UPDATE 2-Mediaset says ads pick up as banks step in

* Mediaset Italy advertising revs up 5 percent in Q1

* Sees April ads trend in Italy in line with Q1

* Telecinco unit ads up 20 percent in Jan, up 40 pct in Feb

* Sees Spain acquisition closing in Q3

* Shares up over 5 pct, outpace sector (Adds more comments, updates shares)

By Danilo Masoni

MILAN, March 24 (Reuters) - Italy's largest commercial broadcaster Mediaset said its advertising outpaced the overall Italian market in January and should rise faster through April as banks and insurers resume marketing spending.

The comments boosted Mediaset (MS.MI) shares by 5 percent to a two-year peak and made it the best media sector performer.

Mediaset, owned by Prime Minister Silvio Berlusconi, said January advertising in Italy was up 3.3 percent while the rest of the Italian advertising market rose only 1.1 percent.

"We will close the first quarter at plus 5 percent," Chief Executive Giuliano Adreani told an analyst presentation, adding that the April trend would be in line with first quarter.

Mediaset performed even better in Spain, its second biggest market, with advertising at its Telecinco (TL5.MC) unit up around 20 percent in January and over 40 percent in February, Telecinco said in a statement, clarifying earlier remarks by Adreani.

Advertising in Europe fell at double-digit rates last year when companies were hit by recession.

"Banks and insurers have come back to TV after disappearing last year," Adreani said, citing big spending from Mediobanca's (MDBI.MI) retail bank and asset manager Mediolanum (MED.MI).

He said big telecoms players like Telecom Italia (TLIT.MI) continued to invest a lot while food companies were up over 10 percent.

On Tuesday German media group Bertelsmann [BERT.UL] forecast a slow return to growth this year while earlier this month Britain's ITV (ITV.L) said it was seeing a marked improvement in advertising sales. [ID:nLDE62M0RY] [ID:nLDE62125V]

By 1623 GMT Mediaset shares were up 5.37 percent while the STOXX Europe 600 media index .SXMP was up 1.5 percent.

On Tuesday Mediaset forecast a higher 2010 net profit thanks to revenue growth, cost controls and breakeven for its pay-TV operations. [ID:nLDE62M1A7]

Mediaset Chairman Fedele Confalonieri said the deal announced in December for its Spanish unit Telecinco (TL5.MC) to buy free-to-air and pay-TV assets from Prisa (PRS.MC) should close in the third quarter.

Chief Financial Officer Marco Giordani said Mediaset would pay out all its 2010 cash flow in dividends next year barring extraordinary operations. (Editing by David Holmes and David Cowell)