THE GOVERNMENT IS preparing to effectively nationalise Allied Irish Bank (AIB), following the announcement from the Central Bank that it needs a further €3 billion in capital.

The revelation comes amid news of a major management shake-up at the bank: managing director Colm Doherty and chairman Dan O’Connor are both to depart the bank, it was announced this morning.

The bank will now seek to raise €5.4 billion in a stock offering before 31 December, it said in a statement.

The National Pensions Reserve Fund Commission, which is guaranteeing the sale, may buy as much as €3.7 billion of stock and convert €1.7 billion of preference shares.  It is buying the shares at a fixed price of 0.50 cent per share – a discount of 9.4 per cent on the closing price yesterday.

Analysts said the announcement about AIB was the big surprise from this morning’s Central Bank statement, which also put a final tally on the cost of bailing out Anglo.

Sebastian Orsi, an analyst with Merrion Capital told Bloomberg:

The big surprise is the increased capital number for Allied Irish. The government could end up with over 90 percent of the group, subject to investor take-up of the planned stock sale to shareholders.

Shares in AIB tumbled as a result of the news.