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The Irish jokes were flowing at M&T Bank's annual meeting in Buffalo Tuesday.

One shareholder asked if St. Patrick's Day will be a bank holiday. M&T Chairman Robert G. Wilmers responded by joking that M&T employees are now "all Irish."

The joviality was part of the welcome given three new business partners from Dublin, partners who could play a crucial role in the future of the largest company based in Buffalo.

Allied Irish Banks now owns 22.5 percent of M&T Bank. They picked up the shares as part of the deal to sell their U.S. subsidiary, Allfirst Financial in Baltimore, to M&T.

AIB is a big money European partner that could help build M&T into one of the top 10 U.S. banks. The Irish bank could also be a prime candidate to someday control M&T.

"There is no question about AIB investing in other U.S. banks. Our sole partnership here is with M&T. . . This is it. This is the one we're putting our money on," AIB Group Chief Executive Michael D. Buckley said during an interview in Buffalo on Tuesday.

When asked if AIB would ultimately like to own M&T outright, Buckley declined to speculate on the future.

"That's not really on the agenda. What's on my mind is making the integration (of Allfirst) work, and making the partnership work as we've laid it out."

Here's how the partnership is laid out. AIB no longer owns a U.S. bank, as it did with Allfirst, it owns 22.5 percent of M&T. The deal prohibits AIB from owning more than 25 percent of M&T's stock, unless M&T's board determines a larger stake is in the best interest of the company.

AIB has three seats on M&T's board. Those chairs are filled by Buckley, 58, Gary Kennedy, the 45-year-old director of finance and enterprise technology at AIB, and Eugene J. Sheehy, the 48-year-old former Allfirst president.

M&T's board, elected Tuesday, remains at 23 members. The AIB members replace retiring M&T Vice Chairman Carl Campbell, John L. Vensel and John H. Benisch. Campbell was the former head of Keystone Financial, the Harrisburg, Pa., bank that M&T bought in 2000.

M&T has one seat on AIB's board, held by the 68-year-old Wilmers.

The relationship between the Irish bank and M&T bears a slight resemblance to the newlywed years of HSBC and the former Marine Midland Bank. London-based HSBC started out with a few board seats, and hands-off management, at Buffalo-based Marine Midland in 1980.

But there is one big difference between the two deals. HSBC started out with a 51 percent stake in Marine Midland before acquiring the remaining shares in the late 1980s.

"It would be logical to assume AIB is a strong candidate to acquire the balance of the stock they do not already own in M&T. But it's not automatic, a lot depends on how this partnership goes," said Nelson D. Civello, the Oishei Visiting Professor of Finance at Canisius College.

The future relationship between the two banks depends on many factors, including the merger and acquisition climate within the bank industry, the future performance of M&T and management succession planning, Civello said.

"This is certainly a valid question. It depends on how they're looking at succession planning internally right now, and those are very private discussions," the Canisius professor said.

The business of the day is M&T's push into the mid-Atlantic region, where the Rust Belt bank will knock heads with Southeastern heavyweights Bank of America, Wachovia and SunTrust.

M&T acquired Allfirst shortly after the Baltimore bank took a black eye from $691 million in fraudulent currency trades made by former employee John Rusnak.

Management failures surrounding the losses were confined to the trade unit and did not spill over into Allfirst's retail and commercial banking units, said Buckley. "Obviously, there was bad publicity. Did it effect the (Allfirst) brand? I think the test of that is customer attrition. There really was no customer attrition. We didn't lose any customers," Buckley said.

Now M&T has to manage the risk of customer attrition which comes with any bank merger. When an out-of-town bank takes over, the competitors swarm in like vultures to pick off major accounts.

Since M&T has little name recognition in the rapidly growing Baltimore-Washington corridor, the bank stretched its conservative corporate culture and struck a 15-year, $75 million stadium naming rights deal with the Baltimore Ravens. Buckley liked the big splash in Baltimore.

"The biggest challenge, and the one M&T is taking on, is to establish what had been an unknown brand in that market and to do it in a dramatic way," he said.

Buckley thinks M&T, currently the 18th largest U.S. bank, has the right formula to survive the industry consolidation game and become a top 10 U.S. bank. He said AIB's board members will play an active role in helping the Buffalo bank get there.

Buckley serves on M&T's executive committee and plans to be in Buffalo twice a month for committee meetings on bank strategy.

"I think our input into the big decisions will be very active input," he said.


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