-sized enterprises(SMEs) are key contributors to the Irisheconomy, and we support them throughour Enterprise programme, with a range offinancing options and specialist insightsacross a range of sectors.

Enterprise and communityprogramme

This programme is an important part ofour brand and commercial strategy, andhelps businesses and communities acrossIreland to grow. €800k was invested in2018 and initiatives included:• Local Enterprise Activity - a range of

local enterprise and community eventsincluding 40 Enterprise Town events,sponsorship investment in the NationalStart-Up Awards, and 12 workbenchesand five partner facilities.

• National Enterprise Week - 23 eventsaround the country under the theme of‘Investing for business growth’.

• National Enterprise Town Awards(NETA) - 83 entries from towns andvillages across the country whichculminated in a gala event inNovember.

• ThinkBusiness.ie - the number onesmall business reference site in Ireland,which offers entrepreneurs free adviceon starting, running and growing abusiness.

Business support

We offer a range of support to businessesas they set up, establish and mature – fromfinance to help them make the most ofopportunities, to providing specificexpertise to sectors such as health,agriculture and manufacturing. Our supportin this area includes:• Business Start-up package - a two-

year package for customers who haveset up a new business in the last threeyears. It includes discounted fees, 24months’ free transactions, and twoyears’ free subscription to BusinessOnline.

• A range of other options to SMEs whowish to access finance throughcollaborations with the StrategicBanking Corporation of Ireland (SBCI)and MicroFinance Ireland.

• Sector events, providing specialistsupport and guidance to a range ofsectors, including agriculture,healthcare, retail convenience andmanufacturing.

• Financial literacy - pilot withDoLearnFinance (a tool targeted atbusiness owner-managers who lackknowledge of financial accounts)launched on ThinkBusiness.ie to helpIrish SMEs with financial literacy.

Financing housing and thegreen economy

Our fund to support home building will seethe delivery of c.5,400 new family homesand 2,750 student beds including 1,400under development over the next few yearsin Ireland. Bank of Ireland is also a leadingfinancier of the renewable energy sector.We have been involved in the financing ofover 1GW of energy projects in Ireland, ofwhich approximately 620MW relates towind farms. To date, the wind projects wehave funded provide the equivalent ofc.450,000 homes with green energy.

Information security

As our business becomes increasinglydigital, it is vital we protect ourselvesagainst cybercrime - and help ourcustomers protect themselves. Our securityoperations team constantly monitors cybersecurity threats, implementing protectivemeasures where needed. During the pastyear, we introduced a new-look SecurityZone on our website, giving our customerssecurity guidance, fraud alerts, andinformation on how to report suspiciousonline activity, emails or phone calls. Wealso held educational sessions in-branch forolder customers, cyber security briefings forlocal businesses, and school visits with tipsfor children on how to connect safely. Wesupported Fraud Awareness Week, led byFraudSMART.ie, an initiative of the Banking& Payments Federation Ireland (BPFI). Wewill continue to invest in people andtechnology to protect customer information.



Silver thread

Silver Thread is a company set up by twowomen who believe everyone has a story totell that can become part of their legacy. Weworked with them on two initiatives in 2018.The first celebrated the centenary of Bankof Ireland Charlestown as part of PositiveAgeing Week 2018; the second, at Bank ofIreland Finglas, captured some of ourcustomers’ Christmas memories. In both,we ran workshops with older people fromthe local communities (customers and non-customers) who brought photographs withthem relating to the Charlestown andChristmas topics. Through dialogue andstorytelling, the background of each photowas brought to life, and Carmel and Cathyof Silver Thread documented the stories inan exclusive book for participants to takeaway - and for local schools, libraries andBank of Ireland branches to give to othermembers of the community. Silver Threadwas a finalist in the ISAX Ingenuity (matureentrepreneur programme), which wesupported.

Workbench

Bank of Ireland Workbench is a uniqueconcept which connects entrepreneurs, branchand community by offering free dedicatedspace for co-working, seminars, clinics andevents to encourage innovation and new ideas.Tom McDonald, Niamh Butler and OrlaO’Donnell (pictured above) are all regular usersof one of our newest Workbenches in Kilkenny.The opening of this and others in 2018 bringsour number of Workbenchs to 12 across thecountry. A space away from home with a goodworking environment combined with theopportunity to meet and network with like-minded people are the main drivers for thesestart-ups to use Workbench. In 2018,Workbench collected the Excellence inMarketplace award at Chambers Ireland CSRAwards.


Engaging our colleagues

To achieve our ambition and purpose andto embed our values, we have embarkedon a multi-year transformation of ourculture. Throughout 2018, we focused onbuilding awareness of our purpose andvalues and establishing baseline measures.This was achieved through a series ofroadshows which reached over 6,000colleagues in 44 different locations acrossthe Group. We also held ‘Open View’employee engagement surveys and skip-level meetings to gather feedback fromcolleagues. Colleagues told us that theywelcome the opportunity to share theirviews; want to be involved in our

transformation; support our strategicpriorities; embrace flexible working andsee more and more of us demonstratingour values.

Some of the key initiatives that wereintroduced in 2018 include:• ‘Change Makers’ - a self-managed

team of colleagues focused on drivingchanges, big or small, to improve ourvalues based culture.

• Launch of a new Group-wideRecognition Scheme.

• Introduction of a new CompetencyModel that ingrains our values throughevery aspect of the employee lifecycle.

• Completion of a ‘Ways of Working’pilot on flexible working that will beintroduced across the Group in 2019.

Our Open View employee engagementsurveys enabled us to measure colleaguesentiment through our Engagement andCulture Indices. In 2018, our EngagementIndex trended upwards from 50% to 55%,strengthened by colleague perceptions ofour strategic priorities.

Our Culture Index is the primary measureof our cultural transformation and ameasure of our colleagues’ awareness,understanding, belief and demonstration ofour Group Purpose and Values. As 2018was the first year of our culturaltransformation, the focus was on creatingawareness, up 9% to July 2018, andensuring understanding, up 8% to July2018, with a baseline formed for belief anddemonstration.

But there is more to do to build on thisfoundation. In 2019, our focus will be toimprove the extent to which colleaguesbelieve in the cultural transformation of theBank and understand the changeunderway. This means delivering tangiblechanges that colleagues directlyexperience in their day to day working livesin the Bank. Initiatives to support thisinclude:• Delivery of ‘values in action’

workshops across all teams Group-wide.

• Embed ‘agile ways of working’ andmethodologies.

• Continued focus on our Inclusion andDiversity journey to ensure colleaguescan be themselves at work anddevelop to their full potential, whilealso attracting a diverse range oftalents at all levels.

22


Responsible and sustainable businessEnabling colleagues to thrive

We strive to ensure that our colleagues are engagedand have the skills and capabilities to serve ourcustomers brilliantly. At the same time, we areworking hard to make our workplace more inclusiveand diverse, so colleagues can be themselves andperform to their full potential.

55%engagementindex score

58:42male / female appointment tomanagement and leadership positions

c.€14minvested in learning




Inclusion and diversity

We are committed to creating an inclusiveand diverse place to work. Our Inclusionand Diversity agenda continued to gainmomentum and embed in 2018. Inparticular, we:• worked towards our 50:50 gender

balance target for management andleadership appointments by 2021. In2018, appointments to managementand leadership positions represented a58:42 male / female split. This hascreated an improvement in the overallrepresentation of women atmanagement and leadership level from36% to 37%;

• further developed our six colleaguediversity networks; and

• improved data collection and reportingof diversity data on age and gender.

An assessment by the CBI in 2018acknowledged the progress that has beenmade by the Bank in its Inclusion andDiversity agenda and also identifiedopportunity for improvement in the areas ofsuccession planning, measurement andprominence of inclusion and diversity atsenior levels. We are committed to furtherstrengthening our work in these areas andwill continue to measure progress againstthe targets we have set.

Learning

In 2018, we invested c.€14 million indeveloping the capabilities of ourworkforce - an important priority insupporting our transformation. Thisincluded a development programme forleaders on agile methodologies.

We continue to ensure learning is part ofour DNA. This year, we developed a widerange of bite-sized learning experiences,designed for just-in-time learning oncomputers and mobile devices. 60% of ourlearning is now through digital channels,helping our people learn as quickly andeffectively as possible. We introduced 40new courses, and provided 162,000 hoursof training, with individuals completing anaverage of 14.5 hours.

Talent management

An important means of developing talentand leadership is our Group-widecompetency model. This comprises sevencategories and we are currently integratingit across practices such as 360-degreefeedback, succession planning, resourcing,performance achievement, and career andlearning development. We put particularemphasis on improving capabilities acrossour organisation, with one of ourcompetencies being ‘Amplify Capability’.Developing female leaders is a keycommitment. Our Accelerate programmewhich ran over nine months with 62participants supported the goal ofappointments to management andleadership positions meeting a 50:50gender balance.

Wellbeing

Wellbeing is about good physical andmental health, quality of life and prosperity.Building on our Be At Your Bestprogramme, we continue to supportwellbeing in our workforce, to help usattract and develop the best people, andimprove productivity.

Our approach to wellbeing addresses threepillars: mind, body and experience (withcolleagues sharing their experiences for thebenefit of others). In 2019, we will runinclusive activities at all locations, andestablish a clear Group focus and priorities.

Employee RepresentativeBodies

The Bank of Ireland Group engages withemployee representative bodies (FinancialServices Union, Services IndustrialProfessional and Technical Union (SIPTU),and Unite) in a constructive, professionaland transparent manner. In the UK, ourPartners’ Council - an employee councildealing with business-as-usual issues - isrecognised as one of the Top Three workcouncils in the UK by independent experts,the Involvement and ParticipationAssociation.

Agile Leadership Training

As part of our cultural transformation, weare embedding agile methodologies andwork practices across the Group. As a firststep in this process, we introducedleadership training to enable a shift tobusiness agility.

Bank of Ireland alumni network

Our alumni form one of our most importantcommunities. Anyone working in the Banktoday is part of a much wider Bank of Irelandfamily, and our success is built on the hardwork and dedication of those who haveworked in the Group through the years. Fromour foundation to the present time, ourorganisation reflects successive generationsof people who have made it what it is today,complete with its unique culture and heritage.We launched our new alumni network in

November to give former colleagues anopportunity to stay connected, reflect on ourhistory and heritage together, and share in ourfuture ambitions. We were delighted towelcome over 300 alumni members to ouriconic College Green building for a networklaunch in December. There was a very warmatmosphere, with alumni membersreconnecting with former colleagues andfriends. Group CEO, Francesca McDonagh,spoke about the importance of strong alumninetworks, and Alumni President, StephenMason, outlined plans for the network in 2019.


24


Responsible and sustainable businessEnabling communities to thrive

Our communities are those where we live and work -as well as other local and global groups; such as ourpartners, shareholders and regulators. We support thewider community through our charity and communityinitiatives, our contribution to arts and culture, and byplaying an active role in society.

Investing in our community

We encourage our colleagues to exercisegood corporate citizenship by gettinginvolved with local and nationalorganisations focused on promoting thebusiness, economic, social and cultural lifeof the communities we serve.

In 2018, we joined the LondonBenchmarking Group (LBG) to betterunderstand, measure and benchmark ourcorporate community investment - whichincludes our Give Together charityinvestment programme, Enterprise Townprogramme, community sponsorships andfinancial wellbeing programmes. UsingLBG methodology, we have calculated ourtotal community investment in 2018 at €4.9million with an additional €1.4 million givenby our colleagues and 1,396 daysvolunteered.

Flagship charities

Throughout the year, we continued to workwith our four flagship charity partners: AgeAction, Irish Heart Foundation, Jack & JillChildren’s Foundation, and the Alzheimer’sSociety in the UK. We made a tangibledifference to their work in our communities,and our colleagues supported themthrough numerous initiatives throughoutthe year. We have focused on the impact ofour support rather than simply on theamounts raised or days volunteered, andwe are delighted to report the followingresults:• 965 teachers trained by Irish Heart

Foundation to provide CPR training to184,142 students.

• 20,536 nursing hours given to Jack &Jill families across Ireland.

• 450 Bank of Ireland volunteers tackled200 gardens of older people in Dublin,

Cork and Galway as part of theBackyard Blitz in support of AgeAction.

• 1,082 days of the Alzheimer’s Society’s‘side by side’ service for people livingwith dementia in the UK.

Arts and culture

Seamus Heaney: ‘Listen Now Again’ is amajor exhibition celebrating the life andworks of one of Ireland’s greatest writers.Officially launched by the President ofIreland, Michael D Higgins, it became theinaugural exhibition in the new Bank ofIreland Cultural and Heritage Centre inCollege Green in the summer of 2018. Apartnership between the National Library ofIreland (NLI), the Department of Culture,Heritage and the Gaeltacht, and Bank ofIreland, the exhibition focuses on the

€4.9mtotal community investment

1,396volunteer days




poetry for which Heaney is best known,and features original manuscripts, letters,unpublished works, diary entries, andphotographs. It also includes personalobjects, such as Heaney’s desk from thefamily’s home in Sandymount, a lamp thatonce belonged to WB Yeats, and a portraitby Louis le Brocquy.

Group CEO, Francesca McDonagh said,‘Bank of Ireland has been part of the fabricof Irish life for over 200 years and I amdelighted our College Green buildings willnow house an exhibition on the life andwork of Seamus Heaney - a poet andwriter of such national and internationalstanding’.

Our direct economic impact

Through our activities and those of ourcustomers - as well as the jobs we createand the taxes we pay - we make asignificant contribution to the communitieswe serve in Ireland, the UK, France,Germany and the USA. Our footprintbenefits both the economy and widersociety. In 2018, Bank of Ireland provided€15.9 billion in new lending, spent €1.1billion on goods and services, employed10,367 people (EOY figure), and paid €0.37billion in taxes to the Irish and UKexchequers.

Providing advice to ourcommunity

We frequently publish research to provideinsight and enhance decision-making forstakeholders. This independent, thoughtleading research helps positively shape thecommunities where we operate, and wemake it available to the public so everyonecan access and benefit from it.

Our research includes:

• The Bank of Ireland Economic Pulse -charting changes in sentiment due toeconomic and political events. Weconduct the surveys in partnership withthe European Commission (EC), withthe data feeding into a Europe-widestudy, which has run since the 1960s.Topics include the economy andhousehold finances, and we offerinsights on topical issues like Brexitand regional infrastructure.

• The Bank of Ireland / Economic &Social Reserch Institute (ESRI) savingsand Investment Index - trackinghouseholds’ attitudes towards savingsand investment, and monitoring theirperspectives on the current and futuresavings and investment environment.

The Index also provides a RiskBarometer and a Retirement OptimismIndex, to give insights into householdrisk taking and retirement planning.These are presented on alternatemonths.

Engaging with our investor andpolitical community

Over the course of 2018, Bank of Irelandtook part in a number of national andinternational hearings and events as part ofour ongoing commitment to engage withour diverse communities including ourinvestors and the political system. TheBank appeared at a number of Oireachtascommittee hearings over the year,including the Joint Committee on Finance,Public Expenditure and Reform, andTaoiseach, and the Joint committee onBusiness, Enterprise and Innovation.

Our Group CEO, Francesca McDonagh,addressed the Bank of America MerrillLynch Financial CEO Conference inLondon in September, a significantinternational event for investors andanalysts from our sector. There has beenongoing engagement with our regulators inboth Dublin and Frankfurt throughout theyear and a series of national andinternational investor meetings andengagements especially following thepublication of our annual and interimresults.

Head 2 Head Challenge -raising vital funds for Jack & Jill In September 2018, 56 colleagues fromacross the Group formed one single team tocycle ‘Head 2 Head’ for Jack & Jill, raising€130,000, enough for more than 8,000 nursinghours for Jack & Jill families. The peloton andtheir crew travelled through some of Ireland’smost picturesque but challenging locations,covering 700km over the six-day event – agreat achievement, and memorable for allinvolved.

‘Being at Mizen Head to welcome in the Bankof Ireland cyclists was quite overwhelming forme and our Cork nurse Eilin. That physicaland emotional effort was matched by thefundraising drive behind the Bank’s Head 2Head cycle for Jack & Jill, and I can guaranteethat every €16 raised will be put to good useby funding one hour of home nursing care forour community of 357 precious childrenacross the country.’ Carmel Doyle,CEO, Jack & Jill Children’s Foundation

Backyard Blitz - supporting Age Action

In June 2018, we undertook our largest-ever volunteering project, with over 450colleagues tackling the gardens of olderpeople in the East Wall area of Dublin,Renmore and Mervue in Galway, andBallyphehane in Cork. ‘Do notunderestimate the value of this work. It wasmuch more than tidying up a garden - formany older people it was about givingthem back the opportunity to enjoy theiroutdoor space and all the benefits, bothmental and physical, that come with that’. Dermot BannonAmbassador


Responsible and sustainable businessOperating responsibly

We take seriously our responsibility to manage ourimpact on the environment and to reduce thatimpact. We must work to high standards and ourCode of Conduct along with a range of policesoutline the high expectations we set ourselves.

26


Managing our impact on theenvironment

50% reduction in carbon emissions by 2030In May, we signed up to the Low CarbonPledge to reduce our carbon emissionsintensity by 50% by 2030. This is the firstcollective public commitment by Irishbusiness to lead the transition to a low-carbon economy, and help Ireland achieveits international commitments under theParis Climate Agreement.

The pledge is part of The Leaders’ Groupon Sustainability, a business coalition,convened by Business in the CommunityIreland (BITCI) to address the mostpressing sustainability priorities - social,environmental and economic - as well asfuture opportunities for Ireland.

To date we have achieved a 23% reductionin carbon emissions (on a 2011 baseline).

What we did in 2018:

• We increased the scope of our ISO14001 and ISO 50001 systems fromeight sites to the entire Bank of IrelandGroup.

• We approved an LED lighting upgradeat our IT Centre (ITC) and OperationsCentre in Cabinteely, with workbeginning in January 2019.

• At our ITC in Cabinteely, we generated27,030 kWh of solar renewable energy- enough to power 2,250 two hour carcharges in a year.

• Four electric vehicle charging pointsare now live at our ITC in Cabinteely,with four more due at our OperationsCentre in January 2019.

23%reduction in carbonemissions to date

27,030kWhof solar energy generated

53%reduction in single-use cups to date

4electric vehicle charging points


Reducing plastic and other waste

A big part of reducing our impact on theenvironment is minimising waste. Oneimportant step is to greatly reduce ourreliance on single use cups in our largerbuildings in the Republic of Ireland and theUK, where we use nearly 740,000 of thesecups a year. We have provided KeepCupsto all colleagues in these buildings alongwith incentives to use them. To date thishas resulted in a 53% reduction.

Other measures to reduce waste in2018:• All disposables in our canteens are

100% recyclable, and some arecompostable.

• We no longer use any Styrofoam items.• We recycle all our paper going to

confidential waste (1,527 tonnes in2018).

Sourcing responsibly

Our Group Procurement Policy sets out aframework for engaging with our suppliersincluding a commitment to procure goodsin an ethically, environmentally, and sociallyresponsible way. This includesrequirements to reduce environmentalimpact and promote the application of

good labour standards and workingconditions. In accordance with relevant UKlegislation, we published our statement onModern Slavery and Human Trafficking for2018 setting out the steps and measureswe have taken to seek to ensure thatmodern slavery and human trafficking doesnot occur within our supply chain or in ourbusiness operations.

How we conduct ourselves

Our Code of Conduct outlines the highstandards we set ourselves for what wesay and do in our relationships withcustomers, colleagues and thecommunities in which we do business. Itsets out the standards and behaviourexpected from each of us. We must allkeep to the Code when we deal withothers, both within and outside the Bank ofIreland Group, and in our personal financialdealings. While the Code cannot bespecific to every situation, its intention isvery clear and it includes details of whataction can be taken in certain situations.The Bank is focused on creating anenvironment where colleagues feelcomfortable to speak up, and challengewhere they feel it is appropriate.

Integrity and honesty

The Group has an Anti-Bribery andCorruption Policy Standard, which sets outthat we expect all employees to act withintegrity and honesty at all times in theirdealings with business and commercialpartners. This policy reiterates the Group’sethical and regulatory obligations toeffectively manage bribery and corruptionrisks. All our employees completemandatory online training to help themunderstand their obligations.

Anti-money laundering,countering the financingof terrorism, and financialsanctions

Our policies on anti-money launderingsanctions and countering the financing ofterrorism set out the standards needed toensure the Group meets its legislative andregulatory requirements relating to keyrisks in this area. All our colleaguescomplete mandatory web based trainingand pass the examination assessment.



Enabling sustainable travel

Siobhán Gleeson bought her first electricvehicle in January 2018 because she believesit’s the way of the future. It’s good for theenvironment, as it reduces carbon emissionsand other pollution. But in addition, it’s cheaperto run with no need to buy petrol, reducedmotor tax at just €120 a year, and significantlycheaper insurance and servicing. With a €5,000grant from the Sustainable Energy Authority ofIreland (SEAI), Siobhán is now paying less for

her car loan than she was previously paying forpetrol.

When Siobhán first bought her car, sheinvestigated the idea of having EV chargingpoints installed at her place of work (ITCCabinteely). At the same time, Bank of Irelandwas exploring the option of putting in placecharging points. Within the year the chargingpoints were installed representing aconvergence of colleague requirements andthe Bank’s environmental programme. This has

made a huge difference - for example, if shewants to go somewhere at lunchtime, she isn’tworried that she won’t have enough power toget back home later.

For those thinking about buying an electricvehicle, Siobhán says, ‘go for it!’ Along with thecost savings and environmental benefits, shefinds it more relaxing without the constantengine hum. It has made her rethink the wayshe travels, and she is also more consciousof her speed.


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A key objective of theGroup’s governanceframework is to ensurecompliance with applicablelegal and regulatoryrequirements, and to supportthe sustainable achievementof Group

Annual Report2018...bank, serve customers brilliantly and grow sustainable profits. Delivering on...

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