May 9, 2019 / 6:50 AM / 14 days ago

UPDATE 2-BlackRock pulls out of rescue bid for Italian bank Carige

(Adds Carige comment, ECB background)

By Stephen Jewkes

MILAN, May 9 (Reuters) - U.S. asset manager BlackRock has pulled out of a proposed rescue of Italian bank Carige, raising the prospect that Rome could be drawn into a costly state bailout.

A BlackRock spokesperson confirmed a report first carried by La Repubblica newspaper but gave no details.

BlackRock was to have bought around half of a 720 million euro ($806 million) share issue, emerging with control of the country's 10th-biggest bank and enabling the government to avoid its fourth major bank bailout in two years.

BlackRock was the linchpin of the rescue plan which was also backed by Italian banks. But the U.S. fund deemed the investment too risky, among other reasons, a source familiar with the fund's decision said on Thursday.

Carige, recently put under special administration by the European Central Bank, said it was looking at other market solutions to its capital shortfall after BlackRock's move but noted that it could also seek government financial aid.

"We will evaluate other market solutions aimed at ensuring the stability and turnaround of Banca Carige," the lender said in a statement.

"It remains in any case possible to activate ... a request for a precautionary recapitalisation to the economy ministry."

The government has earmarked up to 1 billion euros to buy Carige shares in the event it cannot find investors.

The ECB has set a mid-May deadline for investors to submit binding bids, sources have said.

Carige has been laid low by years of mismanagement and an excessive exposure to the depressed economy of the northwestern Liguria region.

$1 = 0.8933 euros Additional reporting by Andrea Mandala Editing by Silvia Aloisi, Mark Bendeich and Edmund Blair

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