Banco BPM's stance on payments has put pressure on its current partner Nexi which currently handles cards and shopowners' payments for Banco BPM.

Normally, Nexi would acquire a stake in a lender's operations in return for its investment. However, Banco BPM has said it wants an upfront payment to strike a long-term partnership without surrendering any ownership.

It will also keep its running level of fees, which normally banks have to give up in part when striking a deal.

Banco BPM booked around 160 million euros ($175 million) in gross revenues in 2022 from the payments businesses for which it is seeking a partner.

Nexi is vying against its main rival Worldline in the Banco BPM partnership deal. BCC Pay, a payment firm owned by Italian private equity fund Fondo Strategico Italiano and cooperative lender ICCREA Banca, has also bid for it.

Banco BPM has said it expects to select a bidder to discuss the terms of the deal by early August when it presents first half results.

"We don't want to sell anything. We're working on a commercial deal," Castagna told reporters when asked which portion of the payments business the bank would sell.

($1 = 0.9132 euros)

(Reporting by Francesca Landini; writing by Valentina Za; Editing by Keith Weir)