AIB has put a price on its shares in US bank M&T after announcing yesterday that it will sell its 22.4% stake in the Buffalo-based bank in a public offering of shares.

This comes after talks with potential buyers of AIB's entire stake holding broke down.

AIB says each note, which will be exchanged for a share when the deal is passed by shareholders, is to be priced at $77.50.

That is a 1.8% discount, and is smaller than expected, following the breakdown of its talks with Spanish bank Santander.

The bank will hold an extraordinary general meeting on November 1 to look for shareholder approval for the sale.

The bank says the deal will raise proceeds of €1.5 billion, and generate about €0.9 billion of equivalent equity capital.

It says it will use the equivalent equity capital to meet part of AIB's revised capital requirements of €10.4 billion which the regulator called for last week.

In a statement released overnight, it said the net cash proceeds will be used as an additional source of liquidity to support its business activities.

The financial regulator stunned investors and AIB management last week when it said the bank would need a €3 billion infusion on top of an existing requirement of €7.4 billion.

AIB had hoped to raise its capital target with disposals and a rights issue.

The Government, which owns 19% of AIB, will underwrite a €5.4 billion capital raising next month. Analysts expect it will end up owning about 90%.

AIB recently already sold its Polish banking business to Spanish bank Santander for €2.5 billion.

Shares in AIB closed down 8.5% at 41 cent in Dublin.