BANK of Ireland needs to restore medium-term profitability and extricate itself from the state guarantee scheme, Davy stockbrokers has said.
The bank is the only major Irish lender to escape nationalisation following the financial crash, after attracting more than €1bn in private sector investment last year.
However, its share price has been under pressure throughout the year, not least after the announcement of weak first-half operating profits.
The bank is due to update investors on its financial situation on Wednesday, when net interest margins -- the difference between what the bank pays to borrow and how much it charges to lend -- will be closely watched.
In an analyst note, Davy said yesterday that its forecast for pre-provision profits at the bank of €242m depends on the net interest margin recovering from 1.2pc in the first six months of the year to 1.3pc, and on the bank's costs falling.
Margins should improve as a result of an increase in the interest rate the bank charges UK customers with standard variable rate mortgages, and lower rates being paid to savers.
The amount that the bank pays the Government for insuring customers' deposits is also set to fall after its UK customers were removed from the scheme.
Meanwhile, the reliance of all of the Irish banks on ECB funds has fallen to €78.2bn from €79.1bn at the end of September, the Irish Central Bank said in a statement.
Banks here have depended on ECB funds since they were frozen out of the money markets in 2010.
So-called "extraordinary liquidity assistance" (ELA) from the Central Bank rose slightly to €40.7bn at the end of October from €40.6bn a month earlier.
The ELA is made up mainly of cash used to support the Irish Bank Resolution Corp (IBRC), the former Anglo Irish Bank.