26/09/2002

AIB to sell bank at centre of Rusnak fraud scandal

It has been reported that the Allied Irish Bank (AIB) is on the verge of selling its scandal-hit subsidiary Allfirst to an American rival.

Reuters has reported that M&T Bank Corp will take on Allfirst for around $3 billion in cash and stock.

Sources close to the talks are reported as saying that the deal, which could be announced later today, would transfer ownership of Allfirst to M&T, with AIB receiving about a 25% stake in another bank.

At this stage, AIB released a statement today merely confirming that it is "in discussions with a US bank in relation to a possible partnership involving Allfirst Financial Inc". The bank said that it would release a further statement "in due course".

AIB had been under considerable pressure to divest themselves of Allfirst following the revelation that a currency dealer had covered up losses of around $690 million.

John Rusnak was charged with bank fraud on June 5, for which - if convicted - he could face up to 30 years in prison and a £1 million fine.

Heads have rolled over the Rusnak affair and, amid widespread criticism of Allfirst management, bank president Susan Keating resigned. Although, Ms Keating stressed that she was leaving over matters unrelated to the fraud.

However, in July Allfirst's plus-minus figures seemed impervious to the fraud allegations after it announced a 5% hike in pre-tax profits compared to the same period last year.

(GMcG)

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