Allied Irish takeover alert after fraud blow

Published on Thursday 7 February 2002 00:00

ALLIED Irish Banks’ shock disclosure that it has apparently been hit by a half-billion pound fraud at its US operations has sparked market speculation that it may now be vulnerable to a takeover bid.

City analysts said the Royal Bank of Scotland or Lloyds TSB could well be interested in a bid for Ireland’s biggest bank, if it had been sufficiently weakened by the latest crisis.

However, AIB insist s that while the 500 million-plus debacle at its Allfirst subsidiary is a heavy blow, it is not a fatal injury.

A analysts said the Royal Bank, whose Ulster Bank subsidiary operates throughout Ireland, could be put off by the inevitable concerns a bid for AIB would cause competition authorities.

As well, they said the Royal is preoccupied with processing its 21billion purchase of NatWest two years ago, and integrating the operations of Pennsylvania-based Mellon Financial into its existing US operations.

The bank could not be contacted for comment, while a spokesman for Lloyds TSB said it was "generally" interested in acquisitions in the US and Europe.

The AIB announcement - just days after Irish pharmaceutical giant Elan issued a profits warning that wiped out three-quarters of its value - was seen as another blow to Ireland’s image as a booming "Celtic Tiger" economy.

"It certainly doesn’t help the image of the Irish market internationally when we see these kinds of issues emerging," said Seamus Murphy, banking specialist at Merrion Capital in Dublin, as shares of AIB, which had been Ireland’s biggest company, dropped as much as 23 per cent.

Finance minister Charlie McCreevy pointed out Elan and Allied together accounted for about 40 per cent of the capitalisation of the Irish stock market.

"AIB are one of the major players in the Irish system, they are the major bank," Mr McCreevy said.

"They have a very large stock capitalisation on the Irish stock exchange and therefore a fraud such as this is damaging to both to AIB and to the Irish economy generally."

Tom Conway, head of equities research at NCB Stockbrokers, said the Elan case had shown Irish accountancy standards were in some ways more stringent than those in the US .