Boon for AIB with sale of Allfirst

AIB BANK is expected to go on a share buy-back spree when it gets more that €900 million in cash following the approval of the sale of troubled subsidiary Allfirst to M&T Bank by the US Federal Reserve.

The disposal of Allfirst was an inevitable fall-out from the Rusnak rouge trader disaster which exposed serious short comings in the bank’s internal security arrangements.

Rusnak’s success in hiding trading losses of 691 million over a five-year period hit confidence in AIB’s operations and its sale was expected sooner rather than later.

Buffalo-based M&T, which is 7.3%-owned by canny investor Warren Buffett’s Berkshire Hathaway Inc, will pay about $2.1 billion in shares and $900 million in cash for Allfirst.

This will leave AIB with a 25% voting stake in the 22nd biggest bank in the US.

The sale enables M&T to further expand in the eastern US.

The sale is expected to be completed this month and the integration of Allfirst with M&T could take about two years, AIB chairman Lochlann Quinn said in December. The combined bank will shed over 1,000 staff as it merges the two headquarters and seeks to save $100 million a year.

The Fed announced its approval, saying the banks met all the conditions for the proposed merger.

The Fed also approved a request from AIB to acquire up to 25% of the voting shares of M&T Bank. The Fed said AIB has met conditions imposed on it after a rogue foreign-exchange trader at Allfirst racked up $691 million in losses.

In May 2002, AIB agreed to conduct a comprehensive review of its US operations and submit an oversight plan to US regulators.