The Irish government is this week moving the first loans into a 54 billion euro ($73 billion) "bad bank" scheme, and on Tuesday it will announce how much capital the banks will need to make up for resulting writedowns.
Local media reported the state could increase its stake in Allied Irish Banks to 70 percent from its current holding of 25 percent via preference shares, after the transfers to the National Asset Management Agency (NAMA), the "bad bank." Shares in Allied Irish Banks were down 18 percent by 1306 GMT at 1.39 euros, having fallen as low as 1.32 euros, and Bank of Ireland dropped 8.3 percent.
In Bank of Ireland, in which the government also has a 25 percent indirect stake plus 16 percent in ordinary equity, finance minister Brian Lenihan could take a 40 percent ordinary stake, The Irish Times newspaper reported.
Lenihan has said he could not comment on market speculation ahead of the official announcements.
State dominance
"We expect the Irish government to be the largest single equity investor in each institution, absent an unexpectedly strong economic recovery or material private-market sourced equity capital," Royal Bank of Canada said in a note.
The two top banks have said they would try to raise capital privately first but authorities may impose tight deadlines for replenishing their capital which would require fresh bailouts.
Anglo Irish Bank, which was fully nationalized last year, has said it would need up to 9 billion euros of additional state funds. Building societies EBS and Irish Nationwide, also participants in NAMA, have also already requested state capital.
"EBS is in active discussions with the minister regarding the provision of capital from the State and expects to receive the capital shortly," EBS said in a statement.
It said the financial regulator had given it until the end of May to meet a requirement for a core tier 1 capital ratio of at least 4 percent as that will be restored through the bailout soon.
