Allied Irish Banks is cutting its standard variable mortgage rate for both new and existing mortgage customers by a quarter of one percentage point to 3.7%.

The bank says the reduction will come into effect from 1 October and will benefit around 156,000 customers of AIB, EBS and Haven. 

It said the reduction was the third in ten months and the combined total will deliver savings of €988 per year for customers with a €200,000 mortgage.

AIB made the announcement alongside its results for the first half of 2015, which show a pre-tax profit of €1.2 billion, up from €400m in the same period last year.

€540m worth of provisions AIB had made for bad debts have been written back, which goes straight to the bottom line. 

This time last year the bank was making additional write-downs of €92m, which means it has seen a €632m gain over the past six months compared to the first half of 2014.

The value of impaired loans, those which the bank does not expect to be repaid in full, has fallen by €4.2 billion to €18 billion.

Meanwhile the number of owner-occupier mortgage accounts that were in arrears declined by 13%.

AIB said it was earning more from fees and commissions due to increased customer activity, while its operating costs had also fallen by 6%.

The bank said that it had approved €6.9 billion worth of loans to customers in the six month period - which was a 21% increase year-on-year.

It had €4bn worth of lending drawdowns in the first half of the year - up 56% on the same period of 2014 - while the bank also claimed a 39% of new mortgage drawdowns in the first quarter.