UPDATE 4-Blackstone beats estimates, has $29 bln to invest

* EPS 16 cents; Street view 9 cents

* Sitting on $29 bln cash pile, its biggest ever

* Looking hard at three potential banking deals

* Could do IPOs from private equity portfolio

* Shares slip 6.4 percent after 30 pct run-up this week (Adds comments about bank deals, FDIC, closing share price)

By Megan Davies and Paritosh Bansal

NEW YORK, Aug 6 (Reuters) - Private equity firm Blackstone Group LP (BX.N) reported higher quarterly earnings on Thursday, topping Wall Street expectations, and said it was sitting on its biggest cash pile ever, with $29 billion to deploy.

The credit crunch and lack of financing have meant private equity firms have struggled to spend money on leveraged buyouts over the past year, and thus have large amounts of cash, known as "dry powder," to invest.

"We now have $29 billion in dry powder, the largest amount of available capital in the firm's history, and it couldn't come at a better time," Chief Operating Officer Tony James said on a conference call.

Times of market turmoil and dislocation are when Blackstone can find its most profitable investments, he said.

Blackstone, in a consortium that included rival private equity firm Carlyle Group, struck a deal in May to buy troubled Florida lender BankUnited Financial Corp.

James said there are about three banking transactions he is "looking hard at." The firm, along with TPG Capital LP [TPG.UL] and Carlyle, has been in talks to buy Bank of America Corp's (BAC.N) First Republic, two sources previously told Reuters.

James added that recently proposed guidelines by U.S. bank regulator the FDIC would "kill it" for private equity investments into banks. But, those guidelines are not expected to be as severe as first proposed, meaning there will be opportunity to put some money to work, he said.

Blackstone is hopefully getting close to some "very interesting deals" that should be announced in the second half of the year, he said in a separate call for analysts, although he did not specify the industries.

"Some of the companies we are looking at include distressed assets which have significant debt in place," Blackstone's Chief Executive Officer Stephen Schwarzman said later.

Blackstone's second-quarter earnings before income taxes, noncash charges for vesting equity-based compensation, and amortization of intangible assets -- a measure it calls "economic net income" (ENI) -- were $173 million, up from $100 million a year earlier.