Outgoing Bank of Ireland chairman takes fresh aim at bonus cap

Bank of Ireland’s outgoing chairman, Patrick Kennedy, used his last annual general meeting (agm) address on Thursday to take fresh aim at bank bonus restrictions, as the lender also disclosed it will invest €2 billion “future proofing” itself over the coming years.

Mr Kennedy, a board member of 14 years, told shareholders that ongoing remuneration restrictions across the three surviving domestic Irish banks – with bonuses above €20,000 subject to a prohibitive 89 per cent levy – “create an uneven playing field with other corporates and competitors”.

He signalled the bank would continue political lobbying for an easing of the restriction. The group is alone among the three banks to have basic pay restrictions lifted. That followed the State selling its remaining shares in the business in late 2022.

The bank is said to be making good progress on finding a successor, having flagged in its annual report that it plans to increase the fee for the role from €394,000, where it has stood since 2009, to help it “attract a candidate with the appropriate experience and expertise”.

Tipperary native Evelyn Bourke, a former chief executive of UK health insurer Bupa, is widely tipped in financial circles as a potential replacement among existing board members.

Bank of Ireland chief executive Myles O’Grady told the meeting the group plans to invest “in the region of €2 billion future proofing” the business over the next four years.

[ Bank of Ireland to wind down €2bn British corporate lending business ]

“The focus of our investment will be securing long-term operational resilience, accelerating digital capability, and heightening operational excellence and efficiency, all of which is designed to ensure we meet the fast-evolving expectations of our more than four million customers,” he said.

The investment target is broadly in line with what financial analysts have been expecting. The bank has so far this year announced plans to invest in improving customer services, branches and ATMs, and on customer fraud prevention and protection.

The group has invested heavily in technology over the past decade, including a €1.15 billion programme between 2016 and 2021, centred around replacing its ageing core banking systems.

However, even its new technology has had issues from time to time. The most serious occurred last August when technical issues affected its phone and online banking services.

As the bank looked to resolve the glitch at the time, customers were able to transfer up to €1,000 from their account even if they did not have the funds.

[ Bank of Ireland to invest €34m in customer service improvements ]

The company subsequently gave customers who went into an “unauthorised overdraft” time to pay the money back without an interest charge.

At the agm, the bank fielded questions from a number of former employees about the state of the bank’s defined benefit pension scheme, where retirement benefits are linked to final salaries.

The scheme closed to new members over a decade ago, at a time when existing plan members suffered a hit to future benefits.

The bank’s pretax profit rose to a record €1.94 billion last year from €1.01 billion for 2022, with net interest income rising 48 per cent to €3.68 billion.

This was driven by rising interest rates and the group’s purchase of €8 billion of loans from KBC Bank Ireland, as the Belgian-owned lender retreated from the Irish market.