MILAN, Oct 27 (Reuters) - Italian bank Mediobanca reported stronger-than-expected quarterly earnings on Tuesday thanks to merger deals in Europe that boosted income at its investment banking division.

In line with recommendations from the European Banking Authority, Mediobanca replaced its dividend guidance of 0.54 euros per share for the current fiscal year, with a target payout ratio of 70%.

Such guidance remains subject to the European Central Bank's dividend ban until Dec. 31, it said.

Chief executive Alberto Nagel said he hoped the ECB would take a selective approach in 2021, allowing stronger banks to pay dividends, so as to "put investors' focus" back on banking stocks, now neglected in equity portfolios.

Mediobanca's core capital ratio stands at 16.2%, one of the highest in Italy.

Nagel's mandate is expected to be renewed for another three years on Wednesday when shareholders meet to appoint a new board.

A shake up in Mediobanca's shareholder base over the past year has seen eyewear magnate Leonardo Del Vecchio, 85, emerge as the top investor with a 10.2% stake.

After initially criticising Nagel's strategy, Del Vecchio has praised his latest business plan.

Nagel said he was "in constant contact" with Del Vecchio and other shareholders.

"Our long-standing relationship can only lead to a fruitful collaboration," Nagel told a press briefing.

Profit at the Corporate & Investment Banking division was the highest in five years with a 54% annual increase in fees.

Mediobanca was the lead financial adviser in Intesa Sanpaolo's 5 billion euros ($5.91 billion) takeover of UBI.

Other large deals such as the Nexi-SIA and FCA-PSA mergers will support fees in the coming quarters, Nagel said.

Mediobanca posted a net profit of 200 million euros in the first quarter of its 2020-21 fiscal year, above an average forecast of 140 million euros in an analysts' consensus compiled by the bank.

Revenue topped forecasts at 626 million euros, boosted by solid growth in wealth management and a quicker-than-expected recovery in consumer banking.

($1 = 0.8461 euros) (Reporting by Gianluca Semeraro; Editing by Valentina Za and Mike Harrison)