LODI, Italy (Reuters) - Italian banks Banco Popolare (>> Banco Popolare Societa Cooperativa) and Banca Popolare di Milano (BPM) (>> Banca Popolare di Milano) are getting closer to meeting the conditions set by the European Central Bank to approve their merger and a positive outcome is within reach, Banco Popolare's CEO said on Saturday.

BPM and Banco Popolare have been discussing a deal for months that could lead to further mergers between Italian banks following a government reform aimed at strengthening a fragmented industry and improving profitability.

But the talks had stalled due to the difficulties of winning ECB approval.

"The merger project with BPM has not yet been concluded because of the hurdles posed by the ECB, whose approach is not easy to understand," Pier Francesco Saviotti told a shareholder meeting in Lodi, near Milan.

"A positive outcome cannot be taken for granted but we are getting closer and closer to meeting the (ECB's) requests and it's fair to assume that we can bring it to a happy conclusion."

(Reporting by Gianluca Semeraro; Writing by Agnieszka Flak; Editing by Greg Mahlich)