THE state could net a profit of about €410m if Bank of Ireland buys out the warrants that give the government the right to increase its stake in the bank.

Bank of Ireland chief executive Richie Boucher said last week that it will buy out those warrants as part of plans to raise its capital levels by €2.7bn.

The government has warrants over 334 million Bank of Ireland shares, whi­ch it got as part of the €3.5bn it invested in the bank last year. It can exercise those warrants in four years' time at an average price of 37 cents a share. Based on Bank of Ireland's closing share price last week of €1.60, the government would net a profit of €410m. The profit on the warrants will depend on the bank's share price when they are sold.

Finance minister Brian Lenihan last week said the government would remain a minority shareholder in the bank. The government is likely to convert some of its existing preference shares in Bank of Ireland into ordinary shares as part of the fundraising, raising its stake above the current level of 15.7% but keeping it below 50%.

The bank is expected to launch a rights issue and a debt buyback to raise most of the €2.7bn.