Banca di Roma indicated yesterday it was likely to approve a tie-up with San Paolo-IMI, Italy's largest banking group, to create a business worth about €29.2 billion (£23 billion).

But Banca Commerciale Ital iana (BCI) appeared to be hesitating before responding to UniCredito Italiano's offer to combine the groups into a new enlarged bank called Eurobanca.

Politicians and businessmen hailed the two bids, announced on Sunday, as a sign that Italy was finally adapting its financial system to global market forces and the European single market.

The shares of Banca di Roma and BCI yesterday rose sharply in Milan while those of the bidders, San Paolo-IMI and UniCredito, fell equally sharply.

Analysts said this showed the market expected the two mergers to go ahead.

Banca di Roma shares surged 7.31 per cent while BCI shares rose 4.86 per cent. In contrast, UniCredito and San Paolo-IMI shares both fell about 5 per cent.

Mr Alessandro Profumo and Mr Lucio Rondelli, UniCredito's chief executive and president, unveiled the bank's bid for BCI at meetings in Milan yesterday. It is offering to exchange eight of its shares for five BCI shares to create a business capitalised at about €38.1 billion.

San Paolo-IMI is offering two of its shares for 19 Banca di Roma shares. Both UniCredito and San Paolo-IMI yesterday described their offers as "friendly". They have been under pressure from the Bank of Italy, the central bank, to avoid initiating hostile bids.

Milan bankers expected both mergers to go ahead, although they suggested the decision was likely to be more difficult for BCI. Several large BCI shareholders, however, such as Deutsche Bank, have indicated they favoured a merger.

Banca di Roma said its board would meet tomorrow to consider San Paolo-IMI's offer.