AIB’s planned share bonus to benefit as few as 80 executives

Scheme would offer deferred shares in bank each year up to equivalent of full salary

AIB has so far returned €10.2 billion to the State since it was rescued.

AIB has so far returned €10.2 billion to the State since it was rescued.

 

AIB’s chief financial officer Mark Bourke signalled on Thursday that as few as 80 top executives and managers stand to benefit from the lender’s plan to establish a deferred annual share scheme, starting in 2019.

The scheme, outlined in the bank’s annual report published earlier this month, would offer deferred shares in the bank each year up to the equivalent of 100 per cent of their salary. The bank has said it could be five or six years before the share awards could be exercised.

“We would have evaluated somewhere between 80 and 100 critical roles which would potentially be a beneficiary of a scheme like this,” Mr Bourke told Oireachtas finance committee members at a meeting on Thursday.

AIB is the first bailed-out Irish bank to outline plans for a return to management incentives since the onset of the financial crisis.

Mr Bourke said “variable pay” for the bank’s remaining 10,000-strong workforce would be something it would look to look at “as we normalise”.

Currently, any bonus plans involving a bailed-out Irish lender would be subject to an effective tax rate of about 90 per cent, as a result of a measure injected into the 2011 Finance Act.

Non-binding vote

AIB chairman Richard Pym confirmed in a letter to shareholders, issued on Thursday ahead of the bank’s annual general meeting on April 23rd, that the plan would be put to a non-binding advisory vote at the gathering. There is an expectation that the Government, which continues to own 71 per cent of the bank, will abstain from voting on the resolution at the meeting.

“The key objective of the plan is the creation of long-term sustainable value for customers and shareholders, while also facilitating the retention of key executives considered critical to the delivery of AIB Group’s strategic objectives and safeguarding AIB Group’s capital, liquidity and risk positions,” he said, adding that any such plan would need permission from the Minister for Finance.

“The State’s ability to recover the value of its investment in the AIB Group will act as a final condition prior to any vesting or payout of awards under the proposed plan.”

AIB required a €21 billion taxpayer bailout during the crisis. The bank has so far returned €10.2 billion to the State since it was rescued, including capital repayments, interest on bailout bonds, guarantee fees and dividends.

Meanwhile, Jim O’Keeffe, head of AIB’s financial solutions group, refused to comment on – or confirm the existence – of a €3.75 billion portfolio of non-performing loans that the lender currently has on the market. The portfolio, known as Project Redwood, includes property investment loans and buy-to-let mortgages, according to market sources.

Mr Bourke said the the size of any potential sale “changes massively” as it is marketed to outside investors, as many borrowers in default seek to re-engage with the bank on finding a restructuring solution.

The bank has said it has no plans to sell private home loans as it seeks to lower its 16 per cent non-performing loans ratio, amounting to €10.2 billion of loans, down to European Union norms of about 5 per cent. Still, some €3 billion of this reduction will happen naturally as restructuring solutions for distressed borrowers pass through a probationary period to become performing loans again.