Bank of Ireland met its end-year recapitalisation target on Friday after it bought back outstanding securitised bonds consolidated on the group’s balance sheet at a discount, resulting in a capital gain of €350m ($471.45 million).

Bank of Ireland was ordered in March to raise an additional €4.2bn in core Tier 1 capital to bullet-proof its balance sheet against future property-related losses following tough, fresh stress tests.

Before Friday, it had generated €3.85bn towards that goal, most of it by imposing losses on junior bondholders and through a €1.1bn investment by a group of North American investors, who now own 35 percent of the bank.

It completed the process by buying back €1.15bn of outstanding residential mortgage backed securities (RMBS) issued by Kildare Securities Limited and Brunel Residential Mortgage Securitisation, an increase of 150 million on its original target.

In a separate move to raise additional capital, Ireland’s finance minister Michael Noonan said last week he was
considering wiping out the value of some junior bonds in Bank of Ireland by applying to the courts to use emergency powers the state has deployed to impose losses on bondholders at other banks.

Analysts said now that Bank of Ireland has met the targets set under March’s stress tests, a less coercive outcome may be possible for the over €400m worth of subordinated debt that Noonan has in his sights.

“The fact that the bank has satisfied its outstanding capital requirement under the stress tests suggests that any
capital generated from the outstanding subordinated bondholders is “bonus” capital,” Stephen Lyons, credit analyst at Davy Stockbrokers said.

“It remains to be seen whether the minister will pursue a subordinated liabilities order and a less coercive outcome for bondholders may be possible through negotiation, as the Minister weighs up submissions received this week in this regard.”