Banco BPM shares jumped 9.4% on Monday after Credit Agricole proposed merging its Italian subsidiary with the Italian lender, a deal that would create Italy's third-largest bank. The French bank's shares fell 1.4% on the news, while the wider European market was subdued, with the pan-European STOXX 600 index flat at 648.88 points in early trading.

Credit Agricole said it had submitted a friendly proposal to Banco BPM's board to combine Banco BPM with Credit Agricole Italia. The combined group would be built around Banco BPM and remain listed in Milan, serving 6.5 million customers through more than 2,300 branches. The proposal would lift Credit Agricole's stake in the combined business to about 45%, from 29.6% now.

Premium, dividend and synergies

For Banco BPM shareholders, the proposal includes an exchange ratio reflecting a 20% valuation premium and a 1 billion euro extraordinary dividend. Credit Agricole said the combined group would generate around 800 million euros in annual synergies and lift Banco BPM's earnings per share by about 24% in 2027. Banco BPM chief executive Giuseppe Castagna would lead the merged group.

The deal is not yet agreed. It would need approval from Banco BPM shareholders and clearance under Italy's golden-power rules, as well as banking and competition approvals. Credit Agricole said the transaction could be completed in the second half of 2027.

Bank shares were the bright spot in an otherwise flat European session. UniCredit gained 3.6% after reporting a 24% annual rise in third-quarter earnings and raising its full-year profit goal, while Commerzbank rose 2.5% as investors weighed UniCredit's growing influence over the German lender.