AIB said it generated more capital, reduced its bad loans and increased its net interest margin in the third quarter.
In an interim management statement, AIB said its performance continues to improve as the country's strong macroeconomic trends provide a positive market backdrop.
The bank also said that it is expecting to finalise terms of a capital reorganisation in the coming days.
This will ultimately allow it to begin repaying some of the money invested in it by the State during the financial crisis.
AIB said it plans to redeem some of the preference shares issued in 2009, which will result in a repayment of €1.7 billion.
This is conditional upon a number of other factors, however, including the conversion of the remaining preference shares into ordinary shares and the issuing of two tranches of debt worth at least €1.25 billion.
AIB also said that the maturity of a contingent capital note in July next year will lead to a further repayment of €1.6 billion to the State.
In today's trading update, AIB said it has seen a 53% rise in new lending draw downs in the first nine months of the year.
But it cautioned that at an industry level, the demand versus supply dynamics as well as the Central Bank's new mortgage rules are expected to impact future growth rates in the mortgage market.
The bank's net interest margin - a measure that shows how profitable lending is - rose to 1.94% from 1.92% in the six months to June.
AIB said its NIM was boosted by lower funding costs, increased levels of new lending and restructuring of impaired loans at sustainable margins.
Impaired loans reduced by €2 billion in the third quarter, while Irish mortgage arrears declined by 19% in the nine months to September with lower levels of new arrears and more customers getting out of arrears.
AIB said that customer accounts at the end of the third quarter were stable at €63 billion and account for 64% of the group's total funding base.
AIB's CEO Bernard Byrne said that the bank's performance continues to improve, showing further advances in the third quarter.
He said that "encouragingly", total lending drawdowns continue to increase, with €6.2 billion for the year to date and additionally impaired loans have further reduced by €2 billion in the quarter.
"The key indicators show that AIB is set to continue playing a central role in the rapidly-growing Irish economy. The recent approval by the ECB of our reorganised capital structure is welcome and positions us well to repay capital to the State," the bank's CEO added.
Welcoming today's capital reorganisation details from AIB, Finance Minister Michael Noonan said that the returned cash will enable the Government to further reduce the country's debt levels.
Mr Noonan said that when measures are implemented, they will address the remaining legacy instruments in the bank.
He said they will also ensure it has a capital structure that is not only fit for purpose in the current regulatory environment but is an important initial step in the efforts to maximise the return from this important investment and will start the process of repaying the Irish taxpayer for their substantial support in recent years.
"I am confident that the State will ultimately recover the full value of their €20.8 billion investment in AIB in the years ahead," the Minister added.
