More than £400 million has been wiped off the value of AIB over the last two days amid fears that the bank may be dropped from the key Euro Stoxx 50 index of blue chip shares.
Shares in the bank closed 68 cents lower at €12.20 (£10.68) yesterday, cutting nearly €584 million (£460 million), 5 five per cent, from its value on the eve of the release of its results for the first half of the year.
"If AIB is out of the Euro Stoxx 50, certain institutions won't need to track it and they may be selling," one trader said.
However, other dealers said the shares may have been affected by general weakness in the banking sector - Bank of Ireland was also down sharply yesterday - and the light trading on the Irish stock market as August begins. This factor means that shares can drop sharply, even on fairly small volumes.
Stoxx Limited, a joint venture between Dow Jones and several European stock exchanges, operates the Euro Stoxx 50 index and is moving to a new selection method based mainly on a company's size.
The list of companies selected will be published on August 19th and the changes to the index will occur on September 20th, but fears have been growing in recent weeks that AIB will not be large enough to be included.
The new index is likely to be closely based on a list of the top 50 stocks published on the Stoxx web site at the end of each month. The most recent list, for the end of July, has just been published and AIB is ranked 61st on it.
The bank is the only Irish company currently listed on the index, and its inclusion since the beginning of the year has meant that the shares have been in strong demand with certain types of investment funds, which use the Euro Stoxx 50 as a basis for their asset allocation.
The fear is that if AIB is dropped from the index, it will trigger a flood of technical selling by such institutions as they seek to focus on those companies which are included in the index.
AIB's head of investor relations, Mr Maurice Crowley, said there was a higher degree of likelihood that the bank would be dropped from the index now than in June, when concerns first began to emerge.
"It would be unfortunate for us but we take comfort from the fact that we are on all the other major stock indices, and being on the index over the last few months has given us a calling card with the major European institutions," he said.
AIB is expected to announce today an increase of between 5 and 9 per cent in first-half profits. The main driver of the bank's growth will continue to be the retail division, particularly in Ireland where lending growth remains strong.