AIB faces a testing and challenging year, with work to be done regarding its US subsidiary Allfirst, but the group is confident of a strong outcome, according to group finance director Mr Gary Kennedy. At a conference on Irish equities organised by NCB Stockbrokers yesterday, a week after the release of the Ludwig report into the $691 million (€786 million) foreign exchange fraud at Allfirst, Mr Kennedy said AIB would focus over the next six to nine months on "repairing the damage" at Allfirst.
"We are at the end of phase one of a fairly exhaustive investigation process and serious action has now been taken ... Our near-term objective is to ensure there is no collateral damage to our franchise in the US. But we are not being deflected from our overall objective at Allfirst, which is to build on a strong community bank focused on retail and commercial business. This focus has been given renewed vigour through the appointment of Eugene Sheehy as Allfirst executive chairman."
AIB will address the issues at Allfirst, repairing and rebuilding the bank's retail and commercial momentum over the next six to nine months, he said. After that it would be time for "a revalidation of strategic focus" in the US.
On the general strategic direction of the group, Mr Kennedy said it would streamline its support structure so it could be used in all the group "geographies".
In the personal market in Ireland, the bank will move aggressively to increase its market share in all areas closer to its "natural level of around 25 per cent" by 2005. Without specifying the market segments to be targeted - though he did say AIB had recently aimed to raise its shares of the domestic mortgage and special savings incentive accounts markets - Mr Kennedy said this drive would be "backed by strong investment and initiatives".
In the small and medium-sized business market (SMEs), AIB aimed to "get more of their other banking business" but without compromising credit quality, Mr Kennedy said. Its new customer relationship management technology - now in place in seven of 26 regions in the Republic and expected to be in place in all regions by the end of the year - has already increased significantly the contributions from different customer segments, he explained.
Mr Kennedy said the size and strength of market capitalisation would be important for banks competing on a pan-European basis in the future.
At the same conference, Bank of Ireland chief executive Mr Michael Soden reiterated his interest in a merger with AIB. He told investors he would never sacrifice shareholder value at the whim of management or for so-called patriotic reasons but said he believed in the creation of a substantial independent Irish financial services group, which could be a significant player on the European stage. Such a group could deliver substantial value for shareholders, and help to strengthen the Irish economy and the Irish Stock Exchange, he added.
The Bank of Ireland chief will concentrate on three main areas: capital management, costs management and a collaborative style of management. On capital management, he stressed that active capital management was not a choice; "return on equity is not negotiable". Every euro invested had to meet strict criteria, he said, adding that he was not prepared to hold on to surplus capital for which he could not find a good use.
