Scots could be poised for AIB

SHARES in Royal Bank of Scotland soared 58p to 1743p on Monday in the run-up to its full-year results this week amid speculation that it will launch a bid for troubled Allied Irish Banks.

RBS, led by chief executive Fred Goodwin, ran its slide rule over AIB before the recent revelations of the £487m losses by foreign exchange trader John Rusnak at the Irish bank's US division, Allfirst.

Broker Teather & Greenwood expects RBS to make £5.64bn profit, up from £4.4bn last year. Excitement mounts over whether it will pounce on a weakened AIB, up 18p to 793p.

Goodwin was rumoured at the weekend to be mulling an £8bn bid. But cooler heads doubt that an assault is imminent.

Taking over all of AIB would be problematic. The Scots' ownership of Ulster Bank opens the prospect of clashes with Irish competition authorities. AIB has wide interests in Poland, which do not obviously fit the RBS game plan.

Banking sources believe the Scots are more likely to be interested in buying Allfirst on its own. Its Maryland territory fits well with RBS's existing US interests, Citizens in New England and the recently purchased retail side of Mellon Financial in Pennsylvania. RBS has been steadily extending its interests on the US eastern seaboard.

AIB has not so far had overtures from RBS or any other potential bidders. The wooing is unlikely to start until after US inquisitor Eugene Ludwig delivers his report on the fiasco next month, for fear of new skeletons in the cupboard. US reports suggest an internal memo in 1999 indicated Rusnak's trades were raising concerns.

The Irish camp, which has instructed adviser Merrill Lynch to work on a defence strategy, is convinced that bidders would be reluctant to go hostile. But the smart money says AIB's fate hangs on Ludwig's findings. If his report suggests deficiencies in control systems and management, its days as an independent look numbered.