DUBLIN (Reuters) - Ireland sold 5% of Allied Irish Banks (AIB) to institutional investors for 396.6 million euros ($396.24 million), the finance ministry said on Tuesday, part of a drive to sell down bank stakes acquired during the financial crisis.

Dublin began gradually selling shares in AIB for the first time since a 2017 IPO at the start of the year through a share trading plan, and Monday's placing marked the second time in five months it has sold a 5% stake in one go.

As a result of the placing, at 2.96 euros per share via an accelerated book build, the overall size of Ireland's shareholding will be reduced from to 57% from 62%, Finance Minister Paschal Donohoe said in a statement.

The state's stake stood at 71% at the start of the year.

Ireland pumped 64 billion euros ($64.2 billion), or almost 40% of its then annual economic output, into the country's banks just over a decade ago following a huge property crash.

It sold the last of its shares in Bank of Ireland in September. Its stake in Permanent TSB (PTSB) is to fall to 62% from 75% after NatWest took a minority stake in the bank following the completion of its sale of 5.2 billion euros of Irish mortgages to PTSB on Monday.

($1 = 1.0009 euros)

(Writing by Conor Humphries; Editing by Andrew Heavens)