Rogue trader loss slashes AIB profits

Allied Irish Bank, Ireland’s biggest bank, today confirmed the consequences on its results of the suspected $750m (€866m) fraud loss at one of its American subsidiaries.

The bank’s preliminary announcement of last year’s figures in Dublin disclosed an attributable profit of €484m.

But, without the effects of alleged false trading run up by a rogue American foreign exchange dealer at the AIB-owned Allfirst Finance Corporation in Baltimore, Maryland, the surplus figure would have been €997m.

Before taxation, the profit figure stood at €612m or €1.4b ahead of the American losses.

Chief executive Michael Buckley reported that the losses from the suspected fraud had been finalised at €789m.

Mr Buckley also said that excluding the impact of events at Allfirst, AIB had turned in a ‘‘solid performance in a turbulent year’’, with a 12% rise in adjusted earnings per share and a 13% increase in total dividend.

But he also disclosed activities by Mr Rusnak in Baltimore dated back to 1997 - longer than previously thought and that the after-tax loss and related costs came to €513m in the 2001 accounts.

Today’s AIB report was accompanied by a statement from top American banking figure Eugene A Ludwig, appointed by AIB to make an independent investigation of the alleged fraud in Maryland.

Mr Ludwig, who is to report back to the AIB board by March 9, said his inquiries were ‘‘proceeding vigorously’’.

And he added: ‘‘My highest priority is to conduct a careful and thorough review of this situation.

‘‘This includes pursuing the probability that the bank was defrauded.

‘‘I am satisfied that the scope of the investigation is sufficiently wide that it will allow me to establish what happened and will enable the AIB board to take any further actions that are appropriate to protect the strength and integrity of the enterprise.’’

AIB has pledged that Mr Ludwig’s findings and recommendations will be made public - together with any action they intend to take.

Today’s figure confirmed a development that increased AIB embarrassment over the Maryland revelations - confirmation of a further €10m trading loss through the fraud-unrelated activities of a trader in New York, who has now left the company.

Presenting the new figures, Mr Buckley said the suspected Maryland fraud had been ‘‘a substantial blow to all AIB stakeholders’’.

But he maintained: ‘‘AIB remains a well-capitalised profitable company with a thriving retail and commercial banking business.

‘‘I am determined to spare no effort in repairing the damage we have suffered.’’

Today’s figures also reported a 130% income drop in AIB’s Allfirst American subsidiary, where the suspected multi-million dollar loss was incurred.

Before consideration of that factor, the Maryland bank’s income rose last year by 12.2%.

Allfirst chief executive Susan Keating reported: ‘‘The suspected fraudulent foreign exchange trading losses unfortunately have dealt a heavy blow to what was otherwise a good improvement in our core banking performance in 2001.

‘‘The revenue growth from our core banking business and our strong asset quality are particularly encouraging, given the weakened economy.’’

In Dublin, following the overall group figures that showed that the Allfirst affair had trimmed profits by 47%, AIB said it was targeting mid-single digit growth for this year.

A statement said: ‘‘The Irish economy remains fundamentally strong and competitive.

‘‘There are signs of recovery in the US, the United Kingdom has proved resilient and interest rates have reduced significantly in Poland (where AIB also owns a bank).

‘‘Consequently, there are signs for optimism, particularly for the second half of 2002.’’