Bank of Ireland - a systemically important bank

1. Bank of Ireland in period of stabilisation

Management have made good progress in stabilising Bank of Ireland and significant progress on Group priorities.

Management priority is to continue to stabilise the Bank and position ourselves strongly for recovery;

• Supporting our customers
• Committed to further strengthening capital ratios
• Committed to further strengthening balance sheet metrics
• Actively managing credit risks
• Rigorously managing costs

2. Bank of Ireland has a portfolio of good businesses with resilient business models

The Group has a robust core franchise in Ireland and focused positions in selected international businesses where we have clear competitive strengths and capabilities.

3. Bank of Ireland is a systemically important bank and plays a critical role in the operation of the Irish economy

4. The Irish Government remains committed to supporting Bank of Ireland and the wider Irish banking system

The Irish Government has already played a significant role in stabilising the financial sector through;

• Credit Institutions (Financial Support) Scheme 2008 (CIFS) - 30 Sep 2008
• Re-capitalisation of Bank of Ireland - 31 Mar 2009
• National Asset Management Agency (NAMA) announced - 7 Apr 2009
• Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009 (ELG) - 9 Dec 2009

5. Bank of Ireland is operating in a challenging environment

- although there are encouraging signs of stabilisation in the Irish economy and improvement in the UK

Credit Ratings

Bank of Ireland is a participating institution in the Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009 (ELG)

• On 11 Jan 2010, Bank of Ireland joined the new Irish Government Guarantee, the ELG Scheme
• All Government Guaranteed deposits and debt securities from Bank of Ireland (covered under CIFS and ELG) benefit from the Irish Sovereign credit rating (see credit ratings table above)
• Bank of Ireland has successfully raised both guaranteed and un-guaranteed funding from international markets in recent months

Encouraging signs of stabilisation in Irish economy

1. Irish GDP rose by 0.3% in Q3 2009

• The Irish economy recorded a modest 0.3% rise in Q3 2009, following a revised 0.6% contraction in Q2 and a 2.1% decline in Q1
• It is premature to conclude that the recession is over, as the pick up in activity was solely driven by net exports. Nevertheless, it is encouraging to see signs of stabilisation and improvement in some areas
• Many Irish economic indicators appear to have bottomed and are recovering, while others are pointing to a slowdown in the pace of contraction
• Unemployment now expected to peak at a much lower level than previously feared

3. Export-led growth catalyst for recovery - Irish exports outperforming Euro Area

• Irish exports have held up relatively well during the last year, falling by 2.6% in the year to Q3 2009 against a 13.5% fall for exports in the Euro Area
• Global recovery should provide a further boost to Irish export performance

4. Domestic economy likely to remain weak in the near term

• Construction spending as a percentage of GDP declining and consumer spending constrained by rising unemployment, flat to negative wage growth, tax rises and an increase in the savings ratio

5. Irish Government making progress in stabilising public finances

• During the last 18 months the Irish Government has made savings (through spending cuts and tax increases) of c.€12bn equivalent to c.7.5% of GDP

6. Government actions viewed positively by international bond markets

• Irish 10 year bond yields over German bunds have tightened to c.165bps (1 Feb 2010) from wides of c.275bps last year
• The market is differentiating between Ireland and the other peripheral sovereigns on the basis of actions being taken by the Irish Government to tackle the fiscal issues

7. Irish Sovereign demonstrating access to international funding markets

• The National Treasury Management Agency (NTMA) raised almost €35bn in 2009 and has already raised c.33% of the €20bn planned borrowing requirement for 2010

8. Ireland improving competitive position

• Unit labour costs projected to fall in 2009, 2010 and 2011
• Wage freezes / cuts and a re-acceleration in labour productivity growth is driving a return to price competitiveness

9. Moving forward from this difficult period, there are several key advantages that should help the Irish economy recover and grow over the medium term

• Strong demographic profile
• Well-educated labour force
• Labour market flexibility
• Competitive corporate tax rate
• Business-friendly environment
• Ability to attract modern FDI

This document has been prepared by Bank of Ireland Global Markets (“GM”). Bank of Ireland is incorporated in Ireland with limited liability. Bank of Ireland is authorised by the Irish Financial Regulator. In the UK, Bank of Ireland is authorised by the Irish Financial Regulator; regulated by the Financial Services Authority for the conduct of UK business. Details about the extent of our authorisation and regulation by the Financial Services Authority are available from us on request. This document is for informational purposes only and GM is not soliciting any action based upon it. Any information contained herein is believed by the Bank to be accurate and true but the Bank expresses no representation or warranty of such accuracy and accepts no responsibility whatsoever for any loss or damage caused by any act or omission taken as a result of the information contained in this document. No prices or rates mentioned are bids or offers by GM to purchase or sell any currencies, securities or financial instruments. Except as otherwise may be specifically agreed, GM has not acted nor will act as a fiduciary, financial or investment adviser with respect to any derivative transaction that it has executed or will execute. Any investment, trading and hedging decision of a party will be based on its own judgement and not upon any view expressed by GM. This document does not address all risks related to the transactions described. You should obtain independent professional advice before making any investment decision. Any expressions of opinion reflect current opinions as at 1st February 2010 and are subject to change without notice. This publication is based on information available before this date. For private circulation only. This document is property of GM. The content may not be reproduced, either in whole or in part, without the express written consent of a suitably authorised member of GM staff.
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