BALTIMORE, May 29, 2002 (PRIMEZONE) -- Allied Irish Banks plc (NYSE:AIB):
Good Morning Welcome to Belfast
It has been a difficult time for AIB. While the business climate was adversely affected by the Foot and Mouth outbreak in the early part of last year and by the terrible events of September 11, neverthelesswe made solid progress throughout the Group in 2001. However, themajor event, which now overshadows everything is the Allfirst fraud,which first came to light in February this year and is fullyreflected in the results for 2001. My first duty is to apologise to you the shareholders for the lapses that allowed this fraud to occur. Like everyone else in this room I was shocked when I first heard about the scale of the loss. The Board very quickly decided we needed some outside help to get to the bottom of what happened and we asked Mr. Gene Ludwig and Wachtell, Lipton, Rosen & Katz, a new York law firm to help us. The Ludwig report concluded that the fraud carried out by foreign exchange trader John Rusnak was "carefully planned and meticulously implemented." It involved falsification of key bank records and documents and thecircumventing of controls. Rusnak managed to do this because of the"weak control environment" at Allfirst treasury.
Since the fraud came to light the Board has taken steps to ensurethat such an event can never happen again.
Among the steps taken were:
* We accepted the recommendations in the Ludwig Report in full.
* We terminated the employment of staff found to be culpable.
* We are working with the relevant regulators to ensure that any
concerns they may have are addressed.
* We decided on a rapid acceleration of an organisational strategy
designed to improve customer relationships, simplify support
structures and strengthen controls across the Group.
* We appointed Mr John Heimann as special advisor to the AIB Board
on risk management organisation and governance.
* We decided to undertake an external search for a new Chief Risk
Officer
* We decided to centralise the management and control of all
treasury activities throughout AIB Group in Dublin and appointed
First Manhattan Consulting Group to validate that the controls
meet the best international standards.
* We also decided to strengthen the links between the main AIB
Board and the Boards of major subsidiaries.
* We agreed changes in management most notably the appointment of
Eugene Sheehy former MD of AIB Bank (ROI) as Chief Executive of
AIB USA and Executive Chairman of Allfirst.
* We have also put our external audit out to tender and we will
recommend the appointment of KPMG Chartered Accountants as
Auditors at a reconvened AGM to be held in Dublin on Wednesday,
June 26, 2002.
We'll now show a video outlining the year's main events...........
While the Allfirst fraud represented a very serious lapse in controlswhich should not have happened, the loss is a once-off charge to thebusiness which is now performing well. Let me now update you on thetrading position in the current year, which we released to the StockExchange in our trading statement yesterday.
All of our franchises are performing well up to our expectations. InIreland our Home Mortgage activity has almost doubled over the sameperiod last year and we achieved market leadership in Special SavingsInvestment Accounts. In Great Britain there is strong commercial andcorporate loan demand while lending activity in Northern Ireland isahead of expectations. In Allfirst, average core deposits are up overthe same period last year and have remained broadly stable since theannouncement of the fraud. Operating profit in Poland is expected toimprove significantly this year. There has been no materialdeterioration in asset quality across the Group. As a result weexpect to meet our target of mid single digit growth in adjustedearnings for the Group in 2002.
Since the fraud, the share price has recovered well as the marketsappreciate the underlying strength of our business. It is now 9 percent (at 15.00) above the level before the fraud was announced.Let me conclude by commenting briefly on stories in the media aboutthe possibility of an AIB/Bank of Ireland merger, arising frominterviews given by the new Chief Executive of Bank of Ireland. Theproposal seems to be based on the premise that this is the only wayto ensure that an Irish controlled financial services company canmaintain its independence and compete on the European stage.The position of the AIB Board is clear. Our aim is to grow AIB'sbusiness as an independent, multinational financial services company.The focus of our growth strategy is not at all on merging AIB withany other company. It is clearly fixed on developing and successfullyimplementing a distinctive AIB customer proposition. Wherever weoperate our growth will come from winning more business by meetingmore of our customers' needs.
We are interested in competing with Bank of Ireland not in mergingwith them. We believe any such merger would be unacceptable oncompetition grounds and has not been and is not now on the agenda.Our independence has to be earned year by year by our performanceversus our peer group. So far we have done this as you will see frompage 18 of the Summary Annual Report. In the last five years yourinvestment in AIB has outperformed the top nine companies on theIrish Stock Exchange by 8 per cent, the average of the banks in theEurotop 300 index by 26 per cent and Irish Government gilts by 223per cent. That is the sort of performance that earns independence.