AIB exploring new executive incentives – report

//AIB exploring new executive incentives – report

AIB exploring new executive incentives – report

Tuesday 28 January 2014 14.59

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AIB chairman has held talks with Dept of Finance officials on reintroducing long-term awards for executives AIB chairman has held talks with Dept of Finance officials on reintroducing long-term awards for executives AIB's CEO David Duffy plans a return to profit this year for the first time since 2009 AIB’s CEO David Duffy plans a return to profit this year for the first time since 2009

AIB has approached the Government about setting up an incentive plan to retain top executives before the government starts selling the lender.

This is according to three people with knowledge of the matter, Bloomberg says.

AIB chairman David Hodgkinson has led exploratory talks with Department of Finance officials on reintroducing long-term awards for senior staff at the bank when it returns to profit, according to the financial newswire service. 

Salaries were capped and bonuses banned at the bank after its rescue.

The bank declined to comment on the matter. Bloomberg also said the Department of Finance declined to comment on the approach from the bank, and said it has no plans to change compensaton policy in bailed-out banks.
    
AIB’s CEO David Duffy plans to return the bank to profit this year for the first time since 2009 as he completes over 2,500 job cuts, rebuilds lending margins and bad-loan losses ease.

The bank’s board will probably start talks with Duffy in coming months about extending his existing three-year contract to December by another three years, according to the reports.

Finance Minister Michael Noonan said last week that the Government may sell a stake in the bank before the next scheduled elections in 2016.
 
AIB’s bailout accounted for almost a third of the €64 billion rescue of its financial system.

David Duffy, a former executive with South Africa’s Standard Bank Group, joined AIB in December 2011 on a €500,000 a year salary, in line with a state-imposed salary cap on rescued banks. He took a 15% pay cut the following year as he cut compensation of senior bank executives.

AIB has replaced its entire board and most of its senior executives since its initial bailout in 2009. Eleven bank executives had total salaries of between €400,000 and the €500,000 cap in 2012, according to a government-commissioned bankers’ pay report by consultants Mercer, published in March.

Some 116 executives at the lender were earning above €400,000 in 2008.
   
Irish senior bank executive salaries are generally below European peers and publicly quoted Irish companies, the report said.

While it highlighted a reintroduction of long-term incentives as an option in the future, Mr Noonan ignored this as he published the report in March with an order that lenders cut compensation costs by as much as 10%.
    
The Mercer report said incentives could return “when the institutions look likely to return to profitability and hence
have the opportunity of coming out of state ownership.” Plans could be of shares, share-related securities or contingent capital instruments, it said.
 
While incentive plans align the interests of bank executives and taxpayers, “there is likely to be a significant
negative public reaction” to their reintroduction, Mercer said.

Any AIB plan would likely be share based and linked to government-set targets for profitability and taxpayer
returns, said one of the people.

The bank said in November that it was seeing signs of stabilisation in the quality of the bank’s loans and that the pace of growth in customer arrears was slowing. Its loan impairment charge fell 16% in the first half of last year to €744m.

The lender’s net interest margin, the difference between the rate at which it borrowers and lends to customers, widened to more than 1.4% in the third quarter, excluding government guarantee costs, it said in November.

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By | 2014-01-28T21:58:16+00:00 January 28th, 2014|Business|0 Comments