* Working on 500 mln euro sale after 2.2 bln euro sales in 2017
* Italian banks stepping up targets for bad loan sales (Adds comment on business plan)
MILAN, Feb 9 (Reuters) - Banca Carige pledged on Friday to sell up to an extra 1 billion euros ($1.2 billion) in bad debts this year, joining the ranks of Italian banks that have bowed to regulatory pressure to clean up their balance sheets more quickly.
Carige said it would cut its soured loan pile to 2.6 billion euros, before writedowns, at the end of this year, from 4.8 billion euros last December, topping targets previously agreed with the European Central Bank.
Carige’s own previous target for this year had been to cut bad debts to 3.4 billion euros.
The ECB had told the bank to raise capital and start shedding bad debts by the end of 2017 to stave off the threat of being wound down.
Carige, which has suffered from years of mismanagement and from its exposure to the troubled local economy of the northwestern Liguria region, managed to pull off a risky 544 million euro cash call in December despite a 66 percent take-up from shareholders.
Carige’s core capital rose to 12.4 percent in December from 10.4 percent three months earlier, as the cash call and asset sales helped it offset a full-year loss of 380.5 million euros driven by 416.5 million euros in writedowns of soured loans.
Shares in Carige closed up 5.3 percent after the results against a 1.2 percent drop in Italy’s banking index.
However, the bank said its 2017 result was 12.6 percent below the target set in the business plan approved in September partly due to a delay in selling its merchant acquiring business, which processes card payments, but also because of lower-than-expected revenues.
Italy’s 324 billion euro pile of loans which turned sour during a harsh recession that ended in 2014 is the focus of the ECB’s concerns over the country’s banks.
A slow-moving judicial system hampers debt collection but lenders have been reluctant to sell as they can only do so at a loss since book values are above market prices.
Carige held soured loans equivalent to 27 percent of total loans before writedowns at the end of last year, nearly twice the Italian average and almost five times the European one.
All leading Italian banks said this week they planned to take advantage of a new accounting rule coming into force in January to book fresh writedowns on loans and pave the way for disposals.
Earlier on Friday, UBI Banca said it would sell impaired debts to lower their weight over total lending below 10 percent between 2019 and 2020.
On Tuesday, Italy’s biggest retail bank Intesa Sanpaolo pledged to halve its bad debts under a new four-year plan and smaller rival Banco BPM on Wednesday announced an additional 5 billion euros in bad loan disposals by 2020.
$1 = 0.8183 euros Reporting by Valentina Za; Editing by Adrian Croft