Bank of Ireland shares have taken another hammering as investors remain disillusioned about its attempt to take over Abbey National.

The stock closed at €8.68 yesterday, down another 32 cents, as it remained under sustained selling pressure. Bank of Ireland's share price has dropped by 15 per cent since news of its approach to the former UK building society was announced at the weekend.

In three days the slide in its share price has wiped €1.5 billion off the bank's market capitalisation, reducing it from €10.3 billion to €8.8 billion by close of business yesterday. This had led to speculation that Bank of Ireland may itself now be vulnerable to a takeover bid.

The scale of the decline in the size of Bank of Ireland is close to that suffered by AIB when it announced that a rogue trader, Mr John Rusnak, had defrauded the bank of almost $700 million (€709 million). Some €2 billion was immediately wiped off AIB's market value.

Market sources suggest that the bank's shares will not slip below €8.50 with some support for the stock at this level, but the bank will come under pressure to abandon its bid if the shares continue to slide.

Despite the very negative sentiment towards this deal in the markets, Bank of Ireland remains committed to pursuing its bid for Abbey National and is preparing to issue details of its proposal to the market in the coming days.

Investment bankers unconnected with the merger discussions between the two banks said BoI's attempt to win control of Abbey through a so-called bear hug, but without putting an attractive price on the table, was "naive". One banker said: "They need to have Abbey onside because they need to do due diligence on Abbey's life insurance business and on its treasury operations. Also, a bear hug really only works if the target takes you seriously because you have the financial firepower to go ahead and bid anyway."

A spokesman said the bank was not ignoring what the market was saying but said this response was based on a lack of information. The fact that its bid has been described as offering a nil premium was "nonsense", he said.

Meanwhile, Abbey National shares continued to soar, boosted by confirmation that an approach by National Australia Bank had also been rebuffed by Abbey.

Its shares climbed another 7 per cent to end at £5.93 (€9.37), 39.5p higher as investors bought the shares in anticipation of further emerging bids for the bank.

Bank of Ireland had expressed surprise at the swift dismissal of its bid and yesterday a number of Abbey National shareholders expressed some concern that the approach may not have been given adequate consideration.

Mr Philip Gibbs, a fund manager at Jupiter Asset Management in London, said that Abbey should look at all possible deals. "I was very cross that Abbey didn't really look at the Lloyds deal. I thought they would have learned a lesson but they are still not talking to potential bidders."

Jupiter is also a substantial Bank of Ireland shareholder. Mr Gibbs said he believed that the bank should not pursue a hostile bid. "It is not big enough. This merger is not going to happen."

Some Abbey National shareholders were indicating that they were not prepared to support a deal at its current share price and that any offer would need to value Britain's sixth biggest bank at more than £8 a share. Abbey shares were trading as high as £12 when Lloyds TSB made an approach some months ago.

Investors were also calling for Abbey to appoint an outsider as its chief executive in the hope that new blood will help to restore profitability. Abbey has been trying to find a new chief executive to replace Mr Ian Harley, who stepped down in July, and is said to be very close to completing the process.