Ireland's largest lender by assets has led a sector-wide revival as the Irish economy grows faster than any other in Europe, and is set to be the first bank in the country to resume dividend payments since the 2008 financial crisis.

However, it has to first stop counting the preference shares as capital and, after generating fresh capital throughout this year, said it had gained consent from European regulators to redeem the shares.

"The redemption is an important event for Bank of Ireland and is possible because of the progress we continue to make across our businesses, which is reflected in the strength of our organic capital generation," chief executive Richie Boucher said in a statement.

The bank moved quickly, despite reporting a small quarterly fall in its capital adequacy ratio earlier this month as an increase in its pension deficit offset organic capital growth.

Its Core Tier 1 capital adequacy ratio fell to 10.6 percent of assets at end-September from 11.1 percent at the end of June under fully loaded Basel III industry rules and excluding the preference shares.

The bank had guided it would seek to redeem the shares between January and July 2016 and analysts expect it to declare a dividend in the second half of 2016 or first half of 2017.

Boucher told Reuters in September that it certainly wouldn't happen before that and it was a "bit premature" to form an absolute view on when it would do so.

He said he wanted Bank of Ireland to become a predictable income stock, which to his mind means ultimately targeting a payout ratio in excess of 50 percent of attributable profits after tax.

"While the announcement should not come as a surprise, it is nonetheless a further positive sign of the significant progress achieved by Bank of Ireland in strengthening its capital ratios," Davy Stockbrokers said in a note.

(Editing by Mark Potter)

By Padraic Halpin