AIB says it returned to profit in the first three months of this year, with current trading “in line with expectations.”

The bank, which is led by Colin Hunt, recorded a loss after tax of €741m last year.

In the three months to 31 March this year total income at the bank decreased 4pc, according to a trading update. However, AIB said it experienced “resilient revenues supported by diversified income streams.”

AIB said negotiations with NatWest, Ulster Bank’s parent, for the acquisition of a around €4bn performing corporate and commercial loan portfolio, have “progressed constructively and we will update the market in due course.”

Net interest income (NII) –a key measure of profitability in a bank – was 13pc lower in the first quarter of this year versus the same period in 2020.

The bank said momentum was gathering on NII recovery through its negative interest rate strategy. Since the year-end, deposits at negative rates increased from €4.7bn to around €10bn currently.

Customer deposits of €84.5bn increased 3pc from December as peoples savings continue to accumulate.

In the first three months of this year AIB reported total new lending of €2.3bn, down 7pc on the corresponding period in 2020. There were mixed lending trends across segments, with “sluggish” demand in consumer lending and stronger activity in corporate sectors.

Total loans of €59.2bn were down €300m in the quarter primarily driven by non-performing loan portfolio sales and the continuing trend of redemptions exceeding new lending, according to the bank.

Non-performing loans are now down to €3.8bn or 6.5pc of the bank’s loan portfolio.

Performing loans of €55.3bn were up €200m since year-end.

Mortgage drawdowns were up 7pc year-on-year. A “solid rise” in mortgage lending is expected with market estimates revised to approximately €10bn for 2021.

AIB said the regulatory approval process is underway for the acquisition of Goodbody and its joint venture proposition with Great-West LifeCo is “progressing well.”