UPDATE 1-Italy's BPER to pay dividend after swinging to quarterly profit

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MILAN, Feb 3 (Reuters) - Italy’s BPER Banca swung to profit in the fourth quarter, beating expectations thanks to falling costs and slighter higher revenues.

Italy’s fifth-largest bank said on Wednesday it would pay a dividend of 0.04 euros per share in full compliance with the prudent guidelines given by the European Central Bank.

BPER’s profit for the three months through December was 45 million euros, compared with a loss of 143 million euros a year earlier, when it was hit by one-off costs for staff exits and writedowns needed to ease a sale of bad debts.

Analysts surveyed by Reuters had forecast on average a fourth-quarter net profit of 38.6 million euros.

Revenues rose 2% year-on-year lifted by commissions which more than offset a 2% drop in net interest income, a measure of how much money a bank makes from its core lending business.

BPER, based in the northern Emilia Romagna region, last year agreed to buy 486 branches from Intesa Sanpaolo as part of Intesa’s takeover of rival UBI Banca.

Intesa’s UBI acquisition has set in motion a wave of consolidation in Italian banking, which is expected to accelerate this year, thanks also to tax incentives for mergers taking place in 2021.

BPER has long been seen as the best merger partner for Banco BPM in a deal that would create Italy’s second-largest bank by market share.

Sources told Reuters in December the two banks are considering a potential merger that would take shape in the first half of the year. (Reporting by Andrea Mandalà; editing by Valentina Za, Kirsten Donovan)