Bank of Ireland blames pay limits as CFO quits for Musgraves

Bank of Ireland’s chief executive took aim at pay restrictions in the domestic banking sector on Monday after it was revealed her chief financial officer, Myles O’Grady, has handed in his notice to join food wholesaler and retailer Musgraves.

Group chief executive Francesca McDonagh said the CFO’s decision to quit “highlights the challenge that remuneration restrictions represent for Irish banks in attracting and retaining talent”.

"The lack of a level playing field means Bank of Ireland is at a competitive disadvantage to other companies, corporates and PLCs who are not restricted in the same way. Any company in a similar position would highlight this as a serious challenge," said Ms McDonagh. "The normalisation of our operations is now vital to the long-term sustainability of the indigenous banking sector."

Bonuses continue to be effectively banned across bailed-out Irish banks, by virtue of a prohibitive 89 per cent levy, more than a decade after the financial crisis.

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Basic executive pay is also largely capped at €500,000 across the sector, though CEOs at Bank of Ireland, which avoided nationalisation during the crisis, have enjoyed salaries in excess of that threshold. Ms McDonagh’s basic pay currently runs at €950,000.

Mr O’Grady is expected to leave the bank next March and a process to find a successor will now commence, the bank said in a statement on Monday morning, which did not say where the executive was moving to.

Musgraves announced at noon, five hours after the Bank of Ireland statement, that he would be joining the group which is behind brands including Supervalu, Centra and Donnybrook Fair as CFO from next April.

“The CFO was well liked by the market, so the departure will likely be viewed negatively by investors,” said Goodbody Stockbrokers analyst Eamonn Hughes. “In addition, with BOI [Bank of Ireland] set to update the market on new strategic targets at some stage next year, one could question the potential timing now on these disclosures should it go down the external choice route, though this may be less of an issue if an internal candidate is chosen.”

News of the planned exit of Mr O’Grady, whose total remuneration came to €531,000 last year, also come at a time when the Government is seeking to sell its stake in the bank.

The Ireland Strategic Investment Fund (ISIF), which holds the Bank of Ireland stake on behalf of the Minister for Finance, sold two percentage points of its holding in the market between July and August, reducing its interest to just below 12 per cent.

Mr O'Grady, who was previously been a top finance executive with at AIB, joined Bank of Ireland in June 2019 in a senior finance role. He was appointed CFO in October 2019 and a member of the board the following January.

The executive, who was heavily involved in AIB’s return to the stock market through an initial public offering (IPO) in 2017 as its group director of finance and investor relations, quit the second-largest bank by assets in the middle of 2018 and subsequently took on the role of CFO at a housebuilder, called DRes, that was at the time being lined up for flotation.

Landbank

US private-equity giant Lone Star and Patrick Durkan, managing director of Durkan Residential, were seeking to a €300 million-plus IPO of DRes. However, the transaction was put on ice in late 2018 and Lone Star decided the following year to develop on its massive Irish landbank through its own housebuilding unit, Quintain.

“Since joining Bank of Ireland, Myles has provided exceptional financial leadership to the group,” said Ms McDonagh. “He has helped steer the bank through the Covid-19 pandemic, overseeing a return to profitability in the first half of 2021.

“I want to personally thank Myles for his unwavering support and wish him the very best for his future.”

Bank of Ireland also blamed remuneration restrictions when its previous CFO, Andrew Keating, quit two years’ ago to become director of group finance at building materials giant CRH.