The chief executive of Banca Popolare di Milano (BPM) (PMII.MI) sees a 20-30 percent risk shareholders will sink a merger with rival Banco Popolare (BAPO.MI) to create Italy's third-largest bank, the Financial Times said on Thursday.

The tie-up agreed back in March would be the first to follow a landmark reform of cooperative banks Italy passed in early 2015, seeking to promote consolidation and strengthen their profitability.

Shareholders in the two banks will meet on Saturday to vote on the merger and ditch a cooperative status granting shareholders one vote each regardless of the size of their stakes.

Shareholders in Banco Popolare are widely expected to back the deal while at least 250 former BPM employee-shareholders oppose the merger. Each of them can hold up to 10 proxy votes.

The bank's current employee-shareholders are in favor of the merger after winning concessions on corporate welfare and layoffs. Their high expected turnout boosts the chances the deal will go through.

"The higher the participation the greater chance of success. We are quite optimistic," BPM CEO Giuseppe Castagna told the Financial Times. "But for 20 to 30 per cent there is a real fear something will go wrong [with the merger]."

"The merger's success is important for the bank and it is important for the country. If it succeeds it will be an enormous boost to let everyone know reform can happen. The opposite message will be really bad for Italy," he said.