ANALYSIS: AIB'S board and senior management will have to work hard to break the bank's association in the public consciousness with the $691 million (€783 million) fraud at Allfirst. It will have to focus on rebuilding its reputation as a well-managed international bank, and reassuring investors that it has the ability to continue to grow and prosper.
Analysts believe the bank has handled itself reasonably well over the past month since it first announced the fraud at its Baltimore-based bank. Group chief executive Mr Michael Buckley announced the massive loss on February 6th and the market was told it would have an independent report into what had happened within 30 days.
Chairman Mr Lochlann Quinn enlisted former US currency controller Mr Eugene Ludwig to undertake this investigation, and his account of events and recommendations have been positively received. AIB's share held up well in the aftermath of the report, signalling that investors are content to remain as AIB shareholders for the time being.
The fraud wiped out 47 per cent of AIB's profits in 2001 but Mr Buckley has signalled that the bank will quickly recover and post a strong set of results in 2002.
Analysts are broadly happy with current growth forecasts for AIB, suggesting the fraud will not have any long-term significant impact on profits. But some believe it will slow AIB's momentum, particularly in the current year, as management and staff come to terms with what has happened.
Mr Scott Rankin, banking analyst at Davy Stockbrokers, suggested AIB can achieve profit growth in the region of 6 per cent this year to about €1.4 billion. This is at the lower end of the consensus forecast for the group and largely reflects a more cautious view of its prospects this year.
"The momentum will be affected in some way. The performance of Allfirst will be affected in some small way and will put further demands on management's time," he said.
Mr Quinn has stated that it would take at least six months for the bank to fully assess the damage inflicted by Mr Rusnak's activities and its own failures.
Yesterday Mr Buckley said business at Allfirst had been holding up fairly well in recent days, with deposits remaining steady. The bank had lost up to $200 million to rivals in February when the fraud was announced.
Other parts of AIB's business will also take a hit. The board has committed to implementing the Ludwig report findings, which will principally affect its treasury operations in Ireland and internationally. Apart from absorbing a greater amount of management time, these measures will inevitably result in lower levels of activity at its treasury divisions in Dublin and London.
Mr Buckley must also reassure investors that his management team is sufficiently strong, and that reporting and control structure are adequate to prevent any further shocks.
Further distractions will emerge for senior AIB executives in the months ahead as investigations by regulatory authorities in the US and the FBI reach conclusions.
And the big question that will continue to exercise the minds of investors will be AIB's intentions regarded the future of Allfirst.
Mr Buckley has vehemently supported its continuance as part of AIB group citing its strong franchise and growth potential. But ambitions of expansion in the Washington area will have to be put on hold for the time being.
Mr Eugene Sheehy, the head of AIB's retail banking division in the Republic, will move to Allfirst to work with its chief executive, Ms Susan Keating, in running the bank. Mr Buckley will be hoping Mr Sheehy's experience will help to guide Allfirst though these dark days and retain its share of the Maryland banking market.
Mr Piers Brown, banking analyst at Commerzbank, suggested the bank would also continue to have to deal with speculation about it being a takeover target.
"Even if nothing happens in the short-term, there will always be an asterix beside AIB as a possible takeover candidate," he said.
