THE UPHEAVAL in the banking sector claimed three of its most senior casualties yesterday as the chairman, chief executive and finance director of AIB said they will be standing down in the coming months.
Chairman Dermot Gleeson SC, a former attorney general, will stand down next July after six years. Chief executive Eugene Sheehy will retire once his successor is appointed and finance director John O’Donnell will leave in August.
The departures, after two board meetings in the past two days, marks the culmination of rising pressure on AIB.
The bank’s shares have lost more than 90 per cent of their value in 12 months amid acute doubt about its capacity to weather a big rise in loan losses as a result of the recession.
AIB had resisted recapitalisation by the Government until late last year and it had insisted for months that there was no cause for its board to reconsider the position of any top management figures in the organisation.
On two occasions since it decided to accept €2 billion in new capital from the Government last year, AIB has revised upwards the amount of capital it says it needs to support its capital base as loan losses increase in the contracting economy.
With €3.5 billion now coming from the State, the bank conceded within the past fortnight that it required an additional €1.5 billion. It hopes to raise this money through asset sales and a buyback of debt.
It is understood that two institutional shareholders had indicated they would abstain from the vote at an extraordinary general meeting later this month in a signal that they had lost confidence in Mr Sheehy.
Other institutional shareholders showed ambivalence about Mr Sheehy’s re-election, saying they had not made up their minds how they would vote.
This was interpreted as indicating that Mr Sheehy’s position as chief executive had become untenable, especially as the Government had not yet declared whether it would use its 25 per cent voting rights to support Mr Sheehy or other board members.
“There’s obviously been significant pressure from ourselves and the private sector,” said a senior Government source.
“The Government has always emphasised the need for significant change at the top of the financial institutions but it has to be done in a considered manner and that’s what you’ve seen.”
AIB sources insisted, however, that Minister for Finance Brian Lenihan had put no pressure on the bank to drop either its chief executive or chairman. “This was absolutely something that we – AIB – went to the Minister with,” the sources said.
The same sources indicated that none of the three departees will receive any “golden handshakes” from the bank.
They will receive only the pension entitlements they have so far accrued.
Within AIB itself, senior banker Colm Doherty is widely seen as an early favourite to succeed Mr Sheehy. Mr Doherty is head of the bank’s profitable capital markets unit.
However, the bank made it clear last night that it will consider external as well as internal candidates for the top position.
“A process will be put in place immediately to identify and appoint his successor in the coming months. Mr Sheehy will continue as chief executive until his successor is appointed,” AIB said.
AIB director Dan O’Connor, who joined the bank’s board two years ago, will succeed Mr Gleeson as chairman.
His co-director David Pritchard, who also joined the board in 2007, has been appointed to the new post of deputy chairman.
Mr Gleeson, Mr Sheehy and Mr O’Donnell will each seek re-election to the bank’s board at its annual general meeting this month.
If re-elected, they will continue as directors until they leave the bank.