Saturday 16 November 2019

Politicians slam AIB on bonuses as PTSB defends loans stance

PTSB CEO Jeremy Masding
PTSB CEO Jeremy Masding

Gretchen Friemann

AIB executives faced a barrage of criticism from politicians over the State-backed lender's plans to increase the remuneration of 80 to 100 top executives with a deferred share bonus scheme.

Under questioning from the Oireachtas Finance Committee, AIB's chief financial officer, Mark Bourke, insisted the proposal to re-establish a performance-related pay structure a decade after the crash marked a "first step" in the bank's push for a "normalised form of remuneration".

He said the shares would not vest for another five years, would be tied to management's ability to return the remainder of the €21bn bailout and would also include clawbacks if the bank's performance deteriorated.

Details of the scheme were set out in the group's annual general report, which was published alongside the annual results earlier this month.

Fine Gael Senator, Kieran O'Donnell claimed it "reeks of elitism" and reminded management that the bank is still 71pc-owned by the taxpayer. The bank was also criticised for its silence on the multi-billion euro Project Redwood loan sale.

Jim O'Keeffe, head of AIB's financial solutions group, the bank's workout arm, refused to confirm the sale process even existed, prompting sharp criticisms from the committee. Sinn Féin's Pearse Doherty describing the bank's stance as "bizarre".

As this newspaper has reported for many months, Redwood comprises soured loans - largely commercial mortgages and buy- to-let loans, although early sales documents showed SME and land loans were included among others.

The gross value totals €3.75bn but is expected to change hands at close to €2bn.

However, as highlighted by the Irish Independent earlier this month, the deal size has reduced slightly following increased levels of engagement from distressed borrowers. The precise scale of this reduction remains unclear.

Yet while AIB stuck rigidly to its tight-lipped strategy, Permanent TSB opted for relatively frank disclosure.

CEO Jeremy Masding argued the bank is "running out of options" to comply with a tougher regulatory regime and warned against any move by the Government to block the planned sale of 18,000 home loans and buy-to-let mortgages.

He pointed out PTSB still owes the taxpayer about €1.5bn and said the lender's declining share price reflects investor scepticism about the bank's ability to "manage down" its stack of non-performing loans.

He pointed out that PTSB's current share price of €1.86 - close to 60pc below the IPO issue price in 2015, when a quarter of the bank's shares were floated in 2015 - leaves the market capitalisation at under €850m.

He said that gap between the market cap and the amount owed to the taxpayer "is being registered" by the market as the bank's inability to scale back its NPL exposure, which still stands at 26pc of the overall loan book.

Mr Masding said that as a "guest" in Ireland, his job as CEO is to "implement the right option for all taxpayers".

Irish Independent

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