Investor Wilbur Ross, who made a fortune snapping up distressed companies, said on Thursday he expects as many as 800 more U.S. banks to fail in the next few years.

Ross, on the sidelines of an insurance conference where he spoke, told Reuters he includes in his tally banks that have accepted funds as part of the federal government's bailout program.

In total, he expects about 1,000 failures, including about 200 that have failed so far and 800 more in the next few years.

About 250 banks are on the Federal Deposit Insurance Corp's so-called watch list of financially troubled banks, he noted. There will be more on that watch list when the March quarter results are announced, he told a gathering of insurance-linked securities specialists.

Ross, a consummate turnaround specialist, has been eyeing the sector for deals.

Earlier this year he agreed to buy more than 68 percent of First Bank & Trust Co, an Indiantown, Florida, community bank with a handful of branches and $83 million in assets, from Linda Post, widow of the bank's former chairman.

It is a tiny deal, but expected to be the first of more takeovers by an investor known for getting in before sectors rebound.

First Bank represents a slightly different strategy for Ross. The family-owned bank, located an hour from Ross' Palm Beach residence, avoided the lending problems that gripped many Florida banks. Post, the seller, will remain a director and retain a 23 percent interest.

Ross has been eyeing financial institutions because they are on sale at deep discounts in the wake of the long, drawn-out credit crisis. He is also interested in making further investments in insurance.

Ross, the founder of New York-based private equity firm WL Ross & Co, holds investments in a wide range of sectors from low-cost Indian airline SpiceJet Ltd to bond insurer Assured Guaranty Ltd .

Last year, he acquired H&R Block Inc's subprime mortgage servicing operations for $1.3 billion.

WL Ross, formed by Ross in 2000, has been a part of fund manager Invesco Ltd since 2006.

Based on Wednesday's close, the KBW Bank Index <.BKX> has fallen more than 70 percent since the end of June 2007, as the credit crisis began to set in. The index ended down 9 percent on Thursday.

(Editing by Bernard Orr and Jeffrey Benkoe)