AIB chairman, Mr Lochlann Quinn has told shareholders it will take time to rebuild the bank's reputation in the wake of the five-year fraud at its US subsidiary, Allfirst, that cost it €789 million. The bank has also dismissed class actions filed by shareholders in the US seeking compensation in the wake of the fraud as being without merit.

"There is no doubt that our reputation has suffered, but the business is strong. Rebuilding our reputation will take time but we will do so," said Mr Quinn in a statement in AIB's annual report to shareholders. He added that he was confident of the bank's future and noted the swift action by AIB's board and management team when the fraud was discovered last February.

Mr Quinn sits on the remuneration committee that decided to cancel bonuses normally awarded to senior executives. The other directors on the committee are AIB deputy chairman and UTV chairman, Mr John McGuckian and UK-based director, Mr Derek Higgs.

Referring to the class actions filed against AIB, Allfirst and serving and past officers of the Baltimore-based subsidiary, the bank said it was not practicable to predict the outcome of this court challenge and any financial impact for AIB. It noted the actions, under which shareholders claim AIB and Allfirst filed misleading accounts with the US Securities and Exchange Commission over the five years the fraud was perpetrated, are largely based on newspaper articles. "The board has been advised the action appears to be without merit."

AIB group chief executive, Mr Michael Buckley, said the €789 million loss at Allfirst had overshadowed an otherwise very solid year of progress for the bank. "As a company, we have acted in a determined, decisive, open and timely fashion since the loss was revealed. Our focus now is on continuing to work with our regulators so as to ensure that their requirements are fully met."

Mr Buckley added that AIB would demonstrate "resilience" in difficult times. "I look forward with confidence to a successful 2002."

The bank's auditors, PricewaterhouseCoopers, which lost the lucrative contract last month, notes in its report that it was not required to consider whether the bank's controls were effective. Its reports to AIB shareholders over the past five years did not contain any adverse opinion about Allfirst's treasury activities. The AIB board of directors decided last month to put the €2.5 million audit contract out for tender.