LISBON (Reuters) -French banking group BPCE has agreed to buy U.S. private equity fund Lone Star's 75% stake in Novo Banco in a deal that values Portugal's fourth-largest bank at 6.4 billion euros ($7.39 billion), following a wave of consolidation in European banking.

Novo Banco was created in 2014 from the collapsed Banco Espirito Santo (BES) after a state bailout, with Lone Star buying its stake in 2017 for 1 billion euros.

Nicolas Namias, the chief executive of France's second largest domestic bank which operates under the Banque Populaire and Caisse d'Epargne brands, said in a statement on Friday that the Portuguese acquisition would allow his group to become a retail banking player in Europe.

The Portuguese state and a banking resolution fund financed by the country's banks own the remaining 25% stake in Novo Banco, and enjoy a tag-along clause that allows them to sell on the same terms as Lone Star.

"I do think that this acquisition is fully in line with what the ECB is advocating for, which is European banking consolidation," Namias said in a call with journalists.

Europe's banking sector has seen renewed consolidation activity, with domestic and cross-border deals back in focus.

In Spain, BBVA announced a more than 14 billion-euro hostile bid for rival Sabadell last year, aiming to gain scale and cut costs in its home market, while the CEO of Italy's UniCredit, Andrea Orcel, last year made a move on Germany's Commerzbank and smaller Italian peer Banco BPM, sparking angry reactions in both Berlin and Rome.

BPCE already has a small consumer credit operation in Portugal and its subsidiary Natixis has a technology centre handling IT services and back office for the whole group.

As of March, Novo Banco had 30 billion euros in deposits and 28.5 billion euros in net loans, equivalent to a 9% market share in Portugal. It has almost 300 bank branches and more than 4,200 employees.

BPCE said the deal should complete during the first half of 2026.

($1 = 0.8660 euros)