Banco Popolare H1 net profit gains 43 pct

MILAN (Reuters) - Italy's Banco Popolare (BAPO.MI) turned in net profit of 391 million euros for the first half, up 42.6 percent, it said in a statement on Friday.

Banco Popolare, one of Italy's medium-sized lenders with about 2,200 branches, said it was in a position now "to reach the results indicated for 2008 in the three-year plan."

The bank has a 30.7 percent stake in Banca Italease BIL.MI, which returned to profit for the first quarter after heavy losses in 2007 as derivatives contracts weighed.

Banco Popolare itself is changing strategy to focus on retail and on credit to small and medium companies.

Previous year figures are pro forma as it was created in July 2007 from the merger of regional lenders Banco Popolare di Verona e Novara and Banca Popolare Italiana.

Banco Popolare said its Tier 1 ratio was 5.6 percent and it said this should reach 7.4 percent by year-end.

Italian banks have weathered current global market storms better than European peers largely because of conservative lending policies and lack of strong competition in domestic banking.

Banco Popolare has a market capitalisation of about 8 billion euros, which puts it among Italy's top five retail banks, although it is dwarfed by market leaders UniCredit (CRDI.MI) and Intesa Sanpaolo (ISP.MI).

Banco Popolare has had to deny on a regular basis rumours that its supervisory board wanted to oust Chief Executive Fabio Innocenzi or make other changes to management.

Its shares closed broadly flat at 13.04 euros as the DJ Stoxx index of European banks .SX7P gained 0.7 percent.

(Reporting by Jo Winterbottom; editing by Rory Channing)