Bank of Ireland has announced that it will redeem €1.3bn worth of preference shares issued in March 2009 by the State to bailout the bank.

In 2013 the bank sold preference shares to private investors and repaying the money to the State - it will redeem the shares on January 4th.

The move would pave the way for the bank to return to making dividend payments - Bank of Ireland is on course to be the first Irish bank to resume dividend payments since the beginning of Ireland's financial crisis.

Having generated fresh capital during this year, it has now been given consent from European regulators to redeem these shares.

"Their redemption at the earliest possible date is beneficial for our ordinary shareholders, while honouring commitments we gave to the 2009 Preference Stock investors in 2013," CEO Richie Boucher said.

"The redemption represents further delivery against a key strategic priority of the group, and is possible because of the progress we continue to make across our businesses, which is reflected in the strength of our organic capital generation," he continued.