The Commercial Court has approved AIB's application to reduce its share capital by €5 billion. The bank will now have the option of paying a dividend to shareholders, the largest of which is the State following the 2009 acquisition of 99 per cent of the company by the National Pensions Reserve Fund Commission (NPRFC) for €3.75 billion.

Under the capital reduction, those shares can ultimately be redeemed by AIB from distributable profits or further share issue.

The court heard there were no objections from creditors or from AIB pension fund trustees in Ireland and Britain to the capital reduction application.

This followed assurances from the company in relation to a deficit of about €600 million in the main defined benefit pension scheme covering 17,500 members, 9,000 of whom are current employees. The average pension being paid out to about 3,900 current pensioners is €30,000 per annum, the court heard.

The Minister for Finance, the Central Bank and the NPRFC also supported the application.

Mr Justice Peter Kelly yesterday approved a reduction of €1.07 billion in the bank's share premium account and by €3.9 billion in its capital redemption reserve.