DUBLIN, May 24 (Reuters) - Allied Irish Banks (AIB) increased its net interest margin, improved its capital position and reduced its bad loans in the first quarter, it said on Tuesday, pledging further improvements in the coming months.
The lender, whose 21 billion euro ($23.53 billion) taxpayer bailout was the biggest for any Irish bank still trading, said its net interest margin, which shows how profitable its lending is, rose to 2.09 percent in the first three months of 2016 from 2.02 percent in the last quarter of 2015.
It said the improvement was expected to continue in 2016, driven by the maturity of 1.6 billion of contingent capital (CoCos) notes in July.
AIB said it had increased its core tier one capital ratio to 13.1 percent from 13.0 percent under fully loaded Basel III industry rules.
New lending draw downs increased 17 percent on the year, while bad loans fell 1 billion euros from the end of December to 12 billion euros.
Allied Irish said that growth in the mortgage market would be hampered by "market constraints" this year, without giving details.
Banks have come under renewed government pressure to cut their mortgage rates after a proposed law to hand the central bank the power to intervene in the market passed the initial legislative stage in parliament despite objections from the government and central bank.
Finance Minister Michael Noonan said last week that he hoped 99 percent state-owned AIB would follow the rate cut it just announced with another "fairly soon".
Noonan, who was re-appointed to his position as part of a new minority government this month, has also said it will be the first half of next year, and not later this year as previously hoped, before an opportunity arises to sell a stake in AIB.
$1 = 0.8924 euros Reporting by Conor Humphries, editing by Louise Heavens