The pay packages of Irish banking chief executives are not out of kilter with peers in Europe when viewed against the size of their balance sheets and complexities of their businesses, data compiled by Citigroup suggests.
The finding may take away from a recommendation in a Government-commissioned report, which has been lying on the desk of Minster for Finance Paschal Donohoe since mid-June, that pay restrictions should be eased across bailed-out banks.
The report by Citigroup analysts on remuneration across European banks, circulated to clients on Tuesday, showed that CEOs of Irish lenders were at the bottom of the pile last year. Their Swiss counterparts were at the top as total remuneration averaged €3 million last year across the continent.
Fixed salaries made up, on average, 43 per cent of CEO compensation in the sector in Europe, while cash bonuses and share incentive plans accounted for a further 44 per cent. The remainder was made up of pension contributions and other benefits.
Pay across bailed-out Irish banks has been capped at €500,000 and bonuses effectively banned for the past decade as they face an 89 per cent tax.
Bank of Ireland, which is 14 per cent State-owned, is an exception. Its chief executive, Francesca McDonagh, has a gross salary of €950,000, with no performance-related pay.
Mr Donohoe asked executive search firm Korn Ferry to review the restrictions late last year, amid concerns that banks are struggling to retain staff as foreign-owned financial group in the State that have been growing in anticipation of Brexit are not subject to the caps.
Amount of assets
However, figures and charts contained in Citigroup’s report show the remuneration of Irish bank CEOs is not out of sync with other European banks when looked at it from the perspective of the amount of assets on their companies’ balance sheet and the fact that the State’s banks have no investment banking activities.
“Balance sheet size and business mix show higher correlation to remuneration than profitability metrics,” said the Citigroup analysts. “Investment bank CEOs seem to have the highest overall compensation, but in most cases also have higher variable compensation as [a percentage] of total.
“Banks with high profitability/returns, but relatively low CEO compensation, include a number of the Benelux and Nordic banks,” they added.
Best paid
Swiss banking giant UBS's chief executive, Sergio Ermotti, was the best paid in the sector last year, with his compensation reaching 14.1 million Swiss francs (€12.9 million). Credit Suisse chief Tidjane Thiam, who was cleared by the group's board on Tuesday of ordering a botched surveillance of a former senior executive in a highly damaging scandal, was second on the list, at 12.7 million francs. Both of these banks make a significant portion of their earnings from investment banking.
Although the Citigroup data suggest that Irish bankers’ total remuneration reflects the size of their companies’ balance sheets, industry observers say they have to work just as hard as the heads of bigger European lenders.
Meanwhile, senior bankers, such as AIB CEO Colin Hunt, have said the effective ban on bonuses was having a greater impact on the industry's ability to hold on to key mid-ranking staff than the €500,000 executive pay cap.