PRAGUE, May 30 (Reuters) - Czech investment group PPF and MONETA Money Bank have walked away from a deal to combine their assets, the two said on Monday, terminating a proposal that would have created a major competitor to foreign-owned market leaders.

The proposed deal comprised a 25.9 billion crown ($1.1 billion) takeover of PPF's banking assets in Air Bank and the Czech and Slovak operations of consumer lender Home Credit.

"The termination comes as a consequence of senior management change in PPF Group and a subsequent transaction review conducted by them. Unfortunately, the review resulted in the PPF Group’s decision not to pursue the transaction," MONETA said in a regulatory release.

"Management of MONETA continues to believe in the strategic merit of the transaction, however, under the current circumstances, felt it necessary to find an amicable solution with the PPF Group."

PPF, controlled by the family of deceased founder Petr Kellner, took on long-time business partner Jiri Smejc as chief executive on May 4. PPF Group remains MONETA's largest shareholder, with a 29.94% stake,

PPF said in its own statement that the deal collapse resulted from "macroeconomic changes which radically altered the parameters of the originally planned merger", including rising capital requirements and interest rates as well as economic risks from the war in Ukraine.

"PPF Group was ready to meet the transaction’s obligations, but it welcomes the termination agreement, deeming it the best solution for both PPF and other (MONETA) shareholders," it said.

MONETA said that besides a rise in a countercyclical buffer for all banks from 0.5% to 2.5% of capital, the central bank informed the parties that the combined entity would face additional capital requirements, which together would cut the bank's dividend capacity by more than 60% in 2022 and 2023.

MONETA, which has a market capitalisation of $1.76 billion, said it reiterated its market guidance for net profit of 4.4 billion crowns this year, combined profit of 23.76 billion until 2026 and 80% dividend payout.

MONETA said the agreement prevented PPF from selling or raising its stake, but it may sell it to a strategic investor.

The planned deal included issuance of MONETA shares at a preferential rate of 82 crowns to current shareholders, which has helped to anchor the stock. It closed 1% up at 78.8 before the news on Monday. ($1 = 22.9330 Czech crowns) (Reporting by Jan Lopatka; Editing by David Holmes and Leslie Adler)