M&T, the US bank that has taken over AIB's Allfirst subsidiary, has issued $400 million (€366.8 million) in subordinated debt to part finance the $886 million cash payment owed to the Irish bank.

The bank also confirmed that it had signed a letter of intent to acquire AIB's branch office in New York.

It will continue to provide lending, treasury and advisory services to the not-for-profit and corporate sectors from its offices in New York, Philadelphia, Atlanta, Chicago, Los Angeles and San Francisco.

Under the terms of the deal with M&T, AIB will take a 22.5 per cent stake in the Buffalo-based bank with chief executive Mr Michael Buckley and finance director Mr Gary Kennedy joining the M&T board.

Mr Eugene Sheehy, who had been running Allfirst for AIB, has joined M&T as an executive. He will remain in Baltimore and work with M&T executive vice-president Mr Atwood Collins. AIB will nominate a fourth director of M&T in due course.

Meanwhile Mr Robert Wilmers, M&T chairman, president and chief executive has been co-opted as a non-executive director of AIB.

Yesterday, Mr Collins said M&T was gaining talented employees and dedicated customers in vibrant new communities.

"We anticipate a smooth integration for the customers and communities we service," he said.

The integration of the two banks will be largely completed by the end of July when they will be rebranded.

AIB intends to use the $886 million in cash to buy back its shares over the coming weeks. Its shares gained 30 cent yesterday to close at €12.95 ahead of the buy-back process.

M&T now operates more than 700 branches and 1,600 ATM machines in Maryland, New York, Pennsylvania, Virginia, West Virginia and the District of Columbia.