The government's stake in Bank of Ireland could fall to as low as 3% by the time the process of selling down the state shareholding is due to conclude next year, according to one analyst.

The Minister for Finance confirmed today that the gradual sell down of the state's shares in the bank would be extended to May 2022 from an original deadline of January.

"The extension of the trading plan to May 2022 will not come as a surprise given the reductions in the shareholding since the state initially announced its intention to use a trading plan to decrease its stake," Diarmaid Sheridan, Financials Analyst at Davy said.

"We estimate, based on progress achieved to date, that the state will have a circa 3% stake by end of the extended period," he added.

Paschal Donohoe announced in June that the government intended to start the process of selling down the state's 13.9% stake in Bank of Ireland.

The plan has since seen the state reducing its holding to 9.3%.

It was confirmed today that proceeds raised to date from the share sale process have amounted to €249 million.

The average price achieved was €4.96 per share.

The shares have been trading at between €5.20 and €5.25 in Dublin trade today.

Bank of Ireland shares closed at €4.49 on the day prior to the initial announcement.

The state has so far recovered €6.2 billion from its €4.7 billion investment in Bank of Ireland.

"When I announced the launch of the share trading plan in June, I highlighted the benefits of gradually disposing of the State's investment in Bank of Ireland using this approach. Given its success to date, I believe it is in the best interest of the taxpayer to extend the plan for a further period," Paschal Donohoe said.

In line with the Government's commitment to deliver best value for the taxpayer, shares will not be sold below a pre-determined floor price which the Department of Finance will keep under review.

If the share sale eventually results in the government exiting Bank of Ireland entirely, it would make it the first of Ireland's bailed-out banks to fully return to private ownership.

Citigroup will continue to act on behalf of the state in executing the share trading plan, the Finance Department said in its statement today.

Francesca McDonagh, Bank of Ireland Group CEO, said today's announcement continues a very positive process for Irish taxpayers, the Irish economy, and Bank of Ireland.

"The ongoing share sell down is an important process in normalising the relationship between the Irish State and Bank of Ireland. We look forward to being the first Irish bank to return to full private ownership in 2022," Ms McDonagh added.