Allfirst has been taken over by a bank twice its size and becomes a smallfish in a much bigger banking pond, writes Conor O'Clery, North America Editor.
The merger of Allfirst with M&T Bank in Buffalo, New York, brings to a close the great dream of AIB chiefs in the early 1980s of acquiring a US bank that would grow ever bigger and richer through acquisitions.
It starts a new chapter for the Irish bank in America, as a junior partner in a larger, expanding bank in the north-eastern United States.
M&T Bank Corp is about twice the size of Allfirst, with $31 billion (€31.8 billion) in assets and 451 branches located in New York, Pennsylvania, Maryland and West Virginia. The 26th-largest bank in the US, it has weathered the recession better than most other American banks, recording an average annual 18 per cent increase in earnings in the past decade.
M&T, whose largest single shareholder is billionaire investor Warren Buffett's Berkshire Hathaway with a 7 per cent stake, beat Wall Street analysts' estimates after a first quarter of strong earnings growth this year, mainly through housing equity and vehicle loans.
The purchase of Allfirst caps a decade-long buying spree for M&T, which conducted 15 mergers and acquisitions between 1990 and last April, when it acquired Keystone Financial in Harrisburg, Pennsylvania.
M&T chairman and chief executive Mr Robert Wilmers, who took over the ailing company with only $2 billion in assets in 1983, told M&T's annual meeting in April that the bank intended to continue growing through acquisitions. At the time he had been negotiating with Dublin for six months, according to AIB, and, in recent weeks, conducted due diligence on the AIB-owned bank.
The deal was conducted with great secrecy. After The Irish Times reported on September 4th that AIB would merge Allfirst before the end of the year, the Baltimore Sun said this had been denied by a "top executive" at AIB.
The consolidation with Allfirst is M&T's biggest gamble. It adds $18 billion in assets to the Buffalo bank and 262 branches in Maryland, Delaware, Pennsylvania, Washington and northern Virginia, giving it a total of 713 branches from the Canadian border to the Mid-Atlantic.
It is also a risky acquisition for Mr Wilmers (68), who has a personal stake in the bank worth $500 million and last year took home a salary of $969,000 and options exercised to the value of $23.4 million. Getting too big can cause problems, he acknowledged in a recent interview.
"There is an invisible line that a bank crosses as it grows and, when it does, management finds itself mired in all sorts of bureaucratic systems and processes that divert it from its fundamental mission, to work for and develop customers."
Mr Wilmers, a prominent civic leader in Buffalo and a close friend and backer of New York Republican Governor George Pataki, is also taking over a troubled bank.
After AIB purchased Allfirst, then known as First National Bank of Maryland, in 1989, the Baltimore bank went on to make only one really big acquisition, that of Dauphin Deposit in Pennsylvania in 1996.
The American Banker said at the time that AIB "could be the textbook case for how a foreign banking institution can succeed in the United States". It didn't work out that way, as Allfirst appeared to cross "the invisible line" to which Mr Wilmers referred, and under-performed compared to rival banks.
Allfirst's core problems, however, can be traced back to the forced retirement in 1994, over strategic and personal differences, of chief executive Mr Charlie Cole, a veteran banker who had increased earnings by 20 per cent annually for 10 years. This led to a collapse in morale and staff turmoil, which continued for years and contributed to a dysfunctional treasury department, where trader Mr John Rusnak's mounting losses went unnoticed for five years.
The latest merger will inevitably bring further big changes in the senior ranks, which have seen 10 firings or resignations since the trading scandal broke in February, and lay-offs as the banks are consolidated and some branches closed.
It also means, Mr Wilmers said, that the name Allfirst, adopted by the bank in 1999, will be consigned to banking history. It was unpopular in Baltimore where it replaced the title of a well-loved bank dating back to 1864. Even former chief executive Ms Susan Keating admitted at the time that customers asked if the new Allfirst logo was "a PC, a laptop, a pizza box or a movie screen".
"M&T doesn't want to keep a tainted name," said Mr Lew Sosnowik, a banking analyst with Koonce Securities in Bethesda, Maryland. Mr Sosnowik believes M&T got a good deal with its $3.1 billion purchase of the Baltimore bank, as some analysts valued Allfirst at between $3 and $4 billion. "Maybe it indicates the haste with which AIB wanted to get rid of it," he said.
The deal, however, was hailed by both banks and Mr Wilmers said that Mr Buffett supported it, which will be enough for many shareholders.
