IRELAND: 7% GROWTH IN SLUGGISH WORLD

Government debt ratio below 100%, fastest growing economy in EA

January 2016

Index

Page 3: Summary

Page 8: Macro

Page 33: Fiscal & NTMA funding

Page 49: Long-term fundamentals

Page 58: Property

Page 66: NAMA

Page 73: Banking

2

3

SUMMARY

Ireland’s credit spread narrows to around half a percentage point

Ireland outperformed again in 2015

• Ireland is growing faster than every other euro area country Ireland’s economy grew by 7% real and 11.7% nominal in the first three quarters of 2015.

Consumer spending and investment have recovered. Spending is up for seven straight quarters. Ireland has benefitted from the sharp depreciation of the euro following ECB quantitative easing, low interest rates and the dramatic decline in oil prices.

Unemployment is falling but the pace of improvement has slowed a little. The rate was 8.8% in December 2015, down from the crisis peak of 15.1% in Q1 2012.

• Government exited the EDP in 2015 and posted deficit of around 1.5% The deficit will beat the Government forecast of 2.1% of GDP for 2015. This allowed the

Government an extra 2015 stimulus of 0.75pp. For 2016, it is forecasted to fall to 1.2%.

Ireland has beaten its target for five straight years. At end-2010, the EC set Ireland a 2015 goal to exit the Excessive Deficit Procedure (EDP): no extensions were required.

• Government debt below 100% of GDP by end-2015, down from 120% The official forecast is for a ratio of 97% - it could be closer to 95% - helped by the large

excess of nominal growth over interest cost and second primary budget surplus in a row.

The return of capital to the Government from sales of equity stakes in state-owned banks and the eventual wind-up of NAMA will reduce debt in the next few years.

4

Funding has begun in 2016; set to be lighter than 2015

• Funding Plan for 2016 announced NTMA plans to issue €6-10 billion of long-term bonds over the course of 2016 Funding is low thanks to falling deficits and late-2017 being the next major

redemption

• 2016 Funding off to a successful start On January 7th, the NTMA issued a €3bn 2026 bond via syndication – at a yield of

1.156% The investor base continues to expand: 88% share of the syndication was bought

by international investors, led by the UK (32%), the Nordics (13%) and Germany (11%).

Among investor categories, the bias of the deal was to real money: asset/fund managers (37%), banks (22%) and pension/ insurance (17%).

• 2015 was a strong year for the NTMA We raised €13bn from a stated range of €12-15bn at the outset of 2015. The

lower-than-forecast Government deficit limited our need. The NTMA completed the early repayment of IMF loans in 2015. A total of €18bn

worth of loans was refinanced: total interest cost savings could exceed €1.5bn (0.8% of GDP) over 5 years. We issued our first ever 30-year bond last February.

5

Ireland’s happy bond market story has lots of milestones

6

Source: Bloomberg (weekly data)

NAMA haircuts, rising ELA &

Deauville

EU/IMF Programme

PCAR results

Moody's downgrade

EU/IMF loan rate reduction

ECB 1st LTRO

NTMA issuance recommences

NTMA returns with bond syndication

Promissory Note deal & Liquidation of IBRC

begins

EU/IMF Programme Exit

NTMA returns with regular bond auctions

-1

4

9

14

19

24

Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15

10 Year 2 Year

OMT announced

ECB QE

Trend is upwards in Ireland’s sovereign credit ratings

Rating Agency Long-term Short-term

Outlook/Trend Date of last

change

Standard & Poor's A+ A-1 Stable June 2015

Fitch Ratings A- F1 Positive Aug. 2015

Moody's Baa1 P-2 Positive Sept. 2015

DBRS A R-1 (low) Positive Sept. 2015

R&I A- a-1 Positive Dec. 2015

7

8

SECTION 1: MACRO

Recovery strengthened in 2015; Unemployment has dropped sharply from a peak of 15.1% of the labour force to 8.8% in December 2015

-10.0

-8.0

-6.0

-4.0

-2.0

-

2.0

4.0

6.0

8.0

10.0

2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016f

Domestic Demand Net Exports Change in Inventories GDP Change Forecast

Personal consumption and investment drove GDP growth in real terms in 2015

9

Source: CSO; Department of Finance(Budget 2016); * Imports of intellectual property and aircraft trade exaggerate the contribution from domestic demand and underestimates the effect of Net Exports. Excluding this factors, the contribution of Investment is closer to 40% of GDP growth while Net Exports is closer to 20%, not a small negative. Please see slide 30 for more details.

%

Domestic Demand contributing strongly in first three quarters of 2015 -

highlighting a more broad based recovery*

Nominal GDP (€bn) exceeded pre-crisis peak in 2015

10

Source: CSO; Forecasts from Department of Finance (Budget 2016)

0

50

100

150

200

250

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015e 2017f

Growth remained strong in Q3 2015, after robust H1

• 7% real GDP growth for H1 2014 – well above expectations

• Q-Q real growth outturn for Q3 2015 was 1.4%, with Q2 2015 growth at 1.9%

• Investment was nominally the driver in 2015 – although growth is overstated by the movement of Intellectual Property (IP) into Ireland.

• Personal consumption is now a key driver of growth (3.6% y-o-y to Q3 2015).

• Exports grew strongly in Q3 2015 but imports outpaced exports (due in part to IP/ intangible asset issue).

11

Source: CSO; NTMA workings

Real GDP Growth Y-o-Y %

-20%

-10%

0%

10%

20%

30%

40%

Q4 2014 Q1 2015 Q2 2015 Q3 2015

Private Consumption Investment

Government Net Exports

GDP

Ireland’s economy outperformed the euro area in 2015 and is expected to do so again in 2016

Real GDP Y-o-Y growth rates The composite PMI is a strong leading

indicator for Irish GDP growth

12

Source: Department of Finance; Euro area forecasts based on EU Commission Forecasts Source: CSO; Markit

0%

1%

2%

3%

4%

5%

6%

7%

Department of Finance(Oct-15)

Euro Area (Nov-15)

2015 2016 2017

30

35

40

45

50

55

60

65

70

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Q12004

Q12006

Q12008

Q12010

Q12012

Q12014

Q12016

GDP PMI Composite (leading 2 Quarters)

Correlation is strongest when PMI is leading

by 2Qs

External factors such as energy prices and weaker euro boosted GDP growth in 2015

13

90

95

100

105

110

115

120

1995 1999 2003 2007 2011 2015

Source: Bloomberg Source: CBI, NTMA workings

Brent Oil €/Barrel

Most competitive since early 2000s

Real Harmonised Competitiveness Indicator

0

20

40

60

80

100

120

2005 2007 2009 2011 2013 2015

Ireland’s goods exports respond vigorously to euro depreciation; GDP higher thanks to openness

14

0.99

0.51

0.37

0.89

1.13

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

US UK EA ROW EXP EXLPHA

Source: CSO; NTMA empirical analysis

Note: All coefficients significant at 99% level

Response of Irish goods exports to 1% depreciation of the euro

• A 1% depreciation of the euro increases Irish goods exports to the US by 1%

• The equivalent response for exports to the UK is 0.5% and to the rest of world is 0.9%

• The EUR/USD exchange rate has a positive effect (elasticity of 0.37) on Irish goods exports to the euro area, due to Ireland-based multinational companies’ exports to EA for onward sale to the rest of the world

• The elasticity of total goods exports excluding pharma to the exchange rate >1

Ireland has benefited the most in the euro area from the recent euro depreciation

15

Source: Bruegel - ‘Real effective exchange rates for 178 countries: a new database’; NTMA Workings Note: REERs cover business sector excluding agriculture, construction and real estate activities and are calculated against 30 trading partners using fixed weights from Q1 2008. Data available to Nov 2015. See Darvas, Z (2012) for more details.

Yearly change in real effective exchange rate

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

Competitiveness gains not explained away by shift to highly productive/

less labour-intensive sectors

Services exports have driven export performance post-crisis

-5

0

5

10

15

20

25

30

35

40

95

100

105

110

115

120

125

130

135

140

2009 2010 2011 2012 2013 2014 2015

Goods (% of growth) Services (% of growth)

Total Exports

16

Cumulative post-crisis exports (4Q sum to end-2008 = 100)

Large increase in goods exports exaggerated by

contract manufacturing*

Source: CSO, NTMA calculations Source: CSO, World Trade Organisation * For discussion on contract manufacturing and its limited effects on Ireland’s National Accounts, please see here.

Patent Cliff 0%

1%

2%

3%

0%

10%

20%

30%

40%

50%

60%

1980 1984 1988 1992 1996 2000 2004 2008 2012

Ireland Services Export % GDP

Irish Services Export (% of Global Share, RHS)

Ireland has tripled its share of global service exports in the last 15 years

Export structure has changed dramatically, thanks to the arrival of new technology/ social media firms

17

5%

8% IT

2%

3%

3%

6%

26% Pharma

Machinery , 32%

15%

2000

Insurance & Financial Services Computer ServicesBusiness Services Other ServicesTourism AgricultureChemicals MachineryOther Goods

9%

25% IT services

10%

7% 2%

5%

26% Pharma

6%

10%

2014

Source: CSO, DataStream

Consumption is now a large contributor to growth

15

16

17

18

19

20

21

22

23

24

2000 2003 2006 2009 2012 2015f

Quarterly Consumption (€bn)

Consumption contributed positively to GDP growth in 2014 and 2015

Seven consecutive quarters of positive q-o-q growth for the volume of consumption

18

Source: CSO, NTMA calculations, Department of Finance forecasts

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

2003 2005 2007 2009 2011 2013 2015e

Consumption Rest of Economy GDP

High frequency indicators show Ireland’s uniform recovery is much stronger than euro area’s

Ireland growing faster than EA PMI composite difference (pts.)

All sectors growing (PMI chg. as cumulative index level, June 2000=100)

19

Source: Markit; Bloomberg; Investec ; NTMA workings

0

50

100

150

200

250

300

2000 2002 2004 2006 2008 2010 2012 2014

PMI Services PMI Manufacturing

PMI Construction

-10.0

-5.0

0.0

5.0

10.0

15.0

Labour market has rebounded since 2012

Unemployment rate down to 8.8% in December 2015

20

0

2

4

6

8

10

12

14

16

1999 2001 2003 2005 2007 2009 2011 2013 2015

Source: CSO

Employment up 6% from cyclical low

Down over 6pp from peak in

less than three years

000s

1,400

1,500

1,600

1,700

1,800

1,900

2,000

2,100

2,200

1998 2000 2002 2004 2006 2008 2010 2012 2014

Labour participation has not yet recovered – similar to US; Wages only now rising, pointing to slack in market

Participation rate hovering around 60%

21

Source: CSO

Wages and hours worked beginning to recover, although pockets of excess capacity remain

Source: CSO

56%

57%

58%

59%

60%

61%

62%

63%

64%

65%

1998 2000 2002 2004 2006 2008 2010 2012 2014

Hu

nd

red

s

35,500

35,750

36,000

36,250

36,500

36,750

37,000

31.2

31.3

31.4

31.5

31.6

31.7

31.8

31.9

Q42009

Q32010

Q22011

Q12012

Q42012

Q32013

Q22014

Q12015

Hours Worked (Annualised)

Annualised Earnings (annualised,€, RHS)

Rising employment and house price rises lift retail sales; confidence back at mid-2000s level

Consumer confidence recovers “Core”* retail sales jump (peak=100)

22

75

80

85

90

95

100

105

2005 2007 2009 2011 2013 2015

Volume Index Value Index

Source: KBC, ESRI, CSO *Excluding motor trade; 3 month average used

Massive Gap = price discounting

20

40

60

80

100

120

140

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

70

80

90

100

110

120

130

140

2009 2010 2011 2012 2013 2014 2015

Public Goods/Services Inflation

Private Goods/Services Inflation

Overall Inflation

Stagnation in consumer prices; good news that real incomes are underpinned by lower oil prices

Inflation similar to euro area… …and driven by public goods/ services

23

Source: CSO

Jan 2009 = 100

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

1999 2001 2003 2005 2007 2009 2011 2013 2015

Hu

nd

red

s

HICP Ireland HICP Euro Area

Industrial production increasing quickly due to pharma; growth from traditional manufacturing has slowed

24

Source: CSO

6 month moving averages (Jan 2005 = 100)

80

100

120

140

160

180

200

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Industrial Production Traditional Sector Modern Sector

Large increase stemming from contract manufacturing in

pharma sector

Private debt levels are high, apart from “core” domestic companies

0

50

100

150

200

250

300

350

400

450

Q1 2006 Q1 2008 Q1 2010 Q1 2012 Q1 2014

€ B

illio

ns

Resident banks OFIS ROW

NFCs and other Total

Irish Non-Financial Corporate (NFC) debt is distorted by multinationals (€bn)

Household debt ratio (% DI) declining (see next slide) but still among highest in Europe

0

50

100

150

200

250

300

25

Source: Eurostat (2014 data except 2013 data for euro area)

Source: NTMA analysis; Breakdown from Cussen, M. “Deciphering Ireland’s Macroeconomic Imbalance Indicators”, CBI * OFI = Other Fin. Intermediaries

Green bars account for true “Irish” NFC debt (€bn)

-250

0

250

500

750

1,000

2002 2004 2006 2008 2010 2012 2014

Financial Assets Liabilities

Housing Assets Net Worth

Household deleveraging continues, but at slow pace; Rising house prices bolster HH balance sheets

26

* Measure includes both loans and other liabilities. Excluding other liabilities, debt-to-income ratio is 167%

Household net worth (€bn) improved in 2015 and has underpinned consumer spending

Debt-to-income ratio in Q2 2015 at 177%*, the lowest since Q4 2005

Source: CBI, CSO Source: CBI, NTMA calculations

50

70

90

110

130

150

170

190

210

230

2003 2005 2007 2009 2011 2013 2015

Household Debt (€bn)

Household Disposable Income (€bn, annualised)

Interest burden high but suppressed by trackers; savings rate around euro area average

Interest burden on households has been suppressed by tracker mortgages and ECB..

…and falls heavily on households with non-tracker mortgages

27

Source: Eurostat Source: CBI, NTMA Analysis

Note: Interest burden is ‘actual’ (i.e. excludes FISIM adjustment) and is calculated as a share of actual gross disposable income.

0%

2%

4%

6%

8%

10%

12%

14%

2002 2004 2006 2008 2010 2012 2014

% o

f d

isp

osa

ble

Inco

me

EA Germany

Ireland Spain

Italy Netherlands

United Kingdom

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Sep

Dec

Mar

Jun

Sep

Dec

Mar

Jun

Sep

Dec

Mar

Jun

Sep

Dec

Mar

Jun

2012 2013 2014 2015

Non-Tracker Mortgage Other Debt

Tracker Total

Gross household saving rate revised downwards significantly; helps explains consumption pick up in ‘14

28

Source: Eurostat, CSO

0

2

4

6

8

10

12

14

16

2002 2004 2006 2008 2010 2012 2014

% o

f D

isp

osa

ble

Inco

me

(4

Q M

A)

Ireland EU-28 EA-18 UK

Savings increased in 2015

Increase in investment in 2015 Q2/Q3 overstated due to large imports of Intellectual Property

Intangible asset transfer increases investment and reduces net exports

29

Source: CSO, NTMA analysis * Excl. imported IP, investment grew by 29% y-o-y

Please note that this quarterly data is volatile and not as reliable as the published annual data

0

2

4

6

8

10

12

14

1997 2000 2003 2006 2009 2012 2015

€ B

illio

ns

Total Investment Investment excl. intangibles

Machinery and Equipment

Building Investment

-20%

-10%

0%

10%

20%

30%

40%

Q3 2015 Adjusted for IP

Estimated Y-o-Y growth rate

GDP Investment Exports

Aircraft trade coupled with IP imports mean Irish National Accounts are further complicated

Further to issue of IP imports, investment and net exports are affected by the presence of aircraft trade in Ireland.

• Under new methodology, trade in aircraft by Irish resident aircraft leasing companies is now recorded in the national accounts.

• Like IP imports, this leads to an increase in imports and a subsequent decrease in net exports. There is an offsetting increase in investment.

• Again this has no effect generally on GDP and GNP.

• But excluding these two factors gives a better picture of the underlying drivers of GDP growth in 2015.

4.9%

2.7%

-0.6%

1.6%

2.6%

2.6%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

National Accounts Adjusted for IP and Aircrafttrade

Investment Net Exports Other sources

Investment is reduced & Net Exports increased in adjusted case*

30

Source: CSO, NTMA analysis *Growth for first three quarters of 2015

Investment overall is rising from a low base, but building remains mired at low levels

31

0%

5%

10%

15%

20%

25%

1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014

Building Investment % GDP Mach., Equip. and R&D Investment % GDP

Source: CSO * 2015 figures estimated using first 3 quarters growth for 2015.

Economic and fiscal forecasts: Budget 2016

2013 2014 2015e 2016f 2017f

GDP (% change, volume) 1.4 5.2 6.2 4.3 3.5

GNP (% change, volume) 4.6 6.9 5.5 3.9 3.2

Domestic Demand (Contribution to GDP, p.p.) -1.2 4.2 4.3 2.9 2.0

Net Exports (Contribution to GDP, p.p.) 2.6 0.1 2.0 0.2 1.2

Current Account (% GDP) 3.1 3.6 6.9 6.2 5.4

General Government Debt (% GDP) 120.1 107.5 97.0 92.8 90.3

General Government Balance (% GDP^) -5.7 -3.9 -2.1 -1.2 -0.5

Inflation (HICP) 0.5 0.3 0.1 1.2 1.5

Unemployment rate (%) 13.1 11.3 9.5 8.3 7.7

32

Source: CSO; Department of Finance (Budget 2016)

33

SECTION 2: FISCAL & NTMA FUNDING

Ireland’s Government debt ratio dropped below 100% of GDP in 2015; will reach landmark by exiting Excessive Deficit Procedure (EDP)

Five straight years of fiscal outperformance

General Government Balance (% of GDP) Deficit forecast to be fully closed by 2018; recent

improvement may bring this forward (€bn)

34

Source: Department of Finance (Budget 2016) CSO; Eurostat; NTMA workings

0

10

20

30

40

50

60

70

80

90

1995 1999 2003 2007 2011 2015f

General Government Expenditure

General Government Revenue

-10.3

-8.0

-5.5

-4.0

-1.5 -1.2

-10.6

-8.6

-7.5

-5.1

-2.9

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2011 2012 2013 2014 2015E 2016F

GGB DoF forecasts

GGB EU target under EDP December 2010

Ireland has confirmed debt sustainability: debt is falling naturally through “snowball” effect

-15

-12

-9

-6

-3

0

3

6

9

Primary Balance Interest GGB Structural Balance (% potential GDP)

35

Source: Department of Finance; Eurostat; IMF

1.5% primary surplus expected this year

36

Ireland’s fiscal adjustment route quicker than peers

Underlying GGB % of GDP

Change to nominal GDP (%)

Source: European Commission, DataStream Note: All black markers are 2009 starting points

-14

-12

-10

-8

-6

-4

-2

0

-12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12

Ireland Portugal Spain France

GGB % GDP shrinks quickly

even during low growth period

2009

2010

2015F

EDP target 3%

Average interest on total Government below 3.5%; so interest rate-growth maths (i-g) in Ireland’s favour

37

Source: Department of Finance; DataStream

-15%

-10%

-5%

0%

5%

10%

15%

20%

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016f 2018f

Nominal GDP Growth (g) Average Interest Rate (i)

Gross Government debt fell below 100% by end-2015

38

Source: CSO; Budget 2016 (Department of Finance)

Peak

36.6

66.6

77.6

86.7 89.7 87.8

80.0 61.8

86.8

109.3

120.2 120.0

107.5

97.0 92.8

90.3 86.7

0

20

40

60

80

100

120

140

2009 2010 2011 2012 2013 2014 2015E 2016F 2017F 2018F

Net Debt Cash balances/Other EDP assets GG Debt

Following strong 2015 GDP data, debt-GDP ratio

fell below 100% 12 months earlier than

expected

Net Government debt ratio (% GDP) now below that of Belgium – our closest bond market counterpart

39

Net General Government Debt = Gross General Government Debt - EDP Assets EDP Assets = Currency and Deposits + Securities other than Shares (excluding financial derivatives) + Loans Note: EDP assets are all financial assets (excluding equities) held by general government

Source: CSO, Eurostat, NTMA analysis

87.8 80.0

93.6

178.1

119.2 111.4

78.3

0

20

40

60

80

100

120

140

160

180

200

Ireland Belgium Greece Italy Portugal Spain

169%

120%

112%

96% 88%

85% 83%

72%

60% 54% 52%

17% 14% 10%

161%

120%

109%

96% 88%

84% 78%

71%

60% 51% 51%

16%

5% 9%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

Greece Italy Portugal Belgium France Spain Ireland UK Austria NL Germany DK Finland Sweden

Net debt % GDP Net debt (including bank stakes) % GDP

Core

Irish Govt. bank stakes worth at least 5% of GDP

40

Sources: Eurostat, Banks’ 2014 annual reports, each countries bank rescue fund, NTMA calculations

Periphery

Semi-core

H1 2015 data for Ireland

0

5

10

15

20

25

Bill

ion

s €

Bond (Fixed) IMF and Other EFSM EFSF Bond (Floating Rate) Bilateral

Improved maturity profile in recent years

41

Source: NTMA Note: EFSM loans are subject to a 7-year extension that will bring their weighted-average maturity from 12.5 years to 19.5 years. It is not expected that Ireland will refinance any of its EFSM loans before 2027. As such we have placed the EFSM loan maturity dates in the 2027-31 range although these may be subject to change.

Jan. ‘16 issuance of 2026 bond

€3bn

2016-2020 maturity profile improved significantly in recent years

0

5

10

15

20

25

30

€ B

illio

ns

Debt Profile Near-term reductions

Long-term extensions End 2013 Debt Profile

42

Source: NTMA; Eurostat; Q4 2015 figures

Various operations in last two years have led to an extension of maturity…

… with Ireland comparing favourably to other European countries

11.6

8.5 8.4 8.1 7.9

7.1 6.7 6.6 6.5 6.2 6.0 5.6

11.7

16.3

9.5

0

2

4

6

8

10

12

14

16

IR GR DK BG AT NL FR PT IT ES FN BD

Years

Govt bonds - Weighted Maturity

Govt Bonds & Programme Loans - Weighted Maturity

EA Govt Bonds - Avg Weighted Maturity

Nearly 40% of Ireland’s government debt has maturity over 10 years

General Government Debt breakdown

% share €bn

Retail 10.1% 20.6

Bonds

Short-term* 2.3% 4.7

Long-term 60.8% 124.2

Loans

Short-term* 0.7% 1.4

Long-term 26.1% 53.6

Ireland’s maturity profile in €bn

43

Source: CSO (Q2 2015 data), NTMA

*Short-term definition : Bonds issued with a maturity of less than 1 year

38%

29%

26%

7%

Over 10 years

Between 5 and 10 years

Between 1 and 5 years

<1 year

Includes €8bn April 2016

redemption

Investor base for Irish government debt is wide and varied

Country breakdown – Average over last 7 syndications

Investor breakdown – Average over last 7 syndications

44 Source: NTMA

Ireland, 13%

UK, 27%

8%

Cont. Europe,

30%

12%

10%

Ireland UK

US and Canada Continental Europe

Nordics Other

50%

24%

17%

10%

Fund/Asset Manager Banks/Central Banks

Pensions/Insurance Other

NTMA has been funding approximately 12 months in advance; Less issuance needed in 2016

45

Source: NTMA; Department of Finance

• With only two major redemptions in 2016/17 issuance is lower in 2016 than in recent years. The next bond redemption is the €8.1bn April 2016 bond.

• NTMA expected to issue €6-10bn worth of long term bonds in 2016. €3bn has already been issued.

• Exchequer had €10.9bn of cash and other liquid assets at end 2015.

Open Cash €10.9

Close Cash

c.€10.5

EBR €1.7

Long Term Debt (LT)

€6-10

EBR €4.0

Bond €8.1

Other €2.3

Bond €6.4

Other €1.5

-

2

4

6

8

10

12

Y/E 2015 c.€10.9bn

Outflow €11.3bn

Funding (€6-10bn)

Y/E 2016 c. €10.5bn

2017Outflow

Bill

ion

s €

• EBR is the Exchequer Borrowing Requirement • Cash balances excludes Housing Finance Agency (HFA) Guaranteed Notes and CSA Collateral Funding end-2015

balances . Total Cash and Other Financial Assets at end-2015 were €13.6 billion. • Other outflows includes contingencies, including for potential bond purchases. Other sources Includes short-term

paper, net State Savings (Retail) and other funding.

Central Bank of Ireland purchasing c.€700m worth of IGBs per month under ECB’s QE programme

46

Estimated Composition of ECB’s QE €60 billion/month programme

€10bn

€7.2bn

€42.1bn

Covered Bonds & ABSEuropean Institution securitiesIrish Government BondsOther Government Bonds

7.1

0

5

10

15

20

25

30

Estimated CBI Holdings

2016purchases

Holdings (end-Dec 2015)

€ Bn

Source: NTMA; ECB

IGB purchases c.€700m per month under Capital Key

Rule

With QE extended the CBI will be able

to continue purchases of IGBs

into 2017

Greater geographic balance in holdings of Irish Government Bonds (IGBs)

€ million

End quarter Dec 2013 Dec 2014 Oct 2015

1. Resident 51,747 50,805 49,987

(as % of total) (46.6%) (43.7%) (39.8%)

– Credit Institutions and Central Bank* 49,240 45,875 46,083

– General Government 2,153 1,632 757

– Non-bank financial - 2,870 2,807

– Households (and NFCs) 354 428 340

2. Rest of world 59,260 65,534 75,554

(as % of total) (53.4%) (56.3%) (60.2%)

Total MLT debt 111,007 116,339 125,541

47

Source: CBI * In March 2013 resident holdings increased significantly thanks to the IBRC Promissory Note repayment (non-cash settlement) which resulted in €25.034bn of long-dated Government bonds being issued to the Central Bank of Ireland on liquidation of IBRC. The CBI also took €3bn of 2025 IGBs formerly held by IBRC.

Breakdown of Ireland’s General Government debt

€ million 2010 2011 2012 2013 2014

Currency and deposits (mainly retail debt)

13,708 58,386 62,092 31,356 20,918

Securities other than shares, exc. financial derivatives

96,381 94,013 87,297 112,665 119,078

- Short-term (T-Bills, CP etc) 7,203 3,777 2,535 2,389 3,760

- Long-term (MLT bonds) 89,178 90,236 84,762 110,276 115,318

Loans 34,138 37,723 60,849 71,312 63,191

- Short-term 731 558 1,886 1,442 1,320

- Long-term (official funding and prom notes 2009-12)

33,407 37,166 58,963 69,870 61,870

General Government Debt 144,227 190,123 210,238 215,333 203,187

EDP debt instrument assets 33,516 55,170 58,707 54,435 37,127

Net Government debt 110,711 134,953 151,531 160,898 166,060

48

Source: CSO (Oct 2015)

49

SECTION 3: LONG TERM FUNDAMENTALS

Rebalancing achieved; Fundamentals are in place but retaining competitiveness is crucial

Much rebalancing has taken place; 2007 peak in GNI per capita surpassed in 2015

50

Source: CSO

0

20

40

60

80

100

120

140

160

180

200

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015f

Successful fiscal consolidation in

late 1980s

"Celtic Tiger" 1994-2001

Credit/Property Bubble

Bubble Burst

Recovery

Lower interest rates/

recovery in major export

markets

Delayed Convergence

(Real GNI per capita) 1995 = 100

Ireland’s openness has been critical to rebalancing

51

Exports (%GDP)

1999

Exports (%GDP)

2014

Ireland 85 113

Spain 25 32

Italy 24 29

Portugal 27 40

Belgium 67 86

Source: DataStream (value of exports) Source: CSO

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

% o

f to

tal g

oo

ds

exp

ort

s

US Euro area UK Other

Ireland benefits from export diversification by destination...

…and openness relative to other non-cores

Ireland’s current account in surplus but affected by IP imports and re-domiciled PLCs

52

Source: CSO * For estimates of the undistributed profits of redomiciled PLCs see Fitzgerald, J. (2013), ‘The Effect of Redomiciled PLCs on GNP and the Irish Balance of Payments’

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

1998 2000 2002 2004 2006 2008 2010 2012 2014

Published Adjusted for redomiciled PLCs Adjusted for PLCs and IP Imports

Historically-high current account surplus somewhat

flattered by record net factor inflows

Favourable population characteristics underpin debt sustainability over longer term

53

1.01.21.41.61.82.02.2

Hu

nga

ry

Ro

man

ia

Po

lan

d

Latv

ia

Po

rtu

gal

Ger

man

y

Spai

n

Mal

ta

Ital

y

Au

stri

a

Cze

ch R

ep.

Gre

ece

Slo

vaki

a

Cro

atia

Cyp

rus

Bu

lgar

ia

Esto

nia

Luxe

mb

ou

rg

Swit

zerl

and

Euro

are

a

Slo

ven

ia

EU-2

7

Den

mar

k

Lith

uan

ia

Net

her

lan

ds

Fin

lan

d

Bel

giu

m

No

rway

Swed

en UK

Icel

and

Fran

ce

Irel

and

Turk

ey

Source: World Bank WDI (2013); OECD (2014)

Fertility rates in Ireland are above typical international replacement rates

Old age dependency ratio (65+ : ages 15-64) compares well against OECD countries

05

1015202530354045

Wo

rld

Ch

ina

Ch

ile

Ko

rea

Isra

el

Ru

ssia

Slo

vaki

a

Irel

and

Icel

and

Cyp

rus

Po

lan

d

Un

ited

Sta

tes

Au

stra

lia

Ro

man

ia

New

Ze

alan

d

Can

ada

OEC

D -

To

tal

No

rway

Slo

ven

ia

Hu

nga

ry

Cze

ch R

ep.

Net

her

lan

ds

Spai

n

Au

stri

a

UK

Bel

giu

m

Bu

lgar

ia

Swit

zerl

and

Latv

ia

EU-2

7

Den

mar

k

Po

rtu

gal

Fran

ce

Gre

ece

Swed

en

Fin

lan

d

Ger

man

y

Ital

y

Jap

an

Workforce is young and educated - especially so in IT sector

Ireland has one of the largest % of 25-34 years old with a third-level degree…

…and the highest % of population working in IT with a third-level degree

54

0% 10% 20% 30% 40% 50%

ItalyGermanySlovakia

Czech RepPortugal

Euro areaEU28

SloveniaAustriaGreeceFinlandIceland

SpainDenmark

PolandNetherlands

BelgiumFrance

UKSweden

SwitzerlandNorwayIreland

LithuaniaLuxembourg

Cyprus

Source: Eurostat

0.0% 0.3% 0.6% 0.9% 1.2% 1.5%

ItalyGreece

PortugalGermanyLithuaniaSlovakia

PolandEuro area

BulgariaSlovenia

EU28CyprusFrance

Czech RepAustria

NetherlandsSpain

BelgiumDenmark

LuxembourgSwitzerland

SwedenIcelandFinland

UKNorwayIreland

Ireland continues to attract foreign investment (average FDI inflows per annum as a share of GDP, 2009 – 2014)

55

Source: UNCTADStat

0

10

20

30

40

50

60

D

enm

ark

G

ree

ce

It

aly

S

love

nia

F

ran

ce

G

erm

any

L

ith

uan

ia

S

lova

kia

A

ust

ria

S

wed

en

F

inla

nd

R

om

ania

S

pai

n

P

ola

nd

P

ort

uga

l

C

zech

Rep U

K

L

atvi

a

N

eth

erla

nd

s

S

wit

zerl

and

N

orw

ay

C

roat

ia

Ic

elan

d

H

un

gary

B

ulg

aria

E

sto

nia

C

ypru

s

B

elgi

um

Ir

elan

d

L

uxe

mb

ou

rg

Ireland has the second largest average annual FDI inflows as a % of GDP in the EU

Despite the underlying fundamentals competitiveness is crucial for Ireland’s future growth

56

80

90

100

110

120

130

140

150-12%

-8%

-4%

0%

4%

8%

12%

16%

1998 2000 2002 2004 2006 2008 2010 2012 2014

GDP (y-o-y % change) HCI (inverted)

Average HCI (1998 - 2015) = 110 Below avg. (Competitive) -> median GDP growth is 6.2%

Above avg. (Uncompetitive) -> median GDP growth is 3.5%

Correlation of -0.64

Source: CSO, CBI

-25

-20

-15

-10

-5

0

% d

eclin

e si

nce

pea

k

Competitveness gains as of Nov 2015 Competitveness gains as of Nov 2014

Competitiveness recovery still exceptional even when compositional effects are accounted for

57

Source: Bruegel - ‘Real effective exchange rates for 178 countries: a new database’ Note: REERs cover business sector excluding agriculture, construction and real estate activities and are calculated against 30 trading partners using fixed weights from Q1 2008. Data available to Nov 2015. See Darvas, Z (2012) for more details.

Euro depreciation has led to strong competitiveness gains for Ireland in last year

5%

58

SECTION 4: PROPERTY

Property prices rising thanks to lack of supply, reasonable starting valuations and strong capital inflows

New CBI mortgage rules impact demand before and after introduction

59

Supply tightening and demand lower below 3.0 and vice-versa

Source: ECB and CBI (Bank lending survey)

Demand & credit standards tighten following CBI rules

Mortgage drawdowns rise from deep trough (‘000s)

Source: BPFI

1.5

2

2.5

3

3.5

4

4.5

5

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Supply Demand

0

20

40

60

80

100

120

140

2006 2008 2010 2012 2014

Residential Investment Letting

Mover purchaser

First Time Buyers

Modest pick-up from low

base driven by FTBs

Residential market continues to be boosted by non-mortgage purchasers

60

Source: BPFI; Property Services Regulatory Authority; NTMA Note: Non-mortgage transactions are implied by difference between total transactions on property price register and BPFI mortgage data

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

10 2011 2012 2013 2014 2015

Nu

mb

er o

f tr

ansa

ctio

ns

Mortgage drawdowns for house purchase Non-mortgage transactions Total Property Transactions

Non-mortgage transactions accounts for

roughly half of all property transactions

Property prices have rebounded since 2012 (peak = 100 for all indices)

61

Source: CSO; IPD

House prices surge, led by Dublin Office leads commercial property

0

20

40

60

80

100

120

1995 1998 2001 2004 2007 2010 2013

Retail Office Industrial

Index 100 = Q3 2007

40

50

60

70

80

90

100

110

2005 2007 2009 2011 2013 2015

All Outside Dublin Dublin

Housing valuations are still relatively attractive

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Average Irish house prices/ disposable income per capita Rental yields still exceed 5%

62

Source: CSO; NTMA, IPD

Rental yields should be lower than before in

world of low real rates

6

7

8

9

10

11

12

13

14

15

16

1979 1984 1989 1994 1999 2004 2009 2014

Rat

io t

o D

isp

osa

ble

Inco

me

per

Cap

ita

Real commercial property prices down 52% from peak (index 1983 = 100)

63

0

50

100

150

200

250

1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Jones Lang LaSalle Real Office Estimated Rent Value (ERV) IPD Real Office Property Price Index

Source: Jones Lang LaSalle; IPD; NTMA

Real office property price moves together with Equivalent Rental Value (rents). Price is driven

by real demand in the long-run

Bubble period

3%

5%

7%

9%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Commercial Property

Ireland average commercial property equivalent yields 5yr Euro swap rate + 300bp margin

Foreign buyers interested on “carry trade” grounds

64

Source: IPD; NTMA

3.4PP positive carry

Made no sense for

foreign buyer

3%

4%

5%

6%

7%

8%

9%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Residential Property

Ireland average residential property equivalent yields 5yr Euro swap rate + 300bp margin

2.3PP positive carry

Made no sense for foreign buyer

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

NW BG UK SD FN FR DK ES IR NL BD IT GR PT

Irish house price valuation is still attractive versus European countries

65

Source: OECD, NTMA Workings Note: Measured as % over or under valuation relative to long term averages since 1990. All data updated to 2014 Q4

Deviation from average price-to-income ratio

Deviation from average price-to-rent ratio

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

BG UK FR NW SD OE NL DK IT ES FN IR BD GR PT

66

SECTION 5: NAMA

NAMA is set to make a profit of up to €2bn on wind-up

• NAMA’s operating performance is strong

Acquired 12,000 loans (over 60,000 saleable property units) related to €74bn par of loans of 758 debtors for €32bn

NAMA continues to generate net profit after impairment charges.

• Repaid €22.1bn (73%) of €30.2bn of original senior debt

NAMA is meeting its senior debt redemption targets ahead of schedule. Originally, a target of 50% of redemptions was set for 2016. The Agency now plans to redeem a total of 80% of its senior debt by 2016.

• NAMA may realise a surplus of up to €2bn, market conditions remaining favourable

• In October 2015, NAMA announced a new initiative to develop up to 20,000 housing units by 2020.

67

NAMA: over 70% of its original debt repaid

More NAMA information available on www.nama.ie

NAMA’s Residential Development Funding Programme

In reaction to the lack of housing supply, NAMA hopes to bring up to 20,000 housing units to the market by 2020 under programme

The focus will be on starter homes and will be concentrated in the Greater Dublin Area

75% of units will be houses, 25% apartments

90% of units in Greater Dublin Area (Dublin, Wicklow, Kildare & Meath)

Progress so far has been strong

In addition to the 2,300 units already delivered by NAMA, construction has begun on sites which will ultimately deliver another 3,000 units.

Another 5,000 units have received planning permission with construction expected to begin on the majority of these in 2016.

Planning applications have been lodged or will be lodged within 12 months for another 9,900 units. Another 32,500 units are at the pre-planning stage or feasibility stages.

Existing NAMA commitments are unaffected by this new programme

Plans for all senior debt to be repaid by 2018 and subordinated debt repaid by March 2020 are still in train

68

NAMA: financial summary 2011 – 2014 Financial results (€m)

• NAMA continues to generate net profit after impairment charges.

• 2014 operating profit and impairment charges much lower than previous years

69

2011 2012 2013 2014

Net interest income 771 894 960 642

Operating profit before impairment

1,278 826 1,198 648

Impairment charges (1,267) (518) (914) (137)

Profit before tax and dividends

11 308 283 510

Tax (charge)/credit and dividends

235 (76) (70) (52)

Profit for the year 246 232 213 458

Source: NAMA • €1bn of NAMA senior bonds redeemed in Oct 2015 bringing total amount redeemed to €22.1bn (73% of its senior debt liabilities)

• All of €30.2bn in NAMA senior bonds expected to be redeemed by 2018

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Mar

-11

May

-11

Sep

-11

May

-12

Dec

-12

Jun

-13

Oct

-13

Dec

-13

Mar

-14

Jun

-14

Au

g-1

4

Sep

-14

Oct

-14

Dec

-14

Mar

-15

May

-15

Sep

-15

Oct

-15

0.25 0.5 0.5

2.0 1.5 1.5

0.75 0.5

3.0 2.5

0.75 0.75 0.6

1.5 1.0

1.75 1.75

1.0

NAMA redemptions

Deliberate NAMA focus on UK disposals during 2010 – 2013 period.

ROI transactions have increased significantly since Q4 2013 - from €2bn to €10.2bn.

Disposal Trend by Location

70 Source: NAMA

London 9,342 35%

Rest of UK 3,579 13%

Dublin 7,244 27%

Rest of ROI 2,931 11%

ROW 2,074

8%

NI 960 4%

Not an Asset Sale 451 2%

Disposals by Location since Inception Nov 2015 (€26.6bn)

London 1,341 18%

Rest of UK 546 8%

Dublin 3,603 50%

Rest of ROI 1,027 14%

ROW 516 7%

NI 9

0%

Not an Asset Sale 191 3%

Disposals by Location Nov 2015 (€7.2bn)

71

Breakdown of NAMA property portfolio, June 2015

Source: NAMA

Commuter Belt 6%

Dublin 49%

Rest of ROI 4%

Urban Centres

10%

Rest of World 7%

Non Real Estate

2%

Rest of UK 6%

London 16%

Geographic Breakdown

Residential 15%

Development 21%

Office 16%

Land 16%

Retail 21%

Industrial 3%

Other 1%

Non real estate

2%

Hotel & Leisure

5%

Sector Breakdown

Over 90% of remaining portfolio in Ireland is in Greater Dublin Area or in other urban centres

Dublin Docklands Strategic Development Zone (SDZ):

A core objective of NAMA’s development funding is to facilitate the delivery of Grade A office accommodation in the SDZ.

NAMA has an interest in 14 of the 20 development blocks identified in the SDZ and has developed detailed strategies for these blocks.

It is estimated that up to 3.8m sq. ft. of commercial space and 2,000 apartments could be delivered in all sites. This includes one additional site at City Quay (just outside the SDZ). Planning achieved on 2.2m sq. ft., 0.36m sq. ft. in the planning system and over 1.2m sq. ft. at pre-planning stage

Social Housing:

A SPV – NARPSL – was established by NAMA to expedite social housing delivery. It acquires residential units from NAMA debtors and receivers and leases them directly to approved housing bodies (Department of the Environment, Community and Local Government; and the Housing Agency).

By end-December 2015, 2,000 units were delivered under this initiative. Since the start of 2012, NAMA has identified over 6,600 houses and apartments, controlled by its debtors and receivers, as available for social housing. 2,578 of these units have been confirmed as suitable by local authorities.

72

NAMA: Other strategic initiatives also progressing

73

SECTION 6: BANKING

Banks overhauled and smaller; AIB, BOI and PTSB have returned to profit

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2011 2012 2013 2014 2015H1

Pre-Provisions Post-Provisions

-5

-4

-3

-2

-1

0

1

2

3

2011 2012 2013 2014 2015H1

AIB and BOI returned to profit in 2014 (€bn); PTSB broke even in H1 2015

74

Allied Irish Bank Bank of Ireland Permanent TSB

Source: Annual reports of banks - BOI, AIB, PTSB

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2011 2012 2013 2014 2015H1

Banks fundamentally rebuild profitability

75

Source: Central Bank of Ireland Note: Margins are derived from weighted average interest rates on loans and deposits to and from households and non-financial corporations.

Net interest margins recover %

Source: Annual reports of Irish domestic banks

Cost income ratios improve dramatically

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2003 2005 2007 2009 2011 2013

Outstanding Business New Business

74%

63%

85%

96%

78%

111%

123%

88%

144%

77%

60%

119%

55% 55%

126%

48% 50%

80%

0%

20%

40%

60%

80%

100%

120%

140%

AIB BOI PTSB2010 2011 2012 2013 2014 2015 H1

Asset quality improving as impaired loans and provisions continue to fall

76

Impaired loans and provisions at PCAR banks (group and three banks)

Source: Published bank accounts

Impaired Loans % (Coverage %)1 by Bank and Asset

Dec-13 Dec-14 Jun-15 Book (€bn)

BOI Irish Residential Mortgages 14.2(49) 12.6(46) 11.1(48) 25.3 UK Residential Mortgages 2.4(24) 2.0(23) 1.8(24) 28.1 Irish SMEs 26.7(50) 25.6(51) 24.3(52) 9.5 UK SMEs 17.1(50) 16.9(44) 13.9(46) 2.6 Corporate 7.5(41) 5.6(54) 5.1(59) 8.6 CRE - Investment 42.3(38) 37.2(46) 35.8(48) 12.5 CRE - Land/Development 89.3(68) 89.5(74) 90.1(75) 2.5 Consumer Loans 8.4(90) 6.4(98) 5.3(100) 3.2

18.5(48) 18.2(50) 14.4(53) 92.4

PCAR Banks (€bn) Dec-13 Dec-14 Jun-15

Total Loans 208.9 197.1 192.6

Impaired 53.9 43.1 37.4

(Impaired as % of Total) 25.8% 21.9% 19.4%

Provisions 29.4 23.5 18.7

(Provisions as % of book) 14.1% 12.0% 9.7%

(Provisions as % of Impaired) 54.5% 54.5% 50.1%

AIB Irish Residential Mortgages 23.0(43) 22.6(40) 20.1(36) 35.3 UK Residential Mortgages 11.3(53) 11.6(59) 11.5(58) 2.6

SMEs/Corporate 30.0(64) 21.4(68) 16.8(63) 17.9 CRE 66.7(64) 56.9(62) 48.6(62) 13.8 Consumer Loans 33.2(81) 27.2(69) 23.3(75) 3.7

34.9(59) 29.2(51) 24.6(48) 73.3

PTSB Irish Residential Mortgages 26.0(47) 25.5(46) 24.0(47) 21.9 UK Residential Mortgages 1.3(85) 1.5(60) 2.3(63) 3.8 Commercial 68.7(63) 74.0(60) 71.3(61) 0.9 Consumer Loans 26.0(105) 29.7(94) 28.7(93) 0.3

23.6(51) 24.5(51) 22.6(50) 26.9

1 Total impairment provisions are used for coverage ratios (in parentheses)

Loan Asset Mix (banks Jun 15)

61% 15%

4%

21%

Mortgage Corporate/SME

Consumer

CRE

Capital and loan-to-deposit ratios strengthened

77

Loan-to-Deposit Ratios (Dec-10 to Jun-15)

• Core Tier 1 capital ratios at the PLAR banks remain well above minimum requirements.

Core Tier 1 Capital Ratios (Jun-15)

Source: Published bank accounts Source: Published bank accounts

Note: “Transitional” refers to the transitional Basel III required for CET1 ratios which came into effect 1 January 2014. “Fully loaded” refers to the actual Basel III basis for CET1 ratios. * The AIB and BOI fully loaded CET1 ratios include €3.5bn and €1.3bn of preference shares respectively. Excluding these preference shares, the ratio for AIB is 8.3% and for BOI is 11.1%.

17.4%

14.1% 15.9%

13.6% 15.4%

13.4%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

CET1 % (Transitional) CET1 % (Fully Loaded)

AIB BOI PTSB

176%

166%

108%

99%

BOI

AIB

Jun-15 Dec-10

67pp decrease

68pp decrease

Aggregated balance sheet of the “Covered” banks much slimmer and more solid

Total Assets: €249.6 bn

Loans and receivables - loans to customers

170.7

Loans and receivables - loans to credit institutions

7.1

Loans and receivables - debt instruments

12.5

Available-for-sale financial assets

32.5

Cash & cash balances with central banks

10.7

Other 16.1

Total Liabilities, Minority Interest and Equity: €249.6 bn

Deposits excl. Credit Institutions

155.7

Deposits from Credit Institutions and Central Banks

26.4

Debt Certificates 25.4

Subordinated Liabilities 4.3

Other liabilities 12.4

78

Equity & Minority Interest 25.5

Total Liabilities, Minority Interest and Equity

257.6

Source: CBI Note: Banks included in this measure are outlined here; Balance sheet calculated on consolidated basis

0%

2%

4%

6%

8%

10%

12%

14%

0 50 100 150 200 250 300 350 400 450 500 550

Introduction of CBI’s macro-prudential rules will increase resilience of banking and household sector

79

Key changes to lending rules

Banks must restrict lending for primary dwelling purchase above 80 per cent LTV to no more than 15 per cent of the aggregate value of the flow of all principal dwelling loans*

Bank must restrict lending for primary dwelling purchase above 3.5 times LTI to no more than 20 per cent of that aggregate value

Banks must limit Buy-to-Let loans (BTL) above 70 per cent LTV to 10 per cent of all BTL loans.

* First time buyers can borrow 90% of the first €220,000 and 80% of the remaining property value

Proportion of loans below 3.5 times LTI by year House price distribution for FTBs in 2014 H1

Median: €182k

€220k threshold

Source: CBI Drawdown amount (€000s)

0

0.2

0.4

0.6

0.8

1

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

First Time Buyer All Buyers

Irish residential mortgage arrears – improving but still challenging

80

• PDH mortgage arrears have fallen steady since Q3 2013. The smaller BTL market (c. 25% of total) has higher arrears but also saw declines in the same period.

• 121K PDH mortgage accounts were classified as restructured at end-Sep, reflecting a q-o-q increase of 1.9%. Of these restructured accounts, 86.6% were meeting the terms of the restructured arrangement.

Mortgage Arrears (90+ days) Total Restructured/Rescheduled Cases

Source: CBI

* ‘Other’ comprises accounts offered temporary Interest rate reductions, payment moratoriums and long-term solutions pending six months completion of payments.

%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

20092010 2011 2012 2013 2014 15

PDH + BTL (by balance) PDH + BTL (by number)

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3

200920102011201220132014 15

PDH Arrears Formation (p.p. Q-Q

by number)

Interest Only 5%

Reduced Payment

12%

Term Extension*

14%

Arrears Capitalisatio

n* 26%

Split Mortgage

20%

Other** 21%

Personal Insolvency Arrangements (PIA) and bankruptcies on the rise

• Personal Insolvency legislation enacted and in use, but take-up has been slow.

• In May 2015, the Government announced a number of new measures to support mortgage holders who are in arrears. It has agreed to give the courts the power to review and, where appropriate, to approve insolvency deals that have been rejected by banks.

• Court rules and procedures will also be streamlined to guide more cases towards the Insolvency Service.

• A Mortgage to Rent scheme will be expanded, including in particular by increasing the property value thresholds that apply.

81

65, 15%

271, 60%*

112, 25%

448 Bankruptcies and 271 Repossessions in 2014

Not applicable Family home lost/Surrendered

Family Home retained

* No. of occurrences,

% of total 0

200

400

600

800

1,000

1,200

1,400

1,600

2013 2014 2015

Total Insolvencies

New Applications Arrangements Approved

Source: ISI, Q3 2015 data

Small and medium-sized business (SME) credit trends and lending policy supports

In October 2014, the Strategic Banking Corporation of Ireland (SBCI) was formally launched with the goal of ensuring access to flexible funding for Irish SMEs.

The SBCI’s initial funding partners are the EIB, KfW (the German promotional bank) and the Ireland Strategic Investment Fund (ISIF).

These partners are providing long-term funding at attractive rates to the SBCI, which in turn will provide the funding to Irish SMEs through Irish-based credit institutions.

Range of additional funding supports include:

• Microfinance Fund - €40m available over 5 years

• Loan Guarantee Scheme - €150m per annum over 3 years

• Enterprise Ireland – upwards of €200m in 2013

• European Investment Bank , European Investment Fund (€80m through AIB) and Silicon Valley Bank partnership with the NPRF ($100m over 5 years)

82 Source: CBI

99 75

50

0%

20%

40%

60%

80%

100%

Active Enterprises Private SectorEmployment

All Enterprises GVA

SME Share of the Irish Economy

SMEs Other Enterprises

0% 10% 20% 30% 40% 50% 60%

Real Estate Activities

Wholesale and Retail

Hotels and Restaurants

Primary Industries

Business and Admin

Manufacturing

Community and Social

Construction

Other

Health and Social

Hundreds

New Lending (€3.2 billion, yr to Sep-2015) Oustanding Credit (€47 billion, Sep-2015)

-40

-30

-20

-10

0

10

20

2010 2011 2012 2013 2014 2015

Accumulated New Lending and Repayments of Non-Financial SMEs

New Lending Repayments Net Transactions

€bn

SME deleveraging continuing as dispersion in SME interest rates persisting across EA

83

Source: CBI; ECB

c. €20bn worth of necessary

deleveraging in last 5 years by

Irish SMEs

Over 200bps

Note: Annualised Agreed Rate is defined by the ECB as ‘the interest rate that is individually agreed between the reporting agent and the NFC for a loan, converted to an annual basis and quoted in percentages per annum. The rate shall cover all interest payments on loans, but no other charges that may apply.’

1

2

3

4

5

6

7

8

9

2008 2010 2012 2014

%

Rates on loans (<€1m, < 1yr) to Irish NFCs over 150bps over EA average

Max Min Ireland Euro Area

Disclaimer

The information in this presentation is issued by the National Treasury Management Agency

(NTMA) for informational purposes. The contents of the presentation do not constitute

investment advice and should not be read as such. The presentation does not constitute

and is not an invitation or offer to buy or sell securities.

The NTMA makes no warranty, express or implied, nor assumes any liability or responsibility

for the accuracy, correctness, completeness, availability, fitness for purpose or use of any

information that is available in this presentation nor represents that its use would not

infringe other proprietary rights. The information contained in this presentation speaks only

as of the particular date or dates included in the accompanying slides. The NTMA

undertakes no obligation to, and disclaims any duty to, update any of the information

provided. Nothing contained in this presentation is, or may be relied on as a promise or

representation (past or future) of the Irish State or the NTMA.

The contents of this presentation should not be construed as legal, business or tax advice.

84