Losses at AIB fell in the first six months of 2013 as loan impairment charges declined.

Overall losses were €758 million for the period, compares with €1 billion a year earlier.

The bank, in which the State has a majority holding, said it returned to pre-provision operating profit for the period, reaching €162 million, or €272 million higher than in 2012.

Operating losses before tax and exceptional items was 47 per cent lower at €572 million, with provisions down 24 per cent to €738 million.

Chief executive David Duffy said the results were encouraging and that he expects the positive performance to continue.

Operating income rose in the first half of the year, reaching €916 million, some 19 per cent higher than in the previous year.

“We are mid-way through a three year plan to return to sustainable profitability. While we have met our key strategic objectives to date, we acknowledge the continuing challenges that lie ahead,” Mr Duffy said. “The bank’s results for the first half of 2013 demonstrate that our strategy for stabilisation and recovery is delivering results. We are seeing a steady improvement in our operating performance and a return to pre-provision operating profit. I expect that overall progress made in the first half of 2013 will continue through this year.”

Customer accounts were stable, the bank said, with the loan to deposit ratio down to 106 per cent from 115 per cent as at the end of December 2012.

The bank also cut staff costs by 16 per cent, with 2,300 people leaving the company.

AIB’s funding from the ECB fell by €4 billion in the year to date.

“Although the economic environment remains challenging we have observed early positive trends in the SME, corporate and mortgage sectors. AIB approved over €3 billion in lending in the Irish market in the first half of 2013 and we are well positioned to actively support growth in the economy,” Mr Duffy said.