SocGen shares were up 2.4 percent while UniCredit shares rose 3.8 percent.

Analysts at investment bank Jefferies said that while such a deal could make sense at an operational level, it could face hurdles, such as the uncertain political climate in Italy.

"What surprises us in terms of timing is: 1) The Italian political situation has increased the costs of capital of all Italian assets; 2) SG still remains difficult, with one litigation case to close as SG today announced a finalization of settlement of Libor and Libya for less than 1 billion euros," wrote Jefferies in a note.

On Sunday, SocGen denied "any board discussion regarding a potential merger with UniCredit", according to an emailed statement to Reuters. UniCredit declined to comment on the FT report, while saying their 'Transform 2019' turnaround plan is based on "organic assumptions".

(Reporting by Sudip Kar-Gupta; editing by Louise Heavens)