31 May 2006 07:00
Bank of Ireland(Governor&Co)31 May 2006 Bank of Ireland Group Preliminary Announcement of Results For the year to 31 March 2006 Wednesday 31 May 2006 7am Bank of Ireland Group Preliminary Announcement for the year to 31 March 2006 Performance Highlights % Change Pro-forma (1) March 2006 over Statutory (1) 31 March 2006 31 March 2005 Pro-forma March 31 March 2005 2005 • million • million • millionGroup ProfitabilityProfit before tax 1,599 1,220 31 1,310Non-core items: Disposal of business activities 176 11 - 11 Gross up for policyholder tax in 69 26 - 26 the Life business Hedge ineffectiveness on (7) - - - transition to IFRS Impairment loss provision write - 100 - 100 back Restructuring programmes (32) (123) - (123) 206 14 - 14Underlying profit before tax 1,393 1,206 16 1,296 Per Unit of €0.64 Ordinary StockBasic earnings per share 136.4c 103.9c 31 111.1cUnderlying earnings per share (2) (a) 118.5c 102.3c 16 -Dividend (3) (b) 52.5c 45.6c 15 45.6cDividend payout (b) / (a) 44% 45% (1) - Divisional Pre-tax Performance (4)Retail Republic of Ireland 550 465 18 474Bank of Ireland Life 134 81 65 135Wholesale Financial Services 386 325 19 334UK Financial Services 349 332 5 356Asset Management Services 85 125 (32) 125Group Centre (111) (122) 9 (128) 1,393 1,206 16 1,296Group Performance (4)Net interest margin 1.79% 1.94% - -Cost/income ratio 57.1% 59.9% - -Cost/income gap (5) 4.8% - - -Annual impairment loss charge 11 bps 11 bps - -Return on equity 24% 23% - - Balance SheetTotal stockholders' equity 5,328 4,305 24 4,277Total assets (• billion) 162 128 27 128Total lending (• billion) 107 84 27 84Total customer accounts (• billion) 62 60 3 60 CapitalTier 1 ratio 7.5% 7.9% - -Total capital ratio 11.4% 10.9% - -Risk-weighted assets (• billion) 97.5 75.9 28 - (1) (1) "Pro-forma" and "Statutory" IFRS results for 31 March 2005 aredefined in the "Basis of Preparation and Presentation" note on page 3 of thisdocument. (2) Underlying EPS excludes the after-tax effect of the non-core itemslisted above and based on the average number of shares in issue ((including Bankof Ireland own shares held for the benefit of Bank of Ireland Lifepolicyholders) (31 March 2006: 971m; 31 March 2005: 966m)). (3) 31 March 2006 dividend of 52.5c includes a proposed final dividend of34.3c (not yet approved by the Annual General Court). (4) Based on underlying performance which excludes the impact of non-coreitems above. (5) Total income grew by 8.2%, total costs grew by 3.4% resulting in apositive gap of 4.8% in the year to 31 March 2006:- cost/income gap notavailable for pro-forma March 2005 as 31 March 2004 was not restated under IFRS. Bank of Ireland Group Preliminary Announcement for the Year to 31 March 2006 Performance Highlights* "Our clear strategy is delivering excellent results. We will continue to meet our strategic commitments, step up the pace of delivery and I am confident of another year of strong performance in 2006/07." Brian Goggin, Bank of Ireland Group Chief Executive, commented Key messages: • Excellent Group profit growth of 16% - in particular in Retail Ireland, Life and Wholesale • Investment initiatives in Wholesale and UKFS delivering results • Group income growth of 8% driven by very strong lending and resources growth partially offset by a reduction in margin • Cost growth well contained at 3% with excellent improvement in our efficiency ratios (cost/income ratio down 2.8% to 57.1%) • Strategic Transformation Programme ahead of target - €35 million saving delivered • Excellent asset quality - impairment charge represents 11bps of average loans • Strong Capital ratios - Total Capital and Tier 1 ratios at 11.4% and 7.5% respectively • Strong Dividend growth of +15% • In Retail Ireland: (+18%) o Performance driven by volume growth, higher fee income, well managed costs and excellent asset quality o Competing successfully and building on our service ethos with the launch of the Customer Programme - 'Changing for You' • In Life: (+65%) o Excellent performance driven by increased sales of new business, strong existing business ahead of long term assumptions and buoyant investment markets • In Wholesale: (+19%) o Building skill & capability - investment in people and geographies yielding results o In Corporate Banking - strong lending volumes, higher margins and historically low impairment loss charge driving profit growth o In Global Markets - leveraging business potential within the Group and broadening geographic scope of operations o Davy & IBI Corporate Finance continue to perform well • In UKFS: (+5%) o Clear strategy with focus on execution o Strong Mortgage growth & winning market share - back-book re-pricing complete o Transformed Business Banking, delivering strong volume growth and building momentum o Joint ventures with UK Post Office delivering on target • In Asset Management Services: (-32%) o Harnessing our global distribution platform and building a portfolio of investment boutiques * Based on underlying performance.Forward-Looking Statement This statement contains certain forward-looking statements as defined in the USPrivate Securities Litigation Reform Act of 1995 with respect to certain of theBank of Ireland Group's ("the Group") plans and its current goals andexpectations relating to its future financial condition and performance and themarkets in which it operates. Because such statements are inherently subject torisks and uncertainties, actual results may differ materially from thoseexpressed or implied by such forward-looking statements. Such risks anduncertainties include but are not limited to risks and uncertainties relating toprofitability targets, prevailing interest rates, the performance of the Irishand UK economies and the international capital markets, the Group's ability toexpand certain of its activities, competition, the Group's ability to addressinformation technology issues and the availability of funding sources. The Bankof Ireland Group does not undertake to release publicly any revision to theseforward-looking statements to reflect events, circumstances or unanticipatedevents occurring after the date hereof. Basis of Preparation and Presentation The Group has implemented International Financial Reporting Standards ('IFRS')from 1 April 2005 and the annual accounts have, for the first time, beenprepared in accordance with IFRS adopted by the International AccountingStandards Board (IASB), and interpretations issued by the InternationalFinancial Reporting Interpretations Committee of the IASB and endorsed by theEuropean Union (EU). Comparative figures for the year ended 31 March 2005 have been restated underIFRS. The Group has availed of the option in IFRS 1 (First Time Adoption ofInternational Financial Reporting Standards) not to apply IAS 32 (FinancialInstruments: Disclosure and Presentation), IAS 39 (Financial Instruments:Recognition and Measurement) and IFRS 4 (Insurance Contracts) to the comparativefigures for the year ended 31 March 2005. Accordingly statutory comparativeinformation in respect of Financial Instruments and Insurance Contracts isprepared on the basis of the Group's accounting policies under Irish GenerallyAccepted Accounting Principles (IR GAAP). A consolidated opening balance sheetincorporating the initial effect of implementing IAS 32, IAS 39 and IFRS 4 as at1 April 2005 is presented on page 54. However, given the impact of IAS 32, IAS 39 and IFRS 4, the Group is alsoproviding detailed comparative information on a pro-forma basis that includesthe estimated effect of these standards for the year ended 31 March 2005 tofacilitate inter-period comparison. These standards impact the accounting forderivatives, income recognition on loans (Effective Interest Rate (EIR)),accounting for insurance contracts, impairment provisioning and theclassification of financial instruments. The pro-forma comparative informationfor the 12 Months to 31 March 2005 does not adjust for the impact of accountingfor derivatives (hedge accounting) and impairment provisioning. The results for the year to 31March 2006 with pro-forma comparatives for theyear to March 2005 are presented on page 15. A reconciliation of the GroupIncome Statement for the twelve months to 31 March 2005 on a statutory IFRSbasis to a pro-forma basis is set out on page 25. The Group and Divisional results for the year ended 31 March 2005 have beenprepared on a pro-forma basis to ensure that the underlying performance trendsinherent in the business are explained. To further enhance comparability betweenboth periods certain non-core items are excluded from our analysis of Group andDivisional performance. These non-core items are set out on page 1 of thisdocument. Transition to IFRS The rules for first-time adoption of IFRS are set out in IFRS 1. IFRS 1requires the Group to determine its IFRS accounting policies and apply theseretrospectively to determine the opening balance sheet position under IFRS atthe date of transition. IFRS 1 applies when an entity first adopts IFRS andprovides certain transition provisions. The Bank of Ireland Group has used the following exemptions granted under IFRS1: • Business combinations: The Group has availed of the exemption and has not restated the group accounts for any acquisitions or business combinations that took place prior to 1 April 2004. • Fair value or revaluation as deemed cost: The Group has availed of the exemption to treat fair value as deemed cost at transition on 1 April 2004 in respect of adaptations to the properties existing at that date. • Employee benefits: The Group has elected to recognise all cumulative gains and losses on defined benefit pension schemes at 1 April 2004. • Cumulative translation differences: The Group availed of the exemption to deem all accumulated balances arising from translation of foreign subsidiaries to be nil on transition to IFRS at 1 April 2004. • Share-based payment transactions: The Group availed of the exemption only to apply IFRS 2 to share based payments granted on or after 7 November 2002 that have not vested before 1 January 2005. • Comparative restatement: The Group availed of the option not to apply IAS 32 (Financial Instruments: Disclosure and Presentation), IAS 39 (Financial Instruments: Recognition and Measurement) and IFRS 4 (Insurance Contracts) to the comparative figures for the year ended 31 March 2005. Group Chief Executive's Comments The year to 31 March 2006 was one of strong profit growth for the Bank ofIreland Group. We achieved this through record business levels in our maindivisions, aggressive cost management and by reaping the emerging benefits ofour focused investment strategy. We also met our goal of stepping up theimplementation of our business strategy where we made significant progress on anumber of fronts. We are ahead of target in Year 1 of our StrategicTransformation Programme and we are creating clear differentiation with ourcompetitors through our "Changing for You" customer service programme. Thishighly satisfactory performance for the year has been achieved while maintainingexcellent asset quality. The progress we made is reflected in our financial results for the year wheretotal profit before tax was up 31% to €1,599 million with basic earnings pershare also up 31% to 136.4c. Underlying profit before tax, which excludesnon-core items, was up 16% to €1,393 million with underlying earnings per shareat 118.5 cent, also an increase of 16% on the previous year. The Group cost/income ratio reduced by almost 3% in line with our goal of improving efficiencyand our impairment loss charge at 11 basis points (bps) reflects strongunderwriting skills and the benign credit environment. These results continue awell-established trend making this our 15th consecutive year of profit growthand our 14th successive year of dividend growth. The basis for these results is our positioning in Europe's two best performingeconomies with Ireland and the UK accounting for 86% of Group profits. Irelandhas significantly outshone the rest of Europe in economic growth over the pastdecade while the UK has also consistently outperformed the eurozone. Both ofthese trends are forecast to continue giving us confidence for further profitgrowth in our two main markets. Bank of Ireland Group has a well-established business strategy. We aim to bethe number one bank in Ireland with dynamic businesses growing internationallyby: • maximising returns from our leading position in Ireland • substantially growing our businesses in the UK • growing our portfolio of niche, skill-based businesses internationally Over the past year we have embarked on a programme of actions designed to stepup the implementation of this strategy in order to deliver superior results andalso to build an organisation capable of sustained growth in an efficient andstreamlined manner. We have delivered on this objective against the committedtimelines. Our Retail business in the Ireland had a very strong year made possible by ourexcellent distribution network and unique sales effectiveness model. We madegood progress in achieving greater efficiency while also continuing to investdirectly in customer service. We delivered on a key strategic commitment withthe launch of our customer programme - "Changing for You". This underlines theBank's commitment to real customer differentiation and includes additional staffin branches, improved branch layout, active queue management initiatives andenhanced phone and online services. In an increasingly competitive environmentour broadly based multi-channel distributions franchise and our superiorproducts and services continue to deliver profitable growth. Bank of Ireland Life is now a market leader for life and pensions new businessand enjoyed a successful year with excellent new business volume. The Lifebusiness has consistently taken a leadership role in the development of SSIAproducts. These products mature over the next year, and we have been first tomarket with an innovative set of competitive products to enable customers togain the maximum benefit from their maturing savings. We concluded the review of our UK Division during the year with the disposal ofthe Bristol & West branch network. At the same time we completed the BusinessImprovement Programme and continued our investment programme resulting in strongloan growth of 46% in our business banking activities in this market. We havealso made good progress in our business relationship with the UK Post Office, asit continues to significantly build its customer base from 100,000 in May 2005to 475,000 in May 2006 exceeding our ambitious target of 400,000 customers.With the restructuring of our business in the UK now complete, including theincorporation of both the Post Office Financial Services (POFS) and First RateTravel Services (FRTS) into this Division, we now have a clear focus in the UKon business banking, mortgage lending and consumer financial services and we aretargeting strong growth in this Division in the coming year. The development of our international niche businesses also continued during theyear with Corporate Banking opening offices in Paris and Frankfurt, GlobalMarkets opening a Treasury operation in London and the acquisition of 71.5% ofGuggenheim Advisors providing us with a greater product range for ourdistribution platform in Asset Management Services. Our Strategic Transformation Programme has achieved cost savings of €35 millionin Year 1 against a target of €30 million and we have clear line-of-sight on thedelivery of the second year target of €75 million. Just as importantly we havemade significant progress in transforming the organisation model in Bank ofIreland that will continue to deliver benefits as we grow the business. The Group has strong capital resources and our approach to capital managementensures that we have adequate capital to support our business plans. Weconstantly strive to provide a mix of capital that meets the objectives of bothequity and debt investors and delivers superior returns from efficient capitalmanagement. This has been a year of significant change for the Bank of Ireland Group. Whiledelivering an excellent growth and profit performance, we have also takensignificant steps in transforming the business for the future. We have madeefficiency a core objective by starting to build an organisation capable ofstrong growth without adding costs in the same proportions. We undertook toinvest in the business and spend "good" costs where there was a clearopportunity for our customers and stockholders. We committed to taking thequality of our customer service to a whole new level of excellence in anincreasingly competitive and demanding environment. The core purpose of thisstrategy is to build a sustainably growing business for the future. We havemade significant progress on achieving this objective in 2005/06. Our employees in Bank of Ireland continue to be a key factor in the progress ofthe business. During a year of great change they have shown resilience,determination and, above all, an unrelenting commitment to putting the customerfirst. We are fortunate to benefit from this key differentiating factor wherethe quality of advice, service and product innovation helps us to win and retainever-increasing numbers of satisfied customers. Outlook: Continuing positive economic prospects in our main markets, the inherentstrengths of our businesses, excellent cost and efficiency management andprudent, targeted investment will deliver strong growth across the Group whilstmaintaining our robust capital position. We will continue to meet our strategiccommitments, step up the pace of our delivery and I am confident of another yearof strong performance in 2006/07. Divisional Performance As set out in the Basis of Preparation and Presentation (page 3) the Group'sfinancial performance is explained on the basis of pro-forma results excludingthe distorting impact of non-core items which are detailed on page 15 of thisdocument. Divisional Performance: Profit Before Tax % Change Pro-forma March 2006 over Statutory 31 March 2006 31 March 2005 Pro-forma March 31 March 2005 2005 • million • million • million Retail Republic of Ireland 550 465 18 474Life 134 81 65 135Wholesale Financial Services 386 325 19 334UK Financial Services 349 332 5 356Asset Management Services 85 125 (32) 125Group Centre (111) (122) 9 (128)Underlying profit before tax 1,393 1,206 16 1,296Non-core items 206 14 - 14Profit before tax 1,599 1,220 31 1,310 Retail Republic of Ireland Retail Republic of Ireland reported an excellent performance for the year to 31March 2006 with pre-tax profit growth of 18% to €550 million. Total operatingincome rose by 11% and expenses rose by 6% representing a very satisfactoryincome/cost relative performance. This achievement reflects the continuingstrength of our domestic franchise and customer proposition and has been drivenby strong volume growth, higher fee income, well-managed costs and strong assetquality. Retail Republic of Ireland: Income Statement Pro-forma % Change Statutory 31 March 2006 31 March 2005 March 2006 over 31 March 2005 • million • million Pro-forma March • million 2005Net interest income 1,119 1,020 10 1,019Other income* 356 314 13 316Total operating income 1,475 1,334 11 1,335Total operating expenses (871) (818) 6 (810)Impairment losses on loansand advances (54) (51) 6 (51)Profit before tax 550 465 18 474 * Includes share of associates/joint ventures. Performance was enabled by a continuing favourable economic environment anddemographics in Ireland: • clear strategic focus on service excellence delivered through our " Changing for You" Customer Programme • highly effective and responsible sales model • leading multi-channel distribution capability Lending and resources volumes in the Division grew by 23% and 15%, respectively.In Business Banking, targeting of the Small and Medium Enterprise sectordelivered impressive results with loan growth of 23% recorded for the year. Wemaintained our number one position in the mortgage market with book growth of27%, while new advances grew by 29%. Personal lending volumes increased by 13%for the year. Net Interest Income rose by 10% reflecting volume growth as well as a furthernarrowing of net interest margin. Net interest margin in the Division continuesto be impacted by: • the effect of the low interest rate environment on liability margins • the higher rate of loan growth compared with resources leading to higher wholesale borrowings • changing product mix • competition Other Income, including the income from associated companies and joint ventures,rose by 13% driven particularly by strong growth in business banking, privatebanking and credit cards. The impairment losses on loans and advances were €54 million or 15 bps as apercentage of advances, down from 18 bps in the prior year. Costs were well managed with the cost/income ratio for the Division down over 2percentage points to 59.1%. Cost growth of 6% included a significant increase inthe pension charge arising from IAS 19. Excluding this IAS 19 impact, costsgrowth was 4% - a very satisfactory performance. Bank of Ireland Life Bank of Ireland Life, the Group's life and pensions business, reported a highlyimpressive IFRS profit performance with growth in operating profits of 43% to€113 million and growth in profit before tax of 65% to €134 million. The ongoingsuccess of our sales effectiveness model and strength of our multi-channeldistribution network increased our market share by a further one percentagepoint to 25%. IFRS Performance Bank of Ireland Life: Income Statement Pro-forma % Change Statutory 31 March 2006 31 March 2005 March 2006 over 31 March 2005 • million • million Pro-forma March • million 2005Income 208 172 21 212Costs (95) (93) 2 (93)Operating Profit 113 79 43 119Investment variance 17 2 - 16Discount rate change 4 - - -Profit before tax 134 81 65 135 The life business achieved excellent APE (annual premium equivalent) salesvolumes of 30% to €387 million, and experienced continued favourable mortalityand persistency variances together with rising equity markets. Profitabilitybenefited from a positive investment variance of €17 million, and a reduction inthe risk discount rate (the rate at which we discount future insuranceliabilities) of 0.5% to 7.5%. Bank of Ireland Life continues to investsignificantly in its administrative platforms to improve efficiency and hasrecently completed the move to a single platform for administering our sales andapplications processing for the life business. The economic and demographic backdrop to our life business in Ireland is verysupportive: a strong economy, a growing population, significant job creation,rising incomes, an excellent savings ratio and the need for substantialinvestment in personal pension provision providing significant opportunities.The outlook remains very positive. Embedded Value Performance The alternative method (which is widely used by the life insurance industry) ofpresenting the performance of our Life business is on an embedded value basis.The embedded value basis translates estimated future distributable earnings to apresent value and is set out in the following table. Under this treatment, ourLife business also shows an excellent performance with operating profit up 22%and profit before tax up 51%. Both new business and existing business performedwell, with growth of 32% and 16% respectively, in the year to 31 March 2006.The impact of economic environment changes, such as a strong equity market andlow interest rates, also had a positive impact. Bank of Ireland Life: Embedded Value Income Statement 31 March 2006 31 March 2005 % Change 31 March 2006 over 31 March 2005 • million • millionNew business profits 78 59 32Existing business profits 94 81 16• Planned return on capital 66 59 12 • Experience variance 20 18 11• Assumption changes 8 4 100Investment income on free funds 5 5 -Inter-company payments (32) (26) 23Operating Profit 145 119 22Investment variance 51 16 -Discount rate change 8 - -Profit before tax 204 135 51 The Embedded Value for the Life business includes a Value of Inforce asset bothin respect of contracts classified as Insurance and contracts classified asInvestment. In contrast, the IFRS statutory result include a Value of Inforceasset in respect of insurance contracts only. The Value of Inforce is the discounted value of future after tax profits thatwill arise from insurance and investment business in the long-term fund. The keyassumptions used in the calculation of this asset are the discount rate of 7.5%(2005: 8.0%), the future growth rate on unit-linked assets of 5.5% (2005: 6.0%)and the rate of tax assumed to be levied on shareholder profits of 12.5% (2005:12.5%). Actuarial assumptions are also required in relation to mortality,morbidity and persistency rates and these have been derived from the Company'sexperience. Wholesale Financial Services Our Wholesale Division (WFS) comprises Corporate Banking, Global Markets, DavyStockbrokers and IBI Corporate Finance. Profit before tax in WFS increased by19% to €386 million for the year to 31 March 2006. Wholesale Financial Services: Income Statement Pro-forma % Change Statutory 31 March 2006 31 March 2005 March 2006 over 31 March 2005 • million • million Pro-forma March 2005 • millionNet interest income 454 325 40 302Other income 243 278 (13) 310Total operating income 697 603 16 612Total operating (288) (240) 20 (240)expensesImpairment losses onloans and advances (23) (38) (39) (38)Profit before tax 386 325 19 334 Total operating income rose by 16% to €697 million for the year to 31 March 2006driven by strong lending volumes and higher margin in Corporate Banking. Inaddition, income figures for Burdale, our UK asset-based lender that we acquiredin January 2005, have been included for a full year for the first time. Lendingvolumes increased by 35% and margins improved reflecting a shift in loan mixtowards the higher margin business in acquisition finance, property andasset-based lending. The application of IAS 32 and IAS 39 in the current year has the effect ofrecognising certain income streams as Net Interest Income, which in the prioryear would have been recognised as other income. Excluding the impact of IAS 32and IAS 39 Net Interest Income rose by 28% with Other Income broadly in linewith the prior year. There were two main drivers of operating expenses within the Division;investment costs and staff related costs. Investment costs in Corporate Banking and Global Markets added 8% to total costgrowth with an increase in front line staff, opening of offices in Paris andFrankfurt, the expansion of our activities in the UK and the US and theinclusion of the costs of Burdale for a full year. Increased staff costs across the Division arising from salary inflation andperformance related pay added 8% to total Operating Expenses. Pension costsarising from IAS 19 and increased compliance costs arising from initiativesunder IFRS, Basel II and Sarbanes-Oxley (SOx) added a further 2% to theoperating costs of the Division. In total, these costs together with othervolume related costs contributed cost growth within the Division of 20%. Credit quality remains excellent with impairment losses on loans and advances of€23 million, or 12bps when expressed as a percentage of the loan portfolio. Thiscompares to €38 million or 26bps in the prior year. Our continued strong creditperformance is being driven by the benign credit environment supported by ouractive approach to credit management. Wholesale Financial Services: Business Unit Profit Before Tax Pro-forma % Change 31 March 2006 31 March 2005 March 2006 over • million • million Pro-forma March 2005Corporate Banking 213 159 34Global Markets 134 124 8Other (including Davy& IBI CorporateFinance) 39 42 (7)Total 386 325 19 Corporate Banking delivered particularly strong profit growth of 34% for theyear. The strategy in Corporate Banking is to continue to grow both our domesticfranchise and to broaden our international business by focusing on niche skillsbased activities. This is yielding results with the delivery of impressive loanand profit growth and improved customer satisfaction. Our niche-lending teams are enabling the successful expansion into sectors suchas media, asset-based lending and UK and European property. Our new offices inParis and Frankfurt, together with the increased resources in the UK and US,provide us with greater presence and diversification in these important markets.In addition, we are increasingly taking lead roles in the arranging andstructuring of syndicated transactions. Our Global Markets business delivers a comprehensive range of risk managementproducts to the Group's customer base and acts as Treasurer for the Group.Profit for the year increased by 8% and we retained our leading market positionwith 27% share of the commercial customer foreign exchange market in Ireland.Our focus for the year has been to broaden the geographic scope of ouractivities with the opening of a treasury operation in London, further build onour technical capability with the recruitment of highly-skilled teams and workclosely with other Group divisions to deliver an integrated service to ourcustomers. The other businesses within the Division, Davy and IBI Corporate Financecontinued to perform well. UK Financial Services (UKFS)(local currency) UK Financial Services: Income Statement Pro-forma % Change Statutory 31 March 2006 31 March 2005 March 2006 over 31 March 2005 £ million £ million Pro-forma March £ million 2005Net interest income 493 429 15 421Other income 63 135 (53) 159Total operating income 556 564 (1) 580Total operating expenses (329) (366) (10) (366)Impairment loss provision (17) 7 - 7Share of associates & JV 28 22 27 22(profit after tax)Profit before tax 238 227 5 243 During the year some organisational changes were made to further streamline themanagement and reporting of our activities in the UK: • Post Office Financial Services (POFS) was transferred to our UKFS Division. • First Rate Travel Services (FRTS), our personal foreign exchange travel service joint venture with the UK Post Office, was transferred from our Wholesale Division to our UKFS Division. The UKFS Division now comprises Mortgages, Business Banking and ConsumerFinancial Services. The latter represents a grouping of our businesses with theUK Post Office (POFS and our 50% share of FRTS). Profit before tax increased by5% for the year. The Divisional performance is not directly comparable, particularly at IncomeStatement line item level, as the disposal of the Bristol and West branchnetwork in the current year and Chase de Vere in the prior year impact theyear-on-year analysis of income and cost growth. Net Interest Income rose by 15% to £493 million for the year to 31 March 2006.Excluding the impact of the disposals mentioned above and the impact of theapplication of IAS 32 and IAS 39 in the current year, Net Interest Income grewby 13%. Strong volume growth of 29% was a key driver of this performance, withvolume gains being partially offset by margin attrition arising from thecontinuing impact of asset growth outpacing the growth of liabilities, thedisposal of the Bristol and West branch network together with the impact ofmortgage back book repricing which has now finished. Other Income fell by 53%, and was again impacted by the effect of the disposalsand our first time application of IAS 32 and IAS 39, which has seen incomerecognised as Net Interest Income which would have been recognised as OtherIncome in prior years. Excluding the impact of these items Other Income was up7% compared to the prior year. Operating Expenses fell by 10% to £329 million for the year to 31 March 2006.Excluding the impact of disposals, Operating Expenses grew by 10% in the yeardue to investment costs, marketing expenditure relating to new product launchesin POFS and other volume related expenditure. Impairment losses on loans and advances are £17 million for the twelve months to31 March 2006 compared with a £7 million credit in the prior year, due to atechnical impairment loss provision release. Excluding the impact of thisimpairment loss provision release the 31 March 2005 impairment loss representeda charge of £3 million. The current year's charge of £17 million represents 5bps of the average advances in UKFS. UK Financial Services: Business Unit Profit Before Tax Pro-forma % Change 31 March 2006 31 March 2005 March 2006 over £ million £ million Pro-forma March 2005Mortgages 134 125 7Business Banking 114 115 (1)Consumer FinancialServices:• POFS (22) (32) 31 • FRTS 28 26 8 6 (6) -Disposed businessactivities: (BWFS & Chase de Vere) (3) (3) -Other* (13) (4) -Total 238 227 5 * Note: includes the amortisation of intangible assets associated with the UKPost Office Financial Services (March 2006:£8m, March 2005: £8m). The prioryear also includes the benefit of £7 million gain on disposal of a loan book. The Mortgage business delivered profit of £134 million, an increase of 7% forthe year. The mortgage book increased by 22% with particularly strong growth inboth our self-certified and buy-to-let specialist portfolios, which increased48% and 36% respectively. The specialist book now represents 45% of the mortgageportfolio. Our commitment to service excellence, and a particular focus on theintermediary channel which represents 90% of our overall business, has resultedin this strong mortgage book growth. The book margin remained stable and thequality of our loan book remains high with loan arrears significantly below theindustry average. Profit before tax from Business Banking was broadly flat for the year to 31March 2006 as a result of the inclusion of a £10 million technical impairmentloss provision release in the year to 31 March 2005. Excluding the impact ofthis, profit before tax increased by 9%. Our investment in the recruitment ofexperienced relationship managers has delivered excellent results with year onyear loan growth of 46% and resources growth of 10%. Throughout the year we havecontinued to focus on the achievement of balanced growth in the property,mid-corporate and SME markets and have further developed our expertise inselected niches including healthcare, hotels and debtor finance. Consumer Financial Services comprises our joint venture businesses with the PostOffice following the strategic divestment of the Bristol & West branch networkduring the year. It was a successful year for POFS as it continued to build itscustomer base from 100,000 in May 2005 to 475,000 in May 2006. The insurancecustomer base reached 290,000 and there was a strong response to its new 2-in-1credit card product, the first of its kind in the UK market. Operating lossesreduced from the prior year by £10 million to £22 million as revenues grewstrongly. FRTS performed well during the year with the continued roll-out of thenetwork expansion for the foreign exchange service through the UK Post Officebranch network. The Bank of Ireland share of the profit of the joint venture was£28m post-tax, an increase of 8% over the prior year. FRTS has firmlyestablished a leading market position in the UK with 30% market share of thepersonal foreign exchange market. Asset Management Services Asset Management Services: Income Statement Pro-forma % Change Statutory 31 March 2006 31 March 2005 March 2006 over 31 March 2005 • million • million Pro-forma March • million 2005Net interest income 7 4 75 4Other income 215 252 (15) 252Total operating income 222 256 (13) 256Total operating expenses (137) (131) 5 (131)Profit before tax 85 125 (32) 125 Asset Management Services (AMS) comprises Bank of Ireland Asset Management(BIAM), Bank of Ireland Securities Services (BoISS) and our holdings in IridianAsset Management (84%) and Guggenheim Advisors (71.5%). Profit before tax forthe Division for the year to 31 March 2006 was €85 million, a decrease of 32%over the prior year, reflecting the full year impact of the mandate losses sinceSeptember 2004. Fund outflows from BIAM continued, but at a slower pace, with funds undermanagement at the year-end of €45.1 billion compared to €44 billion on 30September 2005 and €46.9 billion on 31 March 2005. While the performance ofequity markets broadly offset the impact of these fund outflows, the outflowsfrom our international business have been at higher margins than the new assetsflowing into our domestic business. BoISS, the custody and fund administration arm of the Group, continued todevelop its niche positioning in the securities services arena. During the year,BoISS added 10 new substantial relationships to its international client base,which is drawn from more than 20 countries globally. Iridian Asset Management, is our US based investment manager of large cap andmid cap US equities which focuses on foundations and the not-for-profit sector.Funds under management increased by 4% to US$10.7 billion. We acquired a further8% of Iridian during the year and plan to acquire the remaining 16% in equaltranches over the next 2 fiscal years. We completed the acquisition of 71.5% of Guggenheim Advisors on 31 January 2006,a US fund of hedge funds manager focusing on institutional and high net worthclients. Funds under management at Guggenheim Advisors were US$2.9 billion at 31March 2006. The Asset Management Division is an important part of the Group's ambition tobroaden our activities in international skills-based businesses. Our strategy isto build a diversified portfolio of discrete investment boutiques and todistribute their products through the global distribution platform that we havebuilt up over the years. Considerable progress has been made in achieving thisambition with a particular focus on alternative investments, as demonstrated bythe investment in Guggenheim Advisors. Group Centre Group Centre, which comprises earnings on surplus capital, unallocated centraland support costs and some smaller business units, had a net cost of €111million in the year to 31 March 2006, compared to €122 million in the prioryear. Improved income of €22 million is driven by the impact of higher retentionspartly offset by funding costs arising from additional capital raised during theyear. Higher costs of €11 million are largely due to increasedcompliance-related spend (predominantly Sarbanes-Oxley and Basel II). Review of Group Performance Group Income Statement Group Income Statement % Change Pro-forma March 2006 over Statutory 31 March 2006 31 March 2005 Pro-forma March 31 March 2005 2005 • million • million • millionNet interest income 2,307 1,971 17 1,931Other income 1,132 1,207 (6) 1,329Total operating income (net of 3,439 3,178 8 3,260insurance claims)Operating expenses (1,988) (1,923) 3 (1,915)Impairment losses on loans and (103) (79) 30 (79)advancesShare of associates and joint ventures 45 30 50 30(post tax)Underlying profit before tax 1,393 1,206 16 1,296 Disposal of business activities 176 11 - 11Gross up for policy holder tax in the 69 26 - 26Life businessHedge ineffectiveness on transition to (7) - - -IFRSImpairment loss provision write back - 100 - 100Restructuring programmes (32) (123) - (123)Total non-core items 206 14 14Profit before tax 1,599 1,220 31 1,310 Taxation (303) (237) 28 (256)Minority interest 9 7 29 1Dividends to preference stockholders (13) (10) 30 (8)Profit attributable to ordinary 1,292 980 32 1,047stockholdersBasic EPS c per share 136.4c 103.9c 31 111.1cUnderlying EPS c per share 118.5c 102.3c 16 - The following commentary is based on the Group's performance excluding theimpact of non-core items. A reconciliation of the impact of these non-core itemson the income statement line items is shown on pages 22, 23 and 24 of thisdocument. Income Total income increased by 8% to €3,439 million driven by strong lending growthacross the Group, together with the excellent performance from our fee-earningbusinesses in our Life business, Retail Republic of Ireland, UK FinancialServices and Wholesale Financial Services. Total income after adjusting for theimpact of acquisitions and disposals increased 11% year on year. Total Income % Change Pro-forma March 2006 over Statutory 31 March 31 March Pro-forma March 31 March 2005 2006 2005 2005 • million • million • millionTotal operating income 3,439 3,178 8 3,260Acquisitions: Burdale & Guggenheim Advisors (27) (4) - (4)Disposals: Chase de Vere & Bristol & West branch (31) (127) - (127)networkTotal income excluding impact ofacquisitions and disposals 3,381 3,047 11 3,129 Net Interest Income increased by 17% for the year to 31 March 2006. Thisperformance has been impacted by the distorting effect of income streamsassociated with acquisitions and disposals during the current and prior year,together with the impact of the application of IAS 32 and IAS 39 in the currentyear. These standards had the effect of recognising certain income streams asNet Interest Income which in the prior year would have been recognised as OtherIncome. The financial reporting impact of our first time application of IAS 32and IAS 39 was to increase Net Interest Income by €78 million with acorresponding decline in Other Income. Net Interest Income % Change Pro-forma March 2006 over Statutory 31 March 31 March Pro-forma March 31 March 2005 2006 2005 2005 • million • million • millionNet interest income 2,307 1,971 17 1,931• Acquisitions: Burdale & Guggenheim Advisors (15) (3) - (3)• Disposals: Chase de Vere & - Bristol & West branch network (18) (47) (47)• IAS 32 and 39 impact (78) - - 0 Net interest income excluding impactof acquisitions and disposals & IAS 32and 39 2,196 1,921 14 1,881 Net Interest Income, excluding the impact of the above items, increased by 14%to €2,196 million in the year to 31 March 2006. This was driven by strong loanand resource growth. Loans to customers increased by 27% and resources grew by3% (15% excluding the impact of the disposal of Bristol & West branch networkand its related deposit book). Loan growth was strong across all businesses inthe Group. Exposure to strongly performing economies, together with the deliveryfrom our investment in our UK Business Banking and Corporate Banking teams, havebeen key drivers of this performance. Strong resource growth in Ireland of 12%was largely offset by the disposal of the Bristol & West deposit book resultingin Group resource growth of 3% for the year to 31 March 2006. The strength ofour domestic franchise, supported by the scale of our multi-channel distributionnetwork, is key to the continued strong performance of our Retail volumes inIreland. Group Net Interest Margin % Change Pro-forma March 2006 over 31 March 2006 31 March 2005 Pro-forma March 2005Average interest earning assets (•billion)Domestic 84 64 31Foreign 45 38 18Total 129 102 26Margin (%)Domestic net interest margin 1.87 2.09 (22 bps)Foreign net interest margin 1.63 1.69 (6 bps)Group net interest margin 1.79 1.94 (15 bps)IAS 32 and 39 impact (0.06) - (6 bps)Adjusted net interest margin 1.73 1.94 (21 bps) The Group net interest margin decreased by 15bps to 1.79% at 31 March 2006compared to 1.94% at 31 March 2005 on a pro-forma IFRS basis. Excluding theimpact of IAS 32 and IAS 39, the margin decline was 21 bps. The main drivers ofmargin attrition are: • Balance sheet structure where there was an increase in wholesale funding as loan growth continued to outpace deposit growth. Wholesale funding has increased from 35% to 46% of total funding over the year to 31 March 2006, with 6% of this increase due to the sale of Bristol & West branch network and its related deposit book. • The lower returns being earned on the investment of credit balances (customer funds held in non interest-bearing current accounts) in the current low interest rate environment. The Bank of Ireland policy is to re-invest credit balances on average over a four year investment horizon. As interest rates remain low we are re-investing funds, that are maturing from a higher interest rate environment at lower rates. The low interest rate environment also has an impact on other liability margins. • Product mix where the impact of volumes in lower margin products, including mortgages and corporate banking loans, growing faster than higher margin products. • Competitive pressure impacting lending and deposit pricing in Ireland. Net interest margin has also been impacted by the re-pricing of the UK mortgageback-book which is now complete and the sale of the Bristol & West deposit book.The pace of margin attrition going forward is expected to decline as the rate ofloan growth relative to resource growth is likely to moderate and the increasinginterest rate environment starts to positively impact liability margins. Other Income fell by 6% during the year. This performance was affected by ourapplication of IAS 32 and IAS 39 and the distorting effect on income streamsfrom acquisitions and disposals. Excluding these items Other Income hasincreased by 5% to €1,185 million in the year to 31 March 2006. Other Income % Change Pro-forma March 2006 over Statutory 31 March 31 March Pro-forma March 31 March 2006 2005 2005 2005 • million • million • millionOther Income 1,132 1,207 (6) 1,329• Acquisitions: Burdale & Guggenheim Advisors (12) (1) - (1)• Disposals: Chase de Vere & Bristol & West branch network (13) (80) - (80)• IAS 32 and 39 impact 78 - - - Other income excluding impact ofacquisitions and disposals & IAS 32and 39 1,185 1,126 5 1,248 The main drivers of this increase are the excellent performance from our Lifebusiness, fee growth from our Retail businesses in Ireland where the branchnetwork, Private Banking and Credit Card businesses performed particularly well. Our joint ventures with the UK Post Office delivered an excellent salesperformance. This overall strong performance was partly offset by the decline inincome from BIAM. Operating Expenses Total Operating Expenses increased 3% in the year to 31 March 2006, or by 8%excluding the impact of disposals and acquisitions. Our focus on cost management has delivered a significant reduction in our cost/income ratio which is down 2.8 percentage points from 59.9% to 57.1%. Total Operating Expenses % Change Pro-forma March 2006 Statutory over 31 March 2006 31 March 2005 31 March 2005 Pro-forma • million • million March 2005 • millionUnderlying operating expenses 1,988 1,923 3 1,915• Acquisitions: Burdale & Guggenheim Advisors (18) (2) - (2)• Disposals: Chase de Vere & Bristol & West branch network (37) (131) - (131)Total operating expenses excluding theimpact of acquisitions and disposals 1,933 1,790 8 1,782 The cost base in the prior year included €131 million relating to businessesthat were sold including Chase de Vere and the Bristol & West branch network.The cost base in the current year to 31 March 2006 included costs of €18 millionassociated with operations that were acquired including Guggenheim Advisors andBurdale, our UK asset-based finance operation. Operating Expenses during the year were also impacted by: a) Increased compliance costs associated with the introduction of the BaselII and Sarbanes-Oxley (SOx) initiatives. The increase in expenditure relating tothe introduction of these programmes is one percentage point of the increase intotal Operating Expenses in the current year. Increased expenditure relating tothese initiatives is expected to continue into next year. b) Increased pension costs arising from IAS 19 added two percentage pointsto total Operating Expenses as a result of the lower discount rate applied tothe value of pension liabilities. Under IFRS, the accounting deficit relating tothe liabilities of the pension fund are carried on the balance sheet, and thecosts associated with this deficit are charged through the P&L. c) Investment costs. The Group continues to exploit growth opportunitiesboth in our domestic markets and internationally. In Business Banking UK weexpanded our Relationship Management Team. Wholesale Financial Servicescontinued to expand the geographic scope of its operations with investment inthe UK, Paris, Frankfurt and the US. These investment costs contributed twopercentage points to cost growth for the year. Excluding these items, our "business as usual" cost growth for the year was 5%.The main drivers of this cost growth during the year were salary inflation,performance-related pay and volume-related cost increases. The Strategic Transformation Programme has delivered cost savings at Group levelof €35 million against our target for the year of €30 million for the year to 31March 2006. A new streamlined operating model is now firmly established, consolidatingpreviously fragmented though analogous activities into unified management andoperating structures. These include the creation of the Group Manufacturingfunction and the consolidation of previously disparate support functions,including HR & Learning, Procurement and Facilities, under distinct leadershipstructures. In our Irish Retail Division we have realised cost efficiencies in our backoffice and closed 8 outlets. In addition new technology has enabled thestreamlining of services, for example, our branch cashier system whicheliminates errors and speeds up end of day processes. The process ofconsolidating specialist underwriting activities in our UK mortgage businessinto scale-efficient locations is also well underway. This year the creation of our Group Manufacturing function brought together allemployees in our customer operations and IT areas under one managementstructure. Within Manufacturing the consolidation of our Contact Centre andCredit Operations is progressing well, and a number of further optimisation,consolidation and automation initiatives are now underway. This consolidationenables business growth to be supported on lower employee numbers. In relation to the Group's support infrastructure, we have outsourced ourLearning and Procurement functions to achieve significant efficiencies and buildstrategic capability. In addition, the Group has reached an agreement inprinciple to outsource Facilities Management services for Ireland. We have alsomade progress at consolidating and streamlining our Human Resources function andhave delivered significant efficiencies within a number of other Head Officefunctions. During the year we successfully concluded consultation with employeerepresentatives, to facilitate implementation of staff aspects of the StrategicTransformation Programme. Impairment of Loans and Advances Asset quality across all loan portfolios remains excellent in the continuingbenign credit environment. The impairment charge for the year to 31 March 2006 amounts to €103 million or11 bps when expressed as a percentage of average loans. Impairment losses onloans and advances are at historically low levels, while advances and loans tocustomers continue to grow strongly. We continue to maintain a satisfactorylevel of provisions against impaired loans, with a coverage ratio of 45%, alevel we are comfortable with as mortgages represent 47% of our total lending. Total balance sheet provisions were €360 million at 31 March 2006, compared to€319 million in March 2005. Asset Quality % Change March 2006 over Pro-forma Pro-forma March Statutory 2005 31 March 2006 31 March 2005 31 March 2005Total average customeradvances (•bn) 93 74 26 74Impaired loans (•m) 796 710 12 710Impairment provision (•m) 360 319 13 319 Coverage ratio 45% 45% 45%Impairment losses onloans and advances (•m) 103 79 30 79Impairment losses onloans and advances - bps 11bps 11bps - 11bps Share of Associates and Joint Ventures Profit after tax from associated undertakings and joint ventures increased by50% to €45 million. FRTS, our personal foreign exchange travel service jointventure with the UK Post Office is the largest contributor and continued toperform strongly during the year. Balance Sheet - Capital and Funding The favourable economic backdrop, together with the investment in our businessbuilding capability, in particular in our Wholesale and UK Financial ServicesDivisions, has driven strong loan growth across all Divisions. Growth wasparticularly strong in Corporate Banking, UK Business Banking and mortgages inIreland. Total assets increased 27% from €128 billion to €162 billion in the year to 31March 2006. Customer loans and advances increased by 27% and total resourcesincreased by 3%. Resources were significantly impacted by the disposal of theBristol & West branch network and its associated deposit base. Excluding thisimpact, resources grew by 15%. Risk weighted assets grew 28% from €75.9 billion to €97.5 billion. Division % Growth March 2006 over March 2005 Risk Weighted Assets Loans and advances to Resources customersRetail Ireland 22 23 15Wholesale (corporate loans) 32 35 15UK Financial Services 31 29 (27)Group 28 27 3 Capital Bank of Ireland has maintained a strong capital position. In March 2006, ourTotal Capital Ratio was 11.4% compared to 10.9% in March 2005. Our Tier 1 Ratioat 31 March 2006 was 7.5% compared to 7.9% in March 2005. Our capital raisingprogramme continued during the year with both Tier 1 and Tier 2 issues beingraised across a range of currencies and maturity horizons. The competitivepricing achieved reflects the high level of demand for subordinated capitalissued by Bank of Ireland. 31 March 2006 31 March 2005Tier 1 - • billion 7.3 6.0Tier 1 Ratio - % 7.5 7.9Total Capital Ratio - % 11.4 10.9Non-equity Tier 1 Ratio - • billion 2.6 1.8Risk-weighted Assets - • billion 98 76 The Group has strong capital resources and our approach to capital managementensures that we have adequate capital to support our business plans. Funding Funding sourced from the wholesale markets has increased from 35% to 46% oftotal balance sheet (excluding Bank of Ireland Life assets held on behalf ofpolicyholders) between 31 March 2005 and 31 March 2006. This increase resultsfrom the strength of loan growth in our core markets and also from the one-offimpact of the sale of the Bristol & West branch network and the loss of theassociated deposit book of £4.4 billion. Balance Sheet Funding 31 March 2006 31 March 2005 % %Deposits by banks 23 18CP/CDs 12 10Senior Debt/ACS 11 7Wholesale Funding 46 35Customer Deposits 41 50Capital/Sub Debt 8 7Other 5 8Total 100 100 Wholesale Funding is managed to ensure maximum diversification across maturity,investor type and geography and to minimise the concentration of funding withineach particular market segment. The wholesale market continues to becharacterised by strong investor demand for Bank of Ireland paper asdemonstrated by the success of this year's new issuance programmes. Theseinitiatives included: • A Canadian Commercial Paper Programme • A French Certificate of Deposit Programme • A US Extendible Note Transaction Within our existing Asset Covered Security Programme, we launched a secondsuccessful tranche of €2 billion with approximately 10% of the issue placed intoAsia, where we also successfully completed a Private Placement of Medium TermNotes. The Group remains well placed to access wholesale funding sources. The Groupfunding strategy remains to grow core customer deposits and to access wholesalefunding in a prudent, diversified and efficient manner. Effective Tax Rate The Group taxation charge was €303 million for the year ending 31 March 2006.This compares with €237 million on an IFRS pro-forma basis for the year to 31March 2005. Excluding the tax impact of non-core activities the Group taxation charge was€238 million for the year to 31 March 2006. This compares with €213 million onan pro-forma basis for the year to 31 March 2005. The effective tax rate on ourcore activities for 2006 was 17.1%, compared to 17.7% in the prior year. The taxation charge for 31 March 2006 includes €20 million (2005: €26 million)in respect of the Government levy. This levy was introduced by the IrishGovernment for a three-year period commencing January 2003 and expired inDecember 2005. Dividend The Court has recommended a final dividend of 34.3 cent. The recommended finaldividend together with the interim dividend of 18.2 cent results in a totaldividend of 52.5 cent for the year ended 31 March 2006, an increase of 15%. The final dividend will be paid on or after 28 July 2006 to stockholders who areregistered as holding ordinary stock at the close of business on 30 June 2006. ROE Return on equity, excluding the impact of non-core items (set out on page 1) was24% for the year to 31 March 2006, compared with 23% in the previous year. Income Statement 31 March 2006 - Business Segments Year ended 31 March 2006 Net Insurance net Other Total Insurance Total Operating Impairment Share of Profit Interest premium Income Income Claims income, expenses losses on income before Income income net of loans & from taxation insurance advances associates claimsRetail Republic of Ireland 1,119 - 351 1,470 - 1,470 (871) (54) 5 550BOI Life 8 1,264 612 1,884 (1,655) 229 (95) - - 134Wholesale Financial 454 - 243 697 - 697 (288) (23) - 386ServicesUK Financial Services 722 - 94 816 - 816 (481) (26) 40 349Asset Management 7 - 215 222 - 222 (137) - - 85ServicesGroup Centre (3) 34 (15) 16 (11) 5 (116) - - (111) Group - underlying 2,307 1,298 1,500 5,105 (1,666) 3,439 (1,988) (103) 45 1,393 Sale of business activities - - 176 176 - 176 - - - 176Gross up ofpolicyholder tax in theLife business - - 69 69 - 69 - - - 69Hedge ineffectivenesson transition to IFRS - - (7) (7) - (7) - - - (7)Restructuring programme - - - - - - (32) - - (32) Group total 2,307 1,298 1,738 5,343 (1,666) 3,677 (2,020) (103) 45 1,599 The reconciliation shows the Group and Divisional underlying income statementswith a reconciliation of the impact of the non-core items in arriving at theGroup total income statement. Pro-forma Income Statement 31 March 2005 - Business Segments Year ended 31 March 2005 Net Other Income Total Insurance Total Operating Impairment Share of Profit Interest including Income Claims income, expenses losses on income before Income insurance net net of loans & from taxation premium insurance advances associates income claims Retail Republic of Ireland 1,020 316 1,336 - 1,336 (818) (51) (2) 465BOI Life 6 914 920 (746) 174 (93) - - 81Wholesale Financial 325 278 603 - 603 (240) (38) - 325ServicesUK Financial Services 628 198 826 - 826 (536) 10 32 332Asset Management Services 4 252 256 - 256 (131) - - 125Group Centre (12) 1 (11) (6) (17) (105) - - (122) Group - underlying 1,971 1,959 3,930 (752) 3,178 (1,923) (79) 30 1,206 Profit on sale ofbusinessactivities - 11 11 - 11 - - - 11Gross up of policyholdertax in the Life business - 26 26 - 26 - - - 26Impairment loss write - - - - - - 100 - 100backRestructuring programme - 13 13 - 13 (136) - - (123) Group total 1,971 2,009 3,980 (752) 3,228 (2,059) 21 30 1,220 The reconciliation shows the Group and Divisional underlying income statementswith a reconciliation of the impact of the non-core items in arriving at theGroup total income statement. Statutory IFRS Income Statement 31 March 2005 - Business Segments Year ended 31 March 2005 Net Other Income Total Insurance Total Operating Impairment Share of Profit Interest including Income Claims income, expenses losses on income before Income insurance net net of loans & from taxation premium insurance advances associates income claims Retail Republic of Ireland 1,019 318 1,337 - 1,337 (810) (51) (2) 474BOI Life 6 2,438 2,444 (2,216) 228 (93) - - 135Wholesale Financial 302 310 612 - 612 (240) (38) - 334ServicesUK Financial Services 617 233 850 - 850 (536) 10 32 356Asset Management Services 4 252 256 - 256 (131) - - 125Group Centre (17) - (17) (6) (23) (105) - - (128) Group - underlying 1,931 3,551 5,482 (2,222) 3,260 (1,915) (79) 30 1,296 Profit on sale ofbusiness activities - 11 11 - 11 - - - 11Gross up of policyholdertax in the Life business - 26 26 - 26 - - - 26Impairment loss write - - - - - - 100 - 100backRestructuring programme 13 13 13 (136) - - (123) Group total 1,931 3,601 5,532 (2,222) 3,310 (2,051) 21 30 1,310 The reconciliation shows the Group and Divisional underlying income statementswith a reconciliation of the impact of the non-core items in arriving at theGroup total income statement. Reconciliation of IFRS Statutory to Pro-forma IFRS Consolidated Income Statement for Year Ended 31 March 2005• million IFRS Effective Debt/ Life IFRS Interest Pro-forma Statutory Rate EquityNet interest income 1,931 44 (4) - 1,971Other income 3,601 (68) - (1,524) 2,009Total operating income 5,532 (24) (4) (1,524) 3,980Insurance claims (2,222) - - 1,470 (752)Total operating income net of 3,310 (24) (4) (54) 3,228Insurance ClaimsOperating expenses (2,051) (8) - - (2,059)Impairment losses on loans & 21 - - - 21advancesIncome from associates and joint 30 - - - 30venturesProfit before taxation 1,310 (32) (4) (54) 1,220Non core itemsDisposal of business activities (11) - - - (11)Grossing up for policyholder tax in (26) - - - (26)the Life businessRestructuring programme 123 - - - 123Write back of impairment loss (100) - - - (100)provisionProfit before tax - excluding non 1,296 (32) (4) (54) 1,206core items The pro-forma accounts restate the IFRS statutory performance, as if theeffective interest method, accounting for investment contracts in the Lifebusiness and classification of financial instruments, had been applied for theyear to 31 March 2005. The pro-forma income statement has not been restated forthe impact of accounting for derivatives (hedge accounting) and impairmentprovisions. The pro-forma adjustments are described below. Effective Interest Rate (EIR). On transition to IFRS, IAS 32 and IAS 39required the recognition of interest income and expenses to the income statementusing the effective interest rate. The application of IFRS has resulted incertain upfront fees and expenses being included in interest income and spreadover the expected life of the underlying asset, rather than being taken upfront.This reclassification can be seen in the table above, with Net Interest Incomeincreasing by €44 million and Other Income being reduced by €68 million. Theoverall impact of our application of EIR in the pro-forma accounts to 31 March2005 was to reduce profit before tax by €32 million. Life (IFRS 4/ IAS 39). On transition to IFRS certain long-term contractswritten by the Life business were required to be classified as either insuranceor investment contracts. Income recognition for those contracts which meet theIFRS 4 criteria for insurance contracts was unaffected on transition to IFRS.Those contracts which meet the IFRS 4 criteria for investment contracts areaccounted for on the basis of IAS 39. IAS 39 requires that income earned andcosts incurred will be recognised over the life of the investment contract. Theoverall impact of our application of IFRS4/IAS 39 was to reduce the 31 March2005 profit before tax by €54 million. Debt/Equity (IAS 32) IAS 32 requires that instruments that have the characteristics of debt must beclassified as liabilities, with the associated interest costs taken to incomestatement. The profit before tax impact of the application of this standard wasto reduce profit before tax by €4 million. Consolidated Income Statement for year ended 31 March 2006 Note 31-3-2006 31-3-2005 •m •m Interest Income 3 5,954 4,263 Interest Expense 3 (3,647) (2,332)Net Interest Income 2,307 1,931 Insurance net premium income 1,298 1,791Fees and commissions income 912 1,163Fees and commissions expense (170) (263)Net trading income 30 66Life assurance investment income and gains 625 695Other operating income 4 165 138Profit on disposal of business activity 6 176 11Total Operating Income 5,343 5,532 Increase in insurance contract liabilities and claims paid (1,666) (2,222)Total Operating Income, net of Insurance Claims 3,677 3,310Total Operating Expenses 5 (2,020) (2,051)Operating Profit before Impairment Losses 1,657 1,259Impairment losses 10 (103) 21Operating Profit 1,554 1,280Share of profit of associated undertakings and joint ventures 45 30Profit before Taxation 1,599 1,310Taxation 8 (303) (256)Profit for the Period 1,296 1,054 Attributable to minority interests (9) (1)Attributable to stockholders 1,305 1,055 Profit for the Period 1,296 1,054 Earnings per unit of €0.64 ordinary stock 9 136.4c 111.1c Diluted earnings per unit of €0.64 ordinary stock 9 135.4c 110.2c Consolidated Balance Sheet as at 31 March 2006 Note 31-3-2006 31-3-2005 •m •mASSETSCash and balances at central banks 1,899 1,613Items in the course of collection from other banks 930 560Central government and other eligible bills 8 1,607Trading securities 620 -Derivative financial instruments 2,085 -Other financial assets at fair value through P/L 10,580 -Loans and advances to banks 10,576 8,347Available-for-sale financial assets 28,205 -Loans and advances to customers 10 101,246 79,836Debt securities - 22,711Equity shares - 5,716Interest in associated undertakings 21 17Interest in joint ventures 75 61Intangible assets - Goodwill 375 219Intangible assets - Other 590 573Investment property 807 503Property, plant & equipment 860 720Deferred tax asset 12 30 99Other assets 3,447 5,198Total assets 162,354 127,780 EQUITY AND LIABILITIESDeposits by banks 32,312 20,865Customer accounts 11 61,710 60,185Items in the course of transmission to other banks 284 230Derivative financial instruments 1,647 -Liabilities to customers under investment contracts 6,650 -Debt securities in issue 36,814 21,217Life assurance liabilities attributable to policyholders - 8,713Insurance contract liabilities 5,192 -Other liabilities 4,711 6,757Deferred tax liabilities 12 207 212Provisions 153 179Retirement benefit obligations 15 808 924Subordinated liabilities 6,493 4,086Total liabilities 156,981 123,368 Equity Share capital 13 663 663Share premium account 14 767 767Retained profit 14 3,330 2,424Other reserves 14 803 629Own shares held for the benefit of life assurance policyholders (235) (206)Stockholders equity 5,328 4,277 Minority interests 45 135Total equity 5,373 4,412 Total equity and liabilities 162,354 127,780 Statement of Recognised Income and Expense Group 2006 2005 •m •m Net gain on property revaluation 187 43Net change in cash flow hedge reserve (7) -Net change in Available for Sale reserve (104) -Net actuarial gains/losses in defined benefit pension schemes 113 (386)Foreign exchange translations (17) (108) Income/expense recognised in equity 172 (451)Profit for the period 1,296 1,054 Total recognised income/expense for the year 1,468 603Attributable to:Equity holders of the parent 1,477 604Minority interests (9) (1) 1,468 603 Implementation of IAS32/39 and IFRS 4 as at 1 April 2005 28 -Attributable to:Equity holders of the parent 28 -Minority interests - - 28 - Condensed Cash Flow Statement The Group 31-3-2006 31-3-2005 •m •m Net cash inflow from operating activities 6,618 5,245 Investing activities Net increase in financial investments (7,217) (3,992)Additions to tangible fixed assets (50) (187)Disposal of tangible fixed assets 60 55Additions to intangible fixed assets (106) -Disposal of intangible fixed assets 8 -Purchase of investment property (353) -Disposal of investment property 151 -Disposal of business activity 227 -Acquisition of Group undertaking (120) -Dividends received from joint ventures 25 14Decrease/(increase) in investments in associated 1 (3)undertakingsIncrease in investment in Iridian (18) (33)Net cash balances of Group undertakings acquired 1 142Sale of EuroConex Technologies Limited - 35Sale of UK IFA Balances - 28Cash balances of UK IFA businesses disposed - (24)Acquisition of Burdale - (72) Cash flows from investing activities (7,391) (4,037) Financing activities Re issue of Treasury stock 36 7Issue of new subordinated liabilities 2,414 587 Repayment of subordinated liabilities - (145) Interest paid on subordinated liabilities (233) (223) Equity dividends paid (459) (417) Dividends on other equity interests (13) (8) Dividends paid to minority interests (6) (14) Cash flows from financing activities 1,739 (213) Increase in cash and cash equivalents 966 995 Opening cash and cash equivalents 5,217 4,242 Effect of exchange translation adjustments (21) (20) Closing cash and cash equivalents 6,162 5,217 Notes to the Financial Statements The accounts in this preliminary announcement are not the statutory accounts ofthe Bank and a copy of which is required to be annexed to the Bank's annualreturn to the Companies Registration Office in Ireland. A copy of the statutoryaccounts required to be annexed to the Bank's annual return in respect of theyear ended 31 March 2005 has in fact been so annexed. A copy of the statutoryaccounts in respect of the year ended 31 March 2006 will be annexed to thecompany's annual return for 2006. The auditors of the company have made areport, without any qualification on their audit of the statutory accounts ofthe company in respect of the year ended 31 March 2005. The directors approvedthe Bank's statutory accounts for the year ended 31 March 2006 on 30 May 2006and the auditors have made a report without any qualification on their audit ofthose statutory accounts. 1 Transition to IFRS As set out in the basis of preparation, the financial information has beenprepared in accordance with IFRS as endorsed by the E.U. Bank of Ireland hasavailed of transitional provisions for IAS 32 'Financial instruments: Disclosureand Presentation' ('IAS 32'), IAS 39 'Financial Instruments: Recognition andMeasurement' ('IAS 39') and IFRS 4 ' Insurance Contracts' ('IFRS 4') and has notpresented comparative information in accordance with these standards.Accordingly, comparative information for 2005 in respect of financialinstruments and insurance contracts is prepared on the basis of the Group'saccounting policies under IR GAAP. Reconciliations of balance sheets prepared under Irish GAAP and IFRS at 31 March2005 and 1 April 2005 for the Group are included in this document on pages52-56. A reconciliation of the profit and loss account prepared in accordancewith Irish GAAP and prepared in accordance with IFRS for the period ending 31March 2005 is included in pages 49-50. In addition, a reconciliation of theamount of stockholders' equity at 1 April 2005, before and after the applicationof IAS 32, IAS 39 and IFRS 4 is summarised below. The following table sets out the reconciliation from previously reported IR GAAPinformation for profit after taxation and stockholders' equity for 31 March2005, and the reconciliation to stockholders' equity at 1 April 2005 after theapplication of IAS 32, IAS 39 and IFRS 4. The Group Profit after Stockholders' taxation equity 31 March 31 March 2005 2005 •m •m As reported under Irish GAAP 1,080 4,789 Reconciliation adjustments to IFRS excluding IAS 32, IAS 39 andIFRS 4:Consolidation of new entities and insurance businesses 8 (55)Leasing (8) 44Post retirement benefit obligations (23) (695)Property, plant and equipment - (102)Intangible assets & goodwill 13 12Dividends - 282Employee benefits (8) 3Other (8) (1) IFRS excluding IAS 32, IAS 39 and IFRS 4 1,054 4,277 Reconciliation adjustments to IAS 32, IAS 39 and IFRS 4:Reclassification of financial instruments 127Hedging 15Write down of VIF in Life business (251)Debt/equity reclassification 114Effective interest rate 20Other 31 April 2005 4,305 2 Segmental Reporting The segmental analysis of the Group's results and financial position is set outbelow by business class and by geographic segment. For the geographic analysisIreland (excluding Northern Ireland) includes profits generated in theInternational Financial Services Centre. Revenue is defined as gross interestincome, non interest income, insurance net premium income, net of insuranceclaims and income from associates and joint ventures. The Group has six businessclasses detailed in the table below. During the year the divisional segmentswere restructured with the PO Joint Venture and First Rate Enterprises movinginto UK Financial Services from Group Centre and Wholesale Financial Servicesrespectively. Prior year results have been adjusted to reflect this change. The analysis of results by business class is based on management accountsinformation. Transactions between the business segments are on normalcommercial terms and conditions. Internal charges and transfer pricingadjustments have been reflected in the performance of each business. Revenuesharing agreements are used to allocate external customer revenues to a businesssegment on a reasonable basis. Business Segments Year ended Retail BOI Wholesale UK Asset Group Eliminations Group 31 March 2006 Republic Life Financial Financial Management Centre of Services Services Services Ireland •m •m •m •m •m •m •m •m Net interest income 1,119 8 454 722 7 (3) - 2,307 Insurance net premium income - 1,264 - - - 34 - 1,298 Other income 351 681 243 94 215 (22) - 1,562 Profit on disposal of business - - - 176 - - - 176 activities Total income 1,470 1,953 697 992 222 9 - 5,343 Insurance claims - (1,655) - - - (11) - (1,666) Total income, net of insurance claims 1,470 298 697 992 222 (2) - 3,677 Operating (790) (92) (271) (448) (133) (120) - (1,854) expenses Depreciation and amortisation (81) (3) (17) (33) (4) (28) - (166) Impairment losses (54) - (23) (26) - - - (103) Income from associates and joint ventures 5 - - 40 - - - 45 Profit before 550 203 386 525 85 (150) 1,599 taxation - Sale of business - - - (176) - - - (176) activities Gross up of policyholder tax in the Life - (69) - - - - - (69) business Hedge ineffectiveness on transition to - - - - - 7 - 7 IFRS Restructuring - - - - - 32 - 32 programme Group profit before tax excluding the impact of above items 550 134 386 349 85 (111) - 1,393 Total assets 77,935 12,326 136,774 54,580 2,906 19,533 (141,700) 162,354 Total liabilities 76,320 12,210 135,896 52,501 2,506 19,248 (141,700) 156,981 Capital 55 - 10 58 26 30 - 179 expenditure 2 Segmental Reporting (continued) Business Segments Year ended Retail BOI Wholesale UK Asset Group Eliminations Group 31 March 2005 Republic Life Financial Financial Management Centre of Services Services Services Ireland •m •m •m •m •m •m •m •m Net interest income 1,019 6 302 617 4 (17) - 1,931 Insurance net premium income - 1,755 - - - 36 - 1,791 Other income 318 709 310 246 252 (36) - 1,799 Profit on disposal of business activities - - - (20) - 31 - 11 Total income 1,337 2,470 612 843 256 14 - 5,532 Insurance claims - (2,216) - - - (6) - (2,222) Total income, net of insurance claims 1,337 254 612 843 256 8 - 3,310 Operating expenses (729) (89) (227) (504) (128) (197) - (1,874) Depreciation and amortisation (85) (4) (13) (47) (3) (25) - (177) Impairment losses on loans & advances (51) - (38) 10 - 100 - 21 Share of operating profit from associates (2) - 32 - - 30 Profit before 470 161 334 334 125 (114) - 1,310 taxation Sale of business activities - - - 20 - (31) - (11) Gross up of policyholder tax in the Life business - (26) - - - - - (26) Hedge ineffectiveness on transition to IFRS - - - - - - - - Impairment loss write back - - - - - (100) - (100) Restructuring programme 4 - - 2 - 117 - 123 Group profit before tax excluding the impact of above items 474 135 334 356 125 (128) - 1,296 Total assets 57,830 8,977 101,203 42,941 2,980 18,113 (104,264) 127,780 Total liabilities 56,427 8,876 100,473 41,221 2,600 18,035 (104,264) 123,368 Capital expenditure 59 7 14 88 4 15 - 187 2 Segmental Reporting (continued) Geographical Segments 2006 United Rest of Inter-segment Ireland Kingdom World Revenue Total •m •m •m •m •m Revenue 5,327 3,861 234 (1,883) 7,539 Profit before taxation 1,078 478 43 - 1,599 United Rest of Ireland Kingdom World Eliminations Total •m •m •m •m •m Total assets 143,484 63,680 3,885 (48,695) 162,354 Capital expenditure 95 58 26 - 179 2005 United Rest of Inter-segment Total Ireland Kingdom World Revenue •m •m •m •m •m Revenue 3,594 3,170 192 (1,021) 5,935 Profit before taxation 991 273 46 - 1,310 United Rest of Ireland Kingdom World Eliminations Total •m •m •m •m •m Total assets 109,606 50,551 4,262 (36,639) 127,780 Capital expenditure 95 87 5 - 187 3 Net Interest Income The Group 2006 2005 •m •m Interest and similar income Loans and advances to banks 238 215 Loans and advances to customers 4,576 3,353 Financial assets - available for sale 934 483 Finance leasing 197 212 Other 9 - Total interest income 5,954 4,263 Interest expense and similar charges Interest on subordinated liabilities 250 225 Other interest payable 3,397 2,107 Total interest expense 3,647 2,332 4 Other Operating Income The Group 2006 2005 •m •m Profit on disposal of financial assets - available for 4 2 sale Other insurance income 151 84 Other income 10 52 165 138 5 Other Operating Expenses The Group 2006 2005 •m •m Staff costs 1,167 1,109 Administrative expenses 687 765 Depreciation - Intangibles 106 101 - Property, plant and equipment 60 76 2,020 2,051 6 Disposal of Business Activity On 21 September 2005 the Group disposed of the Bristol and West branch network. 2006 •mCarrying value of net tangible assets 8 Cost of disposal 43 Gain on disposal of branch operations 176 Cash consideration received 227 7 Acquisitions Guggenheim Advisors On 20 December 2005 Bank of Ireland announced that it had acquired a 71.5%interest in Guggenheim Advisors. The closing date for the transaction was 31January 2006. The final cash consideration for the transaction is dependent onthe performance of the business to 1 April 2006 and 1 August 2006. The finalprice has yet to be agreed however subject to terms of the agreement the Bankhas paid to date an amount of $138.3m. Guggenheim Advisors management andGuggenheim partners both retain holdings in the company and these holdings aresubject to put and call arrangements in the medium term on an agreed basis.These options if exercised are required to be settled in stock in the Governorand Company. In accordance with the Group's accounting policy in respect oftransactions of this nature with minorities no liability has been recognised forthese options. A summarised profit and loss account for the period from 31 January 2006 to 31March 2006 is as follows: US$m •mOperating income 5.8 4.8Operating expenses (3.2) (2.7) Operating profit 2.6 2.1 If the business combination had been effected at the beginning of the period,the figures for the Group for the period would have been as follows: US$m •mRevenue 33.1 27.3Profit before tax 10.7 8.9 The details of the fair value of the assets and liabilities acquired andgoodwill arising are as follows: US$m Group Share US$m •mDebtors 6.0 4.3 3.6Cash and cash equivalents 1.1 0.8 0.7Other Assets 2.2 1.6 1.3Creditors Due Within One Year (1.5) (1.1) (0.9) Net Assets 7.8 5.6 4.7Intangible assets* 27.9 23.0Goodwill 111.8 92.4 Total acquisition cost 145.3 120.1 Acquisition expenses 7.0 5.8 Consideration 138.3 114.3 145.3 120.1 \* The intangible represents an estimate of the value of the business model andrisk management systems acquired. It is calculated with reference to similartransactions in the market and external advice received from market experts. Iridian During the year the Bank acquired an additional 8% stake in Iridian AssetManagement LLC ("Iridian"), increasing its stake to 84%. The Bank has the ability to acquire the remaining 16% over the subsequent 2 yearperiod via a series of call options exercisable each year in broadly equalstakes at a pre-agreed market multiple of profits of the business at the time ofpurchase of each individual stake. Each year the Bank may purchase anyavailable stakes not previously purchased. The Iridian members have a similar series of put options applying the same priceformula. The put and call options are mismatched as to timing and consequentlyprice with yearly intervals between when the Bank can exercise each call optionfollowed by when the members can put the corresponding stake. The application of IAS 32 at 1 April 2005 has required a change in theaccounting treatment of the acquisition. Under IAS 32 the put/call options donot qualify for piecemeal accounting as they are cash settled. Therefore we arerequired to recognise a financial liability being the present value of theestimated future cash payments to acquire the remaining 24%. Goodwill has alsobeen adjusted on transition. Therefore there was no change in the carryingvalue of goodwill on the additional 8% stake in the current year. 8 Income Tax Expense The Group 2006 2005The Group •m •m Current TaxIrish Corporation Tax Current Year 191 142 Prior Year 8 2Double Taxation Relief (20) (19) Foreign Tax Current Year 86 75 Prior Year (3) 3 262 203Deferred TaxOrigination & reversal of temporary differences 41 53 303 256 9 Earnings per Share The calculation of basic earnings per unit of €0.64 Ordinary Stock is based on the profit attributable to Ordinary Stockholders divided by the weighted average Ordinary Stock in issue excluding Treasury stock and own shares held for the benefit of life assurance policyholders. The Group 2006 2005 Basic Profit attributable to Ordinary Stockholders 1,292m 1,047m Weighted average number of shares in issue excluding Treasury stock and own shares held for the benefit of life assurance policyholders 947m 942m Basic earnings per share 136.4c 111.1c The diluted earnings per share is based on the profit attributable to Ordinary Stockholders divided by the weighted average Ordinary Stock in issue excluding Treasury stock and own shares held for the benefit of life assurance policyholders adjusted for the effect of all dilutive potential Ordinary Stock. 2006 2005 Diluted Profit attributable to Ordinary Stockholders 1,292m 1,047m Weighted average number of shares in issue excluding Treasury stock and own shares held for the benefit of life assurance policyholders 947m 942m Effect of all dilutive potential Ordinary Stock 7m 8m 954m 950m Diluted earnings per share 135.4c 110.2c 10 Loans and Advances to Customers The Group 2006 2005 •m •m Loans and advances to customers 98,497 77,076 Loans and advances to customers - finance leases and hire purchase receivables 3,108 3,079 Gross loans and advances 101,605 80,155 Less allowance for losses on loans and advances (359) (319) 101,246 79,836 The Group Allowance for losses on loans and advances to 2006 2005 customers and banks •m •m Movement in allowance for losses on loans and advances as follows: Opening balance 319 472 Exchange adjustments (1) (9) Charge against profits 100 (21) Amounts written off (85) (144) Recoveries 21 21 Other movements 6 - Closing balance 360 319 Of which relates to: Loans and advances to customers 359 319 Loans and advances to banks 1 - 360 319 11 Customers Accounts The Group 2006 2005 •m •m Current accounts 15,876 13,422 Demand deposits 18,344 21,316 Term deposits and other products 25,877 24,785 Other short term borrowings 1,373 662 Securities sold under agreement to repurchase 240 - 61,710 60,185 12 Deferred Income Taxes The Group 2006 2005 •m •m The movement on the deferred income tax account is as follows Opening balance 113 118 Income Statement Charge for Year 41 53 Available for Sale Securities - Fair Value Gain on transition 18 - as at 1 April 05 Available for Sale Securities - Transferred to Net Profit (15) - Cash Flow Hedges - Fair Value Gain on transition as at 1 April 12 - 05 Cash Flow Hedges - Transferred to Net Profit (1) - Revaluation of Property During Year 25 5 Disposals of Property - - Other Movements (16) (63) Closing balance 177 113 13 Ordinary Shares, Share Premium and Treasury Shares Capital Stock 2006 2005 The Bank •m •m Authorised 1,500m units of €0.64 of Ordinary Stock 960 960 8m units of Non-Cumulative Preference Stock of US$25 each 165 154 100m units of Non-Cumulative Preference Stock of Stg£1 each 144 145 100m units of Non-Cumulative Preference Stock of €1.27 each 127 127 100m units of Undesignated Preference Stock of US$0.25 each 21 - 100m units of Undesignated Preference Stock of Stg£0.25 each 36 - 100m units of Undesignated Preference Stock of €0.25 each 25 - 1,478 1,386 Allotted and fully paid 2006 2005 947.9m units of €0.64 of Ordinary Stock 607 604 77.2m units of €0.64 of Treasury Stock 49 52 1.9m units of Non-Cumulative Preference Stock of Stg£1 each 3 3 3.0m units of Non-Cumulative Preference Stock of €1.27 each 4 4 663 663 The weighted average Ordinary Stock in issue at 31 March 2006, used in theearnings per unit of Ordinary Stock calculation, excludes the Treasury Stockwhich does not represent Ordinary Stock in issue. All Treasury Stock, excludingBank of Ireland stock purchased by the Life Assurance company, does not rank fordividend. 14 Reserves and Retained Earnings The Group 2006 2005 •m •m Stock premium account Opening balance 767 767 Closing balance 767 767 Capital reserve Opening balance 562 503 Implementation of IAS32/IAS39 & IFRS4 on 1 April 2005 (251) - 311 503 Transfer from retained profit 48 43 Reserve on cancellation of stock - 16 Closing balance 359 562 Retained profit Opening balance 2,424 2,215 Implementation of IAS32/IAS39 on 1 April 2005 (32) - 2,392 2,215 Profit for period 1,296 1,054 Equity dividends (459) (417) Dividends on other equity interests (13) (8) Transfer to capital reserves (48) (43) Minority interest 9 1 Profit retained 785 587 Reissue of treasury stock under employee stock schemes 36 7 Reissue of treasury stock previously held by subsidiary - 1 Transfer from revaluation reserve 4 6 Actuarial gains/(losses) on pension funds 113 (386) Other - (6) Closing balance 3,330 2,424 Share based payments reserve Opening balance 16 5 Charge to the P/L 11 11 Closing balance 27 16 Foreign exchange reserve Opening balance (108) - Exchange adjustments during year (17) (108) Closing balance (125) (108) 14 Reserves and Retained Earnings (continued) The Group 2006 2005 •m •m Revaluation reserve Opening balance 159 122 Transfer to revenue reserve on sale of property (4) (6) Revaluation of property 212 48 Deferred tax on revaluation of property (25) (5) Closing balance 342 159 Available for sale reserve Implementation of IAS32/IAS39 on 1 April 2005 130 - Net changes in fair value (115) - Deferred tax on fair value changes 15 - Profit/loss on disposal (4) - Closing balance 26 - Cash flow hedge reserve Implementation of IAS32/IAS39 on 1 April 2005 67 - Net changes in fair value (8) - Deferred tax of fair value changes 1 - Closing balance 60 - Other equity reserve Implementation of IAS32/IAS39 on 1 April 2005 114 - Movement during period - - Closing balance 114 - 15 Retirement Benefit Obligations The Group operates a number of defined benefit and defined contribution schemesin Ireland and overseas. The defined benefit schemes are funded and the assetsof the schemes are held in separate trustee administered funds. The mostsignificant defined benefit scheme is the "Bank of Ireland Staff Pension Fund"which accounts for approximately 80% of the pension liability on the Groupbalance sheet. In determining the level of contributions required to be made to each scheme andthe relevant charge to the income statement the Group has been advised byindependent actuaries, Watson Wyatt. The most recent approximate valuation ofthe schemes using the projected unit method, was carried out on 31 March 2006.The projected unit method measures liabilities taking account of the projectedfuture levels of pensionable earnings at the time of commencement of benefitsi.e. at normal retirement date. The actuary considers that the methodology usedfor the formal valuation as at 31 March 2004 continues to be appropriate. The approximate valuation discloses that the assets after allowing for expectedfuture increases in earnings and pensions represented 108% of the benefits thathave accrued to members. The actuary has recommended that the existing fundingprogramme be maintained until the results of the next formal valuation of thefund, which will be made as at 31 March 2007, are available. The financial assumptions used in deriving the valuation are set out in thetable below. Financial assumptions 31 March 2006 31 March 2005 % pa % paIrish Schemes Inflation rate 2.10 2.25 Discount rate 4.60 4.85 Rate of general increase in salaries 3.26* 2.99 Rate of increase in pensions in payment 2.93* 2.66 Rate of increase to deferred pensions 2.10 2.25UK Schemes Inflation rate 2.75 2.75 Discount rate 4.95 5.40 Rate of general increase in salaries 3.97* 3.50 Rate of increase in pensions in payment 3.33* 2.74 Rate of increase to deferred pensions 2.75 2.75 * Allows for additional 0.5% for 5 years beginning 1 April 2005for Staff Pension Fund 15 Retirement Benefit Obligations (continued) The expected long term rates of return and market value of assets of thematerial defined benefit plans on a combined basis as at 31 March 2006 and 31March 2005 were as follows: 31 March 2006 31 March 2005 Expected long Market Value Expected Market Value term rate of long term return rate of return •m •m % % Equities 7.5 2,687 7.8 2,177 Bonds 4.2 860 4.1 752 Property 6.5 487 6.8 400 Cash 3.3 36 3.5 88 Total market value of schemes assets 6.6 4,070 6.8 3,417 Actuarial value of liabilities offunded schemes (4,866) (4,341)Aggregate deficit in schemes (796) (924)Unfunded schemes (12) -Net pension deficit (808) (924) Analysis of the amount recognised in Statement of Recognised Income and Expense(SORIE) 31 March 2006 31 March 2005 •m •m Actuarial gain/(loss) on scheme assets 401 114 Experience gain/(loss) on liabilities (46) 43 (Loss)/gain on change of assumptions (financial and (224) (622)demographic)Currency gain/(loss) - 3Total gains/(losses) recognised in the SORIE during the year before 131 (462)adjustment of taxCumulative amount of gains/(losses) recognised in SORIE to end of year (331) (462) History of experience gains and losses 31 March 2006 31 March 2005 •m •mActuarial gain/(loss) on scheme assets: Amount 401 114 Percentage of scheme assets 9.9% 3.3% Experience gains/(losses) on scheme liabilities: Amount (46) 43 Percentage of scheme liabilities 0.9% 1.0% Total actuarial gain/(loss) recognised in SORIE: Amount 131 (462) Percentage of scheme liabilities 2.7% 10.6% 16 Contingent Liabilities and Commitments The tables below give, for the Group, the contract amounts and risk weightedamounts of contingent liabilities and commitments. The maximum exposure tocredit loss under contingent liabilities and commitments is the contract amountof the instrument in the event of non-performance by the other party where allcounter claims, collateral or security proved worthless. The risk weightedamounts have been calculated in accordance with the Irish Financial ServicesRegulatory Authority guidelines implementing the Basel agreement on capitaladequacy. The Group 2006 2005 Risk Risk Contract Weighted Contract Weighted Amount Amount Amount AmountThe Group - Contingent Liabilities •m •m •m •m Acceptances and endorsements 37 21 34 17Guarantees and assets pledged as collateral security- Assets pledged - - - -- Guarantees and irrevocable letters of credit 1,354 1,321 1,268 1,222 Other contingent liabilities 675 327 643 302 2,066 1,669 1,945 1,541 The Group - CommitmentsSale and option to resell transactionsOther commitments- Documentary credits and short-term trade-related 160 36 62 18transactions- Forward asset purchases, forward deposits placed andforward sale and repurchase agreements - - - -- Undrawn note issuance and revolving underwriting 409 - 498 -facilities- Undrawn formal standby facilities, credit lines and othercommitments to lend - irrevocable with original maturity of over 1 year 8,006 3,790 7,367 3,425 - revocable or irrevocable with original maturity of 1 22,362 - 21,369 -year or less 30,937 3,826 29,296 3,443 17 Rates of Exchange The principal rates of exchange used in the preparation of the accounts are asfollows: 31 March 2006 31 March 2005 Average Closing Average Closing •/US$ 1.2126 1.2104 1.2647 1.2964•/Stg£ 0.6826 0.6964 0.6834 0.6885 Average Balance Sheet and Interest Rates The following tables show the average balances and interest rates of interestearning assets and interest bearing liabilities for each of the years ended 31March 2006 and 2005. The calculations of average balances are based on daily,weekly or monthly averages, depending on the reporting unit. The averagebalances used are considered to be representative of the operations of theGroup. Year Ended Year Ended 31 March 2006 31 March 2005 Average Average Balance Interest Rate Balance Interest Rate •m •m % •m •m % ASSETSLoans to banksDomestic offices 9,268 226 2.4 6,834 179 2.6Foreign offices 238 12 5.0 987 36 3.6Loans to customers(1)Domestic offices 49,969 2,309 4.6 38,671 1,784 4.6Foreign offices 43,106 2,264 5.3 35,634 1,781 5.0Central government and other eligiblebillsDomestic offices 126 1 0.8 7 - -Foreign offices - - - - - -Debt SecuritiesDomestic offices 24,380 869 3.6 13,307 426 3.2Foreign offices 1,518 64 4.2 1,125 57 5.1Other financial instruments at fair valuethrough P/LDomestic offices 152 1 0.7 - - -Foreign offices 232 10 4.3 - - -Total interest-earning assetsDomestic offices 83,895 3,406 4.1 58,819 2,389 4.1Foreign offices 45,094 2,350 5.2 37,746 1,874 5.0Net swap interest - 34 - - - - 128,989 5,790 4.5 96,565 4,263 4.4Allowance for impairment losses (341) - (443) -Non interest earning assets(2) 18,615 - 21,181 - Total Assets 147,263 5,790 3.9 117,303 4,263 3.6 Percentage of assets applicable to foreignactivities 31.8% 34.2% Average Balance Sheet and Interest Rates (continued) Year Ended Year Ended 31 March 2006 31 March 2005 Average Average Balance Interest Rate Balance Interest Rate •m •m % •m •m % LIABILITIES AND STOCKHOLDERS' EQUITYDeposits by banksDomestic offices 17,038 478 2.8 18,882 399 2.1Foreign offices 2,041 74 3.6 1,245 38 3.1Customer accountsDomestic offices 35,817 446 1.2 24,136 219 0.9Foreign offices 20,579 1,100 5.3 21,929 918 4.2Debt securities in issueDomestic offices 23,800 827 3.5 13,977 354 2.5Foreign offices 6,393 301 4.7 3,769 179 4.7Subordinated liabilitiesDomestic offices 2,955 120 4.1 2,248 119 5.3Foreign offices 2,284 137 6.0 1,442 106 7.4Total interest bearing liabilitiesDomestic offices 79,610 1,871 2.4 59,243 1,091 1.8Foreign offices 31,297 1,812 5.8 28,385 1,241 4.4 110,907 3,483 3.1 87,628 2,332 2.7 Non interest bearing liabilitiesCurrent accounts 10,578 - - 8,886 - - Other non interest bearing liabilities 20,987 - - 16,340 - -(2) Stockholders equity including nonequity interests 4,791 - - 4,449 - - Total liabilities and stockholders' 147,263 3,483 2.4 117,303 2,332 2.0equity Percentage of liabilities applicableto foreign activities 31.8% 34.2% (1) Loans to customers include non-accrual loans and loans classified asproblem loans. (2) The balance sheets of the life assurance companies have beenconsolidated and are reflected under "Non interest earning assets" and "Othernon interest bearing liabilities". Capital Adequacy Data The following table shows the components and basis of calculation of the Group'sTier 1 and Total Capital ratios for 31 March 2006 together with comparativefigures for 1 April 2005. 31 March 1 April 2006 2005 •m •mAdjusted Capital Base Share Capital 656 656Eligible reserves 3,941 3,073 Minority Interests 45 135 Non-Cumulative Preference stock 65 65Preferred securities 2,516 1,686 Bristol & West preference shares 72 - Regulatory adjustments (net) 39 405 Total Tier 1 7,334 6,020 Revaluation reserves - property and other reserves 690 454 IBNYR/Impairment provisions 127 137 Subordinated Perpetual debt capital 431 294 Subordinated Dated debt capital 3,405 2,106 Total Tier 2 4,653 2,991Supervisory Deductions (870) (768) Total Capital 11,117 8,243 Risk Weighted Assets Banking book 93,398 73,251Trading book 4,112 2,635 Total 97,510 75,886 Capital Ratios Tier 1 capital 7.5% 7.9% Total capital 11.4% 10.9% Consolidated Income Statement for the year ended 31 March 2006 •m US$m(1) Stg£m(1)(Euro, US$ & STG£) Interest Income 5,954 7,207 4,146 Interest Expense (3,647) (4,415) (2,539)Net Interest Income 2,307 2,792 1,607 Insurance net premium income 1,298 1,571 904Fees and commissions income 912 1,104 635Fees and commissions expense (170) (206) (118)Net trading income 30 36 21Life assurance investment income and gains 625 757 435Other operating income 165 200 115Profit on disposal of business activity 176 213 122Total Operating Income 5,343 6,467 3,721 Increase in insurance contract liabilities and claims paid (1,666) (2,017) (1,160)Total Operating Income, net of Insurance Claims 3,677 4,450 2,561Total Operating Expenses (2,020) (2,445) (1,407)Operating Profit before Impairment Losses 1,657 2,005 1,154Impairment losses (103) (124) (72)Operating Profit 1,554 1,881 1,082Share of profit of associated undertakings and joint ventures 45 54 32Profit before Taxation 1,599 1,935 1,114Taxation (303) (366) (211)Profit for the Period 1,296 1,569 903 Attributable to minority interests (9) (11) (6)Attributable to stockholders 1,305 1,580 909 Profit for the Period 1,296 1,569 903 (1) Converted at closing exchange rates. Consolidated Balance Sheet as at 31 March 2006 (Euro, US$ & STG£) •m US$m(1) Stg£m(1)ASSETS Cash and balances at central banks 1,899 2,299 1,322Items in the course of collection from other banks 930 1,126 648Central government and other eligible bills 8 10 6Trading securities 620 750 431Derivative financial instruments 2,085 2,524 1,452Other financial assets at fair value through P/L 10,580 12,806 7,368Loans and advances to banks 10,576 12,801 7,365Available-for-sale financial assets 28,205 34,139 19,642Loans and advances to customers 101,246 122,548 70,508Interest in associated undertakings 21 25 15Interest in joint ventures 75 91 52Intangible assets - Goodwill 375 454 261Intangible assets - Other 590 714 411Investment property 807 977 562Property, plant & equipment 860 1,041 599Deferred tax asset 30 36 21Other assets 3,447 4,172 2,400Total assets 162,354 196,513 113,063 EQUITY AND LIABILITIESDeposits by banks 32,312 39,110 22,502Customer accounts 61,710 74,694 42,975Items in the course of transmission to other banks 284 344 198Derivative financial instruments 1,647 1,994 1,147Liabilities to customers under investment contracts 6,650 8,049 4,631Debt securities in issue 36,814 44,560 25,637Insurance contract liabilities 5,192 6,284 3,616Other liabilities 4,711 5,702 3,280Deferred tax liabilities 207 251 144Provisions 153 185 107Retirement benefit obligations 808 978 563Subordinated liabilities 6,493 7,859 4,522Total liabilities 156,981 190,010 109,322 Equity Share capital 663 802 462Share premium account 767 928 534Retained profit 3,330 4,031 2,319Other reserves 803 972 559Own shares held for the benefit of life assurance policyholders (235) (284) (164)Stockholders equity 5,328 6,449 3,710 Minority interests 45 54 31Total equity 5,373 6,503 3,741 Total equity and liabilities 162,354 196,513 113,063 (1) Converted at closing exchange rates.IFRS Transition Information Summary Consolidated IFRS Income Statement for the year ended 31 March 2005 Total Irish GAAP IFRS Impact IFRS •m •m •mNet interest income 1,898 33 1,931Insurance net premium income - 1,791 1,791Fees and commissions income 1,200 (37) 1,163Fees and commissions expense (199) (64) (263)Net trading income 66 - 66Contribution from the life assurance business 161 (161) -Other operating income 47 786 833Total operating income 3,173 2,348 5,521Insurance net claims - (2,222) (2,222)Total operating income net of insurance claims 3,173 126 3,299Operating expenses (1,924) (127) (2,051)Operating profit before impairment losses 1,249 (1) 1,248Impairment losses on loans and advances 21 - 21Operating profit 1,270 (1) 1,269Profit/loss on disposal of business - 11 11Other exceptional items 5 (5) -Income from associated undertakings and joint 46 (16) 30venturesProfit before taxation 1,321 (11) 1,310Taxation (241) (15) (256)Profit for the period 1,080 (26) 1,054 Attributable to minority interests (1) - (1)Attributable to stockholders 1,081 (26) 1,055 1,080 (26) 1,054 Basic earnings per ordinary share 113.9 (2.8) 111.1 Consolidated Summary of IFRS Income Adjustments for Year Ended 31 March 2005 Consolidation Irish New Insurance Leasing Employee Software & Goodwill Pension Other Total IFRS IFRS GAAP Entities Businesses benefits Intangibles adjustments •m •m •m Net interest income 1,898 20 12 1 - - - - - 33 1,931Insurance premium income net - - 1,791 - - - - - - 1,791 1,791Fees and commissions income 1,200 (4) (29) (4) - - - - - (37) 1,163Fees and commissions expense (199) (5) (59) - - - - - - (64) (263)Net trading income 66 - - - - - - - - - 66Contribution from the life 161 - (161) - - - - - - (161) -assurance businessOther operating income 47 (2) 779 - - - - - 9 786 833Total operating income 3,173 9 2,333 (3) - - - - 9 2,348 5,521Insurance claims, net - - (2,222) - - - - - - (2,222) (2,222)Total income net of insurance 3,173 9 111 (3) - - - - 9 126 3,299claimsAdministrative expenses (1,738) (1) (84) - (8) - - (28) (15) (136) (1,874)Depreciation of property, plant (161) - - - - 85 - - - 85 (76)and equipmentAmortisation/impairment of (25) - - - - (85) 13 - (4) (76) (101)goodwill and intangibles Total operating expenses (1,924) (1) (84) - (8) - 13 (28) (19) (127) (2,051)Operating profit before 1,249 8 27 (3) (8) - 13 (28) (10) (1) 1,248impairment lossesImpairment losses on loans and 21 - - - - - - - - - 21advancesOperating profit 1,270 8 27 (3) (8) - 13 (28) (10) (1) 1,269Income from associated 46 - - - - - - - (16) (16) 30undertakings and joint venturesExceptional items 5 - - - - - - - (5) (5) -Profit/loss on disposal of - - - - - - - - 11 11 11businessesProfit before taxation 1,321 8 27 (3) (8) - 13 (28) (20) (11) 1,310Taxation (241) - (27) (5) - - - 5 12 (15) (256)Profit for the period 1,080 8 - (8) (8) - 13 (23) (8) (26) 1,054Profit attributable to minority (1) - - - - - - - - - (1)interestsProfit attributable to 1,081 8 - (8) (8) - 13 (23) (8) (26) 1,055stockholders 1,080 8 - (8) (8) - 13 (23) (8) (26) 1,054 Consolidated Balance Sheet at 31 March 2005 The Group Irish IFRS IFRS GAAP Impact •m •m •m AssetsCash and balances at central banks 1,600 13 1,613Items in the course of collection from other banks 560 - 560Central government and other eligible bills 92 1,515 1,607Loans and advances to banks 7,783 564 8,347Loans and advances to customers 79,917 (81) 79,836Net securitisation balances 35 (35) -Debt securities 21,321 1,390 22,711Equity shares 52 5,664 5,716Interests in associated undertakings 17 - 17Interests in joint ventures 61 - 61Intangible fixed assets - Goodwill 316 (97) 219Intangible fixed assets - Other - 573 573Investment property - 503 503Property, plant & equipment 1,236 (516) 720Deferred tax asset - 99 99Other assets 4,945 253 5,198Long-term assurance assets 8,529 (8,529) -Total assets 126,464 1,316 127,780 LiabilitiesDeposits by banks 20,254 611 20,865Customer accounts 60,265 (80) 60,185Items in the course of transmission to other banks 230 - 230Debt securities in issue 20,539 678 21,217Other liabilities 7,039 (283) 6,756Deferred taxation liabilities 72 140 212Other provisions 321 (141) 180Post-retirement benefit liabilities - 924 924Subordinated liabilities 4,086 - 4,086Life assurance liabilities attributable to policy holders 8,734 (21) 8,713Total liabilities 121,540 1,828 123,368 Shareholders' equity 4,789 (512) 4,277Minority interests 135 - 135Total equity and liabilities 126,464 1,316 127,780 Consolidated Summary of IFRS Balance Sheet ImpactsBalance Sheet IFRS Reconciliation 31 March 2005 The Group Assets Irish Consolidation Leasing Employee Software & Goodwill Dividend Pension Other IFRS GAAP benefits Intangibles • m New Insurance Entities Businesses Cash and balances at central 1,600 10 - - - - - - - 3 1,613banksItems in the course of collection 560 - - - - - - - - - 560from other banksCentral government and other 92 - 1,515 - - - - - - - 1,607eligible billsLoans and advances to banks 7,783 - 567 - - - - - - (3) 8,347Loans and advances to customers 79,917 (65) - (16) - - - - - - 79,836Net securitisation balances 35 (35) - - - - - - - - -Debt securities 21,321 1,244 146 - - - - - - - 22,711Equity shares 52 - 5,664 - - - - - - - 5,716Interests in associated 17 - - - - - - - - - 17undertakingsInterests in joint ventures 61 - - - - - - - - - 61Intangible assets - Goodwill 316 - - - - - (97) - - - 219Intangible assets - Other - - - - - 464 109 - - - 573Investment property - - 503 - - - - - - - 503Property, plant & equipment 1,236 - - - - (464) - - - (52) 720Deferred tax asset - - - 6 - - - - 104 (11) 99Other assets 4,945 8 136 - - - - - (42) 151 5,198Life assurance assets 8,529 - (8,529) - - - - - - - -attributable to the policyholdersTotal assets 126,464 1,162 2 (10) - - 12 - 62 88 127,780 Balance Sheet IFRS Reconciliation 31 March 2005 The Group Equity and liabilities Irish Consolidation Leasing Employee Software & Goodwill Dividend Pension Other IFRS GAAP benefits Intangibles • m New Insurance • m Entities Businesses Deposits by banks 20,254 611 - - - - - - - - 20,865Customer accounts 60,265 (80) - - - - - - - - 60,185Items in the course of 230 - - - - - - - - - 230transmission to other banksDebt securities in issue 20,539 678 - - - - - - - - 21,217Other liabilities 7,039 8 6 (51) (3) - - (282) - 39 6,756Deferred tax liabilities 72 - - (3) - - - - (26) 169 212Other provisions 321 - - - - - - - (141) - 180Post retirement benefit - - - - - - - - 924 - 924obligationsSubordinated liabilities 4,086 - - - - - - - - - 4,086Life assurance liabilities 8,734 - (4) - - - - - - (17) 8,713attributable to policy holdersTotal liabilities 121,540 1,217 2 (54) (3) - - (282) 757 191 123,368EquityShare capital 663 - - - - - - - - - 663Share premium account 765 - - - - - - - - - 765Capital reserve 561 - - - - - - - - - 561Retained profits 2,772 (55) - 44 3 - 12 282 (695) (27) 2,336Revaluation reserve 234 - - - - - - - - (76) 158Own shares held for the benefit (206) - - - - - - - - - (206)of life assurance policyholdersStockholders funds 4,789 (55) - 44 3 - 12 282 (695) (103) 4,277Minority interests 135 - - - - - - - - - 135Total equity and liabilities 126,464 1,162 2 (10) - - 12 - 62 88 127,780 IFRS Consolidated Opening Balance Sheet at 1 April 2005 The Group IFRS 31/3/ IFRS IFRS 2005 Transition Opening 01/ Impact 04/2005 •m •m •mAssetsCash and balances at central banks 1,613 - 1,613Items in the course of collection from other banks 560 - 560Central government and other eligible bills 1,607 (1,599) 8Trading Securities - 1,119 1,119Derivative financial instruments - 2,277 2,277Assets at fair value through profit and loss - 8,115 8,115Loans and advances to banks 8,347 - 8,347Loans and advances to customers 79,836 152 79,988Debt securities 22,711 (22,711) -Equity shares 5,716 (5,716) -Available for sale financial assets - 20,752 20,752Interest in associated undertakings 17 - 17Interests in joint ventures 61 - 61Intangible assets - Goodwill 219 53 272Intangible assets - Other 573 - 573Investment property 503 - 503Property, plant & equipment 720 6 726Deferred tax asset 99 (44) 55Other assets 5,198 (2,115) 3,083Total assets 127,780 289 128,069LiabilitiesDeposits by banks 20,865 - 20,865Customer accounts 60,185 (115) 60,070Items in the course of transmission to other banks 230 - 230Derivative financial instruments - 2,167 2,167Liabilities to customers under investment contracts - 4,917 4,917Debt securities in issue 21,217 26 21,243Insurance contract liabilities - 3,785 3,785Other liabilities 6,756 (1,789) 4,967Deferred taxation liabilities 212 (68) 144Other provisions 180 - 180Post-retirement benefit liabilities 924 - 924Subordinated liabilities 4,086 127 4,213Life assurance liabilities attributable to policy holders 8,713 (8,713) -Total liabilities 123,368 337 123,705Stockholders' equity 4,277 28 4,305Minority interests 135 (76) 59Total equity and liabilities 127,780 289 128,069 IFRS Opening Balance Sheet The GroupReconciliation 1 April 2005 IFRS Reclassi- Effective Fair Hedging Life Debt/ Other Total Opening 31 March fication of interest value activities Assurance equity adjust- IFRS 2005 financial rates option ments on Balance •m instruments adoption 1 April of IAS 2005 32,39 and •m IFRS 4 Sheet •m Assets Cash and balancesat central banks 1,613 - - - - - - - - 1,613Items in the course of collection 560 - - - - - - - - 560from other banksCentral government and other 1,607 - - (1,599) - - - - (1,599) 8eligible billsTrading securities - 1,119 - - - - - - 1,119 1,119Derivative financial instruments - 1,859 - 92 326 - - - 2,277 2,277Other financial assets at fair - - - 8,146 - (31) - - 8,115 8,115value through profit and lossLoans and advances to banks 8,347 - - - - - - - - 8,347Loans and advances to customers 79,836 111 41 - - - - - 152 79,988Debt securities 22,711 (21,871) - (871) - 31 - - (22,711) -Equity shares 5,716 (52) - (5,664) - - - - (5,716) -Available-for-sale financial - 20,667 - - 85 - - - 20,752 20,752assetsInterests in associated 17 - - - - - - - - 17undertakingsInterests in joint ventures 61 - - - - - - - - 61Intangible assets - Goodwill 219 - - - - - 53 - 53 272Intangible assets - Other 573 - - - - - - - - 573Investment Property 503 - - - - - - - - 503Property, plant & equipment 720 - - - - 6 - - 6 726Deferred tax asset 99 (10) (5) - 3 - - (32) (44) 55Other assets 5,198 (1,839) 7 1 1 (285) - - (2,115) 3,083 Total assets 127,780 (16) 43 105 415 (279) 53 (32) 289 128,069 IFRS Opening Balance Sheet The Group Reconciliation 1 April 2005 IFRS Reclassification Effective Fair Hedging Life Debt/ Other Total Opening 31 March of financial interest value activities Assurance equity adjustments IFRS 2005 instruments rates option on adoption Balance of IAS 32, Sheet 39 and 1 April •m IFRS 4 2005 •m •mLiabilitiesDeposits bybanks 20,865 - - - - - - - - 20,865Customeraccounts 60,185 - - (115) - - - - (115) 60,070Items in thecourse oftransmissionto other banks 230 - - - - - - - - 230Derivativefinancialinstrumentsand othertradingliabilities - 1,694 - 194 279 - - - 2,167 2,167Liabilities tocustomersunderinvestmentcontracts - - - - - 4,917 - - 4,917 4,917Debtsecurities inissue 21,217 - - - 26 - - - 26 21,243Insurancecontractliabilities - - - - - 3,785 - - 3,785 3,785Otherliabilities 6,756 (1,829) 13 (1) (73) 54 53 (6) (1,789) 4,967Deferred taxliabilities 212 (8) 10 2 - (48) - (24) (68) 144Otherprovisions 180 - - - - - - - - 180Postretirementbenefitobligations 924 - - - - - - - - 924Subordinatedliabilities 4,086 - - - 168 - (41) - 127 4,213Life assuranceliabilitiesattributableto policyholders 8,713 - - 23 - (8,736) - - (8,713) - Totalliabilities 123,368 (143) 23 103 400 (28) 12 (30) 337 123,705Equity Share capital 663 - - - - - - - - 663Share premiumaccount 765 - - - - - - - - 765Capital reserve 561 - - - - (251) - - (251) 310Retainedprofits 2,336 4 20 2 (58) - - - (32) 2,304RevaluationReserve 158 - - - - - - - - 158Cash flowhedge reserve - - - - 67 - - - 67 67Available forsale reserve - 123 - - 6 - - 1 130 130Other equityreserves - - - - - - 114 - 114 114Own sharesheld for thebenefit oflife assurancepolicyholders (206) - - - - - - - - (206) Stockholdersfunds 4,277 127 20 2 15 (251) 114 1 28 4,305Minorityinterests 135 - - - - (73) (3) (76) 59 Total equityandliabilities 127,780 (16) 43 105 415 (279) 53 (32) 289 128,069 This information is provided by RNS The company news service from the London Stock Exchange
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