The extension of the Government bank guarantee to the end of June 2013 is likely to be the last, ratings agency Fitch said but it warned that the expiry of the State support could heighten the risk of “deposit flight”.

Fitch said the end of the Eligible Liabilities Guarantee (ELG), the Government scheme introduced in 2009 as a longer-term replacement for the September 2008 blanket guarantee to help the banks secure funding, will help profitability at the banks.

Fitch said the risk of deposit flight had eased after the bank recapitalisations and “deleveraging” of excess loans.

“There was no adverse impact on deposits when overseas subsidiaries were withdrawn from the ELG scheme. Indeed there are some signs that confidence is returning to the banking sector,” it said.

Fitch senior director Cynthia Chan said the European Commission was expected to approve an extension of the guarantee by six months until the end of June 2013.

“We see the withdrawal from the guarantee scheme as another step in the recovery of the banking sector,” said Ms Chan.

The high cost of the guarantee has eaten into the banks’ profits despite liabilities covered by the guarantee falling by up to one-third this year at Bank of Ireland and by one-fifth at AIB. The Department of Finance expects to phase out the guarantee in the first quarter of 2013.

The banks have raised covered bonds and UK deposits without using the guarantee.