Barclays sells Italian branches to Mediobanca at a loss

* CheBanca! to take 89 branches, 620 staff, 2.9 bln euro loans

* Barclays (LSE: BARC.L - news) to book 200 mln pound loss in Q4

* Barclays could have over 14 bln euro of Italy loans to sell

* Mediobanca (Milan: MB.MI - news) shares up 1.5 pct, Barclays up 0.7 pct (Adds comments from CEO of CheBanca!)

By Silvia Aloisi and Simon Jessop

MILAN/LONDON, Dec 3 (Reuters) - Barclays is paying 237 million euros to sell its branches in Italy to Mediobanca in a deal that will give the Italian investment bank a boost in a race for asset management fees on its home turf.

Mediobanca said on Thursday its retail division CheBanca! would buy from Barclays 89 branches with 220,000 clients, residential mortgage loans worth 2.9 billion euros ($3.1 billion) and some 550 staff. Reuters reported on Wednesday the deal was imminent.

The sale is part of plans by Britain's third biggest bank to shed continental European retail banking operations as it retreats from businesses that are unprofitable or lack scale. Barclays said it would book a 200 million pound ($298.5 million) loss on the transaction in the fourth quarter.

Milan-based Mediobanca has been seeking to diversify from its core investment-banking business and expand in more stable, less capital-intensive activities at a time when regulators are imposing stricter requirements.

With (Other OTC: WWTH - news) the Barclays deal, CheBanca!, founded in 2008 and focused on digital-savvy customers with between 50,000 and 200,000 euros, will nearly triple its number of branches and its client numbers will grow by 60 percent to 770,000.

Total (Swiss: FP.SW - news) assets under management will double to more than 6 billion euros. The transaction coincides with a move by Italian banks to draw more on the private household cash to make money and offset weak retail operations.

"This operation immediately gives us the scale in asset management that we needed and allows us to take a leap forward," CheBanca! CEO Gian Luca Sichel told Reuters.

He described the 237 million euros CheBanca! is getting from Barclays as a "dowry" for restructuring and revamping the network, which he said breaks even.

He did not rule out that some branches could be closed in a country where most banks have been cutting their branch networks to reduce costs and are expected to continue to do so.

Barclays for its part is likely to be left with more than 10 billion pounds, or 14 billion euros, of Italian mortgages on its books, which it is trying to sell. It (Other OTC: ITGL - news) had 13.5 billion pounds of Italian residential mortgages at the start of the year.

The bank has already sold retail operations in Spain and Portugal and is seeking to sell in France.

Other banks which want to reduce their retail presence in Italy include Deutsche Bank (Other OTC: DBAGF - news) , sources with direct knowledge of the matter said. Deutsche Bank has said any rumours about a withdrawal from the euro zone's third largest economy are unfounded.

The Italian sale will reduce Barclays' risk-weighted assets by about 800 million pounds and result in a small decrease in its capital ratio.

The deal will have a 20-basis point negative impact on Mediobanca's capital, or around 120 million euros according to analysts, but will boost profit from the 2016-17 financial year.

Barclays said it would continue to operate investment banking and corporate banking services in Italy, and continue to manage its remaining retail mortgage portfolio. It is attempting to parcel those loans up and sell them to investors, including private equity firms.

($1 = 0.9448 euros)

($1 = 0.6695 pounds)

(Additional reporting by Steve Slater, Paola Arosio; Editing by Mark Potter and Jane Merriman)