Shares in AIB closed about 17% lower in Dublin and London this evening after shock news of a $750m fraud at its US subsidiary Allfirst.
In its first public reaction to today's reported fraud, Allfirst admitted that its controls did not work, and said an investigation was under way to establish what happened.
At a news conference in Baltimore, Allfirst executives said the missing trader,John Rusnack had been a solid performer and suggested that personal greed may not have been a factor.
They described the fraud as very sophisticated and well-thought out.
AIB Group chairman Lochlann Quinn said that elements of the fraud dated back to March of last year. He also said that he had less confidence in some of the bank's senior executives than he did three days ago.
In a statement earlier today, AIB said it was conducting an investigation into foreign exchange trading operations at Allfirst's Baltimore headquarters following the uncovering of suspected fraudulent activities by trader John Rosnak, who has since failed to report for work.
Preliminary investigations suggest that the suspected fraud amounts to $750m and will result in a one-off reduction of €596m in AIB's 2001 earnings.
Excluding this item, AIB's unaudited group pre-tax profits amounted to €1,401m. Underlying earnings per share increased by 8%.
Shares in AIB moved back from earlier lows to close 16.5% lower at €11.35 in Dublin this evening - a loss of €2.27. AIB shares also closed down over 17% in London this afternoon.
Group chief executive Michael Buckley said the bank was 'hugely disappointed' that Allfirst's control procedures failed to uncover the situation at an earlier stage. He added that AIB's underlying business and profitability momentum was not impaired by what he called this 'once-off blow'.
AIB has discontinued all foreign exchange trading operations in Allfirst and suspended two Allfirst executives and two other staff members pending completion of an investigation.
Buckley told RTE radio that the fraud was 'complex and very determined'. He later told a conference call that there had been 'internal and external collusion' in the fraud, but ruled out any need for a capital injection into Allfirst.
