AIB likely to quadruple chief executive Colin Hunt's pay package to €2m after government exit
O'Grady is paid a basic rate of €950,000 before his pension or bonus at Bank of Ireland, which divested from State ownership in 2022. That compares to the €500,000 basic wage that his AIB counterpart receives.
After pension and bonuses are included, Hunt is currently paid just over €600,000 a year.
'To be fair, a salary of €500,000 for the CEO of the largest bank in Ireland is not competitive. It's well below market rate,' said banking analyst John Cronin of SeaPoint Insights.
'Bank of Ireland pays Myles O'Grady €950k and it pays CFO Mark Spain €600k. So I would say that the CEO and CFO of AIB will go to those levels at least pretty quickly.
It's hard for the general public to get their heads around pay packages above €500k
"They'll probably keep CEO pay just below €1m. It'd be a surprise if they didn't match Bank of Ireland, and they might go around €25,000 more,' he said.
Now that the Government has sold its stake and the salary cap at the bank has been removed, industry sources believe AIB is also likely to add a lucrative fixed share allowance to Hunt's package – effectively matching O'Grady's deal.
Bank of Ireland's top executives currently get a fixed share allowance of 50pc of salary, introduced after the State sold its final shares in the bank in 2022. That fixed share allowance is expected to rise to 100pc next year.
'It's hard for the general public to get their heads around pay packages above five hundred grand and why a CEO has to be paid a million,' admitted another industry source, adding that Hunt was seen as unlikely to seek work with banks in London or elsewhere.
'I'd think he would probably attach a huge amount of value to living here, from a family point of view. He's also in the middle of every significant macroeconomic debate in Ireland because of his position – and I wouldn't underestimate the value he attaches to that.
'But if you want to hang on to that management team and keep them together, then you have to compete in the marketplace. And now they have the freedom to compete.
"It would be kind of dysfunctional to have a banking market where one big bank can pay double what the other big bank pays, when they're more or less doing the exact same thing,' said the source.
Cronin feels the pay cap should never have been introduced.
'I get that it worked politically. But you have to pay people properly to do a job. They could move to another smaller bank and get paid twice the amount and more.
The danger is you get runaway cost-inflation across the sector
"There is no doubt shareholders saw an ongoing retention risk in relation to the management team and they were not happy about that.'
Cronin said bankers are disappointed that Finance Minister Paschal Donohoe did not remove the ban on variable performance-related bonuses above €20,000.
'My own view is that he should, but I can totally understand why he didn't. The danger is you get runaway cost-inflation across the sector.
'But the problem is that it creates cynicism within the sector, where people say that it's OK for the top guys to get paid properly, but not everyone else. And it can drive fixed-pay inflation, which is less ideal from a cost flexibility standpoint.'
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