UNICREDIT/PROFUMO (INTERVIEW, UPDATE 1)

* CEO: cap hike leaves public finances available

* CEO: "very comfortable" with Core Tier 1 after cap hike

* CEO: market reaction to possible capital hike positive

* CEO: to seek extension on sale of Generali stake (Adds background, quotes)
 

By Ian Simpson and Gianluca Semeraro
 

MILAN, Sept 29 (Reuters) - Italy's biggest bank, UniCredit SpA, approved a capital increase of up to 4 billion euros ($5.83 billion) on Tuesday because market conditions are better than during the depths of the financial crisis, Chief Executive Alessandro Profumo told Reuters.
 

The unanimous decision by UniCredit's board to shun possible Italian and Austrian state aid to shore up its capital means more public resources are available for the economy and households, he said.
 

UniCredit joined a raft of top European lenders, including France's BNP Paribas SA, in spurning state support and restrictions that came with them.
 

"We think that today the market conditions are clearly better than they were before August, before the summer break," Profumo said in a telephone interview.
 

"There have been significant improvements in the overall financial markets."
 

The cash call will fund a 2 billion euro capital increase in Bank Austria, UniCredit's Austrian unit.
 

UniCredit, the biggest lender in eastern and central Europe, also expects some capital contributions from real estate assets in the process of being sold.
 

"Clearly the process is ongoing and pretty soon there will be the contribution of these assets," Profumo said. He did not give details of how much UniCredit expected to raise.
 

Asked if UniCredit would need more capital even after the rights issue, Profumo said the Core Tier 1 ratio -- a standard of capital held against risky assets -- would be 7.65 percent, above the bank's goal of 7 percent to 7.5 percent.
 

"So we feel in a very comfortable position," he said. The figure was 6.85 percent at the end of June.
 

CONFIDENT ON SUBSCRIBERS
 

Profumo said he was confident that shareholders would subscribe to the cash call, noting that the share price had remained steady even as speculation rose about the capital increase.
 

The shares closed up 2.06 percent at 2.72 euros after easing from a year high. The stock has risen about 4 percent since reports first emerged on Sept. 18 about a capital increase.
 

The market reaction shows "it would be convenient to subscribe to the capital increase in order to have neither an economic nor a voting rights dilution," he said.
 

Asked if UniCredit would have a dividend on its 2009 results, Profumo said the decision would be up to the board once the books for the year were closed.
 

UniCredit carried out a 3.3 billion euro capital increase early this year and scrapped its dividend to boost capital.
 

Only two mid-tier banks have signed up for Italian state aid. Economy Minister Giulio Tremonti has repeatedly criticised banks for spurning state aid, which mandated lending to smaller companies.
 

Profumo said he agreed with Tremonti that UniCredit needed a stronger capital base to sustain the economy and meet loan demand when it revived.
 

UniCredit's cash call also is in line with recommendations on capital from such international bodies as the Financial Stability Board, which spearheads the Group of 20 nations' regulatory initiatives.
 

"The decision we have taken is aligned with this expectation," he said.
 

UniCredit also will seek an extension of a year-end antitrust deadline to sell its 3.2 percent stake in Assicurazioni Generali, Italy's biggest insurer, Profumo said.
 

Given that the current share price is below the book value, "for sure we don't want to sell with a minus," he said.
 

(Reporting by Ian Simpson; Editing by Richard Chang)