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UPDATE 1-Italian bank MPS cleared for 1 bln euro share issue

* EGM backs share issue

* Capital increase to be launched by 2015

(Adds vote)

SIENA, Italy Oct 9 (Reuters) - Banca Monte dei Paschi diSiena (MPS) , Italy's No.3 lender, won approval for a 1billion euro ($1.3 billion) share issue on Tuesday to help it tofix a balance sheet ravaged by the euro zone debt crisis.

The world's oldest bank, which also plans to close 400branches and cut 4,600 jobs, is expected to launch the cash callby 2015, opening the door to new investors to pay back stateloans it was forced to request in June.

At an extraordinary shareholder meeting, investors holding57.6 percent of the bank voted in favour of the capitalincrease, which the bank's executives say is vital to restoreits financial health.

The Tuscan bank has waived existing investors' options tobuy the new shares. This means that MPS's biggest investor, acash-strapped charitable foundation with strong ties to localpoliticians, will not have to buy the shares and, as a result,its stake will be diluted.

It has already cut its stake this year, to 34.9 percent from49 percent, to reimburse creditors.

At current market prices, the cash call would be worth morethan a third of MPS's market capitalisation.

(Editing by David Goodman)

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

Keywords: MONTEPASCHI CAPITAL/

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