Allfirst acquisition boosts M&T's earnings by 17%

The acquisition of AIB's former American subsidiary Allfirst contributed to an increase in second- quarter earnings at its new parent, M&T Bank, which yesterday reported a 17 per cent hike in net income to $134 million (118.6 million).

New York state-based M&T took over Allfirst at the beginning of April in a $3 billion deal, which saw AIB take a 22.5 per cent stake in the American financial institution. AIB had been seeking to offload Allfirst since last year's Rusnak affair.

M&T's chairman, president and chief executive, Mr Robert Wilmers, said yesterday that expenses associated with the acquisition of the Maryland-based Allfirst were $25 million, or $0.23 per diluted share.

But the business still reported a 17 per cent year-on-year rise in income to $134 million from $114.5 million. Net income for the first six months of the year was $250.5 million, 9 per cent up on the same period last year, when net income was $228 million.

Basic earnings per share were down 9 per cent second quarter on second quarter to $1.12 from $1.23. This is a direct result of issuing 26.7 million new shares to AIB as part of April's takeover deal. First-half basic earnings per share were down 4 per cent year-on-year to $2.36 from $2.45.

The results show that the Allfirst acquisition contributed to both interest and non-interest income at M&T. It reported that in the second quarter, net interest income grew by 39 per cent year-on-year to $435.2 million from $309.5 million.

The bank stated that this reflected the additional $10.2 billion in loans it acquired in the Allfirst takeover. However, it added that net interest margins were down to 4.12 per cent from 4.43 per cent, as a result of interest charges associated with the Allfirst purchase.

Non-interest income almost doubled, rising 92 per cent year-on-year to $232.9 million from $121.1 million. Spokesman Mr Michael Piemonte said approximately 80 per cent of this was attributable to the new market areas that formed part of the former Allfirst franchise.

Non-interest income includes service charges, revenue from its mortgage business, gains on the sale of securities, trust and brokerage services.

Mr Piemonte said the process of bedding down the acquisition was more or less complete. It had completed re-branding. Over the July 4th holiday weekend, Mr Piemonte said the former Allfirst branches were fully transferred to M&T's system.

Allfirst and its parent AIB group found themselves at the centre of controversy early last year after it emerged that rogue trader Mr John Rusnak had perpetrated a $691 million fraud on the American bank.