UPDATE 1-Italy's Creval to fight for higher Credit Agricole bid - sources

* Bank of America, Mediobanca, RCCD to work with Creval - sources

* Creval wants higher bid to agree a deal - sources

* Creval shares trading above offer price at 11.51 (Recasts lead, adds advisers, defence plan)

LONDON/MILAN, Nov 26 (Reuters) - Italian bank Creval is preparing to fight to secure a better price from Credit Agricole as it sees the French lender’s 737 million euro ($877 million) offer as too low, two sources with knowledge of the matter told Reuters.

Creval is expected to hire Bank of America, Mediobanca and law firm RCCD to consult on its defence strategy, after Chief Executive Luigi Lovaglio secured the green light from the bank’s board on Wednesday to appoint advisers, the sources said.

The mandates will be formalised at a Dec. 3 board meeting.

Credit Agricole Italia said on Monday it would offer 10.5 euros for each Creval share, representing a 21.4% premium on Friday’s closing price.

At 1410 GMT, shares in Creval were up 1.32% at 11.51 euros, indicating the market is betting on a sweetener.

“There will be firm resistance from Creval until a better price is agreed,” one of the sources said.

The source said the price was too low given the tax benefits Italy has drawn up to spur mergers. The tax breaks are due to be approved by the end of the year as part of the 2021 budget.

When asked for a comment, a representative for Creval said its board had met on Wednesday exclusively to mandate CEO Lovaglio to name advisers in accordance with the chairman who could support the board in its activities.

Bank of America and Mediobanca declined to comment.

In a statement on Wednesday, Creval said its board had met to discuss the bid which was described as “unexpected and not previously agreed.”

Credit Agricole’s Italian boss Giampiero Maioli has said France’s second-biggest bank sees the bid as friendly.

If successful, the deal would turn Credit Agricole Italia into Italy’s seventh-largest bank with 100 billion euros in assets.

A takeover has been seen as a possibility since 2018 when Credit Agricole struck a long-term ‘bancassurance’ agreement with Creval, acquiring a 5% stake which it recently doubled.

Analysts have said Credit Agricole has room to improve the bid given its current terms entail only an up to 0.2 percentage point erosion of its core capital.

Its offer is just 50 euro cents above the level at which Creval raised 700 million euros in 2018 by selling new shares to investors to finance a balance-sheet clean-up.

Credit Agricole’s move came after talks ran aground for a more ambitious tie-up with Banco BPM, Italy’s third-largest bank with 187 billion euros in assets versus Creval’s 24 billion.

$1 = 0.8403 euros Reporting by Pamela Barbaglia, Andrea Mandala and Valentina Za; Editing by Mark Potter