Bank of Ireland’s deposits rose three per cent between July and October, improving its funding position as it seeks to rebalance its accounts.
But Ireland’s largest lender said that trading remained difficult, with competition for deposits one of a number of factors holding back its progress.
The bank predicts profit margins will stabilise in the second half of the year, but low interest rates would hamper its progress.
"We have made good progress on restructuring and strengthening our balance sheet, nevertheless trading conditions remain challenging," the bank said in a statement.
Bank of Ireland has so far refused to pass on the European Central Bank’s recent rate cut of 25 base points, coming under fire from the Irish government.
Ireland has threatened to pass legislation forcing the bank to do so.
The banks loan to deposit ratio improved by nine percentage points to 153 per cent since the end of June.
"Against the background of uncertainty, this is a solid statement showing that Bank of Ireland is making good progress in restructuring its balance sheet," Emer Lang, analyst at Davy Stockbrokers, wrote in a note.