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Intesa Sanpaolo SpA (ISP.MI) said Tuesday it will issue a EUR1.5 billion Tier 1 bond and speed up asset disposals and listings as part of a plan to strengthen its capital position without using government cash.

The bank said it had decided to launch the plan because of its improved performance and a stronger economic outlook. The bond issue will lift its core Tier 1 ratio to above 7%, and the bank said that it will resume paying a dividend in 2010 for its 2009 results.

In August, Intesa Sanpaolo said that its core Tier 1 ratio as of the end of June was 6.9%.

The Italian lender's board said that it won't seek the so-called Tremonti bonds from the government. The decision not to use the state aid packages was widely expected by investors because of the high cost of this type of financial instrument and their list of restrictions that come with them, such as on dividends and bonuses.

Only two banks, Banco Popolare (BP.MI) and Banca Popolare di Milano (PMI.MI), have received government sponsored bonds.

Goldmans Sachs analysts last week said that Intesa Sanpaolo's decision to dispose of certain assets would have reduced the possibility of seeking more capital than its domestic peer UniCredit SpA (UCG.MI).

UniCredit said late Tuesday that it too would forgo the offer of government-sponsored bonds and plans to launch a EUR4 billion capital increase.

The move comes amid growing signs that European banks are able to strengthen capital without government assistance. On Tuesday, French bank BNP Paribas SA (BNP.FR) said it is launching a EUR4.3 billion rights issue to help pay back government funding of over EUR5 billion.

Company Web site: http://www.intesasanpaolo.com

-By Sabrina Cohen, Dow Jones Newswires, +39 02 5821 9906; sabrina.cohen@dowjones.com

(Milena Vercellino contributed to the article.)