AIB has said it remained profitable in the first three months of the year on the back of an improving economy in both Ireland and the UK.

In an interim management statement, the bank said that accounts in arrears in its Irish residential mortgage portfolio decreased by 6% since December 2014.

Its total impaired loans reduced by €1.7 billion in the three month period to €20.5bn with reductions seen across all its main loan categories, but especially in the mortgage and commercial investment property sectors.

AIB said it had an overall net writeback of provisions of about €0.3bn in the first quarter of the year, which was ahead of its expectations.

"Positive momentum has continued into 2015 with the Group delivering its strategic objectives. On a pre-provision operating basis, underlying performance has continued to improve," commented the bank's chief executive David Duffy. 

"Whilst there is inherent volatility in the ongoing restructure of impaired loans, the provision write back in the first quarter is reflective of the improving economic environment and the progress being made in the case by case restructuring of customers in financial difficulty," Mr Duffy added.

The bank said its net loan book increased marginally to around €64bn, helped in part by positive foreign exchange movements.

Loan drawdowns were up by 70% compared to the first three months of 2014, with growth across all major loan categories,

Total assets were broadly stable in the first quarter at €108bn with customer accounts remaining steady at €64bn.

The bank's loan to deposit ratio increased marginally to 100% by the end of March, compared to 99% at the end of last year.

The group said it continues to focus on reducing its overall funding costs.

Today's trading statement said that discussions are continuing with the Department of Finance about the appropriate capital structure for the group.

It said the options being considered include the possible conversion of Preference shares into ordinary shares as well as options around the €1.6bn of contingent capital notes.

Another option being discussed is the possible consolidation in the number of shares in issue given AIB currently has in excess of 523 billion ordinary shares in circulation.