AIB may have missed its best chance to boost its capital position by disposing of its 24% stake in M&T Bank when the US regional bank's share prices spiked at the beginning of the month.

AIB could have realised a capital gain of $2.5bn (€1.85bn) by selling out of its investment when the share price hit $95.45 on 1 October. Since then the stock has retreated amid carnage on Wall Street, trading at just above $70 at Friday's close, a fall of more than 25%.

Irish banks will have to recapitalise in the coming months to gird their balance sheets for loan losses and asset write-downs expected in 2009, analysts have said. Most regard AIB as best positioned due to its stake in M&T.

Billionaire and legendary investor Warren Buffett is M&T's next-largest shareholder after AIB. The Berkshire Hathaway chief executive was reportedly considering a merger of M&T with former investment bank Goldman Sachs, in which he recently invested $5bn.

The market has been favouring American regional banks like M&T as larger institutions have fallen on hard times. AIB derives less than 7% of annual profits from its investment in M&T.