Ireland’s government has announced plans to dilute its stake in Allied Irish Banks (AIB) in a phased manner over the next six months.

The government, which has a 71.12% directed shareholding in AIB, will sell its stake through a pre-arranged trading plan, said the Minister of Finance Paschal Donohoe.

Donohoe did not disclose how much stake the government plans to sell and the number of shares to be sold will depend on market conditions.

The divesture will begin in mid-January 2022 and will be capped at 15% of the expected aggregate total trading volume in AIB’s shares over the period.

Donohoe said: “With our share trading programme proving successful in reducing our stake in Bank of Ireland, I am now announcing the restart of our phased exit from the State’s larger investment in AIB.

“The bank’s financial performance has improved significantly while investor appetite for banks is also recovering, so these conditions provide a supportive environment to reduce our shareholding in the bank over time.

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“Given the thinner liquidity in AIB shares, I expect the pace of share sales to be slower than what we’ve seen at Bank of Ireland, but it is important that we make further progress on what will be a multi-year journey.”

The announcement coincides with the Irish government’s decision to further lower its stake in the Bank of Ireland.

In a regulatory filing, the Bank of Ireland revealed that the Irish state has decreased its shareholding from 8.99% to 7.97%.

During the financial crisis due to the property crash, the Irish government pumped $72bn into the banking system. The government also owns a 75% stake in Permanent TSB.