UPDATE 2-AIB to choose bidder for Zachodni next week-report

* Needs to raise 7.4 billion euros capital this year

* PKO Bank Polski, Santander and BNP Paribas expected to bid

(Adds 'no comment' from AIB)

DUBLIN, Sept 2 (Reuters) - Allied Irish Banks (ALBK.I) was expected to select a preferred bidder for its 70 percent stake in Polish lender Bank Zachodni WBK BZWB.WA early next week, The Irish Times newspaper reported on Thursday.

Final offers have been requested from Poland's largest lender PKO Bank Polski, Spanish group Santander (SAN.MC) and French bank BNP Paribas (BNPP.PA) by the end of this week, the newspaper reported, citing a source close to one of the parties.

Offers were thought to have been made in the range of 2.7-2.9 billion euros ($3.5 -$3.7 billion).

AIB said last month it hoped to have a deal for Zachodni agreed by the end of September.

It would not comment on the report on Thursday.

Ireland's second-largest bank is selling its stake in Zachodni, its 22 percent stake in U.S. bank M&T (MT.N) and its British business to raise part of the 7.4 billion euros additional capital requested by the Irish regulator.

Its shares were down 2.6 percent at 76 euro cents at 0845 GMT, in a general market .ISEQ 0.5 percent weaker.

The stock has been decimated by mounting losses on property loans and the prospect of the state having to take a majority stake. (Reporting by Carmel Crimmins; Editing by Mike Nesbit and Dan Lalor) ($1 = 0.7814 euro)