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UPDATE 1-Credit Agricole's Indosuez Wealth Management to buy Italy's Banca Leonardo

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* Indosuez arm to buy 67.7 pct stake in Banca Leonardo

* Deal seen adding 5.9 bln euros in AUM to Indosuez arm

* Indosuez says may buy full 100 pct of Banca Leonardo later (Adds detail, background)

PARIS, Nov 7 (Reuters) - French bank Credit Agricole's Indosuez Wealth Management arm has agreed to buy a majority stake in Italy's Banca Leonardo, in a deal which it said would add a further 5.9 billion euros ($6.9 billion) to its assets under management.

Indosuez Wealth Management said it had reached an agreement with Banca Leonardo's main shareholders - GBH S.p.A., Exor S.A., Eurazeo S.A., Swilux S.A., and Torreal S.A. - to buy 67.7 percent of Banca Leonardo.

The wealth manager added it might subsequently acquire a full 100 percent stake in the Italian bank. The companies said the transaction was expected to be finalized in the first half of 2018 and did not disclose the value of the deal.

The transaction comes as Italy - the third-largest economy in the euro zone - shows signs of emerging from an economic downturn.

Last month, data showed that morale among Italian businesses and consumers had continued to improve in October, reaching multi-year highs and pointing to a strengthening economy in the near term, even as Credit ratings agency Standard & Poor's (S&P) raised its rating on Italy.

"We are delighted to have reached this agreement with the shareholders of Banca Leonardo, a strong and recognized wealth manager in Italy," Indosuez Wealth Management Chief Executive Paul de Leusse said in a statement.

"The wealth management sector in Italy, which is expected to grow at a rate of four per cent per annum, offers great opportunities for growth and innovation and we look forward to working with our new colleagues from Banca Leonardo to enhance our positioning and expand our business in Italy," he added.

The Banca Leonardo takeover follows a similar deal earlier this year in which Indosuez Wealth Management bought the Singapore and Hong Kong private banking businesses of French rival Credit Industriel & Commercial (CIC).

It also marks a further reinforcement of Credit Agricole's position in Italy after the bank's Amundi fund management division acquired Pioneer Investments from Italian bank Unicredit.

($1 = 0.8618 euros) (Reporting by Sudip Kar-Gupta; Editing by Amrutha Gayathri)