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EXCLUSIVE-UPDATE 3-Deutsche Bank moves closer to settling Kirch dispute

(Adds court details, consequences for co-CEO Fitschen)

* Settlement in case 'largely negotiated' - source

* Deal would cost Deutsche around 900 mln euros - source

* Settlement would close painful chapter for Deutsche

FRANKFURT, Feb 19 (Reuters) - Deutsche Bank is close to a 900 million euro deal to settle a dispute with the heirs of late media mogul Leo Kirch, a move that would end an acrimonious courtroom battle that has dogged German's largest bank for more than a decade.

The top committee on the Deutsche Bank's supervisory board has discussed an out-of-court settlement that has been largely concluded with Kirch representatives, a person familiar with the matter told Reuters, in a sign that a final deal was near.

The proposed settlement would cost Deutsche Bank around 900 million euros ($1.24 billion), two sources familiar with the discussions said.

"A settlement is largely negotiated," said one.

Deutsche Bank and a spokesman for the Kirch family declined to comment.

Any deal with Kirch would shorten the long list of legal liabilities and investigations facing Deutsche Bank, many of them stemming from the financial crisis.

Co-Chief Executives Anshu Jain and Juergen Fitschen are trying to shorten the list of scandals and claims in 2014 as they reshape the bank to meet more-stringent regulatory demands and tougher markets that followed the crisis.

The supervisory board has discussed proposals to settle the Kirch suit on several occasions in the past. None of those led to an agreed deal.

But in another sign that a final settlement could be close, a Munich court due to hear oral evidence in the Kirch case cancelled a hearing set for Thursday.

Kirch, who died in 2011, had claimed that ex-Deutsche chief executive and later Chairman Rolf Breuer triggered his media group's downfall by questioning its creditworthiness in a 2002 television interview. Kirch sought for years to recoup about 2 billion euros ($2.7 billion) in damages.

Deutsche Bank and its officers have denied that Breuer's comments led to the collapse of the Kirch empire.

The legal battle that ensued has led to prosecutors searching Deutsche Bank offices as the court case progressed. In 2012, a Munich judge said Kirch had suffered damages of between 120 million and 1.5 billion euros.

FALSE DAWN?

A settlement would reduce uncertainty about the costs of fines and scandals, such as benchmark interest rate rigging, that have hit Deutsche and other banks since the financial crisis. Management recently said Deutsche might need to top up its legal reserves to cover the cost of new settlements.

The threat of more costly penalties has overshadowed Deutsche Bank's share price. The bank currently has a price/book ratio of 0.6 compared to an average of 0.9 for major peers, according to Thomson Reuters data.

Deutsche Bank paid out roughly 5 billion euros in settlements, fines and claims for 2012 and 2013 and has set aside a pot worth more than 2 billion euros to deal with future problems.

Some of those provisions include money for any Kirch settlement, but the bank has never stipulated precisely how much, leaving a question mark over how any deal would affect 2014 results.

Munich prosecutors launched a separate criminal investigation last November into whether Co-CEO Fitschen gave misleading evidence in the suit.

But the Munich prosecutor said on Wednesday that a settlement could help mitigate any penalty Fitschen could possibly face if he were ever charged in the probe.

Deutsche Bank has said it is sure that Fitschen would be cleared.

($1 = 0.7272 euros)

(Reporting by Philip Halstrick; Writing by Thomas Atkins; Editing by Noah Barkin and Jane Merriman)