Alleged fraud wipes €500m off AIB's profits

AIB Group's attributable profit in 2001 amounted to €484 million. However, it would have been €997 million but for a suspected fraud loss at its Allfirst Treasury subsidiary in America.

The losses arising there have been finalised at an amount of €789 million.

AIB Chief executive Mr Michael Buckley

AIB Chief executive Michael Buckley said that excluding the impact of events at Allfirst, AIB had turned in a "solid performance in a turbulent year", with a 12 per cent rise in adjusted earnings per share and a 13 per cent increase in total dividend.

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

Today's AIB report was accompanied by a statement from top American banking figure Mr 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 9th, said his inquiries were "proceeding vigorously".

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 €7 million 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."

"The 13 per cent increase in our dividend is, I think, a sign of confidence of the board in our ability to maintain our momentum."

But Mr Buckley conceded: "This has been overshadowed by the suspected fraud, and we are taking it hard against our 2001 profits."

He said the new, lower assessment of the loss in Baltimore was the "definitive figure", adding, however: "The losses this trader (Mr Rusnak) was covering up in this incredibly devious way actually began as far back as 1997.

"About 55 per cent of those losses were incurred in 2001, about 30 per cent in 2000 and around 15 per cent go back to 1997.

"I agree that it is even more serious that this thing has gone back such a long time. On the one hand you could say this was an absolute lack of controls, on the other you could say equally legitimately that this was an incredibly sophisticated and complex cover-up.

"It is also true that this individual systematically identified each control point and systematically found a way around each control point. That is absolutely the case."

Mr Buckley - whose bank is reckoned by analysts to have been exposed to possible takeover bids by foreign competitor companies as a direct result of the American affair - also said Mr Ludwig's investigation was mapping out "exactly and in detail what happened and how it happened, to whose benefit was it and what the management oversight issues were that the board should address".

He said: "I am as anxious as anyone to get hold of his report because the bank is very committed to taking action on its recommendations very quickly."

Today's figures also reported a 130 per cent 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 per cent.

Additional reporting PA