MILAN (Reuters) - An upcoming state-backed bond by Italy's troubled lender Banca Carige is expected to top 1 billion euros (£880.6 million), three sources familiar with the matter told Reuters.

Italy's populist government has set up a 1.3 billion euro fund to support Carige's bond issuance after the European Central Bank put the bank under temporary administration this month.

Carige could launch the state-backed bond as soon as next week, "with a short to medium term" maturity, once Italy's Treasury has published a decree formally granting the guarantee, one of the sources told Reuters.

State guarantees will help the Genoa-based lender raise badly needed funds on the market, after it failed to raise new capital from investors in December. Carige can raise up to 3 billion euros using the state guarantees.

Banca Carige declined to comment.

(Writing by Giulio Piovaccari)

By Valentina Za and Giuseppe Fonte