LONG-SERVING AIB board member Colm Doherty faces competition from a “very strong” external candidate in the race to succeed departing chief executive Eugene Sheehy, according to informed sources.
As the selection process nears its conclusion, there is speculation within AIB and the banking system as to whether Minister for Finance Brian Lenihan would accept an internal candidate. An appointment is expected soon, possibly within the next fortnight.
The head of AIB’s capital markets division, Mr Doherty is widely held to be the internal favourite for the job, so the emergence of a rival from outside AIB, confirmed by three sources with knowledge of the process, stands as a threat to his candidacy.
Although it is unclear if the rival’s credentials are strong enough to outrank Mr Doherty, the process is being conducted against the backdrop of Government resistance to an internal appointment. AIB’s board will need Mr Lenihan’s approval for its selection, given the extent of Government support in the form of the State guarantee, a €3.5 billion recapitalisation and Nama.
The Department of Finance declined to comment and AIB’s only comment was that “the process is proceeding”.
The advent of Nama and the likelihood that AIB would require a significant level of new capital to compensate for capital depletion when its property and developments loans move to the bad bank means that the incoming chief will face a formidable challenge.
In the absence of any private recapitalisation, the prospect of the State taking a majority shareholding remains a possibility.
Although Canadian Imperial Bank of Commerce recently expressed tentative interest in investing in AIB post-Nama, it remains unclear whether it or any other private investor would proceed with a formal recapitalisation proposal.
The official Government position is that it wants the “best candidate” for the job.
However, informed sources have said the recruitment of an external banker would be easier to explain.
The view was also expressed that the bank would have greater credibility in its efforts to engineer a recovery if there was “complete change” at the top.
Mr Doherty, an AIB director since 2003, was an unsuccessful contender for the top job when Mr Sheehy was appointed in 2005.
The capital markets division in the AIB recently reported a 13 per cent drop in pretax profit to €252 million in the six months to June.
However, the unit has continued to make profits even as the bank’s main Republic of Ireland unit incurs significant losses as a result of its large exposure to the collapse in the property market.
