* To raise 986 million euros via 3-for-10 rights issue
* Issue priced at 8.0 eur, 33 percent discount
* Will buy back preferred shares issued to the state
* To resume dividend payments
(Adds analyst comment, share reaction, background)
By George Georgiopoulos
ATHENS, Oct 19 (Reuters) - Alpha Bank, Greece's third largest lender, will issue new shares and repay almost 1 billion euros ($1.49 billion) of state support in a move to cut ties with government and resume paying dividends.
A 3-for-10 rights issue will raise 986 million euros to redeem 940 million euros of preferred shares the bank sold the government earlier this year. The deal is expected to be completed before May 2010.
Alpha joins a raft of other lenders raising cash to repay state aid taken on at the height of the financial crisis.
France's BNP Paribas, Societe Generale and Credit Agricole have announced cash calls for a combined 12 billion euros to repay state support.
Austria's Erste Group Bank is planning to raise at least 1 billion euros in early November, sources have said, but that will be used mainly to boost capital.
Italy's UniCredit and Intesa Sanpaolo last month snubbed government help and Britain's Lloyds and Royal Bank of Scotland are expected to raise billions to limit the state's shareholding.
Banks around the world are trying to cut loose from government aid, fearful of more state interference on compensation or lending policies.
OTHER GREEK BANKS TO FOLLOW?
Alpha's cash call at 8.0 euros a share - a 32.9 percent discount to the theoretical ex-rights price on Oct. 16 - is expected to be completed by early December.
The bank's shares had almost erased early trade losses on Monday, changing hands 0.69 percent lower at 13.01 euros at 0934 GMT. They are up 95 percent so far this year, outperforming the 58 percent gain in the Athens bourse's general index.
Analysts expect other Greek lenders, which have yet to recapitalise, to tap the market at a later date.
"After the completion of the rights issue we anticipate that Eurobank, with preference shares to the state of 950 million euros, will follow suit with a similar transaction probably in the first quarter next year," said Manos Giakoumis, head of research at Euroxx Securities.
Alpha Bank received the capital injection by selling preferred shares to the previous conservative government as part of a 28 billion euro state support scheme to keep Greece's economy adequately funded during the global credit crunch.
All major Greek lenders, including National Bank, EFG Eurobank and Piraeus Bank, took part in the scheme, which was a combination of capital injections and bank debt guarantees.
Piraeus Bank, however, which received a 370 million euro capital boost, said on Monday it was not contemplating a similar move as its capital adequacy remains sound.
Alpha's cash call will enable it to resume its consistent dividend policy and exit the provisioning cycle earlier than its peers, it said.
For the first time since 1948, the bank did not pay a dividend in 2009 due to restrictions on payouts for banks accepting government support.
The rights issue will be underwritten by a syndicate of investment banks with JP Morgan the global coordinator and joint bookrunner, joined by BofA Merrill Lynch, Morgan Stanley, Deutsche Bank, Citi, Nomura and UBS.
Alpha said it expects the issue to boost its core Tier 1 ratio, which stood at 9.1 percent at end-June, by 200 basis points. (Editing by David Cowell)