Shares in Italy's Banca Lombarda climbed a record 8.5 per cent in trading yesterday following reports in the Italian press that BBVA of Spain was planning a hostile takeover of the small regional lender.

Nearly 3.5 million shares changed hands, or about 1 per cent of the company's outstanding shares. The stock closed up 4.8 per cent at €15.88.

Banca Lombarda has gained 18.3 per cent since Banca Intesa announced its bid for Sanpaolo IMI on August 24th, a deal that has sparked a new round of speculation over which groups were mostly likely to tie up in Italy's fragmented banking market.

BBVA would not comment on the rumours yesterday but the Spanish bank has been keen to re-enter the Italian market since it was forced to sell its 15 per cent stake in Rome-based Banca Nazionale del Lavoro following a failed takeover attempt last year.

Separately, Banca Intesa, Italy's second largest banking group, reported a 23 per cent year on year increase in consolidated net income for the first half of 2006, reaching €1.48 billion.

Operating income was up 8.7 per cent over the previous year at €5.26 billion, while operating costs increased 4.4 per cent, in line with Banca Intesa's announced target. Net fee and commission income was €1.85 billion, a rise of 4.6 per cent.

The Italian banks said that a 50 per cent drop in commissions from third-party structured bonds was countered by strong revenue performance in fees from portfolio management, insurance product distribution and credit and debit cards.

The bank's results did not mention the planned takeover of Sanpaolo IMI. - (Financial Times service)