UPDATE 2-Japan's Seven Bank sets tentative IPO price

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TOKYO, Feb 7 (Reuters) - Seven Bank Ltd, the banking arm of Japanese retailer Seven & I Holdings (3382.T), set an initial public offering price range that it said could be as much as 14 percent below its previous expectations, reflecting slow demand for new listings in a market hit by the U.S. subprime crisis.

The bank, which offers services through a network of about 13,000 automated teller machines in the group's 7-Eleven convenience stores, on Thursday set its tentative IPO price at 120,000-140,000 yen per share.

It had previously named a reference price of 140,000 yen per share, but market participants said demand for financial stocks would likely stay soft due to the subprime crisis and resulting stock market plunge.

"Banks don't really put a smile on investors' faces these days," said Ken Masuda, senior equities dealer at Shinko Securities.

Tokyo's index of bank stocks .IBNKS.T last month hit its lowest in more than three years on concerns about widening subprime losses.

Seven Bank spokesman Kenichi Yamamoto said the lower price range took into account the recent weakness in the stock market.

"Of course it might have been nice to have a higher (price) but when thinking about the current market environment we should probably be satisfied with this," he said.

The market downturn has also slashed the number of share offerings in the world's second-largest stock market. Initial public offerings in Japan dropped about 70 percent to $5.8 billion in 2007, according to Thomson Financial.

Seven Bank will not issue stock but will sell 53,350 shares, while top shareholders including Mitsubishi UFJ Financial Group (8306.T) and Sumitomo Mitsui Financial Group (8316.T) will part with 310,400 shares ahead of the listing.

A price of 140,000 yen would value the roughly 30 percent stake to be floated at about 52 billion yen ($490 million) and the bank at 170 billion yen.

The premarket price is to be set on Feb. 21 after a book-building from Feb. 8-20 overseen by lead managers Nomura Securities, Nikko Citigroup and Morgan Stanley (MS.N).

The bank plans to list on the Jasdaq market for smaller companies on Feb. 29. (Reporting by Nathan Layne and David Dolan)