Bank of Ireland expected to name Gavin Kelly as interim chief executive as strategy refresh drifts

Francesca McDonagh will step down in September after five years in the role

Bank of Ireland is widely expected to pick Gavin Kelly, chief executive of its Irish retail banking unit, as its interim group chief executive for when Francesca McDonagh exits in September after five years at the helm.

It comes as London-based headhunters with US executive search firm Spencer Stuart carry out an international trawl for candidates to succeed Ms McDonagh on a permanent basis, after she announced in late April that she was quitting to become the head of Credit Suisse’s Europe, Middle East and Africa operations.

The surprise exit of Ms McDonagh means Bank of Ireland’s plan to issue fresh financial targets to investors this year is now highly unlikely to be met, with a strategy refresh drifting into next year, according to sources.

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“A process is under way to secure a new group CEO and that process is ongoing. The bank will make further announcements over the coming period, including in relation to the potential appointment of an interim CEO from September,” a spokesman for the bank said. “It is likely that the strategy refresh would be led by the new permanent CEO.”

It is likely to be some months before a permanent replacement is selected and secures the necessary fitness and probity approval of Irish and European financial supervisors. An external candidate holding a senior position elsewhere would also generally have to give extended notice to their employer.

Bonus cap

Mr Kelly joined Bank of Ireland in 2007 from Permanent TSB and has held a number of senior roles with the group. He was appointed chief executive of the Retail Ireland division four years ago.

Ms McDonagh joined Bank of Ireland on an annual salary of €950,000, in line with her predecessor Richie Boucher’s total remuneration.

Mr Boucher was exempt from the general €500,000 pay cap that has applied to top executives at Irish banks since 2009. Michael Noonan, minister for finance at the time of Ms McDonagh’s appointment, extended this to the new chief executive, saying: “Nobody would expect a well-qualified woman to get paid less than a man for doing the same job.”

Still, the bank’s chairman, Patrick Kennedy, has been pressing government for some time to allow the bank to escape a long-standing ban on bonuses across bailed-out Irish banks. The company has more than repaid its crisis-era aid and is on track to see Minister for Finance Paschal Donohoe sell down taxpayers’ remaining shares in the lender in the coming months.

The exits of Ms McDonagh and two of her former chief financial officers, Myles O’Grady and Andrew Keating, have been blamed in part on the effective prohibition on variable pay.

While Ms McDonagh moved quickly on her appointment in late 2017 to widen the scope of redress and compensation for homeowners caught up in industrywide tracker mortgage scandal, the Central Bank has still not completed an enforcement investigation against the lender on the matter.

The chief executive has also been active on the deals front in the past year. She secured approval from competition authorities last month to proceed with the planned purchase of KBC Bank Ireland’s €9 billion performing loan book and deposits portfolio, as the latter exits the market. In addition, Ms McDonagh completed the bank’s purchase of stockbroking firm Davy three weeks ago.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times