The volume of impaired loans State-owned AIB has on its books fell by €700m to €10.6 billion between June and September, according to an interim management statement published by the lender.

Impaired loans at the bank peaked at €29 billion in 2013.

New loans to a value of €4.7 billion were drawn down over the nine months to the end of September, representing a 15% higher on the same period last year.

The report says the bank has strong profitability on both a total and underlying basis, with an eight basis point rise in its net interest margin to 2.16% in Q3.

AIB said the increase in its strong performance was driven by stable asset yields, lower funding costs, lower NAMA Senior Bonds and the repayment of a further €1.8 billion in capital and interest to the State in July on the maturity of the Contingent Capital Notes.

Commenting on the interim statement, CEO Bernard Byrne said: “We continue to trade in line with expectations.

“We have strong underlying profitability, a robust capital base and an improving risk profile.

“This positions the Group well for future opportunities and challenges in a growing Irish economy.”