Bank of Ireland plans to transfer up to 80 staff by the end of 2022 to Davy, after it takes over the main parts of the stockbroking and wealth-management firm.
These employees will benefit from Davy's variable-pay remuneration structure, which the Department of Finance has allowed the firm to retain, even as it falls under the ownership of a bailed-out Irish bank, where bonuses have been banned since the outset of the financial crisis.
The transfers will come from areas of overlap between Davy and Bank of Ireland, mainly covering capital markets and wealth management. Bank of Ireland may also move up to 12 people a year after 2022 to Davy under the agreement with the department.
However, no former Bank of Ireland employee earning more than €50,000 a year can be hired by Davy within two years of leaving the bank.
The accord follows a template set by AIB in March when it agreed to buy Goodbody Stockbrokers. That deal, which also remains subject to Central Bank approval, will enable 30 AIB corporate finance and wealth management staff transfer to Goodbody Stockbrokers by the end of next year and benefit from the brokerage's variable pay policy.
Minister for Finance Paschal Donohoe has said in both cases the transfers will help Bank of Ireland and AIB – in which Irish taxpayers retain 13.9 per cent and 71 per cent stakes, respectively – realise "significant potential synergies" from the purchases.
AIB previously owned Goodbody, but sold the business in 2011 as it disposed of non-core assets in the wake of the financial crash. Davy was also previously a unit of Bank of Ireland, before the firm’s top executives led a management buyout deal in 2006.
Davy and Goodbody will remain separately regulated by the Central Bank following their takeovers and retain their own brands and boards.
‘End to uncertainty’
“Today’s announcement by Bank of Ireland brings to an end an uncertain period for Davy and provides it with a well-capitalised owner providing opportunities for growth, which will support the wider needs of the Irish economy and businesses,” said Mr Donohoe.
“This transaction provides Bank of Ireland with growth opportunities as it expands its product range in the high net worth and mass affluent categories. Furthermore, it supports the bank’s stated strategic priority of growing the wealth and insurance business with the aim of unlocking growth opportunities in Ireland, increasing fee income and generating sustainable profits.”
Davy was put up for sale in March as the firm raced to contain the fallout from a controversial bond trade that resulted in a Central Bank fine and reprimand.
Bank of Ireland confirmed on Thursday that it has it has reached a deal to buy Davy’s core capital markets and wealth management businesses for an enterprise value of €440 million, plus the possibility of up to €40 million of further payments from 2025, subject to the performance of the business.
The bank will also pay a further €125 million for excess cash on Davy's books. A large portion of this will come from the agreed sale, also announced on Thursday, of Davy Global Fund Management, the company's fund-servicing and fund-management arm, to Luxembourg-based peer IQ-EQ. Sources had previously told The Irish Times that this was worth more than €70 million.
The cash pile will also include €19 million Davy is set to receive from the separate sale of its 50 per cent stake in Rize ETF, a UK-based exchange traded funds business.