By Pamela Barbaglia

LONDON (Reuters) - Days before an Italian constitutional referendum that could spook investors, the new chief executive of Banca Monte dei Paschi di Siena faces a high-stakes test in his battle to save the world's oldest bank.

Marco Morelli, who only took up his post in mid September, hopes to secure 5 billion euros (4.28 billion pounds) of fresh capital in the next two weeks or else run the risk of having to ask the government to support Italy's third biggest lender.

After weeks of wooing hundreds of investors, Morelli's first task is to win the backing of shareholders at a meeting on Thursday in order to press ahead with an emergency cash call due to be launched just days after Italy votes on Prime Minister Matteo Renzi's flagship constitutional reform.

A source close to the deal said Monte dei Paschi's share issue only has a 50 percent chance of success given the threat of political and market turmoil after the referendum.

Morelli will need to convince investors that if the bank is to survive they have no choice but to accept a further dilution of their shares - which in 2008 traded at nearly 4 euros but are now worth around 20 cents.

For Morelli, who gave up his job as Bank of America's Italy CEO in September, raising the capital will mean he has the chance to finally clean up the Tuscan lender, by offloading its non-performing debt and possibly merge what is left - the so-called "good bank" - with another Italian bank down the line.

But he is trying to implement his plan against some of the worst possible market conditions, with polls tipping Renzi to lose the vote - a prospect that could see him lose office and cause investors to flee Italy.

Any failure to execute Monte dei Paschi's emergency cash call will have sweeping implications for the future of the country's banking sector, producing a knock-on effect on other lenders.

"A lot hinges on Monte dei Paschi's rescue," one of the bank's largest bondholders told Reuters, adding that if it fails, then Italy's biggest bank, UniCredit, could also struggle with a capital increase it is planning for early next year.

"Then you'd have one of the euro zone's largest countries' largest bank not being able to raise capital."

Pollsters said Donald Trump's U.S. presidential triumph appeared to have encouraged a feeling of rebellion against the established order which, in Italy, is represented by Renzi.





UPHILL STRUGGLE

Morelli is a former chief financial officer at Monte dei Paschi who worked for the bank when it made its ill-fated purchase of regional lender Antonveneta in 2007.

He was vindicated in 2014 when three former top Monte dei Paschi managers were sentenced to jail for misleading regulators over derivative trades that the bank used in 2009 to conceal losses stemming from the Antonveneta acquisition. Siena prosecutors dropped the case against him, saying he had opposed the derivative contracts and asked for an internal audit.

Morelli has spent the past month travelling to the U.S., Middle East and around Europe, meeting more than 300 investors in the hope of convincing some to act as anchor investors and stump up a significant amount of money ahead of the share issue.

Sources say several large funds have signalled their interest in becoming anchor shareholders, but they are all reticent about making a firm commitment before knowing the outcome of the referendum.

Morelli wants to raise around 1.5 billion euros from anchor investors, and between 1 billion and 1.5 billion from bondholders willing to convert their holdings into equity. The rest would come from a share issue expected to begin by Dec. 9.

Shares in Monte dei Paschi are down around 10 percent so far this week as Italian banking stocks came under renewed pressure ahead of the vote.

Saddled with almost 46 billion euros of bad loans, the lender has so far failed to raise takeover interest from Italian and international banks. It fared the worst of all banks in this summer's health check of European banks by regulators, when it was projected that all of its capital would be wiped out in the event of an economic shock.

Its bleak outlook may change if its turnaround succeeds and it can find a deal with another lender, potentially giving Morelli a key role at the helm of a newly merged bank, sources said.

Story continues