UPDATE 1-Italy's Monte Paschi speeds up bad loan sales

(Adds details, CEO quote)

MILAN, Aug 1 (Reuters) - Italian bank Monte dei Paschi di Siena, majority owned by the state after a 2017 bailout, said on Thursday it was speeding up sales of bad loans to clean up its balance sheet.

The Tuscan bank, the world’s oldest lender, aims to sell 4 billion euros ($4.4 billion) in soured loans this year, double its original target for 2019.

This would allow it to lower the proportion of soured debts to 12.7% of all loans at the end of 2019, two years earlier than set out in a restructuring plan agreed with the European Commission as part of the bailout.

The bank said it had booked a 248 million euro hit in the second quarter for the bad loan disposals but foresaw no further impact this year.

Monte dei Paschi had more than 40 billion euros of bad debts, or over a third of its loans, on its books at the end of 2016 - the legacy of a brutal recession in Italy which the country’s lenders are still seeking to shake off.

But the 12.7% target for 2019 is still above the bank’s Italian peers - Intesa Sanpaolo on Wednesday announced a deal over 10 billion euros of unlikely-to-pay loans that will help it to cut gross problematic loans to 7.7 percent of total lending.

Chief Executive Marco Morelli told analysts in a conference call the bank had accelerated its disposal plans to take into account new provisioning guidelines set by the European Central Bank and “a pretty clear moral suasion to cut the NPE (non performing exposures) ratio below 10% as soon as possible.” Monte dei Paschi’s net profit for the first half came in at 93 million euros, down from 288.5 million euros a year ago - although the bank said the figures were not fully comparable because of a change in accounting standards.

Aside from loan loss charges, the fall reflects a weak operating environment for the bank - revenues fell 9.3% and net interest income, which measures how much money a retail lender makes from its core business, dropped by 6.5%.

Monte dei Paschi also said that potential litigation claims linked to allegations the bank’s statements misled the market between 2008 and 2015 had risen to 2 billion euros from 1.6 billion euros at the end of March.

On a brighter note, the bank’s transitional CET 1 ratio, a measure of financial strength, rose to 14% percent at the end of June from 13.3% at the end of March.

The banks is 68 percent owned by the state, and Morelli confirmed that under the agreement with EU authorities the government will have to give details on its exit strategy by the end of 2019. ($1 = 0.9063 euros) (Reporting by Silvia Aloisi, editing by xxx)