AIB said on Friday that it will cut its variable mortgage interest rate for both new and existing customers by 0.25 per cent, as it announced first half pre-tax profits of some €1.2bn, up by 50 per cent on the same period in 2014. It is the third rate reduction from the bank in recent months and follows pressure from Government and public interest groups alike to bring variable rates in line with Euro zone norms. Customers on a € 200,000 mortgage should save €27 a month or € 325 a year from the latest cut AIB said, which will bring the bank's standard variable rate down to 3.65 per cent; the rate at Haven will fall to 3.72 per cent; and at EBS to 3.7 per cent. Some 156,000 customers across AIB, EBS and Haven are expected to benefit from the reduction which will come into effect on October 1st.

AIB's chief executive, Bernard Byrne, said, "We committed to keep mortgage rates under constant review and to reduce these rates for both new and existing customers if and when AIB's funding conditions allowed. Fortunately, we are again in a position to do so today.''

The bank also announced its H1 results for the six months to June 20th 2015, revealing pre-tax profits rose by €0.8 bn to €1.2bn, on the back of signifcant writebacks of some €540m. AIB said the writebacks reflected “progress in case by case restructuring of impaired loans and the improved economic environment”.

The bank’s net interest margin, excluding the eligible liabilities guarantee (ELG), rose to 1.92 per cent, up from 1.60 per cent in the same period in 2014. Fees and commissions rose by 6 per cent due to increased levels of customer activity. Lending rose by 21 per cent to €6.9bn, while impaired loans fell to € 18bn, down € 4.2bn since December 2014 and by € 11bn since December 2013.

AIB chairman Richard Pym said: "The financial outcome for the half-year is significantly ahead of the expectations we had at the beginning of the year and reinforces our endeavours to see all of the €20.8 billion invested in AIB by Irish taxpayers repaid. Whilst any decision on a future sale of AIB is entirely one for the Irish Government, the results so far this year significantly improve the prospects for a successful transaction whenever it happens."

The bank said its loan to deposit ratio of 99 per cent was broadly unchanged since December 2014, and net loans were also broadly in line with December 2014 at €64bn.

Minister for Finance Michael Noonan welcomed the results, noting the performance puts the taxpayer in a “strong position” to recoup its € 20.8bn investment.

“I welcome the strong set of results announced by AIB today and their confirmation that they are well positioned to start returning material amounts of capital to the Irish State. This morning’s comment from the bank’s CEO that subject to regulatory approval, the bank is strong enough to do this now, means that the State’s finances should receive a significant benefit in the coming year independent of any decision to sell some of our shares in the bank.”