Allied Irish Banks said it would try to sell assets or a stake in the group before approaching shareholders or the government for further capital, after posting its first ever full-year net loss.

Allied Irish, in which the government last year acquired a 25 percent indirect stake and which is also participating in a bad bank scheme, repeated on Tuesday it was looking at options to replenish its capital, with more state help a last resort.

We understand from our shareholders that they want us to release capital from our business before we go back to them, Group Managing Director Colm Doherty told analysts after releasing a results statement which had been vague on capital plans pending restructuring talks with the EU.

Ireland's second-biggest bank by market value said it would transfer property loans worth up to 23 billion euros ($31 billion) to the National Asset Management Agency (NAMA), Ireland's bad bank, slightly below an earlier estimate of 24 billion euros.

Doherty said the government had indicated it would ask for an average estimated discount of around 32 percent on the total 80 billion euros of loans to be taken over from Irish banks, higher than the initial 30 percent forecast.

The discount will determine how much extra capital lenders including Allied Irish and rival Bank of Ireland will need.

JEWEL IN PORTFOLIO

To plug the resulting hole in its capital base, Allied Irish said it would first look at selling some of its assets, which include a minority stake in M&T Bank Corp in the United States and a majority holding in Poland's BZ WBK.

It said it had been approached by a number of companies interested in taking a strategic stake in the group, adding the potential suitors were especially interested in some of its overseas units.

The jewel that we have in our portfolio is Poland, Doherty said.

Most strategic investors that talk to us have a high degree of interest in Poland because of the value of that investment and indeed in the Republic of Ireland because of the fact that we have a relatively dominant franchise here.

Allied Irish posted a 2009 net loss of 2.3 billion euros ($3.1 billion), its first time in the red since its foundation in 1966.

The loss, which stemmed mainly from the weakness of its Irish domestic market, compared with an expected loss of 2.9 billion euros in a Thomson Reuters I/B/E/S poll and an 890 million euro profit in 2008.

The bank's operating profit before provisions increased slightly from the previous year to almost 3 billion euros. It swung into the red after 5.4 billion in provisions, mainly on loans to the construction and property sector.

The bank said the outlook was still extremely challenging, with no real growth expected in the Irish economy until the end of 2011 or early 2012, which it said would need to return to sustainable profitability.

The government has forecast that growth would return in the second half of this year.

Allied's Polish unit BZ WBK reported on Tuesday a 4 percent net profit rise in 2009, beating analysts' expectations, as it managed to keep its bad loan provisions mostly under control.

Allied Irish's volatile shares were up 4 percent at 1.04 euros by 1111 GMT, still well below a peak of 3.4 euros last year when the government unveiled the details of the bad bank plan and more than 24 euros in 2007 at the end of the Celtic Tiger boom. The wider Irish market was 0.5 percent higher.

(Editing by Mike Nesbit)

($1=0.7395 euros)

Poland Sale