ROME/MILAN (Reuters) - Shares in Monte dei Paschi (MPS) fell again on Monday, extending Friday's losses, signalling lingering investor doubts over the bailed out Tuscan bank's bid for bigger rival Mediobanca.

On Friday, the state-backed lender launched a surprise 13.3-billion-euro all-share ($13.9 billion) bid for Mediobanca, whose board meets on Tuesday to start reviewing the offer.

Based on Italian takeover rules, the board will be able to express a proper opinion and give advice to shareholders only once the bid's prospectus is public, in a few months' time.

In a letter to employees at the weekend, Mediobanca CEO Alberto Nagel said the offer had not been previously agreed and the bank would decide how to best protect the interests of its stakeholders.

Shares in MPS, which has returned to profits and dividends after a bailout in 2017, fell 1.5% by 0832 GMT, extending a 7% drop on Friday.

Mediobanca shares were little changed, after Friday's 7.7% jump. Italy's banking index fell 0.5%.

MPS' proposed takeover, the latest move in wave of consolidation in the Italian banking sector, was welcomed by Italy's conservative government but it has left analysts concerned about the limited scope for cost savings, and the ability to retain Mediobanca investment bankers.

GOVERNMENT ENDORSEMENT

MPS CEO Luigi Lovaglio, a veteran banker for decades at UniCredit, has said the idea was to combine MPS' branch franchise with Mediobanca products, while preserving both brands and running Mediobanca's investment banking business separately.

Mediobanca's operations include wealth management and consumer finance. On the latter it already partners with MPS.

The government, which still owns 11.7% of MPS, has endorsed the offer and Prime Minister Giorgia Meloni on Sunday said everyone should be proud of MPS' turnaround.

"If the deal is successful, we will have that third major banking group [after Intesa Sanpaolo and UniCredit] which we always spoke about, a group that could help to protect Italians' savings," she said.

Meloni's government had been working on returning MPS to the private sector, after a previous collapsed sale of MPS to UniCredit in 2021.

After spurning MPS then, late last year UniCredit CEO Andrea Orcel derailed government's efforts to broker a tie-up of MPS and Banco BPM with support from billionaire Francesco Gaetano Caltagirone and the holding company of late fellow tycoon Leonardo Del Vecchio.

Caltagirone and the Del Vecchio family's Delfin holding are also leading shareholders in Mediobanca.

Barclays on Monday predicted further volatility in the shares given the lack of clarity and added MPS had room to distribute more of its excess cash.

The bid enjoys unions' favour given it does not require significant branch closures and job losses.

"MPS' hostile bid for Mediobanca could reshape the Italian financial landscape, but is subject to high implementation risk due to different business models and difficulties in achieving sustainable synergies," Scope Ratings wrote.

($1 = 0.9551 euros)