AIB has sold the bulk of its loss-making UK asset management business, Govett, to Gartmore Investment Management for an estimated €20 million.

The bank will incur closure costs of €17 million on the disposal, with close to 80 Govett staff in the UK and Singapore to be made redundant.

AIB will also charge goodwill of €140 million to its 2003 profit and loss account as a loss on disposal. This goodwill was written off to reserves when Govett was purchased by AIB and will not affect the bank's capital ratios.

The sale comes after several years of poor performance at Govett, which was bought by AIB in 1995 for close to £100 million sterling (€146 million). The company was at the time a specialist in the Far East and emerging markets, and thus suffered badly during the Asian financial crisis that occurred just two years later.

A subsequent shift in focus to the UK failed to turn the operation around, with Govett's most recent results showing a pre-tax loss of €7 million in the first half of this year.

Mr Colm Doherty, managing director of AIB Capital Markets, said the decision to sell most of Govett and to close the firm's office in Singapore had followed a review and restructuring of the bank's overall asset management business. The Singapore operation has suffered a number of high-level defections over recent months.

He said the UK business as it stood did not have the necessary scale to operate successfully in an ever-consolidating market.

"To close any business is a tough decision but I think this decision is right," Mr Doherty said.

The move was welcomed in the market, with AIB shares climbing five cents to close at €12.45 in Dublin last night.

Gartmore will pay AIB in cash over three years, with €6 million due immediately and the remainder payable according to the level of funds retained and management fees earned on the assets being sold.

AIB said it would retain some institutional management contracts after the sale, with the management of assets worth some €800 million to be transferred from London to AIB Investment Managers (AIBIM) in Dublin. AIBIM already manages assets worth more than €10 billion.

Assets worth €1.5 billion will meanwhile pass to Gartmore, with this portion including Govett's split-capital trusts. Products of this type have attracted some controversy in the UK market over the past few years because of their tendency to invest in each other.