AIB will spend up to €160m, the equivalent of more than a third of its total market value, on advisers to its mammoth €5.4bn fundraising even though investors will shun the offer.

Investment industry sources said about 2-3% of a typical share issue is spent on various advisers, including investment banks, stockbrokers, law firms, auditors and other expenses, indicating a tab of between €100m and €160m for the bank.

AIB is expected to launch the cash call next month but the government has already said it will underwrite the rights issue after which its stake in the bank is likely to end up in excess of 90%.

The government could introduce legislation taking the bank into public ownership – similar to the nationalisation of Anglo Irish Bank – saving much of the outlay on external advisers. However, the Department of Finance is believed to be concerned that by not allowing the bank's existing shareholders to participate in a rights issue it could be open to legal action.

The cheaper option may be to let the fundraising go ahead. The British government structured its recapitalisation of the Royal Bank of Scotland in a similar way.

The €5.4bn required will be met by a fresh cash injection by the National Pension Reserve Fund (NPRF), which will also convert some of its AIB preference stock into ordinary shares.

Existing and new investors will be offered the opportunity to buy shares at 50c each, but as the bank's shares are currently trading at a 20% discount to that price it is cheaper to buy the shares on the open market now.

In a research note last week, NCB Stockbrokers said that assuming a negligible take-up from existing shareholders in the rights issue, the government's stake in AIB will rise to 93%.

Bank of Ireland's €2.9bn fundraising earlier this year cost it €79m in fees and it also handed over nearly €52m to the NPRF, which participated in the rights issue on behalf of the state, to cover its expenses.

AIB's list of advisers includes Goodbody Stockbrokers, Morgan Stanley and Swiss bank UBS. It will also require law firms in Ireland, the US and UK and an accounting firm to audit a detailed prospectus.

On the sale of its stake in M&T Bank, AIB retained McCann Fitzgerald, Linklaters and Wachtell Lipton Rosen & Katz to provide legal advice.

AIB needs to find €10.4bn to meet new capital standards set by the Financial Regulator, €3bn more than was previously estimated. It hopes to raise €5bn through asset sales. Half of that has been banked by selling its Polish subsidiary, while the M&T deal should generate a further €900m. Its UK and Northern Ireland operations are still on the block.

Any shortfall in meeting the €5bn target will be met by the NPRF converting more of its preference shares.