AIB has reported an underlying first-half loss of €2.6 billion as the number of non-performing loans it has increased.

This compares to an underlying loss of €2.1 billion for the same six month period a year earlier.

Non-performing loans amounted to 34 per cent of all customer loans, up from 29 per cent at the end of December.

The level of loans in arrears for more than 90 days was 7.82 per cent by the end of June, compared with 4.8 per cent at the end of last year.

The country's second biggest bank, which is 92.8 per cent State owned, posted a €2.2 billion profit in the first six months of the year, mainly due tothe sale of its stake in the Polish bank Zachodni in February. This compares to a loss of €1.7 billion for the same six-month period a year earlier.

The bank said customer deposits excluding those it purchased from Anglo Irish Bank fell by a further €5 billion for the year to the end of June but were broadly stable in recent weeks.

AIB said its underlying loan-to-deposit ratio improved to 143 per cent from 165 per cent for the preceding six months.

Net interest income fell by 41 per cent from €1.027 billion to €604 million while trading income was €23 million compared to a loss of €96 million for the same period a year earlier.

Total operating expenses amounted to €832 million, a decrease of €13 million.

The bank's shares were up 1 per cent to 0.13 cents by 3.15pm

Additional reporting: Reuters