M&T Bank will take over AIB's US subsidiary Allfirst today following the completion of a $3 billion (€2.75 billion) deal between the two financial institutions, writes Siobhán Creaton, Finance Correspondent.

Under the terms of the transaction, AIB will be paid $886 million in cash and will take a 22.5 per cent stake in M&T, which is based in upstate New York.

Speaking to The Irish Times yesterday, AIB group chief executive Mr Michael Buckley said he was very confident this was the right deal for the bank.

"We will be a major shareholder in M&T turning over the operation of the US banking subsidiary to the new management team.

"We are putting our confidence in M&T who see this relationship very much as a partnership," he said.

The sale of Allfirst comes a year after rogue trader John Rusnak perpetrated a $691 million fraud at the Baltimore bank.

M&T is one of the top-performing regional banks in the US and its share price has outperformed its peers over the past eight years. Mr Buckley said AIB's partnership with M&T was a long-term one that would benefit its shareholders.

"As the US economy comes into a faster growth path, the benefits will become more apparent. The transaction was valued at about $3 billion. We will get $886 million in cash and will be investing $2 billion in M&T and will be expecting to get double- digit growth over the next few years," he said.

Over the coming weeks, AIB will begin to use the cash raised from M&T to buy back its shares. Mr Buckley said this exercise was likely to continue for a number of months.

AIB becomes the single biggest investor in M&T, followed by its directors and executive officers, who hold 14 per cent of the stock, and Berkshire Hathaway, the investment vehicle owned by one of the world's best known investors, Mr Warren Buffett, who owns 5.7 per cent.

"The combined stake held by management, Mr Buffett and ourselves gives us close to voting control," Mr Buckley said.

M&T will begin to rebrand the Allfirst branches over the summer and more than 11,000 staff will depart from the bank as many head office and technical support functions are removed.

Around 270 people took voluntary redundancy from Allfirst before Christmas. Mr Buckley said that M&T intended to recruit a further 557 staff for new positions at the bank.

The Allfirst acquisition is the biggest undertaken by M&T and will position it as the 18th-largest bank in the US.

Mr Buckley will join the bank's executive committee, attending meetings twice a month in the US. AIB executive Mr Eugene Sheehy will join M&T's management team.