Crédit Agricole has proposed merging its Italian banking unit with Banco BPM to create Italy's third-largest banking group, in a friendly deal that sent Banco BPM shares up 10.6% to €14.88 on the Milan stock exchange on 9 November 2026. The French bank submitted the proposal to Banco BPM's board on Monday, and the Italian bank's board is due to receive an initial briefing on the letter at its meeting on 12 November.

Under the proposal, Crédit Agricole Italia would combine with Banco BPM in a new entity built around the Italian bank, which would remain listed in Milan. The deal would also bring Crédit Agricole's Italian life and non-life insurance businesses into the combined group. Banco BPM's chief executive, Giuseppe Castagna, would lead the new entity.

For Banco BPM shareholders, the proposal offers an exchange ratio reflecting a 20% premium, based on the 2027 estimated price-to-earnings multiples used to value the businesses contributed by Crédit Agricole. Shareholders would also receive an extraordinary distribution of €1 billion. Crédit Agricole estimates the combination would generate about €800 million a year in pre-tax synergies and could lift Banco BPM's earnings per share by about 24% in 2027 once the synergies reach their target run rate.

What the deal would create

The combined group would serve about 6.5 million customers through more than 2,300 branches, giving Crédit Agricole a much larger platform in Italy, its second home market. Crédit Agricole currently owns 29.6% of Banco BPM and would hold about 45% of the merged entity after contributing its Italian businesses. The French bank said its stake would remain below 50%, and the new group would keep its operational autonomy.

The proposal is the latest step in a long-running consolidation of Italian banking. On the same day Banco BPM rose, UniCredit gained 6.3% after reporting record results, and Milan's FTSE MIB index closed 2.7% higher, ahead of Frankfurt and Paris. Italian banks have been among the strongest performers in Europe this year, helped by high interest rates and a wave of domestic deal-making.

What happens next

The proposal is still only a proposal. It must be assessed by Banco BPM's board, agreed in detail by both sides, and then approved by Banco BPM shareholders at an extraordinary general meeting, where at least two-thirds of the capital represented at the meeting must vote in favour. It also needs regulatory approval, including authorisation from the European Central Bank. Crédit Agricole said the deal could be completed in the second half of 2027 if those steps are cleared.

Crédit Agricole shares were little changed by the announcement, trading around €15.8 in Paris on 9 November, suggesting investors see the value mainly accruing to Banco BPM shareholders through the premium and the special distribution. For Banco BPM, the board's response on 12 November will be the first test of whether the friendly approach turns into a formal transaction.

If it proceeds, the deal would reshape Italy's banking landscape and deepen Crédit Agricole's presence in the country. If the board rejects it, Banco BPM would remain independent, but the proposal has already reset expectations for the value of the bank. Either way, the 10.6% share price jump shows the market believes a deal of this scale is now firmly on the table.