New man at AIB looks to future but cannot forget bank's past
New AIB chief executive Colin Hunt was in the mood to look to the future when he met the press following his first set of financial results since taking the top job at the bank. The firm reported pre-tax profits - including exceptionals - of €436m for the six months to the end of June, down 40pc on last year, as low interest rates and a challenging global environment put a lid on the positive vibe in the bank's home market.
And no matter how much in 2019 Irish banks would like to keep the attention on the road ahead, the failures of the past are always ready to come tumbling out of the closet to spoil the mood.
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Hunt, and his management team, were in an upbeat, if cautious, mood about their view of a future which they admit remains uncertain. The domestic environment may be strong but with issues such as Brexit to be resolved, caution is the appropriate approach, Hunt said.
"The sun is still shining in Ireland but we need to repair our balance sheet to the maximum possible extent," he said. "Even though we have made very, very substantial progress in terms of reducing our non-performing exposures."
Hunt, who took over the top role at the bank in March, said: "The Irish economy is doing very well, with 4.5pc unemployment, but we are in an uncertain time globally and we've got to ensure that in our management of this institution, we put our balance sheet into as strong a position as possible, because that's how you withstand whatever way the economic environment goes. That's our number-one focus."
But, for Irish banks - and their management teams - the conversation always seems to end up back at the issues of the past. And despite the air of cautious optimism struck by top management at the bank, they could not quite hide a flash of irritation at questions that sought to pick on the last pieces of flesh on the gnarled old bones of a long ago rotten tiger.
Asked about whether the €500,000 salary cap imposed on senior bankers and 89pc tax rate on bonuses, introduced after the banking crash, were hurting its ability to retain senior staff, the chief executive's answer was curt: "I have given my views on this time and time and time again, and I've nothing further to add. But we are seeing ongoing attrition."
The cap undoubtedly remains popular with voters; not so much with bankers.
When pushed, Hunt did go further: "It is imposing a restriction on our ability to run the bank efficiently and it is imposing a competitive disadvantage on us in this marketplace.
"The focus is on the pay cap. The pay cap impacts a tiny number of people. The big issue is the fact that we have an effective ban on variable pay that affects far, far more people, and our competitors don't have that."
Another issue that arose with hints of past traumas for the bank was the refund of €61m to personal and small business customers, after the group discovered problems with loan documents going back a decade. Hunt insisted that this was not a case of overcharging, but admitted that the bank "fell short of its own standards of transparency".
"This was interest that was owed to us, it was interest that had been accrued on the loan. It was simply a roll-up of interest going forward.
"We weren't as transparent as we should have been. We investigated the issue comprehensively. And we are in the process of addressing it. This was all about us spotting a mistake. Us fixing the mistake, investigating it, making amends, and we're now corresponding with our customers in relation to that, and returning interest that was due. But the standard documentation was not at a level that we regard as our standard."
Yet the problem for Hunt, who was not at the firm when the tracker scandal was unfolding, is that issues such as this most recent loan interest mix-up, no matter how unrelated they are to how Irish banks handled tracker mortgages, remind the public of how the banks got it badly wrong when it came to the overcharging of customers. "Here we go again," many will have said when they read the latest story.
Pushed on this, Hunt went further: "Look, we have a clear interest in bringing the legacy issues to a close. We want to see the reputation of this institution being restored fully in the eyes of the public.
"So our focus is on minimising the risks of these sorts of errors. Nobody can guarantee you're not going to make mistakes, but it's how you address the mistake is what is really important."
Hunt said that AIB wanted to "close the chapter" in relation to legacy issues. He added: "It is vital for the long-term sustainability of the bank and indeed of the sector that we close the chapter on legacy issues. And whenever we do make mistakes - and we will make them - we will admit those mistakes and we will clean up those mistakes."
The new CEO's caution and focus on building a sustainable balance sheet for the future are very welcome. But when it comes to the general public, who make up his customer base, the success of his time at the bank will likely be judged by how he goes about rebuilding damaged trust.
Only then will the thorny issue of pay become a matter for the banks themselves, rather than the hot political potato it remains today.
Sunday Indo Business