Major Italian bank UniCredit and smaller rival Capitalia announced Sunday in Milan that the two banks have decided to merge in a €21.8 billion euros ($29.4 billion) deal, Italian news agency Ansa reported, citing financial sources.
UniCredit said it would exchange 1.12 of its shares for every Capitalia share, valuing the Roman bank at €8.41 per share.

The merger would Europe's second largest bank with a stock- market value of some €100 billion ($135 billion), putting it behind only Citigroup, Bank of America, HSBC Holdings, Industrial and Commercial Bank of China and J.P. Morgan Chase. It will be the world's fifth-largest bank by assets.

Milan's Corriere della Sera estimated that the "synergy effect" of the merger was worth 1.16 billion euros. The shares of both companies were suspended from trading on Friday in preparation for the deal.

UniCredit's two top executives will take command of the combined bank. Alessandro Profumo will become chief executive of the combined bank, and Dieter Rampl will be chairman. The two bank chiefs, Alessandro Profumo of Unicredit and Cesare Geronzi of Capitalia, also met with Italian Central bank head Mario Draghi.

Geronzi will become vice chairman of the combined bank.

"I can assure you this was a friendly deal," Geronzi said in a conference call.

The new institution is expected to bear the name UniCredit and be the sixth largest banking house worldwide.