MILAN (Reuters) - A bid by Italy's third-largest bank Banco BPM to acquire full control of Anima Holding drove shares in the fund manager nearly 9% higher on Thursday.

Banco BPM said late on Wednesday that it would make the 1.6 billion euro ($1.7 billion) bid through its insurance business, which allows it to minimise the use of capital thanks to favourable rules known in the industry as 'Danish compromise'.

"A smart move on a smart company," Deutsche Bank said in a note, adding the impact on capital and returns was also "smart".

The proposed deal, which will prop up Banco BPM's revenues in the face of declining interest rates, is the latest sign of pressure to consolidate in the savings management industry.

Banco BPM's shares rose 7.8% after CEO Giuseppe Castagna said the deal would not impair the lender's ability to use excess capital to reward its shareholders.

Shares in Anima, in which Banco BPM is already the biggest shareholder with a 22.3% stake, rose 8.9% to 6.255%, just above the 6.2 euros a share the bank is offering other investors.

Anima also partners with state-owned Monte dei Paschi di Siena.

Bankers and analysts had predicted a swoop by BNP Paribas to buy the asset manager of insurer AXA would encourage more banks to use their insurance arm to buy fund managers and take advantage of favourable capital rules.

($1 = 0.9290 euros)