Bank of Ireland forecast underlying full-year operating profit would drop by more than a quarter in 2010, knocked by lower income and the costs of government guarantees.
Ireland's biggest bank by market value was the first major Irish bank to replenish its capital from partly private sources, an exercise which left the state with a 36 per cent stake plus preference shares.
The bank said its underlying operating profit before impairment charges will be between 35 and 40 per cent lower than the 1.5 billion euros (£1.3bn) it achieved in 2009.
It added that fees from a government guarantee which was recently extended to June next year will rise to 150 per cent of the 151 million euros reported in the first half.
Unlike its rivals, Bank of Ireland did not require any additional capital from Ireland's Department of Finance when the latest measures to support the country's financial sector were announced at the end of September.
Analysts say Bank of Ireland should emerge from the crisis as a dominant, profitable force in a market where foreign rivals such as Lloyds and Danske Bank have retreated or retrenched, and domestic rivals are on the ropes.
Ireland has now committed nearly 20 percent of its GDP to propping up the financial sector as it looks to unravel years of reckless lending during the go-go years of the "Celtic Tiger" economy.
The banks themselves have inflicted huge damage on public finances having left the taxpayer with a bill of up to 50bn euros or over 11,000 euros per head of Ireland's 4.5 million strong population, to clean up their bad debts.
Shares in Bank of Ireland slumped to their lowest level in over 18 months this week, with Ireland's central bank governor conceding that the sector's huge recapitalisation programme had failed to allay concerns over Ireland's financial stability.
The fear of a spike in mortgage arrears is causing jitters in the market, but Bank of Ireland reassured on bad debts and said Irish mortgage arrears are stabilising, particularly for owner-occupier borrowers.
City A.M. Reporter