A further £500 million was wiped off the value of AIB yesterday as disappointment with the bank's interim results added to fears that it may be dropped from a key European index of blue-chip shares.
The sharp drop in AIB shares since Friday means that the bank is no longer the largest company on the Irish stock market, a position taken over by Telecom Eireann.
AIB stock closed more than 6 per cent lower at €11.43 (£9.00), bringing its fall since Friday to more than 10 per cent. It is now trading nearly 40 per cent below this year's highs.
The bank reported a 7 per cent rise in first-half, pre-tax profits to €542 million (£427 million) - in the middle of market expectations. However, some investors had hoped for stronger results given the continued buoyancy of the Irish economy while others expressed disappointment with the mix of the figures.
Banking analysts said once-off factors which cannot be relied on to recur - such as a low bad-debt provision and a strong performance from the bank's markets division - had helped ensure the figures matched forecasts. There was also some concern about the performance of the bank's US division.
"There is nothing to say these results were terrible; no profit warning, no collapse in a division. The results were just pedestrian and the market may have expected more given the buoyancy of the Irish economy," said a Dublin fund manager.
The first-half figures failed to dispel the gloom already surrounding the shares due to the likelihood that AIB will be dropped from the Euro Stoxx 50, a key pan-European index.
From September, the 50 stocks on the index will be chosen mainly on the basis of size rather than their country of origin as in the past. AIB is the only Irish stock now listed on the index and has benefitted from its inclusion. If it is dropped certain types of investment funds which use the index to determine their asset allocation are likely to sell the shares.
However, some dealers believe that the thin trading conditions on the Irish stock market - with many market players away on holiday - have played a large part in the sharp drop in the AIB share price in recent days. Light trading means that the sale of just a small number of shares may be sufficient to drive the price down.
And, on the bright side, many in the market believe that at current levels AIB is worth buying. "It's definitely in bargain territory," said an investment manager.
The AIB chief executive, Mr Tom Mulcahy, responding to the drop in value, said the bank could only operate "as efficiently and effectively" as possible.
He also suggested the bank did not figure high on lists of take-over targets because of the likely inability of any international bidder to extract cost savings by merging the bank with other operations.