By Sergio Goncalves and Mathieu Rosemain

LISBON/PARIS (Reuters) -France’s BPCE has agreed a 6.4 billion euros ($7.39 billion) deal to acquire Portugal's Novo Banco, including a 75% stake held by U.S. private equity firm Lone Star, BPCE and Lone Star said on Friday.

The Portuguese state and a banking resolution fund financed by the country's banks, who own 11.5% and 13.5% of Novo Banco respectively, said separately on Friday they had also agreed to sell their stakes to BPCE.

The acquisition comes amid a wave of cross-border and domestic banking mergers in Europe, where regulators have long urged industry consolidation to better integrate the financial sector and counter growing competition from U.S. banking giants.

"I do think that (this) acquisition is fully in line with what the ECB is advocating for, which is European banking consolidation," BPCE Chief Executive Nicolas Namias told reporters in a call.

BPCE’s cash acquisition of Novo Banco would give the French bank a second significant retail market outside France, where it currently operates two major banking groups.

"This is the biggest cross-border deal in Europe in recent years. I think this is really good news both for the banking union and for the French banking system," Bank of France Governor Francois Villeroy de Galhau said.

Novo Banco was created in 2014 from the collapsed Banco Espírito Santo (BES) following a state bailout and was acquired by Lone Star in 2017, which paid 1 billion euros for a 75% stake.

Europe's banking sector has seen renewed consolidation activity.

In Spain, BBVA has 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, has 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)

(Reporting by Sergio Goncalves in Lisbon and Mathieu Rosemain in Paris;Additional reporting by Jesus Aguado and Leigh Thomas editing by Inti Landauro, Kirsten Donovan and Elaine Hardcastle)