AIB shares rose 72 cents this morning on the back of weekend reports the Royal Bank of Scotland could be ready to mount a €13 billion bid for the bank.
At 10.30 a.m., AIB was trading at €13.12 in Dublin - continuing the rise seen on Friday when takeover rumours first started circulating.
A newspaper report yesterday claimed Royal Bank was on the brink of making an approach to the board of troubled AIB with a proposal that would see the two banks merge, forming one of Europe's biggest financial services group.
Citing sources close to the situation, it said Royal Bank's advisers are studying proposals to offer AIB shareholders €14.5 a share. It said a merger of the two would unleash savings of at least €530 million.
Royal Bank is also said to be examining another plan that would see it just make an offer for Allfirst.
ABN Amro analyst Mr Eamonn Hughes said although it was difficult to gauge the accuracy of the speculation, there may be some merit to a merger of the pair. "Certainly, there is scope for costs savings, as the company has duplicated operations in the UK, US and Ireland," he said.
However, commentators suggested that Royal Bank of Scotland is more likely to bid for the troubled Allfirst unit, which was the victim of a $691 million foreign-exchange fraud.