AIB will end up with a 22.5 per cent stake in the bank to be created through the merger of Allfirst and M&T Bank. And it will have representation on the board of the enlarged bank, but as the agreement makes clear it will be M&T's management team that will run the show. The reality is that a complete retreat from the US market is now a more likely strategy for AIB than any further expansion.
The warm reception afforded by the stock market to AIB's decision to sell Allfirst Financial should not be confused with a ringing endorsement of its management. AIB may have successfully extracted itself from what was a very difficult situation, but the decision to sell Allfirst also signals that the Irish bank's 20 year foray into US regional banking has ended in failure.
That said, the deal struck with Buffalo-based M&T is as good an outcome as AIB and its shareholders could have hoped for. The bank that will be created by the merger will be the market leader in six states and the District of Columbia. In addition the M&T management have a strong track record and the support of Mr Warren Buffett. The so-called Sage of Omaha is the most respected investor in the US and his Berkshire Hathaway company will be the largest investor in the merged bank after AIB. The deal will also net AIB some $886 million in cash and have a positive impact on earnings.
The reality is, however, that the jump in AIB's shares yesterday had as much to do with the decision to use half of the cash proceeds to buy back its own shares as it does with confidence in the bank's management and their strategy .
The market may be relieved that AIB has drawn a line under the Allfirst debacle, but despite a purge of senior management market confidence in chief executive Mr Michael Buckley is still undermined by the failure of the Dublin-based management to spot the activities of foreign exchange trader Mr John Rusnak before he had all but crippled Allfirst.
Where AIB goes from here is not clear. It remains dominant in its home market and has a strong presence in some sectors of the UK. The focus of its international expansion is now Poland, where it has a retail banking operation in a difficult market.
Having spent the best part of a year extracting themselves from the consequences of the Rusnak fiasco, Mr Buckley and his management team will now have to show that they have the ability to drive the bank forward.