Anglo Irish Bank has halved its bonus costs and is freezing pay in the wake of a 37% slump in profits. Top executives will get no bonus and are also facing pay cuts as the bank sliced 17% off operating expenses this year.

Pre-tax profits at the bank fell to €784m for the year to September and Anglo-Irish has also set aside €500m to cover potentially bad debts, compared to just €31m last year.

The amount of money the bank spent on wages in the year to date is down by €206m on the same period of 2007. Staff numbers also dropped by a relatively modest 96 over the same period.

“Anglo-Irish Bank confirmed on Wednesday that there would be a pay cut for executives, no bonuses would be paid this year and there would be a pay freeze,” a spokeswoman for the firm said.

David Drumm, chief executive of the bank, said of the bonus cuts: “We started at the top on a sliding scale that went all the way down to management level. That involved 100% to 30% cuts. From senior management upwards we’ve frozen salaries, and at the more junior level the cuts have been less severe.”

The cost to income ratio fell to 17% in 2008, down from a peak of 29% in 2005. The bank said it will continue to reduce this.

Staff at Anglo Irish will be soothed by the fact that chief executive David Drumm says he sees “no merit” in the one bank solution and that the bank plans to remain independent.

He said a merger “hasn’t been on the agenda. Anglo as a banking force in Ireland is much more relevant than it ever was.”

Drumm added that there were currently no plans for redundancies, but that some staff may be redeployed.

He also insisted that the bank had performed well in a difficult market.

“The bank is focused and prepared for the challenges facing the banking sector,” he asserted. “We will continue to diligently manage asset quality, enhance our funding franchises and further strengthen our capital position.”