BANK of Ireland said it lost €609 million (£538m) last year, down from €1.87 billion (£1.65bn) in 2009, and well below analysts' predictions for the bank.

Chief executive Richie Boucher said in Dublin yesterday: “We have moved from survival to stabilisation.”

However, the group, which has a pedigree that stretches back to 1783, is facing the likelihood of majority state control after the central bank said it needed €5.2bn (£4.6bn) in extra capital to bulletproof itself from future economic shocks.

The company, in which the Irish Government already holds a 36% stake, has said it will update the market in coming weeks about its capital-raising plans.

Some of its subordinated bonds have risen on speculation it will offer a debt-for- equity swap.

The rest of the domestic banking sector has been effectively nationalised.

Allied Irish Banks – the other pillar bank and Bank of Ireland’s main rival – announced a jaw-dropping €10.4bn (£9.2bn) loss earlier this week.

Bank of Ireland’s net loss of €609m vastly undershot an average €1.9bn (£1.67bn) shortfall forecast from 11 analysts polled by Reuters IBES.

Meanwhile, the Irish central bank trimmed its economic growth forecast from 1% to 0.9%.

That figure is higher than the 0.5% growth in gross domestic product predicted by the International Monetary Fund.

The central bank’s figures also predict the rate of unemployment in Ireland – currently 14.7% – will remain above 14% until the end of 2012.

The data forecasts a 2.2% drop in consumer spending which will weigh down economic growth.

“Although output growth is set to re-emerge, employment and disposable incomes will remain under downward pressure in the short term,” the central bank report said.

Ireland’s economic crisis is rooted in the collapse of its banks, which took massive losses on loans that were extended during the country’s property boom in the 1990s and early part of the 2000s.