"Judgement on AIB has been put on hold for the past five weeks and for many investors that will remain the position even after Ludwig reports." That was how one fund manager with a sizeable interest in AIB shares described the situation yesterday.
And the same manager had a strong message for AIB on how the bank presents the Ludwig report. "We would expect a warts-and-all explanation on what went on in Baltimore over the past five years. What we've read about John Rusnak and his trading has caused real worries about how the bank has been run and we will need clear reassurance that the deficiencies in Allfirst are not mirrored elsewhere within the bank," he stated bluntly.
But while most focus in the past few weeks has been on the role of senior executives in both Baltimore and AIB's bank centre in Dublin, there is less concern among investors about seeing senior management being dismissed or forced to resign.
In particular, fund managers believe, unless there is clear evidence that chief executive Mr Michael Buckley was aware of what was going on in Allfirst's treasury operation, then his position is not in danger.
"Unless there is evidence of absolute incompetence or evasion at board level, then I think that the buck should stop in Baltimore. The last thing AIB needs now is to lose a chief executive with no obvious replacement in the wings," said another fund manager.
Some market sources expressed concern that Mr Ludwig's report has been prepared without him having had access to Mr Rusnak.
"There is a fear that the report could have a lot of gaps and, for that reason, a lot of people will be more interested in what emerges from the Federal Reserve and local Maryland regulator investigations into the affair," he said.
The wait-and-see attitude in the market to the Allfirst situation has been reflected in the performance of the AIB share price since the debacle was first made public on February 6th.
Immediately after the shock announcement of the losses, AIB shares fell 17 per cent in huge volumes from €13.62 to €11.35 before a steady recovery brought the shares back to within 3 per cent of their pre-February 6th level on February 26th.
That recovery was largely driven by speculation that AIB's difficulties in Baltimore had made the bank a target for a possible takeover bid, with Royal Bank of Scotland (RBOS) - owner of Ulster Bank - being consistently mooted as the ideal partner for AIB. There were mixed views about the likelihood of RBOS making a bid for AIB, with some in the market believing that the Scottish bank is the ideal partner while others felt that a bid by RBOS could face a stiff hurdle in overcoming competition objections.
For its part, RBOS has made no secret of its strategy of expansion through acquisition, and there is no question that the Scottish bank has the financial wherewithal to cope with the likely €15 billion cost of bidding for AIB.
But some fund managers and brokers believe that RBOS is more likely to be interested in Allfirst without bidding for the AIB parent company.
The idea of a merger between AIB and Bank of Ireland - forcibly argued by Bank of Ireland's new chief executive Mr Michael Soden - is generally seen as a kite-flying exercise.
Most market sources take the view that the competition hurdles are far too rigorous for a merger of the two big banks to have any prospect of success.
For AIB shareholders, bar an unlikely takeover bid, the short-term prospects for shares are not good, even though AIB is currently trading at only 2.2 times its book value, compared to 3.1 for Bank of Ireland, a British sector average of 2.8 and a European average of 2.4. "That discount might be narrowed a bit once the Ludwig report is out of the way and the dust settles, but AIB shares are going to struggle," said one analyst.
