* Koc Holding's stake in bank seen around $8 bln

* Koc says in preliminary talks for share sale

* Yapi Kredi shares soar 10%; Koc jumps more than 9%

* Gulf investors eyeing Turkey after diplomatic thaw

(Adds Koc statement, continued share rally, adds EXCLUSIVE tag)

ISTANBUL, May 21 (Reuters) - First Abu Dhabi Bank (FAB) is in advanced talks to acquire Turkish conglomerate Koc Group's 61.2% stake in Istanbul-based lender Yapi Kredi for about $8 billion, according to three sources close to the matter.

Final details of the potential deal for Turkey's fourth-biggest private bank are being hammered out after several months of negotiations, the sources said on condition of anonymity because the talks are confidential.

Shares in Yapi Kredi soared 10% after the news emerged, while Koc Holding jumped more than 9%, both touching record highs. FAB shares slipped slightly.

One of the sources said that Turkish conglomerate Koc had sought about $8.5 billion for its shares in Yapi Kredi and that FAB had offered about $7.5 billion.

FAB, the United Arab Emirates' largest bank by assets, declined to comment.

In a statement to the Istanbul bourse, Koc Holding referenced the Reuters report and said it was holding preliminary talks on the sale of Yapi Kredi shares, adding it can always negotiate "to evaluate possible alternatives" in its portfolio.

"Although preliminary discussions of a similar nature continue regarding the issue reflected in the media, there are no developments that require public disclosure," it said.

Koc Financial Services owns 40.95% of Yapi Kredi, while Koc Holding owns 20.22%.

Before the Reuters report, 80-year old Yapi Kredi had a total market value of around $9 billion, up from about $7.5 billion early last month. The first source said the estimated sale value would put the entire bank at between $13 billion to $14 billion based on Koc's request, though it could be less.

Any deal would mark the latest Gulf investment in Turkey, whose President Tayyip Erdogan has worked in recent years to mend ties with the UAE and Saudi Arabia and court their funding to bolster Turkey's sputtering economy and depleted reserves.

Ties between the regional powers had been strained by ideological differences which saw them back opposing sides across the Middle East and North Africa in the last decade.

But last year, the UAE and Turkey signed a free trade agreement and then said they agreed a series of deals worth more than $50 billion after Erdogan's visit to the region in July.

Turkey's economy and its banks are on a sounder footing after a dramatic U-turn toward more orthodox policies since last summer, including aggressive interest rate hikes that helped rebuild some foreign reserves.

It was unclear whether FAB and Koc would ultimately reach a final deal, which could depend in part on Yapi Kredi's second-quarter financial results, set to be announced next month.

FAB and other Gulf banks have benefited as regional governments boost investment and diversify economies away from oil revenues. Last year, the Emirati lender said it had briefly considered bidding for London-listed Standard Chartered.

Bloomberg reported in April that FAB was studying potential targets in Turkey including Yapi Kredi.

In 2022, Italian bank UniCredit completed the sale to Koc of its remaining 18% stake in Yapi Kredi. (Reporting by Ebru Tuncay, Birsen Altayli and Jonathan Spicer; Additional reporting by Anousha Sakoui in London and Hadeel Al Sayegh in Dubai; Editing by Daren Butler, David Goodman, Peter Graff, Alexandra Hudson)