The top investor in Italy's No. 3 lender, Banca Monte dei Paschi di Siena , said on Sunday it had named former UniCredit boss Alessandro Profumo as the bank's new chairman, a sign it is poised for a change of gear.

The arrival of Profumo, an experienced banker with an uncompromising management style, comes as the Tuscan bank -- which says it is the oldest still in business -- works to repair a balance sheet hit by the euro zone crisis and to boost its profitability.

The controlling investor, Fondazione Monte dei Paschi di Siena, a charitable foundation with strong ties to the city of Siena, is already loosening its grip on the bank in a bid to raise cash and repay a huge debt.

In a statement published after a marathon board meeting, the foundation said it had also named director-general Fabrizio Viola as the bank's new chief executive, and four other board members, among whom are three academics new to the lender.

The top investor has the right to appoint half of the bank's 12 board members.

Profumo, who left UniCredit in September 2010 after a row with shareholders, is one of Europe's best-known bankers. He is expected to forge a new strategy for the bank, which like other Italian lenders was hit hard by the financial crisis.

The Italian executive, who turned UniCredit into a European heavyweight through the acquisition of Germany's HVB in 2005, has been out of banking since his tumultuous exit from UniCredit. He will take up his new role at the end of April, after a bank shareholder meeting has endorsed the new board.

The foundation, which until recently had absolute control over Monte Paschi bank, has up to the end of April to sell down its controlling stake to repay creditors.

It has already sold around 2.5 percent of its holding through off-the-market trades worth more than 110 million euros (91 million pounds) . It will continue to carry out block sales as long as the price of the bank's shares stays around 0.38 euro apiece. One source close to the situation told Reuters the foundation may have sold another 2.5 percent in this way.

(Writing by Lisa Jucca; Editing by Dale Hudson)