Bank of Ireland plots route away from state funding

Bank of Ireland plans to move away cautiously from state support by showing it can raise debt outside a government guarantee and gradually repay taxpayers' funds.

Ireland's biggest bank by market value has become the country's first major bank to replenish its capital from partly private sources, an exercise which left the state with a 36% stake plus preference shares.

Its underlying operating profit fell by 32% in the first half of the year but it said tough conditions were set to stabilise or improve with in its main markets of Ireland and Britain heading for recovery.

Allied Irish Banks, still trying to raise 7.4 billion (£6.1 billion) of capital to satisfy regulators, last week said it still needed government help and that the guarantee for bank liabilities should be kept beyond the end of the year, when it is due to expire.

Bank of Ireland chief executive Richie Boucher said his bank could move carefully to regain its independence.

"With the recapitalisation we've done, the EU endorsement of our (restructuring) plan, us passing the stress tests leaves us with the capability to seek to get off the guarantee," he said.

"That's one of our very, very important strategic objectives."

Boucher's cautious optimism contrasted with fully nationalised Anglo Irish Bank, which last week said the government guarantee should be extended into next year and yesterday received EU approval for a fresh bailout of up to 10 billion.

Ireland introduced its bank guarantee scheme at the beginning of the global financial crisis in September 2008 and the EU has approved an extension until the end of the year for debt of over three months' duration.

Bank of Ireland said it aimed gradually to pay back the state's 1.7 billion worth of preference shares in the next three years, although it said it had no control over the 36% stake the government owns in ordinary shares.