AIB has bought back 5.6 million of its own shares on the market at 575p per share, at a total cost £32.2 million. Some dealers expressed surprise at the price offered for the shares, which was 12p higher than the 563p closing price on Thursday. AIB's stockbroking subsidiary, Goodbody, which carried out the deal, described the price as very fair for both the sellers and the buyer. Head of equities, Mr Bruce Ashmore said that the price reflected the large volume of shares acquired and that there were no sellers in the market at any other prices.

The deal is understood to have been initiated by a number of sellers and the price was then agreed with AIB. The move by AIB is related to the bank's £840 million acquisition of Dauphin Development Corporation in the United States. In that deal the bank issued 166.5 million shares to Dauphin shareholders who took AIB shares in lieu of cash for their Dauphin shares. AIB got approval from its own shareholders to buy back up to 50 million of its shares. This was sought so that the effect on the bank's share price of any return to the Irish market of shares given to the US shareholders could be reduced by the bank mopping up some of its own shares.

Dealers said that AIB paid a full price to buy back its shares. Some dealers expressed surprise that the buy-back had been exercised when there appeared to be little evidence in the market that US shareholders were looking to sell shares. AIB shares traded down to 563p after the deal. Following the US acquisition, Dauphin shareholders hold about 19 per cent of AIB shares.

While the number of shares bought back yesterday is modest, at 0.6 per cent of the bank's issued share capital, AIB said it may make further purchases "subject to market conditions". A full buy-back of the 50 million shares would cost AIB just under £288 million at the 575p price offered yesterday.