Allied Irish Banks PLC, the parent of Baltimore-based Allfirst Financial Inc., said yesterday that its business is "steadily recovering" after it lost a staggering $691.2 million in a currency-trading scandal.
The Dublin, Ireland-based company said that after it revealed the fraud at Allfirst, "there was some reduced business momentum. However, our business is now steadily recovering from the damage inflicted by the fraud."
Allied Irish issued the "trading update" a day before its annual meeting in Belfast, Northern Ireland, today, nearly four months after it said Allfirst employee John M. Rusnak had hidden millions of dollars of losses from trading currencies.
The scandal shook the company, which began an internal investigation led by Eugene A. Ludwig, a former U.S. comptroller of the currency, who concluded in March that Allfirst's oversight and controls were riddled with problems and that Rusnak's trading wasn't carefully scrutinized.
Rusnak and six other employees were fired, and Allied Irish named one of its executives, Eugene C. Sheehy, chairman of Allfirst. Sheehy replaced Frank P. Bramble, who retired April 30.
In Belfast, Allied Irish officials braced for criticism from shareholders at the annual meeting but said they were confident that much of the furor over the losses has waned.
Bank spokeswoman Catherine Burke said yesterday that public attention in the case has greatly diminished, especially since Ludwig's report laid most of the blame on Rusnak and his closest supervisors.
Other factors have unintentionally helped the bank shift focus from the controversy, which riveted Ireland last winter and embarrassed one of its most recognized business institutions.
A recent national election and the approaching World Cup soccer tournament have dominated headlines of late. The roughly four pages of newsprint a day that were devoted to the trading scandal in February and March are now splattered with debate about Roy Keane, the national soccer hero who was sent home on the eve of the world's biggest sporting event for arguing with his coach.
The banking scandal has "calmed down a good deal, especially now that we're caught up in World Cup fever," said George Lee, economics editor for Radio Telefis Eireann, the state-run broadcaster in the Republic of Ireland.
Allied Irish Chairman Lochlann Quinn and Chief Executive Officer Michael Buckley will attend the annual meeting, and Sheehy is also expected.
Jim Power, an economist with Friends First, a Dublin brokerage, said anger persists in Ireland that Quinn, Buckley and Allfirst President and Chief Executive Susan C. Keating didn't lose their jobs after the scandal. But he isn't convinced that the bank has put the episode to rest. He thinks the stock has maintained its value because investors haven't ruled out a takeover.
Several shareholder resolutions to remove the board of directors are expected to be overridden today by large institutional investors, who have told the Irish press that they want to give the bank a year to show improvement.
The trading losses sheared Allied Irish's profit last year by about 50 percent, to $421.2 million.
It also caused Allfirst to incur a $36.8 million loss last year. The bank would have made $200.5 million if not for the loss. Allfirst bank also had to restate earnings for the previous four years.
Allfirst's deposits dropped about $100 million in the three to four weeks after its announcement, but it is uncertain how much of that is attributable to the scandal, officials have said.
"We did see some short-term loss in deposits, but that has been largely recovered at this stage," said Alan Kelly, Allied Irish's head of investor relations.
Signs of recovery have been seen in the aftermath of the crisis, especially in Baltimore, experts said.
Allfirst made $37.8 million in the first quarter, and its total revenue rose 8 percent to $226 million.
Its core deposits, which include savings, checking, money market accounts and consumer certificates of deposit, rose 3 percent in the quarter to $9.9 billion.
Allfirst has also paid back $250 million in short-term deposits from the parent.
"In terms of the business, there hasn't been a mass exodus of retail clients or small business clients," said Jonathan Gollins, a banking analyst at Banc of America Securities in London. "There has been reasonable restoration of business as usual. There is no reason why the bank shouldn't go on to normal business."