AIB falls out of FTSE Eurotop

AIB was hit by further bad news yesterday as its was removed from the FTSE Eurotop 100 index.

This will not be good for a share price that has struggled since the Rusnak affair when the bank lost $690 million (€574 million) at its Allfirst subsidiary in the US.

In Dublin yesterday, shares struggled following the announcement. The share price was down seven cent to €12.25 at the end of trading.

Since the Rusnak scandal, the shares in the company have traded within a range of €11.50 to €13.

Being kicked out of the Index was not directly attributable to the troubles and scandals engulfing the bank over the past two months.

However, they would have contributed to the country's biggest bank being removed from the key band of European stocks and shares that make up the Index.

Kevin McConnell, head of research at Bloxham Stockbrokers, said the fall in the share price since the scandal broke over the bank's foreign exchange dealings would have been a factor in its removal.

Companies in these highly prized indices use market capitalisation as a major barometer for the attractiveness of individual stocks in the Index.

A share is included in the first instance for its past performance and this is then used by investors who track the particular index going forward.

To be removed as of close of business yesterday from the FTSE Index will add to AIB's increasing list of woes.

As a result, a weaker share price than had been the case since Rusnak cost the bank $690 million will not help the future rating for the bank, added Mr McConnell.

Since scandals have tumbled out of the bank one after another, the demise of AIB in terms of the FTSE Index will not have come as a big surprise.

However, where the bank goes forward from here will hinge on the intensive investigations into various scandals which are currently being undertaken.

If these show that the culture in the bank has been flawed from top to bottom, then the share price could face its sternest test.

On Thursday, the bank announced an extension by six weeks of its on-going investigation into the foreign exchange scam that ran in the bank for years.

Up to €25 million has been set aside to deal with that matter although the total costs may turn out to be even higher. Independent outside investigations are also being undertaken by the Revenue Commissioners and the new financial watchdog, the Office of the Director of Corporate Affairs.

The bank's senior executives have refused three times to go before the Oireachtas Committee on Finance and the Public Service. However, chairman Dermot Gleeson, in a letter explaining their refusal expressed the confidence of the board in chief executive, Michael Buckley.

His future is seen to hang on the extent of the fraud uncovered and the height to which it extended within the chain of command.

The extension of its own investigation to allow a full trawl of all aspects of the business involving charges to the public is seen as an attempt by the bank to clean up its act once and for all.