UPDATE 2-Banco BPM says CEO had no contacts with UniCredit's boss over M&A

(Adds comments from sources)

MILAN, April 22 (Reuters) - The head of Italy’s Banco BPM has not been in contact with the newly-appointed chief executive of rival UniCredit, a spokeswoman for Banco BPM said on Thursday, after a report the two had met over a potential tie-up.

Italian news website Dagospia said Andrea Orcel, who took the reins at UniCredit last week, had met with Banco BPM CEO Giuseppe Castagna as he prepared to take over Italy’s third-largest bank.

UniCredit was not immediately available for comment.

Italy’s banking sector is consolidating following Intesa Sanpaolo’s surprise takeover of rival UBI last year to create a national champion with a fifth of the banking market.

Following Intesa’s move, which Castagna said had forced everyone else to take action, Banco BPM has been actively looking for a partner.

Veteran dealmaker Orcel is also expected to explore merger and acquisition opportunities for Italy’s No.2 bank, which must find new revenue drivers after shedding assets to rebuild its capital reserves.

UniCredit’s previous CEO Jean Pierre Mustier had been in talks with the Rome Treasury over a possible acquisition of loss-making Monte dei Paschi and one of Orcel’s first decisions will be whether to engage in formal discussions.

But Banco BPM is also considered a possible target for UniCredit thanks to its roots in the industrial Lombardy region.

People close to the matter have said Orcel expressed a preference for Banco BPM over Monte dei Paschi in informal contacts with Treasury officials prior to his appointment.

Banco BPM, on its part, has held talks with rival BPER Banca over a possible merger, sources have said.

BPER on Wednesday appointed as its new CEO Piero Montani, a restructuring and deals expert whom BPER’s top investor Unipol has tasked with studying M&A alternatives.

Some of Banco BPM’s investors view with favour a deal with BPER that would better preserve the bank’s identity given BPER’s smaller size compared to UniCredit, sources have told Reuters.

Others, however, are more interested in the premium that a potential takeover by UniCredit could offer, the sources said. (Reporting by Andrea Mandalà; editing by Valentina Za, Kirsten Donovan)