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* Bank plans to launch issue in first quarter of 2017
* Would help fund removal of bad loans from balance sheet
* UniCredit plans to cut 14,000 jobs, close 944 branches
* Shareholder Amber says is a believer in bank's CEO
* UniCredit sees central and eastern Europe as growth area
By Stephen Jewkes, Gianluca Semeraro and Pamela Barbaglia
MILAN/LONDON, Dec 13 (Reuters) - Italy's largest bank, UniCredit, plans to raise 13 billion euros ($13.8 billion) in the country's biggest-ever share issue to shore up its balance sheet and shield itself from a broader banking crisis.
The plans announced on Tuesday also include 14,000 job cuts and more than 900 branch closures. They come at a turbulent time for Italian banks and the economy - with Monte dei Paschi di Siena at risk of failure, a new government just installed in Rome and early elections expected next year.
UniCredit, the only Italian bank deemed important to the stability of the global financial system, has lost about half its market value this year, hit by profitability concerns, bad loans and a weaker balance sheet than major European rivals.
Chief Executive Jean Pierre Mustier said the bank planned to launch the share issue in the first quarter of 2017 and use the money to help mop up 17.7 billion euros worth of bad debts from its balance sheet, enabling it to boost its profits and also dividend payouts by 2019.
Drafted in five months ago, the former Societe Generale executive has sought to streamline the bank, selling assets like fund manager Pioneer and Polish unit Bank Pekao.
"We've taken some bold actions because self-help is always the best thing to do," the 55-year-old told analysts in a call.
Joseph Oughourlian, CEO at UniCredit shareholder Amber Capital, said he was a firm believer in Mustier.
"Sorting out UniCredit is huge service and a plus for the Italian banking sector. We now have the two largest banks in Italy well-capitalised," he said. Italy's other major bank is Intesa Sanpaolo.
The issue would take the bank's core capital ratio to above 12.5 percent in 2019, from about 10.8 percent now, though UniCredit envisages deep job cuts. It plans to shed 14,000 jobs, or about 11 percent of its staff as of end-2015.
Including announced asset sales, the bank will have a third less staff by 2019, compared with the end of last year, as a result of its turnaround plan. It also plans to close 944 branches in its core areas of Italy, Germany and Austria by 2019.
Mustier pledged to cut his fixed salary by 40 percent to 1.2 million euros with no annual bonus this year or during the plan to 2019.
While UniCredit expects net profit to increase to 4.7 billion euros in 2019 from 1.5 billion last year, it projects revenue will rise just 0.6 percent annually, with growth mainly coming from fees and commissions.
The bank said it would maintain its focus on central and eastern Europe as a growth area where revenues should grow by 2.6 percent a year and streamline its investment banking business.
Shares in the bank jumped 10 percent on news of its plans, with traders saying its targets seemed realistic. The turnaround, though, would involve 12.2 billion euros in one-off losses in the fourth quarter, including loan writedowns and restructuring costs.
"If one was to believe management can deliver on the plan ... and, should the environment turn in their favour, there is an argument to be said the shares look about 50 percent too cheap," said wealth manager Northern Trust Capital Markets.
Mustier said no more asset sales were on the cards and that UniCredit itself was not in talks for a possible merger. His appointment this year had revived rumours about a possible merger between UniCredit and Societe Generale.
The success of UniCredit's plan rests on investors believing it will be a long-term solution. The bank has already raised 14.5 billion euros since the global financial crisis struck in 2008.
Mustier told reporters that the problems of Monte dei Paschi would not upset UniCredit's plans.
"I am highly confident Monte Paschi will be resolved by year-end and so it will have no impact on our capital increase."
Italy is ready to bail out Monte dei Paschi, the country's third-largest bank, if it fails to get the 5 billion euros it needs to stay in business from private investors, a Treasury source said. The European Central Bank has given it by the end of this month to raise the money.
For UniCredit, investment banks have signed a pre-underwriting agreement to help it market the issue, including Morgan Stanley, UBS, BofA Merrill Lynch, JP Morgan and Mediobanca.
UniCredit's bad loans would be sold to two vehicles, one managed by Fortress Investment Group and the other by PIMCO. UniCredit would retain minority stakes in each.
($1 = 0.9403 euros)
Additional reporting by Valentina Za and Maiya Keidan; Editing by Mark Bendeich and Pravin Char