AIB has reported an annual loss after tax of €2.3 billion for 2011, down from a loss of over €10 billion in 2010.
The bank set aside €7.9 billion to provide for expected losses on loans including €1.6 billion related to residential mortgages.
€1.7 billion related to land and development, €2 billion to the property portfolio, €1.6 billion to SME loans and €0.5 billion for corporate & other personal sector loans.
AIB chief executive David Duffy said the bank was still on track to meet its goal of returning to profit in 2014.
AIB CEO David Duffy said credit quality continued to worsen across all its divisions, especially in the property and residential mortgage sectors.
The results show that operating profits for the year - before provisions - fell to €68m from €658m the previous year.
It said this was due to lower levels of income - down 22% - and a 4% rise in costs .
Operating expenses of €1.7 billion were 4% higher, of which 2% were due to the inclusion of the €42m of EBS costs.
AIB said that deposits were stable from August due to increased consumer confidence after the recapitalisation of the bank in July. It also revealed that it drew down €31 billion from the European Central Bank during the year, including €3 billion from the ECB's three year Long Term Refinancing Operation.
AIB is currently in negotiations with staff as it seeks to implement a voluntary redundancy scheme that will see 2,500 job losses. The bank said it hopes to provide details of the redundancy terms following consultations with unions over the coming months.
Mr Duffy said he can not rule branch closures and "there are unviable branches that may be affected." Last year AIB took over EBS, which created an overlap of branches.
AIB said that in addition to the €1.6 billion in mortgage loans classified as impaired it has a further €897m which are categorised as past due. This is where customers are behind on their repayments and the loans are not yet impaired but where the bank believes it will lose money.
Last year the figure for impairments was just €470m and the loans past due was €651m. This illustrates how much pressure consumers are under and how quickly bad mortgage debts are accumulating for the bank.
The bank said that it 2011, 202 staff were deployed in the mortgage arrears support unit, an increase of 70% on the previous year.
During the year, the bank completed the sale of its Polish business. It also sold AIB Jerseytrust Ltd, AIB International Financial Services, AIB Investment Managers and its interest in the Bulgarian American Credit Bank.
AIB also said it had exceeded the Government's €3 billion SME lending target by €600m last year, but added that is has accepted that it must do more to engage with customers to support an increase in the provision of credit and to ensure that it meets its 2012 targets of €3.5 billion.
''The Irish economy has remained weak and consumer and government spending continued to decline in 2011. Credit growth was limited and market conditions have not improved. These challenges have led to an increase in our provisions as consumers struggle to fund their commitments and business, large and small, limit their borrowings,'' Mr Duffy said in the results statement.
But he said that the bank is positioning itself to emerge strongly as the economy recovers.
He also said the bank aims bring on new shareholders next year who will buy some of the Government's shareholding.
Last year, AIB sold its 70% stake in Poland's Bank Zachodni WBKand its 50%holding in AIB Asset Management, to Spanish bank Santander for €3.1 billion. The Government has injected a total of €20.8 billion into AIB and its EBS subsidiary, taking a stake of more than 99.8% in the group.
