BANKING giant Santander could make a bid for the entire AIB group.
The Spanish bank is said to be interested in a takeover of AIB's British and US operations at this point, but a complete bid has not been ruled out.
A report in the Financial Times said recent talks involved Santander's US subsidiary, Sovereign, merging with M&T bank in the US in a stock-based deal.
The deal could net AIB -- which is trying to raise billions in asset sell-offs -- about €1.2bn, for its 22.5pc stake in M&T.
Santander is also currently linked to the purchase of some of AIB's assets in Britain.
The bank is believed to be the lead bidder for a network of 40 AIB branches that includes a loan book with an estimated value of €1bn.
Ciaran Callaghan, banking analyst with NCB Stockbrokers would not rule out a complete bid for AIB's group given the level of Spanish interest.
"You couldn't ever rule it out," he said.
Prior to the credit crunch and the banking crisis, Santander, back in 2006/07, was identified as a potential buyer of AIB, he said.
As the banking crisis deepened, analysts also identified it as a group strong enough to buy Bank of Ireland if its strategy was expanded to embrace the Irish market.
"However, a disposal of AIB's stake on the open market may have to come at a discount," said Mr Callaghan.
Santander is one of the few financial institutions globally that has thrived in the economic crisis.
The group has continually sought to bolster its overseas operations.
The shareholder agreement gives M&T the right of first refusal on any AIB disposal, or alternatively the shares must be "widely dispersed" but if Sovereign/M&T can strike a deal, it would facilitate a sale.
The Financial Times suggests that Santander would acquire AIB's 22.5pc stake in M&T, giving it a substantial stake in the enlarged entity.
M&T shares have risen by 25pc year-to-date, notwithstanding AIB's plan to sell its stake.
There is increased interest in a takeover of AIB after it was reported that Barclays, Britain's second-largest bank were also interested.
A senior Barclays executive in London is reported as saying that taking over AIB would help the British bank expand into the eurozone.
AIB is currently valued at €11.85bn by the stock market.
Royal Bank of Scotland Group, Britain's third-largest bank, is also thought to be interested in AIB, while new Bank of Ireland boss Michael Soden has proposed a merger with AIB.
Barclays is run by Kerry-born Matthew Barrett.