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 di Siena (MPS) , Italy's No.3 lender, won approval for a 1 billion euro ($1.3 billion) share issue on Tuesday to help it to fix a balance sheet ravaged by the euro zone debt crisis.

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

At an extraordinary shareholder meeting, investors holding 57.6 percent of the bank voted in favour of the capital increase, which the bank's executives say is vital to restore its financial health.

The Tuscan bank has waived existing investors' options to buy the new shares. This means that MPS's biggest investor, a cash-strapped charitable foundation with strong ties to local politicians, 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 from 49 percent, to reimburse creditors.

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

(Editing by David Goodman)

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