with Banco Bilbao Vizcaya SA, a transaction worth at least $22 billion that would create the largest bank in southern Europe.

A combination with Banco Bilbao, which is buying Argentaria SA to create Spain's biggest bank by market value, would extend a series of mergers among European financial institutions.

Monetary union in Europe has prompted banks to search for partners to widen their distribution networks and cut costs.

UniCredito, Italy's No. 3 bank, said the talks with Banco Bilbao are still going on "in the search for a shared solution able to ensure a strong reciprocal commitment." It called the merger plan "hoped-for" and gave no further details.

Alfonso Galante, an analyst at Banca Commerciale Italiana in Milan, said a deal would give UniCredito a network overseas, where it has no presence. BBV is looking for growth outside the Spanish market, he said.

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