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Irish Times
7 hours ago
- Business
- Irish Times
Paschal Donohoe's refusal to tackle banker bonus ban is hitting those who bought State's shares
Paschal Donohoe's sale of the State's remaining shareholding in AIB this week will pave the way for a crisis-era agreement that governed the Minister for Finance's engagements with the bailed-out bank to be torn up within weeks. The relationship framework – tweaked in 2017 as Donohoe proceeded with AIB's initial public offering (IPO) just days into the job and his first stint in the role – gave the Minister the right to be given sight of business plans before these were adopted, consulted on any deal or investment worth more than €100 million and get prior notice of a senior executive appointment before it was announced. On remuneration, the document said that 'any incentive arrangements for directors and senior executives are closely related to their performance, measured by the achievement of relevant targets, such targets having regard to the achievement of the business plan'. It was a moot clause, of course. Bank bonuses above €20,000 have been in effect banned across rescued banks by way of a prohibitive 89 per cent supertax for the past decade-and-a-half. (Indeed, Donohoe only allowed for variable pay up to that level to be introduced in late 2022, after Bank of Ireland returned to full private ownership.) READ MORE Bank executive pay remains as politically thorny today as at any stage the financial crash – even if the State has now recovered, in nominal terms at least, just over the €29.4 billion pumped into AIB, Bank of Ireland and PTSB during the crisis. It continues to hold a 57 per cent stake in PTSB, which at present has a market value of €620 million, and stock warrants in AIB, estimated to be worth about €300 million. Donohoe confirmed to reporters on Tuesday, after selling the Government's last 2 per cent stake in AIB to stock-market investors, that he is lifting the €500,000 basic salary cap at AIB and PTSB. He argued that it was not appropriate for the Government to have a role in setting the pay at AIB and Bank of Ireland 'when we no longer own a single share in those companies'. Lifting the cap at PTSB is to prevent it being put at a competitive disadvantage when it comes to hiring and retaining executives. He's right. But the logic fell apart when he said that he had 'no plans' to remove the 89 per cent super tax on bonuses, knowing it is enshrined in law (the Finance Bill 2011) and requires legislation being passed through the Oireachtas. There are no votes in that. [ How AIB, once worth less than its art collection, came back from the brink Opens in new window ] To be clear, the long campaign by bankers to reintroduce bonuses was largely ham-fisted. It started off with a pitch by AIB's then chairman David Hodgkinson to the Department of Finance in early 2014 when the bank had barely returned to profit after the crisis, let alone start to repay its rescue bill. Arguing for a return of variable pay when the sector spent much of the next decade knee-deep in the tracker mortgage scandal was also tone deaf. But lines have been drawn under those. To see where AIB is now headed on the executive pay front, you only have to look at its main rival. Following the lifting of pay caps in Bank of Ireland in late 2022, its board came up within months with a plan to award its chief executive, Myles O'Grady , the equivalent of 25 per cent of his basic salary from 2024 by way of shares in the group, rising to 50 per cent this year. O'Grady was hired two-and-a-half years ago on a fixed salary of €950,000. With the stock awards set to soar to 100 per cent of salary next year, his total remuneration will top €2 million, when pension entitlements are also included. The fixed share bonanza, which have trickled down to other senior Bank of Ireland executives, means that top employees have skin in the game alongside other investors. The board, in fairness, has also decided that executives must now hold on to stock for five years after they are received, up from three years previously. And it argues the CEO's total package will remain about 60 per cent below the median maximum remuneration opportunity that heads of mid-tier UK banks and other top-10 Iseq companies enjoy. But the no-strings nature of the stock awards – to get around the fact that performance-related pay above €20,000 remains outlawed – is not ideal for investors who now hold the shares that the Government sold in the banks. It treats success, mediocrity and even underperformance as one and the same. It also flies in the face of carefully thought-out EU rules brought in after the financial crisis. These limit variable pay to 100 per cent of salary – or 200 per cent if explicitly approved by at least two-thirds of shareholders. These also include provisions for bonuses to be docked or clawed back when staff engage in risk-taking that causes losses later. The Irish solution to an Irish problem is even more incongruous when you consider that senior finance executives are now subject to one of the strictest individual accountability regimes in Europe – by virtue of rules that came into force almost 12 months ago.
Irish Times
19 hours ago
- Business
- Irish Times
Markets mixed after US indicates it will hold back from any immediate action in Iran
Global markets were mixed in choppy trading on Friday, as inflation concerns and uncertainty around US involvement in the Iran-Israel war offset relief over president Donald Trump holding back from any immediate action. Dublin PTSB was the standout performer on the day in Dublin as it climbed 4 per cent while the Euronext Dublin index was unchanged. Its peers AIB and Bank of Ireland were flat. Dalata, the biggest hotel operator in the State, finished up 3 per cent at €6.40 after a Scandinavian consortium circling the group signalled an interest in potentially making an improved offer for the business, after its €1.3 billion bid was rejected earlier this month. Oslo-based investment firm Eiendomsspar and Swedish hotel company Pandox, in which it owns an almost 25 per cent stake, said they have bought 1.69 million shares in Dalata at €6.30 – marking a premium to the €6.05-a-share non-binding offer it made previously. READ MORE Elsewhere, food giant Kerry Group underperformed as it finished down 1.8 per cent after earlier announcing it has initiated a €300 million share buyback programme that will run until February 27th, 2026. The airlines were a mixed bag, with Ryanair up 0.5 per cent, while longer-haul peers Lufthansa and Aer Lingus parent International Airlines Group were up 2 per cent and 1.5 per cent respectively. London Britain's FTSE 100 snapped a five-week winning streak, closing out a week marred by a wave of global risk aversion amid the conflict between Israel and Iran, while a slew of interest rate verdicts were also assessed. The blue-chip FTSE 100 dipped 0.2 per cent to hit a more than two-week low, while the midcap index ended 0.4 per cent higher, though with marginal weekly losses. Drugmakers GSK and AstraZeneca were among the top drags on the FTSE 100, down 2.3 per cent and 1.5 per cent respectively. Heavyweight energy shares gave back some of their gains from earlier this week as crude oil prices also edged lower. BP lagged with a 2.1 per cent decline. Among headlining stocks, Berkeley dropped 8.2 per cent after the home builder reported results and forecast fiscal 2026 and 2027 profits below market expectations and proposed the appointment of CEO Rob Perrins as executive chair. Europe Euro zone government bond yields were on track for a weekly decline. German 10-year government bond yields, which serve as the benchmark for the wider euro zone, fell 0.5 basis points to 2.51 per cent and were set to end the week 1.5 basis points lower. In the stock markets, the Europe-wide Stoxx 600 finished down 1.5 per cent. The Cac 40 in Paris closed up 0.3 per cent, and the Dax 40 in Frankfurt ended 1.3 per cent higher. New York Wall Street indexes tracked modestly higher as markets took comfort after the White House said Trump will decide in the next two weeks whether the US will join Israel in attacking Iran. Six of the 11 major S&P 500 subsectors rose. Utilities led sector gains with a 1 per cent rise. On the flip side, communication services stocks lost 1.2 per cent. All three main indexes were set for weekly gains. Investors are also bracing for any potential spike in volatility from Friday's 'triple witching' – the simultaneous expiration of single stock options, stock index futures, and stock index options contracts that happens once a quarter. Among megacap stocks, shares of Google parent Alphabet fell 2.5 per cent while chipmaker Nvidia, and Meta were down about 1 per cent each. Kroger rose 9.3 per cent after the grocery chain increased its annual identical sales forecast. GMS shares rose 28.3 per cent after QXO made an offer on Wednesday to acquire the company for about $5 billion in cash. Shares of QXO were up 4.1 per cent. Accenture fell 6.3 per cent after the IT services provider said new bookings decreased in the third quarter. – Additional reporting: Agencies
Irish Times
2 days ago
- Business
- Irish Times
AIB share sale brings banker pay back into focus
Nothing was more certain this week than that Minister for Finance Paschal Donohoe 's decision to lift caps on bankers' pay would trigger an immediate adverse reaction. And so it proved. On Tuesday, just hours after confirming the State had sold the last of the shares it held in AIB , the Minister announced there would no longer be a State-imposed cap on salaries at the three Irish banks. The decision comes despite the State continuing to own 57 per cent of PTSB . The Minister explained the logic of the decision by saying it would ensure a 'level playing field' between Bank of Ireland , which had already been given freedom on salaries back in 2022 after it repaid its State bailout, and AIB. Including PTSB meant it would not suffer a 'competitive disadvantage'. In the Dáil that afternoon, Sinn Féin leader Mary Lou McDonald slammed the return of what she called 'gold-plated salaries' and 'bumper bonuses for the top brass at AIB'. READ MORE She accused the Government of doing a 'botch job' in its handling of the shares and claimed that €5 billion would have been generated 'simply by holding on to the shares'. Noting that it was taxpayers who had bailed the banks out, she asked: 'How do you explain this €5 billion loss to the Irish taxpayer.' In fairness, the Minister, for now anyway, is holding firm on the 89 per cent supertax that applies to bonuses in excess of €20,000 across the three surviving domestic banks. And trying to get such a move through the Oireachtas would certainly be a heavy lift. And, as it happens, once dividends, warrants, fees and other income is included, the final sale of the AIB shares left the State closer to €650 million out of pocket on the €20.8 billion it put into keep the bank afloat after the financial crash. Not that that is an insignificant sum, especially when you consider that it is just relative to the break-even figure – not allowing for any of the investment return the State might normally expect on an investment that, in part, dates back 16 years. Ireland's two big banks may feel that they have finally closed the door on a past they would like to forget: it is likely to be some time yet before the memory of the crash and its fallout dims in the mind of the wider public, never mind the Opposition.
BreakingNews.ie
4 days ago
- Business
- BreakingNews.ie
Pay cap of €500,000 at AIB and PTSB removed, Finance Minister says
A pay cap of €500,000 in place at AIB and PTSB is to be lifted, Minister for Finance Paschal Donohoe said. Mr Donohoe, who made the announcement after the Government sold its final 2 per cent stake in AIB on Monday, said it was not appropriate to set pay restrictions when it did not own the bank. Advertisement He said a cap in place for PTSB, in which the State still holds a 57.4 per cent share, would also be lifted. He said that since the financial crash, various regulatory reforms have been introduced to strengthen the oversight of the banking sector. He said this range of measures was a better way to regulate the banks rather than with salary caps. 'This pay cap will now be removed for both of those banks,' Mr Donohoe said. Advertisement 'The skillset required in the banking sector is evolving, and in some cases the greatest demand for staff can be in areas such as IT, cyber, risk management, legal areas and compliance decisions.' Mr Donohoe said the cap was being lifted to ensure the banks could compete with one another more effectively for personnel. 'These skills are in demand right now across the economy, and so the banks are competing for this talent against other companies who are more flexible and have different remuneration policies.' Mr Donohoe was asked about the possibility that the public would be annoyed at bankers' maximum pay increasing while interest repayment rates are high. Advertisement 'Of course, I understand that any decision like this with regard to bank pay is one that will always be viewed critically by people who are both critical of our banks, but also remember all of the cost and difficulty that I was at pains to acknowledge in my statement. 'What I would say to those, and there are many who continue to be concerned, is firstly that I don't believe that it is correct that we set pay in a company that we no longer have any share in, that as a small, open economy we're trying to attract investment into our economy, and I would hope that banks like AIB and Bank of Ireland will continue to be able to attract investment in their future. 'For that reason, us playing a role in setting their pay when we no longer own a single share in those companies is not appropriate. 'Again, I can understand the sensitivity of a decision like this for so many, but the changes that we have made and how our banks are supervised are really considerable.' Advertisement He said they would review options in relation to the future ownership of PTSB under review. 'I did decide there was a fundamental difference between a bank of the scale of PTSB operating in an environment in which one bank is removed from the pay framework, as opposed to where both other banks that it competes against are removed from it. 'The fact that we were moving to an environment where both of the pillar banks that they would compete against, in every sense, would be out of the framework, I decided it was a very important factor versus where they were in the past with only one.' He said this was an 'important moment' in Ireland's economic journey and said it was about sending a signal that Ireland wants a competitive banking sector. Advertisement During the financial crash, the Irish State invested €29.4 billion in AIB, Bank of Ireland and PTSB between 2009 and 2011. When AIB shares were first floated for sale in 2017, the State had a 99.8 per cent stake in the bank. To date, the State has recouped more than €29 billion from two of the three banks it held shares in. The Irish State sold its final shares in Bank of Ireland in September 2022.
The Independent
4 days ago
- Business
- The Independent
Pay cap of 500,000 euro at AIB and PTSB removed, Finance Minister says
A pay cap of 500,000 euro in place at AIB and PTSB is to be lifted, Finance Minister Paschal Donohoe said. Mr Donohoe, who made the announcement after the Government sold its final 2% stake in AIB on Monday, said it was not appropriate to set pay restrictions when it did not own the bank. He said a cap in place for PTSB, in which the State still holds a 57.4% share, would also be lifted. He said that since the financial crash, various regulatory reforms have been introduced to strengthen the oversight of the banking sector. He said this range of measures was a better way to regulate the banks rather than with salary caps. 'This pay cap will now be removed for both of those banks,' Mr Donohoe said. 'The skillset required in the banking sector is evolving, and in some cases the greatest demand for staff can be in areas such as IT, cyber, risk management, legal areas and compliance decisions.' Mr Donohoe said the cap was being lifted to ensure the banks could compete with one another more effectively for personnel. 'These skills are in demand right now across the economy, and so the banks are competing for this talent against other companies who are more flexible and have different remuneration policies.' Mr Donohoe was asked about the possibility that the public would be annoyed at bankers' maximum pay increasing while interest repayment rates are high. 'Of course, I understand that any decision like this with regard to bank pay is one that will always be viewed critically by people who are both critical of our banks, but also remember all of the cost and difficulty that I was at pains to acknowledge in my statement. 'What I would say to those, and there are many who continue to be concerned, is firstly that I don't believe that it is correct that we set pay in a company that we no longer have any share in, that as a small, open economy we're trying to attract investment into our economy, and I would hope that banks like AIB and Bank of Ireland will continue to be able to attract investment in their future. 'For that reason, us playing a role in setting their pay when we no longer own a single share in those companies is not appropriate. 'Again, I can understand the sensitivity of a decision like this for so many, but the changes that we have made and how our banks are supervised are really considerable.' He said they would review options in relation to the future ownership of PTSB under review. 'I did decide there was a fundamental difference between a bank of the scale of PTSB operating in an environment in which one bank is removed from the pay framework, as opposed to where both other banks that it competes against are removed from it. 'The fact that we were moving to an environment where both of the pillar banks that they would compete against, in every sense, would be out of the framework, I decided it was a very important factor versus where they were in the past with only one.' He said this was an 'important moment' in Ireland's economic journey and said it was about sending a signal that Ireland wants a competitive banking sector. During the financial crash, the Irish State invested 29.4 billion euro in AIB, Bank of Ireland and PTSB between 2009 and 2011. When AIB shares were first floated for sale in 2017, the State had a 99.8% stake in the bank. To date, the State has recouped more than 29 billion euro from two of the three banks it held shares in. The Irish state sold its final shares in Bank of Ireland in September 2022.
