Crédit Agricole has proposed merging its Italian operations with Banco BPM in a deal announced on Monday that would create Italy’s third-largest banking group and strengthen the French lender’s position in the country.

The proposal offers Banco BPM shareholders a 20 per cent premium through a share exchange, alongside an extraordinary dividend of €1 billion. Crédit Agricole currently owns 29.6 per cent of Banco BPM, a stake that would rise to approximately 45 per cent in the combined entity.

The French bank submitted the proposal to Banco BPM’s board after briefing the Italian government, according to Reuters. The announcement followed media reports and investor questions that made it increasingly difficult to keep the discussions confidential.

Crédit Agricole described the proposal as friendly and said Banco BPM chief executive Giuseppe Castagna would lead the combined group. The transaction could be completed in the second half of 2027, subject to shareholder approval and regulatory clearances.

The French lender estimates the combination would generate approximately €800 million in annual revenue gains and cost savings. It expects the deal to increase Banco BPM’s earnings per share by around 24 per cent in 2027.

The proposal would require approval under Italy’s so-called whitewash procedure, which could exempt Crédit Agricole from launching a mandatory takeover offer for the remaining Banco BPM shares. The exemption requires a majority of other shareholders attending an extraordinary general meeting not to oppose the transaction.

The deal would also need clearance under Italy’s golden power rules, which allow the government to intervene in transactions involving strategically important businesses, as well as banking and competition approvals. Those powers have become a key political issue following Rome’s previous intervention in Banco BPM’s attempted acquisition by UniCredit, which abandoned its bid last year after the government imposed restrictive conditions.

Italy’s opposition parties criticised Prime Minister Giorgia Meloni’s handling of banking consolidation following the announcement. Antonio Misiani, from the centre-left Democratic Party, said the government’s efforts to preserve Italian ownership of major banks had instead left Banco BPM at risk of falling under French control.

Misiani called on Meloni and Economy Minister Giancarlo Giorgetti to explain their strategy to parliament, particularly how they intended to protect lending to households and businesses and maintain competition in the banking sector. Representatives from the prime minister’s office and the economy ministry declined to comment, Reuters reported.

The political criticism follows years of government efforts to establish a third domestic banking group around Banco BPM and state-backed Monte dei Paschi di Siena (MPS), capable of challenging Intesa Sanpaolo and UniCredit. Those plans suffered a further setback last month when MPS shareholders rejected a proposed combination with Banco BPM.

Meanwhile, Intesa is preparing a €34 billion takeover offer for MPS, expected on 24 November subject to regulatory approvals.

Banco BPM shares rose more than 10 per cent following Monday’s announcement, while Crédit Agricole shares fell around 0.6 per cent.

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