UPDATE 1-Mediobanca seen stronger after writedowns
* Bank posts FY loss of 180 mln euros
* Core Tier 1 ratio at 11.7 pct
* Bank to curb investment portfolio
* Shares up 2 pct (Recasts with details, shares, comments)
By Lisa Jucca
MILAN, Sept 17 (Reuters) - Italian investment bank Mediobanca ended its financial year posting a net loss on the back of heavy writedowns on equity investments such as Telecom Italia but the market welcomed moves to clean up its balance sheet.
Mediobanca, which has for decades played a pivotal role in helping to forge Italian capitalism, announced in June a radical change of strategy that will see it curb or sell stakes in some of Italy's biggest corporate names to focus squarely on banking.
The writedowns, welcomed by the market, reduce the bank's over dependence on the fluctuations of its 4-billion euro portfolio and pave the way for future sales.
Mediobanca said it will not distribute a dividend to comply with Bank of Italy recommendations, which bar loss-making lenders from paying dividends.
The bank reported a net loss of 180 million euros in the year, slightly below the 200 million euros anticipated by management in June, after writedowns of 404 million euros.
It also increased its provisions for possible loan losses to 507 million euros, up 8 percent over a 12-month period but well below the average for the Italian banking sector.
Revenue at the bank's flagship corporate division fell by a hefty 27 percent, reflecting Italy's protracted economic crisis. But the fall was partially offset by stable revenue at its retail banking arm, a good source of liquidity for Mediobanca.
Shares rallied as much as 2 percent after the results as the market welcomed the balance sheet cleanup.
"Investors like the decision to clean up the accounts," said one trader, adding that scrapping the dividend would allow the bank to keep a strong capital base.
Mediobanca's core Tier 1 ratio - a measure of financial strength - stood at 11.7 percent, one of the highest in Italy, compared with 12 percent at the end of March.
Mediobanca, founded in post-war Italy by legendary banker Enrico Cuccia, sits at the centre of a web of corporate holdings, the product of a strategy focused on influence over Italy's corporate landscape rather than profit.
The bank, which owns 13.2 percent of Assicurazioni Generali , is planning to sell 3 percent of Italy's largest insurer as it progressively shrinks its financial portfolio and last week trimmed its holding in RCS Mediagroup, the publisher of influential daily Corriere della Sera.
Mediobanca is one of four key shareholders that control Telco, a holding that owns 22.4 percent of telecoms operator Telecom Italia. The writedown on the indirect Telecom Italia stake alone accounted for 320 million euros.
By slashing the book value of its indirect Telecom Italia stake to 0.5 euros a share, below current market prices, Mediobanca is freer to choose when to exit the telecoms group, now at the centre of intense merger speculation. (Additional reporting by Maria Pia Quaglia, editing by Silvia Aloisi and David Evans)
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