MILAN (Reuters) - Monte dei Paschi di Siena (>> Banca Monte dei Paschi di Siena SpA) shares rose sharply on their market return after a 10-month hiatus, but were well below the price Italy paid to bail out its fourth-largest bank.

The world's oldest bank's shares last traded in Milan in December 2016 when Monte dei Paschi had to turn to Rome for help after failing to find buyers for a 5 billion euro (£4.57 billion) share issue needed to keep it afloat.

Shares in the Tuscan bank opened on Wednesday at 4.10 euros, which will constitute the reference price for the session, and then rose to as much as 4.73 euros, up 15 percent on the day.

That price is above the 4.28 euro level at which the stock was valued last month during an auction held to set the payment due to investors who bought insurance against the bank's default.

It is, however, well below the 6.49 euros paid by the state in August when it injected 3.85 billion euros into Monte dei Paschi, implying a large paper loss for the country's taxpayers.

The loss is even bigger for Monte dei Paschi's junior bondholders, including insurer Assicurazioni Generali (>> Assicurazioni Generali), who were hit by a mandatory debt-to-equity swap due to European Union rules that require investors in a bank to bear losses before any state aid.

The stock was priced at 8.65 euros in the conversion and the bank raised 4.47 billion euros through it.

The state is compensating some retail bondholders by buying out their shares in exchange for Monte dei Paschi's senior debt, thus raising its stake to 68 percent and the average price paid to around 7 euros a share.

"After balance sheet de-risking and de-leveraging, the bank will try in the coming years to rebuild confidence and reach decent profitability," Milan-based broker Banca Akros said in a note resuming coverage of the stock with a "neutral" rating and a target price of 4.6 euros.

To gain approval for the bailout, Monte dei Paschi agreed to a restructuring plan with EU authorities that envisages cutting 5,500 jobs and selling 26 billion euros in bad debts to reach a net profit of more than 1.2 billion euros in 2021.

(Reporting by Valentina Za; editing by Alexander Smith)