April 25, 2018 / 4:55 PM / in 6 months

Most AIB institutional shareholders back scuppered bonus plan

DUBLIN (Reuters) - Most of Allied Irish Banks’ (AIB) (AIBG.I) institutional shareholders backed a proposal to introduce a deferred share plan for senior executives that the government used its majority shareholding to block last week.

FILE PHOTO: Chief Executive Officer of Allied Irish Bank Bernard Byrne looks on at the Allied Irish Bank Annual General Meeting in Dublin, Ireland April 27, 2017. REUTERS/Clodagh Kilcoyne/File Photo

AIB had sought to introduce the scheme to mitigate the risks it says it faces in retaining key staff and decided to put the plan to a non-binding vote at its annual shareholder meeting on Wednesday to gauge the view of investors who bought a 29 percent stake in Europe’s largest initial public offering last year.

Most of those shareholders backed the proposal, narrowing the margin the vote was defeated by with 76 percent opposed and 24 percent in favour.

The bank fears it may lose staff to international banks that are moving operations to Dublin as a result of Brexit, and do not fall under the cap on executive pay and ban on bonuses that Dublin introduced during its banking crisis a decade ago.

The proposed plan would be worth as much as 100 percent of salary and vest only if the state was able to sell more of its 71 percent holding.

While Irish Finance Minister Paschal Donohoe acknowledged the restrictions could act as a barrier to the retention of some staff and launched a review of banking remuneration policy, he said the current policy remained appropriate.

As well as banning bonuses and capping bankers’ pay at 500,000 euros (437,000 pounds), the then government also passed a law in 2011 to introduce a so-called ‘super tax’ of 89 percent on any banking remuneration over 20,000 euros.

“We’ve had very high turnover rates for senior positions and that’s been true for a number of years, more than 20 senior executives from a team of about 10 have left over a five-year period,” AIB CEO Bernard Byrne told reporters.

“We’d like to operate on a level playing field.”

In a trading update, AIB said its new lending in Ireland rose by 18 percent year-on-year in the first quarter, increasing its share of the local mortgage market to 33 percent, while its stock of non-performing exposures fell by 1 billion euros to 9.2 billion, representing 14.5 percent of gross loans.

The bank’s net interest margin excluding cured loan interest - a measure of the profitability of a bank’s lending - stood at 2.50 percent at the end of March, in line with the underlying position at the end of 2017.

Its core tier one capital ratio fell a touch to 17.1 percent from 17.5 percent at the end of last year, still far above its medium-term target of 13 percent as strong profitability was offset predominantly by the impact of the new IFRS 9 accounting principle.

($1 = 0.8212 euros)

Editing by Adrian Croft

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