* Q4 revenue falls 15 pct as banks cut spending

ZURICH Feb 21 (Reuters) - Swiss banking software group Temenos, seeking to merge with Misys, said talks with the British group were continuing and that it still believed a tie-up would help boost efficiency and profitability.

"Temenos believes that such combination would create one of the leading companies in the financial services software industry with the prospects for long-term growth underpinned by increasing demand amongst financial institutions for improved efficiency and customer service," Temenos said as it posted its full-year results.

Temenos said the parties would make a further announcement as and when appropriate. A source close to the deal said this could be just days away.

On Monday, private equity firm Vista Equity Partners threw its hat into the ring by making an approach for Misys, which would scupper the agreed merger between Misys and Temenos.

No price was given but the Financial Times reported Vista was lining up a 360 pence per share bid, valuing the banking software supplier at about 1.2 billion pounds ($1.9 billion).

"If shareholders believe the market is seriously undervaluing Misys' prospects and want to share in the company's future success then the deal with Temenos may prove more attractive, as they will retain a shareholding in the combined entity," Simon Jones, director at American Appraisal, the global valuation firm, said.

"However, with the Vista bid pitched at a premium of about 50 percent to Misys' pre-bid announcement share price, the Vista offer may be too good to refuse," Jones added.

Under the terms of the all-share tie-up with Temenos, Misys would take 53.9 percent of the equity of the combined group, but Temenos's chief executive and chairman would lead the management team.

Temenos and Misys are looking to come together in response to weak demand from their customers. Temenos said fourth-quarter revenue fell 15 percent year-on-year as licence revenue slumped 33 percent.

"The sovereign debt crisis in Europe and its impact on funding markets put the banking sector back into a state of uncertainty. As a consequence, we saw decision cycles lengthen substantially with a corresponding impact on licence sales," Temenos said in the statement.

Misys, which sold its healthcare software unit in 2010, was in talks with Fidelity National Information Systems six months ago but the U.S. group walked away after Misys said its offer was too low.

Vista, which has offices in Chicago and San Francisco, invests in software and technology businesses. It bought the trade and risk management business of Thomson Reuters Corp last year.

• A Permanent Economic Emergency