Pay and bonus issues likely to come up at AIB, Minister told

A discussion on pay caps and the “supertax” on bonuses at AIB is likely to rear its head as the State’s share in the bank approaches zero, Minister for Finance Paschal Donohoe has been told

In a submission on the latest sale of the Government stake in the bank, Department of Finance officials said there was no legal requirement to change the compensation cap as long as the state remained a shareholder.

It said a further disposal of shares could take place before a conversation on pay and perks was necessary with AIB.

The submission also said, however, that “notwithstanding this, we will need to normalise the relationship between the State and AIB as our shareholding continues to reduce towards zero. “[This] means considering the removal of the crisis-era measures (compensation cap, super tax etc) which continue to be still in place.”

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A Department of Finance submission from mid-January said there was a lengthy window for a further sale of the state’s stake in AIB before their annual financial results on March 5th.

It said officials were looking at a deal of around 5 per cent of the bank, which could yield up to €669 million in return. The submission said AIB had been one of the best performing banks in Europe through 2024 and that the department “should take advantage of this share price strength”.

The document added: “Should the AIB share price weaken ahead of the launch date or if market conditions are not favourable then we will postpone this transaction and look at it again following AIB’s 2024 annual financial results.”

Mr Donohoe was advised he would need to have “political clearance” for the sale on the final weekend of January. It said this would leave a “clear path” for the Department to move quickly and “take advantage of market conditions”.

Officials did warn however, of the possibility of sudden volatility or a leak and how this could lead to a halt of the latest AIB share sale.

“This happened [to] the UK Government during summer 2021 on NatWest,” the submission added.

In a note, Mr Donohoe – who had been reappointed as Minister for Finance days before – wrote “excellent work and look forward to catching up with the team soon.”

In a separate submission prepared after the sale, Mr Donohoe said he wants “to exit from AIB entirely, as market conditions allow”.

The post-sale briefing said proceeds from the sale were around €652 million and the state’s shareholding was now down to 12.5 per cent.

“The price achieved on this transaction was 14 per cent higher (€5.60 v €4.90) than what was achieved in our previous ABB [accelerated bookbuild: a way of placing shares with investors in a short space of time] transaction in AIB last June while also achieving a lower discount (2.27 per cent v 2.78 per cent),” the briefing said.

The submission said trade in AIB after the sale had been healthy with the share price rising slightly in the aftermath.

“That is a good outcome from our perspective – it is important for investors to see the stock trade higher immediately after the transaction but not significantly higher.”

In a summary, Mr Donohoe was told that of the €29.4 billion the state invested in AIB, Bank of Ireland, and Permanent TSB during the financial crash, €27.4 billion had now been recovered. “The investments in the remaining banks are currently valued at circa. €2 billion ... meaning we are around break-even on our investment in the three banks on a cash-in cash-out basis and including current valuations.”