Bank of Ireland, in an interim management statement, says its loan to deposit ratio has improved, and it has reduced the amount it has borrowed from lenders like the Central Bank.

It said that while trading conditions in the first quarter of 2011 continue to remain challenging, it believes that the Irish economy has begun to stabilise.

However, it warned that the group's total operating income still faces some adverse impacts due to the continuing competition for customer deposits, the higher costs of wholesale funding and higher guarantee fees.

Bank of Ireland says these fees have increased by €58m for the four months to April 2011 to €135m. This compared to a figure of €87m for the same time the last year.

The bank also said that demand for new loans remains muted.

It said that it still expects that the impairment charges on its non-NAMA loans and advances to customers peaked in 2009, reduced last year with further reductions expected. 'Our experience in the first four months of the year supports this view,' the bank stated.

In its interim management statement, the bank said that the domestic economy remains weak, with low levels of domestic investment, weak consumer sentiment, and elevated levels of unemployment. But it says, GDP in Ireland is expected to gradually recover in 2011 due to the strong performance of the export sector.

The Central Bank has told the group to generate incremental equity capital of €4.2 billion, including a regulatory buffer of €0.5 billion and an addition €1 billion of contingent capital. The bank said that it is working with its advisors to raise that capital. 'The result will be a very strongly capitalised group,' the bank stated.