AIB shares surged this morning after the lender announced it will boost capital by €2.5 billion through the sale of its Polish unit to Spain's Banco Santander.
Shares in the lender were up 7 per cent at 80 cent at 9am in Dublin, the banks largest rise since July 6th, but had fallen back to 78 cent at 12.30pm.
The bank put its 70 per cent stake in Poland's Bank Zachodni WBK and two other foreign assets up for sale in March, when the financial regulator demanded it raise €7.4 billion to reach new capital standards by the year-end.
AIB has also put its UK unit and its 22.5 per cent stake in US regional bank MandT Bank Corp. up for sale.
Emer Lang of Davy Stockbrokers, which has a "neutral" rating on AIB stock, said the sale of Bank Zachodni "represents the first important step" of the process of the €7.4 billion recapitalisation of AIB.
Santander this morning said it expects its per-share profit to increase by 2.7 per cent by the end of 2013 following the acquisition of Bank Zachodni.
Bank Zachodni surged by about 10 per cent in trading in Warsaw today - their largest increase for 15 months.
Shares in all three listed Irish banks were up this afternoon, with Bank of Ireland and Irish Life and Permanent gaining 4 per cent and 3.7 per cent respectively.
The spread between the Irish 10-year bond and the German bund tightened slightly this morning to 330 basis points, with the yield standing at 5.808 per cent, down from 5.813 per cent.
This came despite a scathing Financial Times editorial which suggested the latest plans for Anglo Irish Bank revealed how little Dublin - and most other governments - had learned from the financial crisis.
Under the headline "No Irish Lazarus" the article says the Government's plan to split Anglo, after investing €23 billion in it, "looks like another round of three-card monty".
"It does not clarify the final size of the hole to be filled and continues to make citizens protect bondholders from their own folly," the newspaper said.
It says the explicit State guarantee on banking deposits must be honoured but that the extension of the scheme to "guarantee new debt issues to maturity forces taxpayers chained to a sinking ship to build lifeboats for existing creditors".
Responding to the criticism, Minister for Justice Dermot Ahern said Ireland was not the only country with a bank guarantee and that another article in the same newspaper said there would be chaos if the guarantees were removed.
"You have to understand there are deposit holders, ordinary people and indeed institutions in Anglo Irish Bank to the tune of €56 billion and we have to sustain those," he said.
Mr Ahern said the tax payer had made money from the guarantee. He said €1 billion had been given to the State by the banks and that a €500 million rights issue by Bank of Ireland had benefited the exchequer.
Additional reporting: Bloomberg
