State-controlled Allied Irish Banks (AIB) has sold its Dublin-based asset management arm to South African investment management firm Prescient Holdings for an undisclosed sum, AIB said on Monday.

A former stock market darling with international ambitions, AIB was effectively nationalised last year and is shrinking its operations as part of an EU-IMF bailout.

AIB was ordered to sell its asset management arm last year under a restructuring agreement with the European Commission. The unit employs over 100 people and had 8.4 billion euros in assets under management as of last month.

AIB said the deal was expected to be completed in the first quarter of next year.

Ireland's biggest fund manager Irish Life Investment Managers (ILIM), owned by bancassurer Irish Life & Permanent, had been chosen as the preferred bidder for AIB's investment arm before EU-IMF stress tests in March revealed its parent group needed to raise 4 billion euros in additional capital.

ILIM was expected to pay 20-25 million euros for the AIB unit, a source familiar with the deal told Reuters in April.