Investor reaction to the Ludwig report on the $691 million (€783 million) fraud at Allfirst and the actions undertaken by its AIB parent has been mixed, largely on geographic grounds. Mary Canniffe reports

While investors consulted yesterday ranged from "surprised" to "astonished" that Allfirst chief executive Ms Susan Keating had retained her position, most Irish fund managers were considerably less critical of the group's actions than foreign fund managers.

While most Irish fund managers declined to be quoted directly, the general view was that AIB had taken "fairly appropriate" action though they saw the decision to retain Ms Keating as "difficult to understand". Foreign fund managers were more critical that the sackings stopped at Allfirst. This criticism was not reflected in the market, where the share price closed up 26 cents at €13.37.

Irish Life fund manager Mr Eugene Kiernan said he considered the actions taken were appropriate although he questioned retaining Ms Keating. But he added the bank may have not wanted to squander her experience in the retail area.

While some non-Irish fund managers felt the sackings should have extended to the top of the group for the failure to monitor and control the subsidiary, another Irish fund manager who did not wish to be named said there was no point in "looking for Mr Buckley's [group chief executive] head". He said: "what we are interested in is what is best for the share price, for the company. Mr Buckley needs to be left in place to drive the company forward now...".

A Friends First investment strategist, Mr Jim Power commented on the difference in the reactions of Irish and international investors. "Domestic investors are taking the view that action has been taken and we should now wait and see while international investors believe the buck has stopped short and obvious and easy targets have been scapegoated," he said.

Describing the Ludwig report as "a whitewash", he said he was "puzzled" by the survival of Ms Keating, adding that he feared AIB Group management may now be more concerned with rebuilding their image than giving the bank the leadership it needed in a difficult global banking environment.

Well over one-third of AIB is now owned by US shareholders, who have a 38 per cent stake. A geographic split of AIB shares at the end of 2001 showed that US shareholders are the biggest block with 38 per cent of the 880 million shares in issue.

Some 37 per cent of the shares are held by Irish shareholders, 17 per cent are owned by UK-based shareholders, with the 8 per cent balance spread between shareholders in other geographic areas. Between December 2000 and December 2001, the percentage of shares owned by Irish shareholders fell from 41 per cent to 37 per cent.

Within that breakdown, market sources estimate that 20 per cent of the company is owned by US institutions, with the 18 per cent balance in US hands held by retail shareholders. About 18 per cent of AIB shares are in the hands of Irish institutional shareholders, with about 19 per cent held by Irish retail shareholders. The 880 million AIB shares in issue include 70 million American Depository Receipts (ADR) - shares quoted in the US. Each ADR is equal to two AIB shares so the ADRs, held mainly by US retail shareholders, account for 140 million of the 880 million shares.

The largest shareholder in the group is the US-based Capital Group. AIB's annual report for 2000 shows that the California-based private investment partnership had 7.5 per cent of AIB on February 20th, 2001. Market sources suggested Capital's stake had since increased to about 10 per cent.

The annual report showed that AIB Group subsidiaries together held 4.7 per cent of the group shares while Bank of Ireland Asset Managers had a 3.3 per cent stake. Since AIB accounts for about 16 per cent of the Irish market, most Irish-managed funds have market weightings of 2 to 3 per cent in AIB shares.