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Monte Paschi seeks nod for 1 bln euro capital hike

By Silvia Aloisi

MILAN, Oct 9 (Reuters) - Banca Monte dei Paschi di Siena , Italy's No.3 lender, was set to win approval for a capital increase of up to 1 billion euros ($1.3 billion) on Tuesday, part of a restructuring plan laid out in June.

The world's oldest bank, which plans to close 400 branches and cut 4,600 job cuts, will also seek changes to its governance.

MPS hopes the capital injection and stronger powers for top managers will help it turn the corner after having to ask for state aid earlier this year to fix a balance sheet ravaged by the euro zone debt crisis.

An extraordinary shareholder meeting will vote on the capital increase, due to be launched by 2015 with option rights for existing shareholders waived.

That means the Tuscan bank's main investor, a cash-strapped charitable foundation with strong ties to local politicians, is set to be diluted further after cutting its stake to 34.9 percent from 49 percent this year to reimburse creditors.

After clinging to a majority stake in the bank for nearly two decades, the foundation has been under pressure to reduce its dependence on the lender as dividend payouts have dried up.

MPS executives, in turn, are keen to minimise political meddling and streamline decision-making.

The bank will ask the EGM to approve changes strengthening the powers of chief executive Fabrizio Viola and chairman Alessandro Profumo by dropping the need to get shareholder approval for asset sales.

The measures, opposed by unions and a group of small shareholders, have already won the foundation's backing, so their approval on Tuesday is not in doubt.

MPS was hit hard by the euro zone debt crisis because of its 25 billion euro exposure to Italian government bonds and the legacy of its acquisition of smaller rival Antonveneta in 2007.

It was one of four European lenders that failed to meet tougher capital requirements and, in June, was forced to ask for state aid. Under the scheme, which has yet to be approved by the European Commission, it will sell 3.4 billion euros of bonds to the Italian treasury to bolster its capital base.

The bank will pay interest on those bonds only if it books a profit. If it ends 2012 in the red, which looks likely given a 1.6 billion euro net first-half loss, the treasury will take a stake in the bank to cover for the missed coupon.

($1 = 0.7657 euro) (Editing by Dan Lalor)

(silvia.aloisi@thomsonreuters.com; +39 02 6612 9723)

Keywords: MONTEPASCHI/