By Gianluca Semeraro

MILAN (Reuters) - Mediobanca (MDBI.MI: Quote, Profile, Research), Italy's best-known merchant bank, posted a 21.8 percent rise in six-month net profit on Friday and said it would strengthen its investment banking business in Europe while developing a retail network.

It said net profit should rise to 1.4 billion euros ($2.2 billion) by the end of its 2009-2011 plan. Half-year profit was helped by increased returns on investments and a general increase in business.

The bank, long at the heart of Italian corporate finance, said it aimed to become a Europe-wide player in investment banking. It targeted total income of 1.3 billion euros in 2011 from this unit.

Chief Executive Alberto Nagel said the bank was watching acquisition opportunities but was in no rush to buy.

"We are looking at private banking and asset management but we are not in a hurry. We have a series of growth opportunities without making big acquisitions," he said in a presentation.

Analysts had been wondering what Mediobanca would do with free capital, which Nagel forecast would be between 1.75 billion and 2 billion euros at June 2011.

The bank said it would stick to a 75 percent payout for shareholders and could launch further buyback programs.

Mediobanca said it had no direct or indirect exposure to the U.S. subprime mortgage sector, which has caused huge losses at some U.S. and European banks.