Banker pay in the spotlight as AIB chief Bernard Byrne quits

Move to Davy comes within months of CFO Mark Bourke signalling he was leaving too

AIB chief executive Bernard Byrne is stepping down to take a job with stockbroker Davy, in a move that it set to heap pressure on the Government as it considers remuneration in bailed-out banks.

The move comes within two months of his chief financial officer, Mark Bourke, signalling he was leaving the bank to head up the finance function at Portuguese lender Novo Banco.

"It was a very grim day in my life when Bernard told me that he had an external opportunity which he wanted to pursue," said Richard Pym, chairman of AIB. "The fact that it came so soon after the resignation of our CFO, Mark Bourke, made it doubly difficult."

Shares in the bank fell as much as 10 per cent in Friday morning trade, closing 2.6 per cent weaker at €4.07.

Mr Byrne will take up a new role as deputy chief executive of Davy Group, where he will also replace Kyran McLaughlin as head of capital markets. He will take up his new positions in May. He has headed AIB since May 2015.

It is understood the role is corporate client-based and takes in the substantial part of the business outside of private wealth. It involves corporate broking, corporate finance, institutional sales and refinancing.

“Bernard is a very successful and well-established CEO-level executive board member with over 20 years of board-level experience in a range of complex, dynamic, regulated, domestic and international businesses in public, private equity and semi-State sectors,” said Davy.

“Currently the CEO and former CFO of AIB plc, he held similar roles in ESB, IWP International plc and ESBI.”

The broker rejected a suggestion that Mr Byrne’s appointment may have come as a precursor to a change in ownership. “The current ownership model has served Davy well and we have no plans to change to it,” it said.

Training ground

Mr Byrne, who joined the bailed-out bank in 2010 as chief financial officer, subsequently headed up the retail operation before becoming chief executive and presiding over the return of the bank to the main stock markets in Dublin and London in June last year. That transaction led to the State’s sale of a 28.8 per cent stake in the bank and raised €3.4 billion for taxpayers.

Mr Pym said at a banking conference last week that pay restrictions for bailed-out banks have turned AIB into a “training ground” for bankers who then move to higher-paid roles with competitors.

Mr Byrne said in an interview with The Irish Times Inside Business podcast, aired last week, that the group had lost a "mid-teens" percentage of almost 200 most senior managers since it returned to the main Dublin and London stock markets in June last year.

Currently, any bonus plan involving a bailed-out Irish bank is subject to an effective tax rate of 89 per cent, as a result of a measure injected into the 2011 Finance Act.

Minister for Finance Paschal Donohoe last month hired Korn Ferry, one of the world’s largest headhunting firms, to assess remuneration across bailed-out lenders, which is expected to recommend a return of bonuses. In a statement on Friday evening, the Department of Finance said this review is on track for completion before the end of the year.

“It is important that we do not prejudge the outcome of the review. It is also important to note that the ‘super tax’, which sees 89 per cent of bonuses being paid back to the State, remains in place via the Finance Act 2011. The power to alter that remains exclusively in the hands of the Oireachtas.”

Search for successor

Mr Byrne will remain with AIB into 2019 as it seeks to find a successor. Group chief operating officer Tomas O’Midheach was recently appointed deputy chief executive officer, while group treasurer Donal Galvin was appointed deputy chief financial officer.

The resignation took the focus off a trading statement from AIB on Friday, which showed that the group’s non-performing loans fell 29 per cent to €7.2 billion in the nine months to the end of December, helped by a sale of soured loan portfolio during the period and as the bank continued to restructure distressed loans in a growing economy.

The bank’s interim management statement on Friday said that its net loans increased by €500 million to €60.5 million in the first nine months of the year, reflecting strong growth in new lending, notwithstanding the continued reduction in non-performing loans.

“Following a positive financial performance in [the first half], we continue to deliver strong profitability, generate capital and increase lending,” said Mr Byrne.