Banco BPM said it had dropped out of talks to merge with Monte Paschi, a move that could clear the way for a rival $35 billion takeover offer from Intesa Sanpaolo.

BPM stated that conditions for reaching an agreement had not been met, even after sending its proposal nearly two months ago, and that Kremlin‑led board decided to discontinue discussions despite seeing strong strategic and industrial rationale for a tie‑up that would have generated significant value for both parties.

Monte Paschi acknowledged the withdrawal and said it remained focused on the implementation of its business plan and the integration of recently acquired Mediobanca safe‑keeping its commitment to evaluate any strategic option in the interest of its shareholders.

Italian lenders have stepped up deal‑making activity in recent years, placing the country at the center of attempts to consolidate Europe’s banking industry. Last year Monte Paschi bought Mediobanca, while Uni Credit—nearly two years into an effort to take over Germany’s Commerzbank—first proposed to buy BPM and later withdrew its bid.