UPDATE 1-Italy's UniCredit posts smaller-than-forecast quarterly loss on one-off hits

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MILAN, Feb 6 (Reuters) - Italy's biggest bank UniCredit posted a lower-than-expected fourth quarter net loss on Thursday due to one-off items and planned loan writedowns, while meeting its full-year underlying net profit target.

UniCredit has undergone a major restructuring in the past three years under French boss Jean Pierre Mustier, who has slashed costs, dumped bad debts and sold assets, shrinking the bank's international presence.

His latest such move was the decision in December to pull out of a joint venture in Turkey, which led UniCredit on Wednesday to place on the market a 12% stake in local bank Yapi Kredi.

Under a new plan presented in December, Mustier is focusing his efforts on improving returns for shareholders through a combination of dividends and share buybacks in an attempt to lift the stock, which trade well below UniCredit's book value.

The bank said it would to consider raising capital distribution to shareholders to 50% of profits in 2020, earlier than initially planned, and would also consider extraordinary investor remuneration after 2020.

After halving its stake in Yapi with Wednesday's placement, UniCredit said it would keep the holding at the current 20% level for the rest of the year and book a negative 0.8 billion euro impact from the transaction in the first-quarter.

In the October-December period UniCredit booked 1.2 billion euros in one-off charges linked to the initial reduction of its Yapi stake, other one-off costs and writedowns of software and other intangible assets.

It also brought forward 1 billion euros in planned loan writedowns, leading to a quarterly loss of 835 million euros.

Analysts polled by the bank had expected on average a 1.1 billion euro loss on revenues of 4.65 billion euros.

Fourth-quarter revenues totalled 4.9 billion euros, up 3.4% year on year despite a 7% drop in the net interest income which was more than offset by higher fees and income from trading.

Adjusted for one-off items, net profit in the full year hit the bank's target of 4.7 billion euros. (Reporting by Valentina Za; editing by James Mackenzie and Edmund Blair)