THE CHANCES of Bank of Ireland avoiding majority State control have declined further as shareholders voiced their opposition to the bank’s plan to raise €1.91 billion through a sale of new shares.

The bank is facing up to 70 per cent State ownership if all shareholders shun a rights issue offer of 18 new shares for every five held.

At an extraordinary general meeting paving the way for the rights issue, shareholders objected to the 10-cent-a-share offer after participating in a rights issue of 55 cent a share last year only to see the shares drop again in value.

“Why are you persisting with this rights issue, because there isn’t a God’s earthly chance of it succeeding,” shareholder, John Flynn from Cork told the bank’s chairman Pat Molloy. “I got caught out last time but not again. I might be jaundiced in one eye but I’m not jaundiced in both.”

The bank must raise the cash as part of a €5.2 billion fundraising to meet higher capital ratios set by the Central Bank following the stress tests of the banks in March.

The share price fell 13 per cent, or 1.5 cent, to 10.1 cent yesterday.

One shareholder asked where the bank would be a year from now and whether it would be looking for more money then.

Mr Molloy said the bank was hit with an “extraordinary tsunami” last year, as funding markets froze and the stress tests meant the bank had to raise more money.

“The goal posts have changed; the bar has been raised,” he said.

Richie Boucher, who is coming under increasing pressure as chief executive given looming State control, said loan losses had peaked and would “move progressively downwards in 2011 and 2012”.

Bank of Ireland is the only Irish bank to have so far avoided State control. If no shareholders take up their rights to buy new shares, the State, which is underwriting the sale, would be left with a stake of 69.7 per cent, up from 36 per cent.

Should all shareholders take up their rights, the State will be left with a 29.2 per cent stake.

Talks with private equity firms on an investment were ongoing but they had not as yet reached a conclusion, said Mr Molloy.

“There have been extensive discussions with private equity interests,” he said. As of today these proposals, which have conditions attached, have not been brought to a successful conclusion, but that is not to say they have gone away.”

The bank has raised €1.96 billion by repaying subordinated bondholders at a fraction of what they are owed in a heavily discounted cash or shares deal.

A further €510 million is expected to be raised from further “burden-sharing” with bondholders by the end of the year.

Subordinated bondholders will be left with 19 per cent of the bank.

One shareholder questioned why €150 million was being paid in fees on the rights issue.

Mr Molloy said that €100 million would be paid to the State and the remainder to advisers and sponsors of the rights issue.

Independent TD Shane Ross, a shareholder, said the fees were “absolutely outrageous”.

Mr Molloy said he was “pretty shocked” at the fees but “that is what we are confronted with”.

“These people don’t, I’m afraid, come cheap,” he said.

Mr Molloy said an embargo on the payment of dividends – in place since the first State bailout in 2009 – was likely to be extended beyond September 2012 given that an updated restructuring plan must be submitted to Brussels.

The extraordinary general meeting was attended by 189 shareholders, down from the 370 who attended last month’s more acrimonious annual meeting.