AIB shares raced ahead yesterday by 2.67% but eased later in the day to close at €16.40, up 29 cents, an increase of 1.8%.
Dolmen Stockbrokers analyst Stuart Draper said AIB share values, trading at near year highs, already include a takeover premium in the wake of yesterday's revelations that the AIB board discussed selling the company to M&T Bank in the US.
Mr Draper said Irish banks will have to continue to cut costs to prevent being taken over by foreign banks.
The Dolmen expert said that cost to income ratios in AIB and Bank of Ireland were very high compared to other European banks and to local rival Anglo Irish Bank in particular, where cost to income ratios are in the high 20s compared to the 50s for Bank of Ireland.
Mr Draper said Lloyds TSB, Barclay's Bank or one of the acquisitive US banks like Citigroup would be likely predators.
However, Merrion Stockbrokers analysts Seamus Murphy and John Bowe noted: "Publicly, AIB management has always appeared to us as unwelcoming of a takeover approach. At least now, we have more confidence that any approach would be given due consideration."
The Merrion duo added: "Eugene Sheehy, CEO designate, clearly would have his own views on the merits of any such deal. Furthermore, he comes to the helm of AIB with an independent view of the Group. Therefore, this proposal by his predecessor is not one we can automatically assume will be agreed with by this CEO designate." Mr Sheehy left M&T bank to re-join AIB.