DUBLIN, MARCH 30 - Allied Irish Banks (AIB) said it will make aggressive cost-cuts, on top of job losses already announced, after it narrowed its full-year loss to 2.3 billion euros (1.92 billion pounds) from more than four times that amount the previous year.

Forced to ditch its international ambitions after Ireland's devastating property crash saddled it with huge losses, AIB was effectively nationalised late last year and saved from collapse by emergency European Central Bank (ECB) funding.

The bank's 2011 after-tax loss dropped from a record 10.2 billion euros the previous year and was helped by a 3 billion euro income gain from forcing losses on junior bondholders and a further 1.6 billion from exiting its Polish operations.

AIB recognised net total provisions of 8.2 billion euros for the period to end-December 2011.

After announcing earlier this month that it would axe 2,500 jobs, the bank said further significant cuts were needed after seeing its net interest margin, the profitability of its lending, fall to 1.03 percent from 1.31 percent a year ago.

It is reasonable to say that there will have to be overall aggressive cost cutting as we go forward, the bank's chief financial officer Paul Stanley told Reuters in an interview.

Our challenge is to positively widen the gap between our operating income and operating cost lines. We have a funding cost to address going forward too.

Under the terms of Ireland's EU/IMF bailout, banks have to radically shrink in size by 2013. AIB said it had met 62 percent of a 20.5 billion euros deleveraging target at-end 2011 and had deleveraged a further 1 billion euros since.

The bank's deposits, which dropped dramatically in 2010, fell to 61 billion euros in 2011 from 63 billion a year earlier, but the bank said levels had stabilised since August and had increased by 1.5 billion euros between January and March.

(Reporting by Padraic Halpin; Editing by Erica Billingham)