By Lisa Jucca and Paola Arosio
CERNOBBIO, Italy (Reuters) - The chief executive of Intesa Sanpaolo (MIL:ISP) said on Saturday he expected a new phase of mergers in the banking sector, both inside Italy and across Europe.
Enrico Cucchiani also said his bank was not interested in increasing its exposure to Italy's banking system.
"The industry is highly fragmented, profitability in the banking sector is very low so there are all the prerequisites for consolidation, and I believe that sooner or later it will happen," he told Reuters in an interview.
"It will happen at a domestic level for small and medium-sized banks and at a pan-European level for larger banks,"
He spoke on the sidelines of a business conference in the northern Italian city of Cernobbio.
Asked whether Intesa would be interested in increasing its stake in troubled mid-sized lender Banca Marche by taking part in a planned cash call, Cucchiani said the bank did not want to raise its exposure to the Italian banking sector.
Cucchiani said the first signs of a recovery in the euro zone's third-largest economy had not yet translated into higher lending by the bank, Italy's largest by branches.
"It's too early to claim victory," he said.
'OPEN TO OPTIONS' ON TELECOM ITALIA
Asked if Intesa Sanpaolo might sell its indirect stake in debt-laden telecoms group Telecom Italia (MIL:TIT), he said the bank was "open to all options" provided they made sense for the company and benefited shareholders.
Cucchiani said Telecom Italia's Chairman Franco Bernabe would present a plan and possible options for the firm at a board meeting on September 19.
Telecom, which is trying to stave off a downgrade of its nearly 29 billion euro debt to junk, is at the centre of intense speculation about possible new investors.
Intesa is one Telecom's core shareholders together with Italian bank Mediobanca (MIL:MB), insurer Assicurazioni Generali (MIL:G) and Spain's Telefonica (MCE:TEF). They own Telco, a holding company that controls 22 percent of Telecom.
On Saturday, Generali Chairman Gabriele Galateri told Reuters that the insurer would need to sell its Telco stake in the absence of a convincing plan for Telecom Italia.
On the possible impact of political turmoil in Egypt on Intesa's local unit Bank of Alexandria, Cucchiani said: "It is evident that there is an impact but so far (our unit) has been profitable."
(Additional reporting by Gianluca Semeraro and Valentina Za, writing by Valentina Za, editing by Jennifer Clark/John Stonestreet)