* UniCredit agrees to sell 32.8 pct stake in lender Pekao
* Italy's biggest bank gets 2.54 bln euros for Polish assets
* Polish state boosts control over economy via biggest banks
* UniCredit completes Pekao equity-linked placement deal (Adds UniCredit Pekao equity-linked instrument deal)
By Marcin Goclowski and Agnieszka Flak
WARSAW/MILAN, Dec 8 (Reuters) - Italy's biggest lender UniCredit has agreed to sell its Polish assets for 2.5 billion euros ($2.7 billion), improving its financial standing ahead of share issue at a time of political instability at home.
State-controlled Polish insurer PZU and development fund PFR agreed to buy a 32.8 percent stake in Pekao from UniCredit for 10.6 billion zlotys ($2.6 billion).
Pekao, Poland's second biggest lender, will also pay 142 million euros for UniCredit's stakes in other Polish companies.
The sales should give UniCredit a boost ahead of a strategic review next week that is expected to include a 13 billion euro share issue, despite political uncertainty at home following the resignation of Italian Prime Minister Matteo Renzi.
The sale of the Polish assets had been widely flagged and should not materially change the size of the capital increase as the bank wants to strengthen its balance sheet once and for all.
Shares in UniCredit, Italy's only systemically important bank, rose more than 6 percent, bolstered by the Polish sales and the European Central Bank's decision to extend a bond buying programme. Pekao shares climbed almost 3 percent.
Analysts said, however, that UniCredit needed to strike a balance between improving its core capital, which lags several large European rivals, while maintaining earnings.
Benjie Creelan-Sandford, an analyst at Jefferies, said the Pekao sale had lifted UniCredit's proforma core capital ratio to 11.78 percent but would knock 6-7 percent off future profits.
"It's another tick in the box ahead of the full strategic update on the Dec. 13," he said, adding that he expected UniCredit to announce a clean up of non-performing loans that would more than offset the loss of earnings from asset sales.
UniCredit, which was advised on the deal by UBS and Morgan Stanley, has already sold a 30 percent stake in online division FinecoBank and is in exclusive talks with France's Amundi to sell its asset manager Pioneer.
The Italian bank is selling its remaining 7.3 percent stake in Pekao on the market through equity-linked instruments expiring in December 2019.
Later on Thursday the bank said it had completed placement of the instruments for a total aggregate value of around 500 million euros.
Proceeds from the deal, which will be used for general corporate purposes, are expected to generate a capital release, the lender said.
The sale of Pekao to state-run firms is part of the ruling Polish Law and Justice (PiS) party's plan to "re-polonise" the banking sector.
Although the euro sceptic government failed to buy a smaller bank from Austria's Raiffeisen Bank, the Pekao deal means Polish capital will control 53 percent of the sector, up from 43 percent beforehand.
Analysts say the banks are important for Poland to finance ailing investment in a country whose economy slowed far more than expected in the third quarter to 2.5 percent.
Without fast economic growth, the government will be unable to find long-term funding for the broad social programmes the PiS pledged during its election campaign, economists say.
PFR Chief Executive Officer Pawel Borys denied the state development fund invested in Pekao for that reason.
"If you're asking if we bought Pekao to conduct important economic projects then I will say that we don't need additional capital, PFR's capital is sufficient," he said.
($1 = 4.1200 zlotys)
(1 euro = $1.0790)
($1 = 0.9273 euros)
Additional reporting by Silvia Aloisi; editing by David Clarke and Alexandra Hudson