Italian banking fund meets to pick Carige's buyer

By Andrea Mandala and Valentina Za

MILAN, Jan 10 (Reuters) - The Italian fund that owns Carige CRGI.MI will meet on Monday to pick a buyer for the bank from among three suitors, with which to negotiate a sale it hopes will end a seven-year crisis at the ailing lender.

Carige and bigger rival Monte dei Paschi di Siena BMPS.MI are the two main banking headaches Italy must address to complete a restructuring that has cost healthy lenders more than 10 billion euros ($11 billion) in recent years.

After failing last year to sell state-owned Monte dei Paschi to heavyweight UniCredit CRDI.MI , Italy has tabled 380 million euros in gross tax incentives to ease Carige's disposal.

The steering committee of the FITD banking fund that owns 80% of the lender meets at 1430 GMT.

Financed by Italian banks, FITD spent 600 million euros to rescue Carige and now must pump more money into it before suitors BPER EMII.MI , Credit Agricole Italia CAGR.PA and U.S. fund Cerberus agree to take it on for a token 1 euro.

After initially demanding a 1 billion euro capital injection, which FITD rejected because it topped the 700 million euros it could spend, BPER on Saturday lowered the cash request below that threshold, people close to the matter said.

Italy's fifth-largest bank is the favoured bidder, with the country's authorities keen to see mid-tier lenders tie up and some FITD members wary of further expansion by Credit Agricole Italia, the largest foreign lender in the country.

The Italian arm of France's Credit Agricole last year bought small peer Creval for 1 billion euros, and in 2017 clinched a rescue deal with FITD for three failing banks.

BPER has been steered onto an expansion path by its leading shareholder, insurer UnipolSAI US.MI , and last year boosted its assets by 40% by buying branches sold as part of Intesa Sanpaolo's ISP.MI takeover of UBI.

Carige would further lift BPER's assets to around 155 billion euros, making it Italy's No.4 bank and a more direct competitor to Banco BPM BAMI.MI , the No.3 and a longstanding possible merger partner.

"The potential BPER-Carige deal would move further away the possibility of an integration between BPER and Banco BPM," Intesa Sanpaolo analysts said.

With a cost-to-income ratio of 93%, Carige would "need the full attention of management and time" to be restructured once acquired, Intesa said.

By late morning shares in Carige were up 3.3%, having gained more than a third since mid-December, when news of interest from BPER and Credit Agricole Italia first emerged.

($1 = 0.8823 euros)
Editing by Jan Harvey

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