Asked if UniCredit was interested in Popolare di Sondrio in an interview with Bloomberg television in Davos, Orcel said: "We are interested in everything at the right price."

Daily Il Sole 24 Ore on Thursday reported that a U.S. investment bank had been building a 10% stake in Popolare di Sondrio to allow an Italian lender to become a significant shareholder, with UniCredit being the leading candidate.

"No, we're not," Orcel said when asked if UniCredit was buying shares in Popolare di Sondrio.

Orcel has pledged to decide this year whether to boost its payback to shareholders with part of more than 10 billion euros($10.86 billion) in excess capital UniCredit has piled up.

Having set very stringent terms for mergers and acquisitions, Orcel has said that he would consider extraordinary share buybacks in the absence of suitable targets.

M&A is something "any CEO has in his toolkit," Orcel said in the interview.

"We look at it and we look it a lot in every market where we are. But we're very disciplined in saying is it strategic? And does it fit in terms of valuation?"

"Every time I sit in an interview there is something. Yesterday it was Commerzbank, today Popolare di Sondrio," Orcel said. "At this point in time we know what is strategic, but valuations are misaligned. So there is a lot of intermediaries, and a lot of noise of people who try to create transactions but the numbers don't fit."

Bankers say Popolare di Sondrio would be a good geographic fit for UniCredit, whose presence in Italy's wealthy Lombardy region is historically weak.

The gap with market leader Intesa Sanpaolo widened when Intesa took over northern peer UBI in 2020. Orcel tried to make a similar move for Milan-based Banco BPM in 2022 but a leak and the Ukraine conflict thwarted his plans.

Popolare di Sondrio is widely considered a merger partner for BPER Banca, which has been expanding since taking over 600 UBI branches as part of the Intesa-UBI deal.

BPER and Sondrio have the main leading shareholder, insurer Unipol, which owns nearly 20% of each bank and has commercial partnerships with both.

($1 = 0.9211 euros)

(Reporting by Valentina Za and Andrea Mandala; editing by Bernadette Baum and Richard Chang)