Bank of Ireland sold a London-headquartered lending division to U.S. bank Wells Fargo for around 690 million euros (580 pounds) on Monday putting it closer to meeting its target of selling 10 billion euros in assets under an EU-IMF bailout.

Ireland's banks have pledged to shrink their loan books, bloated after a disastrous binge on property, by nearly a third between 2011 and 2013 to cut their dependence on emergency European Central Bank funding after being largely shut-out of wholesale debt markets.

Bank of Ireland's sale of Burdale, which sells loans secured against assets, means it has raised 8.6 billion euros in divestments this year at an average discount of seven percent, within a base case discount assumed in stress tests carried out under the European Union-IMF bailout.

The bank, the only domestic Irish lender to avoid falling into state control, said it expected to complete its remaining divestments within the overall base case discount assumed under the stress tests.

Fears of large losses on asset sales and loan redemptions under the stress tests left Ireland's banks with a capital shortfall of 24 billion euros in March. The total capital cost of Ireland's banking crisis has been put at 70 billion euros, most of it paid for from state coffers.

Ireland's central bank said last month that Irish banks would find it harder to shrink their balance sheets next year as European rivals step up their own such efforts and it signalled Irish banks might have to slow down their deleveraging to avoid fire sale prices.

In addition to a target of 10 billion euros in asset sales, Bank of Ireland is aiming to redeem another 20 billion euros worth of loans by the end of 2013.

The lender said loan redemptions and repayments remained in line with expectations and deposits had increased since the end of October, when it last gave an update on its funding position.

The losses incurred on Bank of Ireland's divestments have been offset by the reduction in its loan book, which means it has to set aside less capital and overall its core tier one ratio, a key measure of financial strength, has improved marginally.

(Reporting by Carmel Crimmins. Editing by Jane Merriman)