A surprise €105m writedown on property assets held by Irish Life & Permanent (IL&P) combined with weak earnings is causing a capital shortage which could hinder the group's plan to restructure and spin off its banking arm, Permanent TSB (PTSB), according to analysts briefed by management.

The revelation was blamed for the nearly 20% plunge in the share price last week as investors sold out of the stock.

The shares had been gradually bid up since March on speculation about the restructuring and the decoupling of the life company from PTSB to form part of a new "third force" bank. The writedowns related to a €40m paper loss on a commercial property venture in Luxembourg the group had committed to invest in.

The remainder resulted from losses in its insurance portfolio as customers redeemed investments in property funds as the market fell.

The writedowns have negatively impacted shareholder's equity, 28% of which is now tied up in property assets, prompting analyst and investor fear that more capital is at risk if prices keep falling.

A spokesman for the bank called such speculation "hypothetical" and said IL&P had a number of different options for raising up to €500m should the need arise.