* Biggest takeover of European deposit-taking bank by Chinese firm
* Purchase marks Legend's largest overseas acquisition
* Deal expected to complete in Q1 2018
* BIL management to stay after takeover (Adds more details about Legend & BIL)
HONG KONG, Sept 1 (Reuters) - Chinas Legend Holdings struck a deal on Friday to buy a 90 percent stake in Banque Internationale a Luxembourg (BIL) for 1.48 billion euros ($1.76 billion) in the biggest takeover of a European deposit-taking bank by a Chinese firm so far.
Legend, best known as owner of computer group Lenovo Group Ltd, is acquiring 161-year-old BIL from Precision Capital, an investment vehicle of members of Qatar's royal family, including former Qatari Prime Minister Sheikh Hamad bin Jassim al-Thani.
Legend's biggest overseas acquisition is being made through its Hong Kong subsidiary, Beyond Leap Limited, the company said. Reuters first reported in July that Legend was in talks with Precision on a potential acquisition of BIL.
Chinese companies have become increasingly interested in European banks despite the sectors low profitability.
In May, Chinas HNA became the largest direct shareholder in Deutsche Bank, while Fosun holds a 24 pct stake in Portugals largest listed bank Millennium BCP.
The BIL acquisition comes amid China's heightened scrutiny of overseas deals by some large groups in an attempt to curb the country's massive debt build-up. But finance is not on the restricted list of Beijing's new rules on outbound investment.
Founded in 1856 as the oldest private bank in Luxembourg, BIL employs more than 2,000 people worldwide and had some 37.7 billion euros of assets under management at the end of 2016.
"This is an important strategic investment for Legend. Financial services is one of Legend Holdings' key target industries," Legend chairman Liu Chuanzhi said in a statement.
He said Legend aimed to support the bank and its existing management to grow BIL into a Luxembourg-based, international banking brand.
"We believe that as a long-term strategic shareholder, Legend can add value to the international business development opportunities and application of financial technology of the bank," he said.
Apart from owning Lenovo, Beijing-based Legend, led by its long-time chairman Liu, one of China's best-known entrepreneurs, is also the parent of private equity firm Hony Capital and venture capital firm Legend Capital.
Legend has, in recent years, been diversifying beyond the sluggish PC sector, which Lenovo built up by acquiring IBM's PC business in 2005, into other sectors including financial services.
By teaming up with its part-owned investment firms, Legend has dipped its toe into a variety of industries from food production and car rental to dentistry and start-up incubation.
Legend secured a minority interest in Britains Pension Insurance Corporation (PIC) last year. http://reut.rs/2vxMU5A
The Chinese company also made it to the final stages of the auction for Madrid-based mutual fund platform Allfunds but lost out to funds GIC and Hellman & Friedman.
The BIL deal is subject to regulatory approvals, including from the European Central Bank and Luxembourgs Commission de Surveillance du Secteur Financier, and is expected to be completed in the first quarter of next year.
BIL's existing management team will stay in place while the Luxembourg government will keep the remaining 10 percent of the bank, according to the statement.
"We are very pleased that this bank has found a new buyer from China, a country with which Luxembourg has developed a lot of relations knowing that we now have seven Chinese banks established here," Luxembourg Finance Minister Pierre Gramegna told reporters in Luxembourg.
The purchase price more than doubles the 730 million euros Precision paid for BIL in 2011 when Franco-Belgian financial group Dexia, BILs then parent company, needed a state-led bailout by France, Belgium and Luxembourg and sold off all its active businesses.
With the takeover of BIL, Legend said it is looking to further expand its footprint in Europe's financial sector and provide services to companies taking part in Beijing's Belt and Road initiative.
Unveiled in 2013, the Belt and Road project is aimed at building a modern-day "Silk Road," connecting China by land and sea to Southeast Asia, Pakistan and Central Asia, and beyond to the Middle East, Europe and Africa.
While China's overall outbound investments have dropped off amid capital outflows curbs, Chinese acquisitions linked to the Belt and Road policy are soaring.
BIL's net income fell to 110 million euros last year from 134 million in 2015, mainly due to writedowns and restructuring expenses, according to its annual report.
($1 = 0.8398 euros) (Reporting by Julie Zhu in Hong Kong; Additional reporting by Michele Sinner in Luxembourg; Editing by Muralikumar Anantharaman and Adrian Croft)