Allied Irish Banks says CEO David Duffy to resign

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* Duffy named CEO of National Australia Bank's Clydesdale

* Comes week after Irish govt kicks off AIB sales process

By Padraic Halpin

DUBLIN, Jan 19 (Reuters) - Allied Irish Banks (AIB) Chief Executive David Duffy is stepping down to take over National Australia Bank's troubled UK business, just a week after the Irish government appointed advisers to kick off the sale of its shares in AIB.

Duffy, who joined AIB at the end of 2011 and has guided the 99-percent state-owned bank back to profit, will remain in position to support the board in identifying his successor with his final departure date to be agreed, the bank said.

"I believe now is the right time for a new CEO to lead the bank through the next phase of its recovery and growth and a multi-year process of returning capital to the Irish State," Duffy said in a statement.

Duffy will take over as CEO at National Australia Bank's Clydesdale Bank within the next few months, NAB said as it looks at ways to exit the UK market after years of poor performance and high charges to compensate customers for mis-selling.

Ireland (Other OTC: IRLD - news) 's finance minister, Michael Noonan, who last week appointed Goldman Sachs (NYSE: GS-PB - news) to advise on the sale of AIB, said he would be consulting with AIB Chairman Richard Pym in the coming days to put in place a process to recruit a new CEO.

Duffy, a former senior executive at South Africa's Standard Bank International and Dutch bank ING, oversaw a cost-cutting drive that reduced AIB's workforce by almost 20 percent, cut salaries by up to 15 percent and shut branches in a strategy that has begun to turn the bank around earlier than expected.

The appointment of an adviser last week marked a stepping stone in Ireland's bid to begin to recover the 21 billion euros spent on rescuing the country's second-largest bank by assets.

While no transaction is expected until the second half of 2015, the timing is likely to be an unwelcome development in the sales plan, Merrion Capital analyst Ciaran Callaghan said.

Bank executives in Ireland are subject to a government-imposed salary cap of 500,000 euros ($678,600) and Duffy took a pay cut as part of the bank-wide wage reductions, reducing his salary to 425,000 euros last year.

Duffy will replace David Thorburn at Clydesdale after Thorburn said earlier this month that was leaving.

NAB, Australia's fourth-biggest lender by market value, said in October it has made exiting its UK operations an "absolute priority". This could include a sale or initial public offering of the business.

"David (Duffy) is uniquely qualified, particularly as we are examining the broader range of options we announced in October 2014 to accelerate NAB's exit from the UK Banking business," NAB Group Chief Executive Andrew Thorburn said in a statement. (Additional reporting by Steve Slater in London; editing by Jason Neely and Keith Weir)