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UPDATE 1-BlackRock pulls out of rescue bid for Italian bank Carige

(Adds confirmation, background)

MILAN, May 9 (Reuters) - U.S. asset manager BlackRock has pulled out of a proposed rescue of Italian bank Carige, raising the prospect that the government could be drawn into another costly state bailout.

BlackRock and Carige confirmed a report first carried by La Repubblica newspaper on Thursday.

BlackRock was to have bought around half of a 720 million euro ($806 million) share issue, emerging with control of the country's 10th-biggest bank, based in Genoa.

BlackRock decided to reject the proposed acquisition for reasons that included excessive risk, one of the sources said.

Carige issued a statement on BlackRock's withdrawal but did not give a reason for the fund's move.

Carige has been laid low by years of mismanagement and an excessive exposure to the depressed economy of the northwestern Liguria region.

($1 = 0.8933 euros) (Reporting by Stephen Jewkes and Andrea Mandala Editing by Silvia Aloisi and Mark Bendeich)