Exclusive-Amundi discussed possible Italian ops spin-off with UniCredit - sources

By Valentina Za and Mathieu Rosemain

MILAN (Reuters) - Amundi has held talks with its commercial partner UniCredit over the possibility of the bank investing in the French asset manager Italian operations, as the two weigh options for their future relationship, two sources close to the matter said.

The sources said one possibility that has been considered would see Amundi spinning off its Italian operations into a separate company, in which UniCredit could buy a stake.

Reuters was not able to establish how recently the talks were held, or whether more discussions are planned.

UniCredit struck a 10-year deal with Amundi to distribute the French company's products through its branches in 2016, when it agreed to sell its asset management business Pioneer Investment to Amundi for 3.55 billion euros ($3.87 billion).

With three-and-a-half years still to go before the agreement ends, discussions around any future arrangements are still tentative and the two may decide to part ways. Relations between the two groups became difficult after UniCredit CEO Andrea Orcel tried unsuccessfully to renegotiate the terms of their accord when he took the helm at the Italian bank two years ago, several sources have previously said.

Piling pressure on Amundi, Orcel in December struck an accord with Italian fund manager Azimut which gives UniCredit the option to buy an asset management business Azimut is building in Ireland tailored to the Italian bank's needs.

Asked about the relationship with Amundi when he presented the Azimut deal, Orcel did not rule out the partnership not being renewed.

Azimut had 83 billion euros of assets under management (AUMs) at the end of February. With 1.9 trillion euros of AUMs at the end of last year, Amundi is Europe's biggest fund manager and ranks among the top 10 globally.

Amundi, which is 69% owned by Credit Agricole, ranks third in Italy with 214 billion euros of AUMs as of end-February. UniCredit had 194 billion euros of AUMs at group level in December.

The sale of Pioneer, which UniCredit used to bolster its capital reserves, has dealt a blow to the bank's fee income by turning it into a mere distributor of asset management products.

Focused on growing businesses that maximise returns in proportion to the capital allocated, Orcel is keen to boost the share of profits UniCredit derives from net fees.

"Management would also like to grow the share of fee income in the revenue base given its 'capital-lite' characteristics," Jefferies analysts wrote after hosting Orcel for meetings with investors in New York in February.

"Extracting further value from partnerships on asset management, protection and payments remains another focus," they added.

($1 = 0.9172 euros)

(Reporting by Valentina Za in Milan and Mathieu Rosemain in Paris; Editing by Jan Harvey)