'02 profit rose 4% at parent of Allfirst

Allied Irish recovering from trading scandal

February 20, 2003|By Bill Atkinson | Bill Atkinson,SUN STAFF

Allied Irish Banks PLC said yesterday that profit rose 4 percent last year as it worked to sell its Baltimore-based Allfirst Financial Inc. unit, site of one of the biggest banking frauds in history.

The Dublin, Ireland-based banking company made $1.114 billion last year.

That compares with a 2001 profit originally announced at $1.071 billion and then restated to $520 million after Allied reported losing $691.2 million in the currency trading scandal

Allied Irish said income per share last year rose 6 percent to $1.29.

"They were OK numbers in absolute terms, and in relative terms [to the industry] they were excellent numbers," said Seamus Murphy, a banking analyst at Merrion Stockbrokers in Dublin.

"The growth isn't great, but they are recording growth, which is a scarce commodity in these markets."

Profit at Allied's U.S. operations, largely made up of Allfirst, was $331 million for the year.

Provisions for problem loans more than doubled to about $105 million.

Allfirst wrote down $16 million of mutual fund assets held as a hedge for incentive plan liabilities.

It also took a $13 million restructuring charge related to an early-retirement program.

Allied Irish is recovering from problems that surfaced a year ago when Allfirst executives revealed that John M. Rusnak, a currency trader at the bank, had lost millions.

Over five years, Rusnak hid trading losses by doctoring the company's books, creating fake computer trades and bullying subordinates who challenged him. His deception made it appear as though Allfirst was booking profits when in reality losses mounted.

The fraud led to a sweeping overhaul of Allfirst's executive suite. Rusnak was fired, along with six co-workers and supervisors who failed to detect the losses.

Rusnak, 38, who pleaded guilty to one count of bank fraud three months ago, began serving his 7 1/2 -year sentence yesterday at the Federal Correctional Institution at Fort Dix, N.J.

David Irwin, Rusnak's attorney, said his client took the train to Fort Dix on Tuesday morning and then a cab to the prison.

"He was very worried about not getting there because of the snow, but he got through," Irwin said. "He was touching base with me and I told him, `Good luck.'"

In September, Allied Irish agreed to sell Allfirst to M&T Bank Corp. of Buffalo, N.Y., in a $3.1 billion deal that officials say was in the works before the scandal was uncovered. Allied Irish will retain a 22.5 percent stake in Allfirst.

M&T plans to eliminate 1,132 jobs, or 20 percent of Allfirst's work force, over the next year. About half of the cuts - 657 workers - will be made in Baltimore and will include employees in support staff, human resources, marketing, information technology and finance.

The acquisition is expected to close at the end of the first quarter, said C. Michael Zabel, an M&T spokesman. He said regulatory approvals are expected in a couple of weeks.

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