No sparks fly as AIB appoints Sheehy

Eugene Sheehy's appointment to the top job in AIB didn't send sparks flying in the Irish investment community yesterday, with most fund managers giving a muted welcome to the news.

The consensus attitude was that Mr Sheehy's combination of personality and experience made him the best man for the job, or at least the best internal candidate.

The problem for some, however, was that Michael Buckley's replacement shouldn't have been internal at all.

"I think it may have been more appropriate to appoint an external candidate," was one fund manager's assessment of the situation last night.

The manager said that, while Mr Sheehy may have been "the best choice within the universe", he may not be the man to implement a much-needed cultural shift at AIB.

He believes that the bank's strong stock price may have "taken people's minds off" the numerous compliance breaches that have struck AIB over the past few years. Putting these down to a "buccaneering" culture at the bank, the manager doubts that enough has been done to stamp this out.

"These things get wired into the DNA of the company," he said, suggesting that an external candidate would have looked much more desirable if AIB's stock had been weaker.

The accepted view yesterday was that Mr Sheehy's first big test as chief executive will come in how he approaches AIB's 22.5 per cent US holding, M&T. The market has long been eyeing the stake as a finite phenomenon, with most analysts seeing its disposal as a likely option in the relative near term.

Fund managers were yesterday suggesting that Mr Sheehy's recent tenure at M&T may muddy the waters a touch in this regard.

"If they had brought someone in from the outside, a sale would have been more likely," said one market-watcher.

Another wondered if Mr Sheehy may be more "attached" to the US position that other candidates may have been.

In the end, however, the managers all accepted that an external appointment to the helm of AIB was always unlikely, with one suggesting that the external options may not have been as strong as some imagined.

One manager argued that the perceived demand for an appointment from outside was fuelled mainly by the media and had few roots in the investment community.

He viewed Mr Sheehy's appointment positively because it signals a continuation of the business strategy that has allowed AIB to repeatedly produce bumper profits.

"If they hire an external candidate, it's more uncertain," he said.

Another said a compromise in this regard would have been to hire a senior executive from the second level in Bank of Ireland to replace Michael Buckley. That way, he suggested, the bank's culture could have been diluted without losing its effectiveness.