Sheehy is fifth bank chief executive to fall in clear-out

AIB’S Eugene Sheehy became the fifth bank chief executive to step down since December in the latest clear-out at the banks. His successor faces a massive reduction in pay for the role, given the Government’s plans to cap salaries for chief executives at banks receiving state aid at €500,000.

Mr Sheehy, 54, was paid €2.4 million in 2006 and €1.15m last year. Last month he said there was a big job to be done at the bank adding that he was totally committed to leading the bank over the next few years to ensure it recovers.

He had been coming under increased pressure to resign following reports AIB board members and the bank’s institutional shareholders were trying to force him to step down ahead of the AGM.

AIB recently sought a further €1.5 billion in addition to the €3.5bn injection from the Government.

Mr Sheehy had planned to stay on as chief executive until his retirement at 60.

Since December the heads of Anglo Irish Bank, Irish Life and Permanent, Bank of Ireland and Irish Nationwide have all resigned.

AIB shares surged 19% yesterday to 96 cent giving the bank a market value of €847.5 million.

Also yesterday, AIB’s chairman, former attorney general Dermot Gleeson, 60, announced his intention to step down in July.

Non-executive director at the bank Dan O’Connor, who joined the AIB board in 2007, will succeed Mr Gleeson as chairman. David Pritchard, who joined the board in 2007 has been appointed to the new post of deputy-chairman.

AIB has put a process in place to appoint his successor in the coming months and Mr Sheehy will remain in the role until a successor is appointed. The third resignation wasfinance director John O’Donnell, who will step down in August.

The Irish Association of Investment Managers (IAIM) said it welcomed the departures. “We see it as the beginning of a process of renewal of leadership at the bank which we believe is an important step in the process of re-establishing the vibrant banking system here,” IAIM’s chief executive Frank Dwyer said.

AIB, which holds its AGM in two weeks time, said it will consider external and internal candidates for the positions.

AIB said it has consulted with the minister for finance and he conveyed his good wishes to the new chairman and deputy-chairman.

Oliver Gilvarry of Dolmen Securities said: “ “It’s a difficult time for AIB. They have a chief executive who is waiting for someone else to be appointed, but will have to deal with the government on NAMA.”