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AIB Bounces Back From Allfirst Horror

by Jason Gorringe,, London

06 December 2002

Allied Irish Banks, which hit the headlines last year when it discovered that foreign exchange 'rogue trader', John Rusnak had accrued $691 million worth of damage to US subsidiary Allfirst as a result of flawed trades over a period of several years, is forecasting mid single digit earnings growth for the year to December 31, subject to no unforeseen effects on its life business from falls in equity values. Brokers forecast full-year earnings per share of about Euros1.22, compared with adjusted earnings last year of Euros1.16.

Allied Irish Banks recently transferred ownership of Baltimore-based Allfirst to New York bank M&T in return for a 22.5% stake in M&T and $886m in cash, which it said it would use to buy back shares.

After the Allfirst losses, an internal AIB investigation concluded that poor management and financial controls had contributed to the crisis, and Allfirst Chairman, Frank Bramble, and Chief Executive, Susan Keating subsequently resigned, although AIB denied that this was as a result of the Rusnak losses.

In this week's trading statement, AIB said income was growing faster than costs, supported by strong loan growth in Ireland and the UK, with Irish mortgage sales set to rise by a quarter. The bank said that non-performing loans were not significantly increasing, and it expected overall provisions for the year to be broadly similar to 2001 at Euros 179m.

The bank said its Polish subsidiary would generate strong and sustainable earnings growth, and that provisions on its Polish loan book would be lower than last year.

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