UPDATE 2-Intesa books big writedowns, to cut targets

* Posts 10.1 bln euro Q4 net loss

* Books 10.2 bln euros writedowns on goodwill

* To revise business plan targets in face of Italy recession (Adds CEO quote, detail)

By Silvia Aloisi

MILAN, March 15 (Reuters) - Intesa Sanpaolo, Italy's biggest retail bank, posted a 10.1 billion euro ($13.2 billion) quarterly loss after writing down goodwill to repair a balance sheet damaged by the euro zone debt crisis.

Intesa also said on Thursday it was to revise targets because of market turmoil and expectations the Italian economy could shrink as much as 2.2 percent this year.

The current plan, presented last April, factored in 0.8 percent growth for the domestic economy this year.

"We are in a situation of extreme volatility and a very uncertain macro environment," chief executive Enrico Cucchiani told analysts in a conference call.

"We do not know what lies ahead but we are well prepared if we hit strong headwinds," he said, declining to give a timeframe for the presentation of the new business plan.

Intesa wrote down 10.2 billion euros goodwill from past acquisitions, mostly related to the all-share merger that created it in 2007 -- a deal between Banca Intesa and Sanpaolo IMI worth $37 billion at the time.

The impairments also included its acquisition of medium-sized Tuscan bank Carifirenze and Egyptian lender Bank of Alexandria.

The writedowns did not impact the bank's capital, liquidity and cash flow, and Intesa shares rallied on relief it had cleaned up its accounts.

The stock closed up 4 percent at 1.56 euros, outperforming a 0.6 percent higher European banking index.

"Q4 includes quite a lot of kitchen sinking," said one banking analyst who declined to be named, adding core revenues and costs were better-than-expected.

Intesa said it would pay a dividend of 0.05 euro for 2011, down from 0.08 euro in 2010. Its core tier 1 ratio, adjusted to the European Banking Authority's requirements, stood at 9.2 percent after the dividend -- one of Italy's highest.

Intesa is the only top Italian bank that does not have a capital shortfall to plug to meet EBA requirements.

It is vulnerable to a further weakening of an Italian economy in recession, as it gets 80 percent of its revenue from its domestic hub.

Reflecting the deteriorating economy, total non-performing loans grew 7 percent to 22.7 billion euros at the end of 2011, and the bank said it had loans loss provisions of 2 billion.

The bank has the biggest exposure to Italian government bonds among the country's lenders, with around 60 billion euros, slightly down from end-September.

Cucchiani, the former head of German insurer Allianz in Italy, replaced Corrado Passera at the helm of Intesa in December after Passera joined the government as industry minister.

In an effort to further trim costs and bolster its balance sheet, Intesa has announced plans to cut 5,000 jobs by the end of 2013 and last month sold 1.6 billion euros of non-performing loans.

Intesa was Italy's first bank to return to the wholesale debt market after an eight-month funding freeze caused by the debt crisis, issuing a senior unsecured 1.5 billion euro bond in January.

It has also taken up 36 billion euros of cheap three-year funds offered by the European Central Bank in December and February, more than any other Italian bank. ($1 = 0.7651 euro) (Additional reporting by Michel Rose; Editing by David Cowell and Dan Lalor)