Keating to receive Allfirst package of more than $2m

Allfirst has refused to disclose the terms of the retirement package for outgoing chief executive Ms Susan Keating, saying it was "confidential", but informed sources close to the bank said it was in excess of $2 million (€1.98 million).

When Mr Frank Bramble resigned as chairman after the trading debacle in February, the bank disclosed he received a lump sum payment of $2.9 million on the basis of supplemental retirement benefits. He was earning $725,000 a year. Ms Keating's salary was only slightly lower at $675,000 a year.

A bank filing with the Securities and Exchange Commission on April 5th stated that Ms Keating had 190,000 share options at the exercise price of $21.65 with a 2011 expiration date. These had a potential realisable value of $6.6 million, given a 10 per cent annual appreciation rate. She also held 142,000 exercisable options valued at $292,380 at that date.

The decision of AIB to appoint Mr Eugene Sheehy chief executive when Ms Keating steps down at the end of July marks a departure from the "light hand" approach of AIB to its troubled US subsidiary and a tightening of Dublin controls.

An Allfirst spokesman cited strategic and long-term differences with Mr Sheehy about the future direction of Allfirst as one of the reasons for the announcement on Wednesday that she was leaving.

Analysts in Maryland expressed little surprise at the news. Ms Keating had lost much of her executive authority since Mr Sheehy arrived as executive chairman in April after the bank lost $691.2 million through fraudulent trading by Mr John Rusnak, sources close to Allfirst said.

Ms Keating refused to submit her resignation despite the Ludwig report in March, which blamed the scandal mainly on lack of controls at Allfirst. She was backed by the mostly American Allfirst board, which threatened to resign if she was dismissed. AIB has now re-asserted its authority.

Mr Sheehy, former managing director of AIB in the Republic, will hold all three top Allfirst positions; president, chairman and chief executive - almost unprecedented in US banking - unless new appointments are made by AIB before August. This is the first time the bank will have an AIB official as chief executive since it bought Allfirst, then called First Maryland Financial, in 1989.

Ms Keating's departure marks the end of an era when executives from failed Maryland bank MNC, including Mr Bramble and Ms Keating, ran Allfirst.

Mr Bramble was brought in as chief executive by then chairman Mr Jeremiah Casey in 1994 after AIB forced the retirement of chief executive Mr Charlie Cole over personal and strategic differences, despite his record of increasing earnings by 20 per cent a year from 1983 to 1994.

A former senior executive of Allfirst said Mr Sheehy had been given an impossible task running Maryland's second-largest bank with only three months' experience in US and Maryland banking.

Three Allfirst executives, Ms Keating, Mr Bramble and head of risk assessment Mr Brian King, have retired since the scandal broke. Four executives were fired: Mr David Cronin, executive vice-president and treasurer; Mr Robert Ray, senior vice-president of treasury funds management; Mr Jan Palmer, senior vice-president of investment operations; and Mr Michael Husich, head of internal audit. Mr Larry Smith, a clerk responsible for verifying trades, and internal auditor Mr Lou Slifker were also dismissed.

Observers in Maryland saw the departure of Ms Keating as a signal that AIB may be preparing to sell the bank.

"AIB came to the US with the idea of acquiring the bank and expanding it, and becoming a force in American banking. With this added debacle the only logical thing to do is sell the bank," said Mr Lew Sosnowik, a bank analyst with Koonce Securities.