Allied Irish Banks has offered to buy back €3.9 billion of subordinated debt at a discount of 70 per cent as part of a bid to cut its capital requirements.

The offer is broadly in line with secondary market levels, and could generate just under a quarter of the €6.1 billion capital it still needs to raise, Davy Stockbrokers analyst Stephen Lyons said.

"Given the size of the €6.1 billion capital that the bank needs to generate by end-February, outstanding deleveraging and the stress tests on both asset quality and liquidity fear should influence a significant take-up," Mr Lyons said.

"The outlook for State ownership - mid to high 90 per cent - does not really change on the back of this announcement."

Bank of Ireland ran a similar exercise last month, getting a 45 per cent take-up. A 50 per cent take-up for AIB's offer would generate €1.37 billion of capital upfront, Mr Lyons said.