Bank of Ireland is continuing to focus on the British market for potential acquisitions. Chief executive Mr Maurice Keane says Britain is the "logical" focus for the bank.

Having realised £172.4 million from the sale of its stake in the US Citizens Financial group earlier this year, the State's second biggest bank has a substantial war chest.

Mr Keane estimates it could afford to spend between £600 million and £700 million on acquisitions, but stresses it is in no hurry to write that cheque.

"The pressure to make an acquisition is very important to resist. It would not be in the interest of shareholders to rush into something that doesn't give value for money."

Mr Keane adds that the bank is conscious that shareholders will not wait forever for the bank to do something with its cash pile, which imposes a degree of restraint on the progress of Bank of Ireland's share price. But he believes it can afford to wait for some considerable time before shareholders vent their frustrations.

The British market is the most obvious target for the bank on the acquisition front. Despite some slowdown in the economy there, the bank is not concerned about a possible downturn in the British mortgage market. Mr Keane says it is more concerned about the future ownership structure within that market through future demutualisation.

The bank would be interested in a small acquisition which might complement a segment of its existing business mix, he said. It would also focus on acquisitions of strategic interest.

"Much will depend on our attitude to the use of surplus capital and we will display this when there is shareholder value to be found."

Another major challenge for the bank in the months and years ahead is to manage its falling profit margins.

In a low interest rate environment, the bank has seen margins continue to drift lower to levels close to those more familiar to its European counterparts.

Irish banks have long been the envy of their European rivals, earning twice the level of profits in some cases.

But they will increasingly find it harder to deliver that kind of performance on the back of tighter margins.

The bank is satisfied that sustained strong growth in the Irish economy will continue to drive the business with strong volume growth boosting profit growth.

Meanwhile the bank is very satisfied at the low risk profile of its loan book.

At the end of September, the traditionally safe bet, residential mortgages, accounted for some 55 per cent of the bank's total loan book. Its provisions for bad debts now stand at all-time low levels.