Bank of Ireland may have to take a 12 per cent discount on €10 billion of loans it plans to sell by the end of 2013, according to Davy stockbrokers.

The bank agreed last month to sell €5 billion of loans at an average 9 per cent discount.

A 12 per cent overall haircut is "well below" the average 27 per cent discount that Davy calculates was included in bank stress tests in March, Emer Lang, an analyst with the securities firm said in a note today.

Davy continues to believe a 27 per cent average sector discount "looks on the high side, notwithstanding a more crowded market as a number of European banks now see asset sales as an attractive alternative to capital raises," Ms Lang said.

Last month, the bank closed a deal that will see a group of five international financial investors acquire a 34.96 per cent stake in the company for €1.123 billion.

Fairfax Financial Holdings, WL Ross, Capital Research and Management Company, Fidelity, and Kennedy Wilson purchased shares from the National Pension Reserve Fund, which is holding the stock on behalf of the State.

The move reduces the Government’s holding from 42.1 per cent to 15.1 per cent and keeps Bank of Ireland outside majority State ownership.