UPDATE 1-Mediobanca raises bad debt provisions amid ECB review

Wed Feb 19, 2014 7:15am EST

(adds details on coverage ratios, LTRO, shares)

MILAN Feb 19 (Reuters) - Mediobanca lifted provisions for bad debts by 30 percent in the final six months of 2013 as it prepares to incorporate the full impact of an asset health check of euro zone lenders by the European Central Bank.

Mediobanca, the first Italian bank to issue results, said on Wednesday second-quarter net profit jumped to 133.5 million euros ($184 million) from 14.8 million euros a year earlier. Net profit was down around 22 percent quarter on quarter.

Earnings in the second quarter, which in Mediobanca's case ends in December, were helped by capital gains of 72.6 million euros from the sale of equity stakes and lower taxes.

Fees and commissions improved after an increase in capital market activity. But net interest income was down on a quarterly basis, reflecting the sluggish economic environment in its core Italian market and the high cost of funding.

Mediobanca, which for years has been at the centre of a complex web of cross-shareholdings in Italy, has decided to break with the past by offloading many equity investments, with the exception of domestic insurer Generali.

Mediobanca's recent sales include stakes in RCS Mediagroup , the publisher of influential daily Corriere della Sera, and U.S. retailer Saks.

Mediobanca said it had increased its coverage for bad debts to 46 percent from 45 percent with families and firms continuing to struggle in economically-strapped Italy, and with an eye to new classification requirements by the ECB in its review of euro zone banks.

Italy's best-known investment bank also said its Core Tier 1 ratio, a measure of capital strength, stood at 11.9 percent at the end of December against 11.7 percent in June - one of the highest in the euro zone's third largest economy.

The bank said it had repaid 500 million euros of 4.5 billion in cheap European Central Bank funds it took during so-called LTRO tenders in the midst of the euro zone crisis.

Shares in Mediobanca trimmed their losses after results. They were down 0.6 percent at 7.24 euros by 1151 GMT. ($1 = 0.7272 euros) (Reporting by Lisa Jucca, editing by Silvia Aloisi and Mark Heinrich)