Allied Irish Banks has unveiled a jump in first-half profits, shrugging off a $700m trading fraud at its US subsidiary Allfirst earlier this year.

The company said on Wednesday that profits for the first six months of the year came in at 703m euros, 5% up on the same period last year.

AIB said the stronger bottom line came despite 'difficult' market conditions, and showed that the firm is bouncing back from the Allfirst scandal.

"(The Allfirst fraud) and its aftermath created significant challenges for our company, but these were met without losing our focus on growing the business," AIB chief executive Michael Buckley said.

AIB shares were closed up 89 euro cents at 12.3 euros.

Domestic boost

The company's improved profits performance reflected continued growth in its retail and commercial banking business in Ireland and the UK.

This was enough to offset a sharp decline in returns from its US businesses Allfirst and Allied Irish America, where profits fell by 25% on the year.

AIB came under heavy pressure from investors to sell off Allfirst in the wake of the fraud, but has held out in the hope of turning the business around.

Fraud fall-out

The firm was rocked in February by revelations that a foreign exchange dealer employed by its Allfirst subsidiary had hidden trading losses amounting to $690m.

The scam, the biggest banking fraud since rogue trader Nick Leeson brought down Barings bank in 1995, triggered a plunge in AIB's share price, prompting fears that it could become the target of a takeover bid.

The AIB trader, John Rusnak, was charged with fraud in the US last month.