AIB deputy chair says pay restrictions ‘key concern’ for investors

Bank is considering the sale of a final batch of problem loans later this year

Members of the Irish Farmers’ Association (IFA) protest outside AIB's annual general meeting in Dublin to oppose the bank's sale of loans to vulture funds.

 

AIB’s deputy chairperson Catherine Woods told shareholders at the group’s annual general meeting on Wednesday that ongoing pay restrictions and a ban on bonuses across bailed-out banks “remains a real concern” for its large institutional shareholders.

Ms Woods, who was standing in for group chairman Richard Pym, who recently underwent minor surgery, told the meeting in Dublin that AIB’s efforts to attract and retain staff partly depended on its “ability to compete with the remuneration practices of other employers”.

She said the bank, which saw Minister for Finance Paschal Donohoe use the State’s 71 per cent shareholding to shoot down its plans to reintroduce a long-term incentive plan for top executives at the 2018 agm, held off on making a new proposal this year as outside consultants complete a review of remuneration in the sector for the State.

A draft copy of the report, filed by consultants Korn Ferry late last year, is understood to highlight that the current restrictions are unsustainable, although Mr Donohoe has said he has no plans to ease them.

AIB has seen Colin Hunt and Donal Galvin take over as chief executive and chief financial officer, respectively, in recent months following the departure of previous incumbents, Bernard Byrne and Mark Bourke.

Speaking to reporters after the agm, Mr Hunt said that “most acute pressure” being felt as a result of the effective ban on performance-based pay is in retaining mid-ranking employees that in the middle of their careers.

‘Lifeblood’

“This is the lifeblood of future talent in our bank and we want to be in a position where the bank is an attractive place to work,” he said.

AIB faced criticism from consumer advocate Brendan Burgess during the meeting for its continued refusal to put 6,000 customers on a cheap tracker mortgage linked to the European Central Bank’s (ECB) main rate. These customers were on a fixed rate when the financial crisis struck in 2008, but their option to move onto a tracker rate was removed when the lender stopped offering this product in October that year.

The bank has given these customers €1,615 in compensation as part of the industry-wide tracker mortgage review in recent years. “These customers never had a tracker,” said Ms Woods. “We are now very, very comfortable with the position that we’re in.”

Meanwhile, AIB is considering the sale of a final batch of problem loans later this year as it seeks to reduce its non-performing loans (NPLs) by as much as €3 billion in order to cut its NPLs ratio to about 5 per cent from about 8 per cent, currently.

Consortium

The bank sold a €1 billion portfolio of mainly investment loans to a consortium led by US distressed debt group Cerberus earlier this month. However, the deal also included 220 owner-occupier mortgages and some agricultural assets that were used as security by borrowers for commercial property loans.

A group of farmers and the Irish Farmers Association (IFA) gathered outside the meeting at a Dublin hotel to protest against the inclusion of agriculture assets in the recent loan sale.

Speaking outside the meeting, the IFA’s farm business chairman, Martin Stapleton, said it was “wrong” that AIB would sell these loans to a fund that was “not interested in resolving issues by entering into long-term arrangements with farmers”.