AIB managaing director Colm Doherty: 'self-help' options

THE state's 18% stake in AIB has plunged €74m in value after the bank's shares hit a 12-month low last week.

AIB shares crashed to a one-year low of 84 cents in the middle of the week, shaving €114m off the value of taxpayers' shareholding.

The share price recovered towards the end of the week to close at €1.04, but the state was still nursing a €74m loss this weekend. Finance minister Brian Lenihan said earlier this month that by getting ordinary shares in the bank in lieu of the cash payment it would ensure "that taxpayers are remunerated in a timely fashion for their investment in the bank".

The state, through the National Pension Reserve Fund, holds just over 198 million shares in the bank, which it received earlier this month because AIB was prevented by the European Commission from paying a €280m cash dividend on the €3.5bn the government invested in it last year.

AIB shares have been under pressure in recent weeks as investors fear the current market turmoil may scupper its plans to raise a massive €7.4bn by the end of the year to plug the hole in its capital caused by transferring billions of euros of toxic debt to Nama.

The bank's managing director Colm Doherty said the bank has a number of "self-help" options to boost capital to meet the Financial Regulator's new required level of 8%.

AIB is planning a raft of asset sales to raise some of the cash in a desperate bid to avoid the government taking majority ownership.

It intends to sell its 22% stake in American bank M&T, its 70% holding in Poland's fast-growing lender Bank Zachodni WBK and its British operations. However, according to reports, plans to sell the M&T stake to Spain's Santander have floundered while institutions linked with Bank Zachodni continue to rule themselves out. Societe Generale, the French banking giant, was the later to pull out of the race, according to Polish newspaper reports.

AIB admitted in March that it would also have to hold a rights issue by the end of the year to generate some of the extra capital. That is likely to see the government become the bank's largest shareholder.

Meanwhile, Bank of Ireland shares edged closer to the price at which it launched its monster rights issue, falling to as low as 66 cents in the middle of the week, coming perilously close to the 55 cent price at which the new shares were issued.

Bank of Ireland shares climbed towards the end of the week but were still trading below the original theoretical ex-rights price of 94 cents, having wiped out half the rights issue discount.