Bank of Ireland will reduce the size of its workforce further as the lender continues to shrink in size, chief executive Richie Boucher told shareholders at the annual meeting.

The bank has cut staff numbers by just over 3,000 since 2009, he said, and that there would be further reductions as more businesses are sold by the lender. The bank sought 750 redundancies almost three years ago and secured about half this number until an impasse over the terms and conditions concerning severance pay.

"It is fair to assume that there will be less people working in Bank of Ireland next year than there are today," he told shareholders at the bank's "annual general court" in UCD today.

Shareholders raised questions at the meeting ranging from the salaries paid to Mr Boucher and the bank's governor (chairman) Pat Molloy to when the bank would start paying dividends again.

Mr Molloy said that the bank was complying fully with the Government on conditions setting down bankers' pay. Mr Boucher was paid €831,000 in 2011, in excess of the Government's pay cap of €500,000, though this has been approved by the Government, while Mr Molloy received €394,000.

In response to questioning by Independent TD Shane Ross, a shareholder in the bank, Mr Molloy said that the July 2011 placing agreement with the Government on the bank's recapitalisation set "very severe constraints" on the payment of bonuses but he could not tell the meeting what those constraints were.

Mr Boucher said that the bank was not involved in the discussions with the Government about transferring tracker mortgages out of the bank as it was not owned by the State. Discussions on moving tracker mortgages out AIB and Permanent TSB are taking place as part of the restructuring of the long-term annual payments on the bailout of Anglo Irish Bank and Irish Nationwide.

The bank was "keeping a very close eye on potential developments," he said.

Mr Boucher said that the bank has appointed "rent receivers" to buy-to-let properties where rental income was being diverted away from the bank. Arrears on €3 billion of the bank's €7 billion Irish buy-to-let book were "problematic" where borrowers had multiple properties.

More than 500 staff at the bank are working on arrears cases, he said, and the lender was working on finding solutions on a case-by-case basis. Taking litigation against customers was "very last resort" as it was "very expensive" and the outcome was "very hard to judge", said Mr Boucher, but court actions would be taken if this maximised the recovery of loans.

Mr Molloy said the bank was prohibited from paying dividends until December 31st, 2015 or until the bank had repaid the State the €1.8 billion of preference shares, whichever was earlier. The bank would not say when this might happen or offer a forecast on future profitability or on the performance of the share price. The bank's share price was up almost 3 per cent to 11.3 cent a share this afternoon.

The bank will seek shareholder approval to purchase a Government bond from Irish Bank Resolution Corporation, which is running down Anglo Irish Bank and Irish Nationwide, at an extraordinary general meeting due to take place shortly. Responding to shareholder concerns about the transaction, Mr Molloy said that it would be up to shareholders to decide whether they wanted the bank to participate.

The Government bond was issued to IBRC to defer a €3.06 billion cash payment covering the annual instalment on the Anglo/Irish Nationwide promissory notes due at the end of March.

In an interim statement this morning, the bank noted mortgage arrears in Ireland were rising as the domestic economic environment remained difficult coupled with high unemployment.

The lender predicted impairment charges would fall compared with 2011, but said the pace of this reduction depends on the performance of the group’s Irish residential mortgage book and commercial real estate markets.

Overall, loans are down 3 per cent to €99 billion since the end of last year, with customer deposits in line with the level recorded in December 2011, at €70 billion.

Bank of Ireland said its loan to deposit ratio has improved slightly, to 142 per cent compared to 144 per cent at the end of last year. Wholesale funding is 2 per cent down to €50 billion.

The bank is trying to strengthen its balance sheet and product margins, while managing credit risks and keeping costs in check.

"The group’s operating income and net interest margin continue to be adversely impacted by the cost of funding, the carry-over impact of intense deposit competition in the Irish market in the second half of 2011, Exceptional Liability Guarantee 'ELG' fees and reductions in earning assets as we de-lever the group’s balance sheet," the bank said.

Bank of Ireland said it secured €4.8 billion from the ECB’s long-term refinancing operation in February.

It plans to disengage from the ELG scheme, following the decision of its UK banking subsidiary to withdraw earlier this month.

The lender said it had begun to reduce deposit pricing from the start of the year, and was repricing loan portfolios.

“The benefits of these initiatives are expected to positively impact the group’s net interest margin in the second half of 2012, offset somewhat by further reductions in Euribor/Libor rates since the year end,” the bank said.

Bank of Ireland plans to sell €10 billion in loans to shrink its balance sheet. Last year, it confirmed plans to sell €8.6 billion and has already completed the majority of this.

This morning, the bank said it planned to divest a further €900,000 of international corporate and residential mortgage loan portfolios, bringing the divestment to €9.5 billion, at an average discount of 7.6 per cent.

NCB Stockbrokers said there was little surprise in the statement.

"We are still waiting to see any improvement in the operating environment for Bank of Ireland, the situation remains very challenging," analysts said in a note. "We remain confident that bank has sufficient capital, even in the more adverse environment we envisage to see it through the current credit cycle. The update is in line with our expectations at this point in the year and we remain comfortable despite our estimates assuming a continuing deterioration in asset quality."