CORRECTED: Irish bank shares jump on government bailout news

By Jonathan Saul

DUBLIN (Reuters) - Shares in Ireland's three main banks soared on Monday in reaction to weekend news of a 5.5 billion euros ($7.7 billion) government injection that leaves one of their number under state control.

"While the market will want to see some significant equity issuance in the New Year, this is a good start," said analyst Scott Rankin of Davy Research in a note.

"On top of the 5.5 billion euros, the government says that it 'has a substantial pool of additional capital available to underwrite and otherwise support the issuance of core tier 1 capital'. This should help put a floor under the banks and get us into the New Year."

The government announced late on Sunday it would make an initial investment of 1.5 billion euros in Anglo Irish Bank , giving it 75 percent control of the lender and a fixed annual dividend of 10 percent. Dublin said it would make further capital available if required.

Dublin will also invest 2 billion euros each in market leaders Bank of Ireland and Allied Irish Banks via preference shares giving 25 percent voting rights over what the government described as "key issues."

"The government's commitment to make further capital available ensures that the bank will continue to be a sound and viable institution," Anglo Irish Bank Chairman Donal O'Connor said in a statement.

Anglo Irish Bank, which descended late last week into a loans scandal, increased the pressure for a sector recovery plan.

Allied Irish Banks (AIB), said it was aiming to raise an additional 1 billion euros from shareholders.

"Our endeavors will be strongly influenced by our analysis of market conditions and the pre-emption rights of our shareholders," AIB said. Bank of Ireland said the injection would strengthen its capital base helping it to reach its ambition of growing its business in Ireland.

Investors have been waiting for months for a bailout plan to match schemes in other countries, but pressure on the government intensified in the past week after Anglo Irish revealed its chairman had kept shareholders in the dark about 87 million euros worth of loans he had received from the lender.

Shares in Anglo Irish Bank , which have slumped from a record high of close to 18 euros last year, were 17.1 percent higher at 41 euro cents by 0809 GMT, while Bank of Ireland was 18.5 percent higher at 80 cents.

Allied Irish Banks , the third group to receive capital, was up 12.1 percent at 1.85 euros.

Irish Life & Permanent , which did not receive a state investment, gained 6.9 percent to 1.55 euros.

(Reporting by Jonathan Saul; Writing by Andrew Callus; Editing by Erica Billingham)

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