Bank of Ireland plans to move away cautiously from state support by showing it can raise debt outside a government guarantee and gradually repay taxpayers' funds over several years, it has announced.

Ireland's biggest bank by market value has become the first major Irish bank to replenish its capital from partly private sources, an exercise which left the state with a 36 percent stake plus preference shares.

Its underlying operating profit fell by 32 percent in the first half of 2010 but it said tough conditions were set to stabilise or improve this year with the nascent recovery in its main markets Ireland and the UK.

Allied Irish Banks, still trying to raise the 7.4 billion euros ($9.73bn) of capital asked by regulators, last week said it needed continued government help and that the guarantee for bank liabilities should be kept beyond the current year-end expiry.

Bank of Ireland Chief Executive Richie Boucher said his bank could carefully move to regain its independence.

“With the recapitalisation we've done, the EU endorsement of our (restructuring) plan, us passing the stress tests leaves us with the capability to seek to get off the guarantee,” Boucher told journalists.

“That's one of our very, very important strategic objectives,” Boucher added.

Boucher's cautious optimism contrasted with fully nationalised Anglo Irish Bank, which recently said the government guarantee should be extended into next year and which has received EU approval for a fresh bailout of up to 10 billion euros.

Ireland's bank guarantee scheme was introduced at the beginning of the global financial crisis in September 2008 and the EU has approved an extension until the end of 2010 for debt of over three months duration.

Bank of Ireland said it aimed gradually to pay back the state's 1.7 billion euros worth of preference shares in the next three years, although it said it had no control over the 36 percent stake the government owns in ordinary shares.