It's been a long time since the markets reacted positively to a results announcement from an Irish bank. After a year of profit warnings, revised stress tests and massive write-downs, bad newsflow became the norm and investors retreated into a state of nervous pessimism. In fact, sentiment soured so badly that major institutional shareholders gave up on Irish financials entirely, holding their shares as "options" on a future recovery rather than performing investments.

However, something may have turned last Tuesday after Bank of Ireland announced just a small €7m loss for 2008, when most analysts were expecting far worse. More significantly, the results showed clear signs that the bank, despite debilitating losses on property investment loans, is stabilising. There even appears to be a chance that the bank might escape government control and leave its rival, AIB, and others behind.

"Not as bad as expected" is hardly a ringing assertion of financial strength, but B of I shares surged and continued climbing all week as major brokers such as Deutsche Bank and Japan's Nomura upgraded the stock on the bank's surprisingly positive outlook on capital strength after its core equity ratio improved from 5.7% to 6.2%, providing a bigger cushion for bigger-than-expected losses.

Brokers were also very enthusiastic about B of I's plan to buy back up to €3bn of undated debt at discount prices, a move that could add another €700m to the bank's reserves.

The combination of a strongly positive stock market reaction and news of successful share placings by Lloyds and Bank of America – two banks that were once considered half-dead – even moved Davy Stockbrokers to ask whether Bank of Ireland might also be able to raise fresh equity in a few months.

US banks have raised nearly $80bn dollars – Bank of America alone got $35bn in the door – since the Treasury released details of recent stress tests, while Lloyds is looking for £4bn to buy out the government preference shares and resume life as an independent institution.

Davy says B of I's management is "aware" that the funding window is open again, but the bank is playing it a bit more coy, at least until details of the National Asset Management Agency (Nama) are pinned down.

New chief executive Richie Boucher, presiding over his first annual results presentation, tried to make the case that Bank of Ireland was getting on top of the problems that forced it to accept a €3.5bn capital bail-out from the government in March.

"We believe our capital is sufficient to stabilise the bank and participate in the economy," he said. In other words, Bank of Ireland will be able to withstand the crushing force of a collapse in property loans and still resume normal lending to the consumer and business sectors.

Nomura endorsed this view, upgrading from 'sell' to 'neutral' and stating that Bank of Ireland could even improve its capital ratios through some combination of debt buybacks, asset disposals and reducing risk weighting by running off some loan portfolios. Meanwhile, Deutsche upgraded to 'buy' with a giddy target price of €2, deeming the bank's capital position strong enough to absorb even €8bn in losses – €2bn more than that bank's own newly pessimistic outlook.

The big question mark over all this new broker optimism about B of I, however, is Nama. Just how big a chunk is the toxic loan agency going rip out of Bank of Ireland's capital? The brokers' positive response to the 2008 figures – bad as they were in the absolute sense – was tempered somewhat by the continued uncertainty over the value of loans to be transferred to Nama and the size of the discount the government will apply to these loans.

As Davy pointed out last Wednesday: "We need to see exactly what Nama will involve first before the bank could countenance putting something before shareholders. In other words, we need to see more clarity on what the bank will look like on the other side... the bank cannot really go to its shareholders now, even if a strong share price might be saying that it is a good idea."

Perversely, then, the government's go-slow approach to setting up Nama – which has not advanced much beyond the aspirational stage since it was announced in early April – is actually impeding Bank of Ireland's capacity to achieve independence from state support.

If the bank, despite an expected €6bn in impairments by 2011, is now in a position to go to shareholders – as Lloyds or Bank of America have – perhaps Nama would be more of a hindrance than a help.

Bank of Ireland has so far co-operated with the government's plans, but Boucher, questioned by reporters last week, stopped well short of revealing any details of how Nama might affect the bank.

"Our job is to prepare and get on with it. We want it to work in the most practical, pragmatic way," he said. "Within the bank there is a large number of the best people looking at all aspects of Nama. We have put in place a system of managing loans in the intervening period."

Analysts said, however, that Bank of Ireland would remain more motivated than AIB to transfer assets to Nama, as the scale of its development book – at just over €12bn – is more manageable than its rival's €22.6bn. Moreover, much of that exposure is in Britain where haircuts are expected to be less drastic. In other words, it will get away without taking too much pain.

It will also be a much more attractive option for equity investors should management opt for a rights issue. Just as it is going first with a debt buyback, Bank of Ireland appears to be in pole position for fresh private capital too.

"Bank of Ireland has really stolen a march on AIB and we'd expect to see that revealed by the end of the year," said Davy analyst Emer Lang. "Post-Nama it can go to the market and start to pick some of the low-hanging fruit."