AIB returned to profitability in the first three months of the year. In a statement today, the bank says it is seeing a reduction in the amount of bad loans and mortgage arrears are stable.

Chief executive David Duffy says the bank is now in talks with the government about returning some of the bailout money it received from the State.

However he said repaying the capital will depend on the outcome of European stress tests on the banking sector later this year.

"We are delivering our stated objectives which include increases in new lending drawdowns, the recent EU Commission's approval of our restructuring plan, improvement in the cost of funding and capital position, supporting customers in financial difficulty and a decrease in overall impaired loans" he said.

"The bank expects that discussions with the State regarding simplification of the bank’s capital structure will continue into H2 2014. We remain focused on supporting Irish economic recovery, continuing to build profitability and ultimately returning capital to the State" he added.

The bank also said that a "significant reduction" in impairment charges and overall stock of impaired loans continued to fall.

While overall, the level of new lending drawdowns across loan portfolios was ahead of those in the first quarter of 2013.

AIB says it is "actively seeking appropriate lending opportunities in the Irish and UK markets".

The bank also notes that there is increased activity in the small and medium enterprise (SME) sector here, which it says reflects positive trends in key economic indicators and is resulting in increased engagement across key sectors.

Newstalk's Business Editor Ian Guider says the restructuring plan for the bank is on schedule.