Bank of Ireland posted a profit last year for the first time since the financial crisis struck in 2008 as new lending grew by more than half and it clawed back money set aside previously to cover bad loans.

The bank reported an underlying pre-tax profit of 921 million euros in 2014 after a restated loss of 564 million euros a year earlier as Ireland's economic recovery accelerated and collateral values picked up.

"We're in two growing economies in Ireland and the UK and we've had good momentum coming into this year," Bank of Ireland chief executive Richie Boucher said.

"We have started the current year very strongly. Based on the first two months of the year, loan growth should exceed last year," he said in a telephone interview.

Bank of Ireland said the improved economic backdrop meant it had been able to claw back 280 million euros of money put aside for bad home loans, helping it to lower provisions to 542 million euros from 1.6 billion euros a year earlier and beat profit forecasts.

Analysts surveyed by Reuters had forecast an underlying pretax profit for 2014 of 745 million euros on average.

While new lending rose to 10 billion euros from 6.6 billion in 2013, the bank's loan book shrank to 82 billion euros from 85 billion euros at the end of June and 93 billion as recently as 2012 as repayments and redemptions continued to exceed new lending.

Although Ireland's economy is the fastest growing in Europe, many people are still grappling with high debt levels, meaning the stock of outstanding credit across the sector has shrunk for more than five years. Boucher said the gap was closing, however.

Ireland's largest lender by assets said its net interest margin, a measure that shows how profitable lending is, rose to 2.11 per cent at the end of 2014.

The bank said its Core Tier 1 capital ratio, a measure of financial strength, stood at 14.8 per cent versus 14.1 per cent at the end of the third quarter.