(Adds comment from shareholders meeting, market reaction)
By Christian Plumb and Paola Arosio
MILAN, Oct 28 (Reuters) - The Bank of Italy barred Mediobanca from selling part of its stake in sportscar maker Ferrari to Lehman Brothers, the Italian bank said on Monday, throwing a wrench into its bid to win allies in the controversial deal.
The objection by the country's key bank regulator to Lehman's purchase of 6.5 percent of Ferrari was the latest speed bump to hit investment bank Mediobanca's 775 million euro grab for the initial public offering (IPO) rights for the Formula One champion.
Mediobanca's purchase of the 34 percent Ferrari stake in June pumped much-needed cash into its struggling parent company, Fiat , and gave Mediobanca bragging rights for one of the year's highest profile IPO deals.
But Mediobanca has struggled to find takers for the Ferrari stake as it waits for market conditions to improve so that an IPO would be better received. By Italian law, the bank must lower its holding in the sportscar maker below 15 percent.
But on Monday, Mediobanca said it had raised its stake back to 21.5 percent, paying 148.2 million euros to re-acquire the stock from Lehman.
The Bank of Italy found that the sale looked more like a short-term deal under which Mediobanca had agreed to buy the stake back later, than a true sale, Mediobanca said.
Lehman Brothers declined to comment.
At 1510 GMT, Mediobanca shares were up 3.1 percent, outperforming the DJ Stoxx European Banks index .
Mediobanca on Monday also reported results for its financial quarter ended September 30, saying it suffered a 346 million euro pre-tax loss as it wrote down declines in stakes in companies including banks Commerzbank, IntesaBci and insurer La Fondiaria .
Mediobanca said it would look for other ways to bring its Ferrari stake down to the 15 percent ceiling for banks' stakes in industrial companies. Several top Italian banks reportedly passed on the deal, though longtime ally Commerzbank took a 10 percent stake.
In another Ferrari-related headache for Mediobanca, the bank's internal auditors confirmed on Monday that they had asked the bank's board to look into how the Ferrari purchase was managed.
'NORMAL MARKET METHODOLOGIES'
That echoed criticism of the deal's handling by banks Capitalia and UniCredito , two of Mediobanca's main shareholders who saw their lucrative mandate to manage a Ferrari IPO swiped by the investment bank.
The internal auditors are said to have contested the investment bank's purchase of the stake without consulting the appropriate governance organs.
Analysts said at the time that the price was much higher than Ferrari's likely value and the deal was probably motivated by Mediobanca's desire to handle a high-profile stock market listing of the sportscar maker in the future.
Mediobanca Chief Executive Vincenzo Maranghi at the investment bank's shareholders' meeting on Monday defended the Ferrari deal after sceptical queries from some investors.
"We did the evaluation using normal market methodologies," he said. "We believe that the growth in the company's value, in the context of less turbulent markets, could be significant."
The Ferrari deal was also seen by some as an effort by Mediobanca to inject itself into Fiat's recent struggles, and possibly part of a wider plan for the industrial group, with which Mediobanca has had frosty relations lately.
Maranghi on Monday also denied that the bank had any broad plan for Fiat, adding that he personally hoped for its recovery.
"I can only hope for a solid chance for recovery of a company which for a centry has been the main flag-bearer for Italian entrepreneurship," he said.