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UPDATE 1-Spain's Banco Popular approves 2.5 bln-euro share issue

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MADRID, Oct 1 (Reuters) - Spain's Banco Popular said on Monday it has approved a share issue worth up to 2.5 billion euros ($3.2 billion) after an audit showed the bank needed as much as 3.2 billion euros in new capital.

Trading in the bank's shares was suspended following the announcement.

Spain's sixth-biggest bank by assets also agreed that Popular would remain independent rather than searching for a partner.

Executives from the country's sixth-biggest bank were due to hold a conference call with analysts at 0800 GMT to explain the deal.

The bank was highlighted in an independent audit by consultant Oliver Wyman on Friday as one of the lenders that would need extra capital to ride out the economic crisis.

The audit said Spanish banks would need a total of 59.3 billion euros in extra capital in such a scenario. .

Popular needs to reduce its capital shortfall to around 2 billion euros by December if wants to avoid a public capital injection in the short term.

The Wyman report said Popular's estimated capital needs were based on an adverse scenario which is looking increasingly likely with Spain in its second recession in three years and a quarter of all workers unemployed.

Popular's shares closed on Friday at 1.701 euros. ($1=0.7773 euros)

(Reporting By Jesús Aguado; Editing by Paul Day and Greg Mahlich)

((jesus.aguado@thomsonreuters.com)(paul.e.day@thomsonreuters.co

)(Tel +34 91 585 83 08)(Reuters Messaging: paul.e.day.thomsonreuters.com@reuters.net))

Keywords: SPAIN POPULAR/